Management for Filipinos by Inigo Jr.

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Conrado E. Inigo, Jr., Ph.D., DBE

All Rights Reserved Philippine C op yrig ht© 1 98 6 Revised Edition, 2012 C O NRADO E. INIGO, JR., Ph.D., DBE W ARNING: No part of this book may be reproduced any form without the written permission from the publisher. Any copy o f this book not bearing the signature of the author shall be considered as proceeding from an illegal source.

This edition is designed & printed by Gemini Phils. Graphic Arts Corp. 2323 San Anton St., Sampaloc, Manila eedback, suggestions or inquiries, please contact

DR. CONRADO E. INIGO, JR. LYCEUM OF THE PHILIPPINES UNIVERSITY Cell No.: 0917-5212188 Landline No.: 359-7693 Email: c.inigo@ yahoo.com

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Management for Filipinos

Dedication To my wife, son and daughter - Mayette, Christian, Charmie To my parents, brother, sisters, in-laws, nephews and nieces. To all parents, teachers and students.

“What things so ever ye desire when you pray, believe that ye receive them, and ye shall have them.” Management for .cilip
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M A N A G E M E N T FOR FILIPINOS Principles and Applications

By Conrado E. Inigo, Jr., Ph.D. • Associate in Arts - Pamantasan ng Lungsod ng Maynila • BSBA - Pamantasan ng Lungsod ng Maynila • Master in Business Administration (MBA) - Ateneo de Manila University - Philippine Christian University • Ph.D. in Business Management - Manuel L. Quezon University • Management Development Program Wharton School o f Business University o f Pennsylvania • Asia Pacific Business Management Program - University of Thai Chamber of Commerce Bangkok, Thailand • ASEAN Entrepreneurial Course - Ministryr of Education, Malaysia • General Management Program - Faculty o f Business Administration National University of Singapore • Computer Development Forum - University of Nevada, Las Vegas • Basic Management Program - University of Phoenix, California • Minnesota Management Academy - University of Minnesota • Executive Strategy Program - Georgetown University, Washington DC • AGORA Awardee - Outstanding Achievement in Marketing Education • Department Chairman - Graduate School of Business and Economics, Centro Escolar University • Dean - School of Accduntancy, Business and Secretarial and Public Administration, Centro Escolar University • Assistant Vice President for Technology and Development, Centro Escolar University


Contents (Management Study Module) PREFACE FOREWORD ACKNOWLEDGMENTS PRE-INVENTORY EXERCISE

PART I: Business and Management Concepts Chapter I : BUSINESS IN GENERAL • Concept of Business and Development of Business Culture • Relationship Between Business and the Economy • Elements of a Business System • The Profit Motive • Responsibility of a Business Enterprise • Why People Engage in Business • Kinds of Business • Kinds of Economic Systems • Phases of Economic Development • Legal Forms of Business Ownership • The Project Feasibility Study • How to Register Your Business • The Entrepreneur and the Manager • Positive Values of a Filipino Entrepreneur • Small Business Associations- in the Philippines • International Business Environment • Exporting and Importing • Multinational Corporations • Review Questions \ • Discussion Questions • Worksheet

Chapter 2 : NATURE AND CONCEPT OF MANAGEMENT • Significance of Studying Management • Definition of Management • Universally-Accepted Functions of Management Management for FiliDinos

• • • • • • • • • • •

Management as a Science and an Art Evolution of Management Theories Principles of Management by Henri Fayol Scientific Management by Frederick Taylor Gilbreths and Motion Study Major Components and Related Major Events of Management Movements Advanced Management Program in the Philippines The MBA Story Review Questions Discussion Questions Worksheet

PART II: Management Functions Chapter 3 : PLANNING • • • • • • • • • • • •

Definition of Planning The Nature of Planning Major Types of Plans Basic Steps in Business Planning Other Types of Plan Decision Making Planning Techniques and Tools Why Managers Fail in Planning Short Case Study Review Questions Discussion Questions Worksheets

Chapter 4 . • • • • • • • • • • • • • • »i

ORGANIZING

Definition of Organizing Nature of Organizing Organizing as a Process The Nature and Development of Organization Types of Organization Structures Organization Chart Reorganization Departmentation Results of Good Organization The Elements of Delegation The Art of Delegation The Exception Principle Formal and Informal Organizations Centralized and Decentralized Cigo,.;Latio r-


• • • • • •

The Nature of Staff and Line Relationship Flat and Tall Structures Short Case Study Review Questions Discussion Questions Worksheets

Chapter 5 : STAFFING • • • • • • • • • • • • •

Definition of Staffing Nature of Staffing Recruitment Selection Training Identifying Training Needs Common Types of Training Human Asset Accounting Movement of Personnel Short Case Study Review Questions Discussion Question Worksheets

Chapter 6 : DIRECTING Definition of Directing Motivation Theories of Motivation Communication Types of Communication Barriers of Communication Leadership Types of Leadership Management Skills Management Roles Management Grid Management Filipino Styles Short Case Study Review Questions Discussion Questions Worksheets

Chapter 7 : CONTROLLING • Definition of Controlling • The Nature of Controlling Management for Filipinos

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• • • • • • • • •

The Control Process Characteristics of Control Types of Control Control Methods and Systems Accounting Concepts and Techniques as Control Devices Short Case Study Review Questions Discussion Questions Worksheet

PART III: Applications

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Chapter 8 : INTRODUCTION TO THE DIFFERENT AREAS OF MANAGEMENT

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• • • • • • • •

Marketing Management Production Management Materials and Procurement Management Financial Management Human Resources Management Office Management Discussion Question Worksheet

Chapter 9 : MANAGEMENT INFORMATION SYSTEMS Chapter 10 : SOCIAL RESPONSIBILITY Chapter 11 : CAREER OPPORTUNITIES IN BUSINESS Chapter 12 : SCIENTIFIC ANALYSIS OF BUSINESS CASES Chapter 13 : PRODUCTIVITY TECHNOLOGIES IN THE PHILIPPINES FINAL REVIEW QUESTIONS SELECTED BIBLIOGRAPHY


Preface

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n my past years of teaching in various schools, I observed that students and faculty members were always looking for the best textbook which could suit the description recommended by the Philippine Association of Collegiate Schools of Business (PACSB), Council of Management Educators (COME) and the Philippine Council of Deans and Educators in Business (PCDEB) for a course in basic management. Consequently, I have prepared, organized, and outlined a book supplemented by worksheets which will meet the needs of the students and teachers in the field of entrepreneurship and basic management. This book is intended to serve as an introduction in the study of management for students who are interested in this rapidly expanding field. The range of topics covered is necessarily broad and, as a result, the coverage of various problems and topics is not exhaustive. It aims to provide students a foundation and background of management in the successful operation of business. The format of the book brings down the management concepts to the level of the average Filipino student. At the end of every chapter is a set of short cases, review and discussion questions. These cases and exercises will test the knowledge of the students in the application of management functions to practical business situations.

Dr. C o n ra d o E. In igo, Jr.

San Juan City, Metro Manila

Management fo r Filipinos

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Pre-inventory Exercise N a m e :_____________________________ Year/Section: Professor: __________________________ Date: _____ As a student, it is imperative for you to know the relevance of the subject to your career and your expectations. With this premise, write a comprehensive description of the importance of Management to your line of specialization (major subject) and/or to the various areas of business (Accounting, Marketing, Economics, Banking and Finance, Computer, etc.).


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PARTJ l

Business and Management Concepts * *

Chapter 2: Nature and Concept of Management

Chapter 1

Business in General Learning Objectives: At the end of the chapter, the student is expected to understand the following:

• Concept of Business and Development of Business Culture • Relationship Between Business and the Economy • Elements of a Business System • The Profit Motive • Responsibility of a Business Enterprise • W hy People Engage in Business • The Project Feasibility Study • How to Register Your Business • The Entrepreneur and the Manager • Positive Values of a Filipino Entrepreneur • Social and Economic Contributions of Entrepreneurship • Small Business Associations in the Philippines • International Business Environment • Exporting and Importing • Multinational Corporations (M NC )

“The purpose o f business is not to' make a profit, but to m ake a customer. ” - Peter F, Drucker

C O N C E P T OF BUSINESS A N D D E VE LO PM EN T O F BUSINESS CULTURE

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A irst and foremost in the study of-basic business management, is having a clear idea of what business is and how it developed. Business is the evolutionary growth of various activities develop ing from a simple to a complex system. Space/computer technology is continuously improving so that life today is very different from the past and the developments we see today are unknown to the previous gen erations. Those were the years when there were no DVD and CD play ers, space shuttles, computers, antibiotics, electric cars, remote-con trolled televisions, ultra-sound machines, mini-radios, satellites, nor any of our "instant" food or beverage production. Today, a simple push of the button brings conveniences of technology right at our doorstep in the same manner that a mere power breakdown is sufficient to dis rupt routinary and business activities. There is much complexity in business because this area involves the whole range of human wants and needs. Today, there are many different managerial functions, procedures, systems, structures, prac tices, and organizational units in business. Nevertheless, some elements are cqmmon to all businesses. In the first place, all business organiza tions involve men and deal with men. A business entity, as an organi zation, may be simple or highly complex in structure. The operations are subjected to public, consumer acceptance, government regulations and supervision, taxation, and technological changes. In the second place, by the nature of their operations, all business enterprises have basic resources which are managed and developed under a money-andcredit economy. Business primarily aims to satisfy the consumer's basic and sec ondary needs. It can be achieved through the use of effective business marketing practices and strategies for reasonable returns to compensate for the businessman's efforts and risk of loss. Profit is the main objective of business which distinguishes it from charitable institutions and gov ernment agencies. The businessman aims at maximizing his profit so that he can provide for himself and keep his business viable. The profit, however, must be acceptable to every sector, i.e., commensurate his efforts and risks, because a good business does not exploit the public. The businessman should be entitled to a reasonable return on invest ments because, in addition to using his skills and exerting his effort, he takes the xisk of loss (compared to other individuals who do not ven 4


ture into enterprise because they are afraid to lose their money should the business fail). In a broader concept, profit should be maximized to provide a fair share to the workers in the form of just wages and incentives, to the owner or stockholders in the form of dividends, to the management in the form of professional remuneration and profit participation, to the customers and clients .in the form of reasonable prices with commensu rate quality of goods and services and dependability of supply. Realizing the increasing responsibility of business organizations to society, this book emphasizes the inevitable reality with the hope that the exercises and materials in this text will contribute to efficient busi ness activities and sound business economy. The complexity of today's business requires a continuing if not lifetime study. Business is the sum total of all the enterprises that play a vital part in the production and marketing of goods and services to ultimate consumers. In practical and legal sense, business is any activity involved in the production and distribution of goods and services, aimed to meet the economic needs of consumers with an objective of eventually earn ing profit. Consequently, any unlawful activity like gambling and smug gling can be considered business following the definition of business. Nevertheless, students of business are taught and trained to become businessmen based on the moral standards and values of society.

R ELA TIO N SH IP B ETW EEN BUSINESS A N D THE ECONOM Y Basically, the role of business is to produce goods and services which consumers need. Figure 1.1 (see next page) shows the relation ship between business and the economy. The business firm produces goods and services from the factors of production provided by society. Consumers, in turn, buy these goods and services. Business firms thus contribute to the country's economic growth. One measure of economic growth is the Gross National Prod uct (GNP), defined as the total market value of goods and services produced by a country in any given period (usually quarterly, semi annually, annually). Consequently, to produce goods and services, the business firm has to purchase materials, components, or semi-finished goods from other producers, thereby creating a demand for the outputs of other businesses. It has to pay wages to its personnel. These wages form the Business in General

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pays for the goods and services

pays for the factors of productions Figure 1.1 Relationship between business and the economy

income of the workers, who in turn buy foods, clothes, and other goods and services. A business firm co-exists and interrelates with other mem bers in the economic system. Some business firms manufacture the same products or substitutes for others. When we combine these firms as a group, we call them an industry. Thus, we may define an industry as a group of business firms offering similar goods or services. Some examples are the electronics, car, chemicals, petroleum, banking and finance, and construction industries. Industries may be broadly classified by sectors, such as the agri cultural, manufacturing, trade, construction, and government sectors. The manufacturing sectors include all industries involved in producing goods, while the trade sector includes both domestic and foreign trade.

ELEMENTS OF A BUSINESS SYSTEM Economics is the study of how a society produces and distributes its desired goods and services. It deals with how society uses its re sources to produce goods and services. These economic resources to produce are called factors of production. They are land, labor, capital, and the entrepreneur. Land pertains to all natural resources, including timber, minerals, petroleum, and the land itself. Labor refers to the physical and mental input of the people who produce the goods and services. The entrepreneur or businessman buys and organizes these three factors of production - land, labor, and capital to provide goods and services. In return, he profits if his products are in demand and inherent in all business ventures. Before an entrepreneur invests, there are several important ques tions he has to answer. Do I know enough abut the type of business I 6


am entering? Can the business offer the goods and services at competi tive prices? What is the rate of return on his investment? Every busi nessman expects a reasonable rate of return on his investment. The question is: What is "reasonable"? Different businessmen have different expectations of their businesses. Besides, no two businesses are exactly the same. In general, the amount of profits a businessman expects usu ally depends on the risk involved. If, by putting the money in a fixed deposit bank account he can get a ten percent return, he would expect more than ten percent profit for a risky venture. In other words, high risk should bring high return. If he risks losing all his capital (e.g., in an oil exploration venture which may fail), the investor expects a very high rate of return

T H E PR O FIT M O TIVE Profit is the difference between the income an entrepreneur re ceives from the sale of his goods and services and the expenses he incurs to produce them, i.e, it is income minus expenses. Profit is impor tant in business. It is the prime motivator in a capital system. Entrepre neurs produce goods and services that consumers are willing to buy. If demand is high, the entrepreneurs make large profits. In turn, they invest more funds to expand their businesses and produces new goods or services to satisfy consumer demands. Without profits, businessmen will not invest.

~~"eral

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RESPONSIBILITY OF A BUSINESS ENTERPRISE A business enterprise is a part of a 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 business company must also follow all government rules and regulations, besides being a responsible cor porate citizen in the community, and abide by decisions of business associations of which it is a member. If the employees are unionized, the business company must recognize the union and negotiate with it. A manager is employed to do a job and is directly responsible to the board of directors elected by the shareholders, who own the com pany. In a sole proprietorship or a partnership, the manager is respon sible to the proprietor or the partner. If the manager does a good job, he will continue to be employed. If his performance falls below excep tion, he will-be replaced. The manager employs workers to help run the business. In return, he must pay fair wages and benefits, provide a safe and healthy working environment, and treat tnem well. Otherwise, the workers will resign and look for better jobs elsewhere. The manager is responsible to his customers in providing goods and services of satisfactory quality at competitive prices. If his prices are too high, customers will buy from other shops. More importantly, his goods must be genuine. The businessman or manager must also deal with his supplier fairly and pay duly for his purchase. If he defaults, he will not get reliable suppliers. Suppliers themselves are businessmen and are un willing to do business with those who cannot pay. Owners

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Workers

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Business Association —►

Customers

Labor Union

Suppliers

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Community

T

Government

Figure 1.3 A business enterprise in relation to other members in the system

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In conducting his business transactions, a manager must comply with the laws and regulations laid down by the government. Some activities like gambling, may be prohibited even though they may be profitable for the businessman. 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. Many companies donate funds to support neighborhood activities. Others encourage their employees to participate in social work or cultural programs that benefit society. If workers in a business enterprise are members of a labor union, the employer must recognize such representation and negotiate with the union leaders to reach a collective bargaining agreement.

W H Y PEOPLE ENGAGE IN BUSINESS

Human behavior, including consumer behavior, involves a com plicated process of stimulus-and-response system to many factors and motives. People engage in business because of the following reasons: power, profit, service to the community, prestige, livelihood, social ap proval, etc. Businessmen want to earn profit, serve" the community, and achieve prestige because of certain stimuli, and these are the motiva tional factors. These factors can be clearly explained and directly linked with the theory postulated by Abraham W. Maslow, an industrial psy chologist. According to his Hierarchy of Needs theory, there are five needs of men that are to be satisfied continually in the following order: 1. 2. 3. 4. 5.

Physiological or biological need - the essentials for survival, such as the need for food, clothing, shelter, sex, air, water; Safety need - the desire for security, stability, or protection against danger; Social need - the need for group belongingness, affection, love, and friendship; Ego or self-esteem need - the need for self-recognition or group satisfaction; Self-fulfillment need - the need for the realization of personal goal or ambition.

The satisfaction of these needs of men can be properly explained by the use of a ladder.

Business in General

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K IN D S OF BUSINESS Business activity may be divided into three kinds: 1. Industry 2. Commerce 3. Services This classification is based on the nature of principal activity performed by the business enterprise. 1. Industries involve the conversion of raw materials into fin ished products or goods and the application of labor upon raw mate rials so that greater usefulness becomes possible after the process in the industrial group can be divided into extractive industries: farming, fish ing, and mining. The manufacturing industries use materials and sup plies turned out by the extractive industries and change these raw materials into various articles of materials for further production of goods and new products. Examples of manufacturing companies are Nokia, Honda, Sony, San Miguel Brewery, Shell, Purefoods, etc. 2. Commerce involves the process of buying and selling where the goods are moved from the point of production to the point of con sumption. Consumption involves purchasing and the actual investment of capital in the merchandise handled with the intention of reselling at a profit. Examples are Shoe Mart, Rustan's, Robinsons, COD, National Bookstore, Webster, etc. 3. Service enterprises are primarily concerned with the satisfac 10


tion of the needs and wants of the consumers. These are subdivided into: (a) public and community service; and (b) professional or trade service, Examples of the first group are transportation companies, MERALCO, motion picture producers, and newspaper publishers. Professional and trade services are businesses which capitalize on personal skill and talent for rendering service. Payment for such personalized service is usually in the form of fees which are sometimes called retainer's fee. Examples are law offices, certified public accountants, management consultants, commission agents, repair shops, building contractors, and others. Broadly speaking, services may also be subdivided into: .1. Recreation services which include TV stations, movie productions, and the theaters; and 2. Personal services which include hotels, restaurants, schools, beauty parlors, etc.

K IN D S OF E C O N O M IC SYSTEM Normally, a nation may be under one of various economic sys tems - the most common and prevalent of which are capitalism, social ism, and communism. 1. Capitalism is a system in which the means of production are owned and operated by private individuals. It is a system of economic organization wherein privately-owned capital, and property rights are privately invested with the ultimate aim of personal gain. Capitalism depends on the actions of capital owners, who are called capitalists or providers of capital. Active capitalists buy materials and equipment, and build factories to produce goods sold for profits. Capitals may also come from individual savers and passive investors willing to spend their money on business enterprises. Individual entrepreneurs are free to enter the market and pro duce goods and services for as long as there is demand for them. Com petition keeps prices reasonable, and makes available a wide range of goods and services. The capitalist system is based on risks and profits. In every soci ety, there are essential goods and services which involve too much risk and too little profit. 2. Socialism means the ownership of production and capital by the government and the regulation by society, as a whole, of the process Business in General

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of production and distribution, and of the giving of essential services. Socialism has been defined in many ways. Some define it as an economic system with some government involvement. Others argue that the Russia and China are socialist countries. Some use the term "democratic socialism" to mean an economic system in which impor tant industries such as public utilities, postal services, and transporta tion are owned and operated by the government. In such an economy, there is private ownership of property and there are many profit-oriented business enterprises. Examples of demo cratic socialist countries are Singapore, Britain, and Sweden. Demo cratic Socialism stabilizes employment because during economic reces sions, for instance, government enterprise can increase employment by providing more jobs. Critics say that the system restricts economic free dom and that government enterprises are subject to political interfer ence and may be inefficient. A democratic socialist economy is also called a mixed economy. It is in effect, a free enterprise system with government participation. 3. Communism stands for the collective ownership by the gov ernment of consumption goods and production goods. It is also a way of organizing the productive forces of a society. Communism is an utopian economic system. It implies a classless society with no government, as suggested by Karl Marx. But the term "communism" usually refers to the economic system in the People’s Republic of China. In this country, the state owns and controls all means of production. The government plans economic activities. This country is sometimes called "centrally-planned economies" whereas capitalist countries are referred to as "market economies." These three terms (capitalism, socialism, and communism) have been defined in different ways. Very few countries have a pure capital ist or a pure communist economic system. For example, the United States (often quoted as a typical example of a capitalist economy) has state-owned as well as private enterprises. On the other hand, the gov ernment, of the People's Republic of China has recently allowed private ownership of land and has encouraged individuals to set up businesses.

PHASES OF E C O N O M IC D EVELO PM EN T The transition of economic development from one phase to an other is usually gradual, and a country may find itself under economic phases at different points of time. 12


Since the development of a country's economy from one phase to another is not drastic, the various concepts used merely identify the more important attributes of the people's way of life in a certain period of time. . Economic development is only possible if a country has maxi mized the use of its human and natural resources. Since these resources differ greatly in quality and quantity, some countries experience drastic development. As these resources become extensively scarce, their proper allocation and utilization need extensive research and study.

Criteria in Classifying Phases of Economic Development A. Means of Livelihood

1. Hunting and Fishing. Phase. Our ancestors obtained food by hunting and fishing taken directly from the mountains, seas, and the bounties of nature. They did not breed nor domesticate animals. 2. P astoral Phase. The creation of groups and the presence of a large number of livestock have made man settle in an area for a longer period of time. This phase made it necessary for man to satisfy the needs of his group during seasons of inclement weather and the real ization of a greater need for planning, saving, and setting aside of stocks. 3. H andicraft Phase. Items or objects were made by skilled and trained manual laborers. It was the period of the medieval guilds. Guilds were associations of artisans engaged in the same trade. They made excellent workmanship of sculpture, tapestries, jewelry, fine musical instruments, furniture, crystal, porcelain, and other wares which are still admired and treasured to this day. 4. Agricultural Phase. Man's need for a continuous supply of food led to the development of agriculture and the concept of land ownership. Man began to work as a farmer or a fisherman. In the Phil ippines, agriculture is the primary industry because of vast agricultural land and the shortage of foreign exchange needed to buy modem ma chineries and technology 5. Industrial Phase. This is characterized by. the presence of manufacturing companies in certain areas like Metro Manila. This pe riod is an offshoot of the "Industrial Revolution" which came to En gland and Europe towards the end of the 18th century. It was the period when machineries were used in factories and industrial plants. Indus trial production, wiJa the use of power and machines, led to the mass production of other machines, such as automobiles and appliances which have made modem living radically different from that of the previous generations. Business in General

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B. Extent of Economic Activity

The second classification of economic development considers the extent of economic activity of the various social units involved. 1. Household Economy. Since the family is the smallest and ear liest social unit, the first phase is termed household economy. The needs of the family were satisfied largely by the efforts and contributions of all members of the family. 2. Village Economy. When several families organize a village, economic and social relations spread among the various families result ing in the rise of the village economy. 3. N ational Economy. This phase involves the grouping of vil lages into bigger and broader social units. Consequently, nation-build ing develops economic activities on a nationwide scale. 4. International Economy. With better and modem means of transportation and communication, a country expands its economic relationship through international trade and diplomatic cooperation. C. Medium of Exchange

1. Barter Economy. During the primitive era, exchange was done through barter which was the direct exchange of goods for goods, ser vices for services, goods for services or services for goods. Money was not used; instead, commodity was offered. If the commodity offered by a person was not acceptable to another person, no exchange took place. Since barter involved the physical transfer of commodities with every transaction, it is very inconvenient. 2. Money Economy. While barter was used, there came to circu late in the market certain objects, such as bars of metals, buttons, tools, and utensils which were stable in value, durable, and generally ac cepted by the public. Through time and evolution, money was used as a medium of exchange. Money solved the problem of barter economy, when such objects became standardized in value and regular in appear ance so that it became identified and accepted by the general public as a medium of exchange. Consequently, a monetary system evolved. Money is anything which is characterized by its general accept ability, it redeemability in precious metals, or public acceptance in any institution using it. 3. Money and Credit Economy. When transactions continued to increase in volume and frequency, it became imperative to allow others to purchase one's goods or engage one's services with payments to be paid at some future date. This was proven when credit transactions in modem business became far greater in volume than cash transactions. Credit is the power to obtain economic goods and services in exchange 14


for the promise to pay the agreed equivalent at some future time. Credit supplements money as a medium of exchange. Modem business opera tions have expanded through the availment of credit facilities, because the use of credit makes possible the growth of production and of sales.

LEGAL FORMS OF BUSINESS O W N ER SH IP

One of the first and most delicate questions which anyone start ing a business must ask himself is: Which is the best form of ownership for me to use? Each of the several legal forms of business ownership has its peculiarities and, because of this, the future of an undertaking may very well depend on the appropriateness of the form selected for car rying it out. The legal forms of ownership are as follows: 1. Sole Proprietorship - a form of business ownership organized and managed by only one person. It is possible that the capital in this form of business comes from the collective contribution of members of the family or among friends. However, for the business to be considered a sole proprietorship, it should be registered in the name of only one person. 2. Partnership - a business organization Where two or more persons contribute money, property, or talent,to carry on a business. A partnership acquires juridical personality upon the agreement of the partners. Such agreement is required to be in writing, if the capital of the partnership is P3,000 or more. In the case of limited partnership where the organization is composed of a limited and general partner, a limited partner has limited liability for business debts, while general partners have unlimited liability. 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. If you are planning to organize a business, some of the vital questions to answer are: How difficult is it to organize the business and what formalities are necessary? What is the estimated cost to meet the legal requirements including legal fees, taxes, and filling cost? How can you can get additional capital? How easy can you transfer the owner ship? 'Will it be possible for the owners to participate actively in the management of the business? How easy is it to change from one form of ownership to another after the business has been organized? Summarized below are some of the major advantages and disad vantages of the three legal forms of business. These are not the real measurement of whr.t form the business should take. However, tjje^ Business in Genera!

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provide certain comparative attributes that can help the businessman simplify his selection. ADVANTAGES

DISADVANTAGES

1. Single Proprietorship (one proprietor)

1. Easy to set up/start 2. Decision-making is left entirely to owner

1. Demanding on owner's personal time 2. Growth limited by owner’s financial means

2. Partnership (two or more partners)

1. Relatively easy to set up 2. Checks and balances maintained with two parties around

1. Dissolution of partnership by any personal rifts between partners 2. Equal profit sharing despite unequal attention and time given by partners to business

3. Corporation (at least five stockholders)

1. Maximum flexibility 2. Limited liability of individual share 3. Greater room for professionalism 4. Dissolution is least likely to occur 5. Can involve a wide range of people in business including employees 6. Reduced tax burden on owners

1. Complicated settingup process 2. Limited influence on management by individual stockholders 3. Tendency to institutionalize bureaucracy

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The major determinants of business forms are the type of busi ness, the size of investments, the type of risk-taking involved, and your own general objectives and personal biases.

START A N E W BUSINESS OR BUY AN E X IS T IN G ONE? A good and practical answer is, "it depends." First, it depends on the nature and kind of business you have. There are businesses where it takes long to develop products and mar16


kets (e.g., trading in general). In this case, you may be better off buying into a company that already has established products in the market bu for some reason or another also needs fresh equity or fresh approaches (The?e are also other businesses where "teething" takes time as in manufacturing operations in general and, putting up a new plant and training a new set of workers may be relatively more expensive than acquiring an existing plant. For businesses such as restaurants, the op erations may be essentially good, and a new marketing approach, or cash, may be the only inputs that could improve its viability. Second, it depends on the availability of opportunities for acqui sition. If you are sufficiently interested in a business but figure out that you do not have the best personal preparation for it, it may be better for you to get into an existing operation with the option to learn the ropes and gain control of the business at a later date. But looking for actual situations that will allow you to apply this strategy may be difficult. You can always look at classified advertisements for opportunities, such as banks and other financial institutions, or companies being sold, or con sult other business professionals - but be prepared for disappointments. Third, it also depends on your personal biases. Do you want to have the satisfaction of building a new organization, or would you derive greater satisfaction in "being around" a company that has been losing? Can you also cope with the usual "bad habits" that employees in established organizations bring with the/n? Would you rather de velop a new team within a new organization?

T H E PROJECT FEASIBILITY STUDY

The project feasibility study, sometimes called a-project study or a feasibility study evaluates the viability of a business undertaking. The undertaking may be a new or proposed venture, or an existing business. The enterprise may or may not have an expansion program. Normally, a project study is merely considered as a procedural requirement for securing financing or government assistance. Its real objective is to guide the project promoters, business executives, and financial manag ers in determining the actions they must take on a project in order to bring about its successful operation. The preparation of a project study covers: 1. The collection of data (through research work) which is signifi cant to all areas of undertaking; 2. The analysis of the collected data; and 3. The formulation of recommendations, based on the analysis.

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VARIO US ASPECTS OF PROJECT FEASIBILITY STU D Y A good project study should cover the various aspects of the operations of a project: management, marketing, technical, financial, and socio-economic.

Marketing Aspect The marketing aspect is considered the life blood of virtually all project feasibility studies for the extent of the data and information gathering because the succeeding aspects depend largely on it. This serves as the basis of the financial section through the projected de mand. Indeed, profitability is the focal point of every study. However, there can be no discussion of profitability or of the other aspects of the study, if in the first place, there is no demand or market. This aspect includes the following topics: demand, supply, de mand and supply gap analysis, marketing program, and the projected sales. The objective of the marketing aspect of a feasibility study is to determine the quantity of the product that can be sold at a certain price given the competitive situation.

Organization and Management Aspect The overall implementation plan is discussed in the organization and management study. This aspect includes a study of the officers and key personnel, basic considerations in forming the organizations, form of ownership, organizational chart, and project schedule. The objective of the management aspect of a feasibility study is to determine the option effectiveness of the organizational set-up and the qualifications of the individuals who will make up the organization. This aspect will determine the successful realization of the project study.

Technical Aspect After having determined the market size and area, product de mand and growth, the potential and technical feasibility of the project may be analyzed. The technical soundness analysis will be considered complete if all pertinent technical aspects of the project have been taken into account in the analysis and if the planned construction or procure ment conforms to accepted engineering standards and practice. The estimated cost of the project should be as low as any other reasonably 18


Figure 1.5 Objective of Marketing Aspect (World Executive Digest, June 1998)

available alternate which would produce the intended results. The objective of this portion of the feasibility study is to deter mine to what extent the project meets the technical soundness criteria.

Technical Requirements of the Project Prior to projecting technical feasibility, the technical requirements of the project must be analyzed. This may be done by A. Stating: 1. the quantity and quality of products to be produced 2. the specifications of raw materials 3. the supplies to be used 4. the labor needed, both skilled and unskilled 5. the utilities needed 6. the waste disposal methods 7. the manufacturing process B. Providing estimates of total project cost and enumerating the major items of capital cost. C. Listing down in detail estimated production cost and over head cost that will go into the operating of the proposed plan. D. Taking into consideration any major technological develop ment in the industry which may affect the commercial or technical soundness of the project. Once the technical requirements have been prepared, the project proponent is ready to analyze technical feasibility. Business in Genera!

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Financial Aspect The financial aspect of the project feasibility study quantifies the results of the marketing, technical, management, taxation and legal phases of the project study, and expresses in peso terms the possible outcome of operating the project. The major parts of the financial study are: 1. Statements of assumptions; 2. Possible sources of outside financing, if the capital require ments cannot be met entirely by the proponents; 3. Projected financial statements; 4. Details of various amounts contained in the projected financial statements; and 5. Analysis of the financial projections. Basically, project studies consist of the skillful coordination of the various information of all the factors in the form of financial projec tions. It covers all the factors that are pertinent to an intended venture having established the existence of a sample market and the feasibility of the production facilities to supply this market, the investigation should move on to the study of finance cost. What remains is to study the result of the market and technical studies. The financial study attempts to meet the following objectives: 1. To make a realistic, complete, and conservative estimate of the total cost to put up a project of its capital requirements. 2. To determine the amount of capital financing available and borrowings needed, including possible source and terms. 3. To make complete, safe, and realistic projections of operating cost and revenues. 4. To determine whether the project will be able to pay its total debt with a reasonable margin of safety. 5. To determine the necessary financial arrangements to'insure that the project will have the cash it needs when required. 6. To determine the company's earning performance and the soundness and liquidity of its financial positions.

So cio -E co n o m ic Aspect A proposed venture, to be worthy of financing, should be pre convinced not only for profit but also for social and economic benefits. It becomes even more worthy of establishing a business unit if it will be for tht welfare of others rather than simply for the wealth or power of the proprietor. 20


The objective of the socio-economic aspect of the feasibility study is to determine how the project will affect: 1. Income, considering the benefits it will give to families and individuals; 2. Taxes, indicating the amount of revenue it could raise for the government; 3. Prices, considering the influence of the proposed project on supply of goods, and foreign exchange balances; 4. Local producers, considering the use of locally manufactured machines, raw materials, and labor; and, 5. The community, in terms of benefits the proposed business will directly or indirectly share on the developments of the place, com munity, and the nation.

Parties Requiring Project Feasibility Study Project Feasibility Studies are prepared for the following parties and purposes: 1. Management of on-going concerns. a. To determine the feasibility of expansion programs. b. To set the reasonable price of an existing business which they are considering to take over. 2. Proponents or promoters of new projects. a. To ascertain the viability of new projects. b. To select or improve the project specifications in terms of: form of business organization, location, market, distribu tion channel, plant capacity, sources of financing, and other designs. 3. Stockholders a. To decide on the sale of existing companies and if so, to set the selling prices. b. To find out if an investment in a project or an existing enterprise is still attractive. 4. Lending institutions a. To ascertain the advisability of lending to a new project or existing undertaking. b. To define the conditions to be imposed in order to safe guard the position of the institution. 5. Government offices a. To determine if a project is entitled to government incentives. b. To specify the level of incentives to be granted (if the office has this discretion). Business in General

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Limitations of Project Feasibility Study A project feasibility study is primarily based on forecast of de mand, prices, new products coming in, technological developments, amendments to laws, changes in tariff rates, sales revenues, cost and expenses, and available financing. Such forecasts are based on available information, and on the opinion of the party preparing the project study. Thus, the basic limita tions of the study are as follows: 1. Certain required information is usually not available. 2. The one preparing the study may not be professionally com petent, and hence the opinion he forms may be deficient. Professional competence is an opinion on the project based on the analyses. 3. Even assuming that all the required data are available, and the one preparing is competent, the study is still a forecast. The results of a forecast do not usually tally with the actual events. Utility of Project Studies. Notwithstanding the above inherent limitations (but assuming that the one preparing the study is compe tent), the project study still offers the advantage of consulting the most realistic basis of calculated action to implement or stop a project. Hence, project studies minimize the profitability of business failures.

H O W T O REGISTER YOUR BUSINESS

After you have carefully studied all the technical, financial, mar keting, and management aspects of the business you have in mind, y.ou are now ready to establish your own business. In fact, you are now very eager to practice your skills as a manager. HoweveY, you will see that starting your own business is not at all that simple. You may be disappointed to learn that readiness and eagerness alone do not establish a business firm. There are certain legal requirements that must be accomplished. One of such requirements that must be accomplished is the registration of a business activity. A businessman needs to register his business not only because the enterprise has to be known by its legal or official name, but also because his business requires a legal personality in most of its transac tions. Failure to accomplish certain government requirements may cause unnecessary delays in the business operation. On the other hand, the national government offers privileges and other incentives to busi nesses considered as priority projects. These advantages may only be obtained if one's enterprise is properly registered and legally recognized. 22


A new small enterprise has to be registered in various govern ment agencies. The complexity of registration varies according to the legal form of the business. A single proprietorship is the easiest to reg ister while a corporation requires more elaborate procedures. Business registration is undertaken for the following purposes: • to establish the legal personality of the business • to obtain a Permit to Operate (PTO) • to comply with the requirements of special regulatory or promotional programs of government. There are two government agencies involved in the registration of business for the first purpose depending on the type of organization. These are the Securities and Exchange Commission (SEC) and the Bu reau of Trade Regulation and Consumer Protection (BTRCP). SEC is responsible for registering partnerships and corporations while BTRCP is responsible for single proprietorships. The agencies involved in the issuance of permits to operate depend on, the location or area of operation and the nature of the busi ness. All businesses are required to obtain a PTO from the city or mu nicipal government where the business activity is to be undertaken. On the other hand, there are some business activities that are regulated by law. A company that wishes to carry out a regulated business activity is required to obtain a PTO from the agency thqt is mandated to regu late the industry. For example, drug manufacturing and trading is being regulated by the Bureau of Food and Drug (BFAD). The two key agencies involved in implementing two major pro grams of the government are the Bureau of Internal Revenue for rev enue collection and the Social Security System for the promotion of social justice. All businesses regardless of the type of organization, lo cation of operation or nature of business activity are required to comply • with the registration requirements of the BIR and the SSS. The normal sequence of registering with the different govern ment agencies is as follows: 1. Securities and Exchange Commission of Bureau of Trade Regulation and Consumer Protection 2. Bureau of Internal Revenue 3. Local Government Unit 4. Social Security System If the company will engage in a regulated business activity, a Permit to Operate will have to be obtained first from the government agency mandated to regulate the industry before registration with the Local Government Unit can be done. If it plans to avail of incentives, it should apply with the Board of Investment (BOI) first before proceed ing with the SEC or BTRCP and the rest of the required registrations with government agencies. Business in General

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REGISTERING W IT H THE DEPARTMENT OF TRADE AND INDUSTRY (DTI) I.

Purpose of Licensing:

Republic Act 3883 (approved on November 14, 1931) otherwise known as the Business Names Law was enacted so that no two businesses (whether in the same line or not) would have the same or similar names. The Department of Trade and Industry (DTI), through its Bureau of Trade Regulation and Consumer Protection (BTRCP) administers the registration of business names. II. W ho are required to register:

If you are a single proprietor and your business is using a name other than your own name, that business name should be registered. For partnerships and corporations, registration of business name with BTRCP is optional. By registering with the Bureau, you are as sured that no other entity can legally use your business name anywhere in the Philippines. Register your business name at the DTI regional office where your business is located (those from National Capital Region may reg ister at the BTRCP office in Makati;.. The following are the procedures to follow: 1. Pay a registration/processing fee (P121.00 at 1992 rates) and secure application form, 2. Fill up the form and file it with the DTI office, Attach original receipt, and, 3. With the form, file the following basic supporting documents: FOR SINGLE PROPRIETORSHIP For natural-bom Filipinos, recent passport-sized photo. For aliens, photostat copy of Alien Certificate of Registration (ACR) for current year (bring original for comparison); and certificate of authority to engage in business in the Philippines from the Board of Investments. FOR PARTNERSHIP AND CORPORATIONS If fully-owned by Filipinos, Articles of Partnership or Incorpora tion and photostat copy of the SEC Certificate of Registration. If fully or partially owned by an alien, Articles of Partnership or Incorporation; SEC Certificate of Registration; and Certificate of Au thority to engage in business in the Philippines from the BOI. 24

Managem ent for Filipinos

If owners are citizens by naturalization or election, photostat copy of naturalization certificate and oath of allegiance/affidavit of election or identification card issued by the Commission on Immigra tion and Deportation (CID). Those who are natural-bom citizens but have names suggestive of foreign nationality are often required to submit proof of citizenship like birth certificate or voter's ID. III. Requirements for Registration:

a. Original Registration (New) 1. Individuals • Accomplished Application Form • Accomplished Index Card • Two Passport Sized Photos of Owner 2. Entities • Accomplished Application Form • Accomplished In lex Card • Articles of Incorporation / Partnership • SEC Certificate of Registration b. Application for Renewal (for Individual Entities) 1. Application Form 2. Old Certificate of Registration IV. Estimated Tim e Processing:

Processing time normally takes four days from date of filing. During peak season (usually 1st quarter) processing time is seven working days. V. Validity of Registration:

The BTRCP Certificate of Registration is valid for a period of five (5) years. Different procedures apply for provincial and Metro Manila applicants. VI. Accreditation

Accreditation is the legal recognition that a service and/or repair enterprise and the technical personnel therein have complied with the require ments of law and fulfilled the basic requirements of the industry for their operation and are therefore reliable and competent to practice the trade.

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T H E ENTREPRENEUR A N D T H E MANAGER We have used the terms “businessman” and “entrepreneur” inter changeably to describe the person who uses the other three factors of production together. Most small business firms are managed and owned by entrepreneurs themselves. They decide Ip start the business, risking time and capital, hoping to profit from this venture. They make all manage ment decisions. As a business expands, the entrepreneur has to increase owner ship to get more capital. When the business becomes more complex, it has to be managed by professional experts in finance, marketing, personnel production, or data processing. These managers are usu ally employees in the business enterprise, though some may become shareholders or partners. Their main role is to maximize the use of resources, to make decisions, to generate profits and to sustain the growth of the business. The entrepreneur’s way of life is a combination of creativity, challenge, hard work and satisfaction. Entrepreneurship is a cre ative endeavor in much the same way as artistic or scientific creativ ity is. An entrepreneur must, like the artist or the scientist, con ceives an idea out of his own visualization then turn the idea to 26


reality. To accomplish this, he puts in long and unremitting hours of work and takes financial risks. All these would require a lot of en ergy and self-discipline. The successful entrepreneur attains a position of prestige in the community because of his many contributions to society especially in terms of general jobs to many people and providing needed goods and services. These services are equally if not more, important than those performed by lawyers, doctors, teachers, or accountants.

POSITIVE VALUES OF A FILIPINO ENTREPRENEUR 1. P a k ik ip a g k a p w a tao

There are many ways in making our cultural values favorable to entrepreneurship. For example, our value for pakikipagkapwa tao (human relations) which covers our concern for hiya (loss of face), pakikisama (togetherness), pakikibagay (adjusting or adapting to other people), malasakit (concern), utang na loob (debt of gratitude), amor propio (self esteem) and bayanihan (cooperative spirit). Pakikipagkapwa tao is a value favorable to entrepreneurship because it is against any form of exploi tation of another. Basically, entrepreneurship is a practical translation of one's pakikipagkapwa tao because the work is to provide things and ser vices of value to others to improve their standards of living. The entre preneur that has pakikipagkapwa tao does not cheat his customers by overpricing or underweighing his goods; nor undercut his competitors by underpricing or maligning them, nor maltreat his workers by under paying or overworking them; nor cheat the government by avoiding or evading taxes. At the same time, other Filipinos who benefit from the fruits of the entrepreneur will give him back his share. Customers pay, competitors play fair, and workers demonstrate malasakit over the busi ness. If pakikipagkapwa tao developed well, it should promote and up hold the vision of entrepreneurship. 2. B a h a la na

By nature, Filipinos are malakas ang loob (strong-hearted), and not timid and fearful. The fact is that many of us pursue our plans and projects even if we are not sure of future developments or events that may affect their accomplishment. We undertake projects which should perhaps have frightened us if we were only less courageous to take the risk involved. In situations where we are not sure of our ability to accomplish things, we say bahala na (let fate decide the outcome) and do the best we can believing that Nasa Dios ang awa, nasa tao ang gawa (Look io God for compassion and to man for action) Business in General

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3.

P akikipagsap alaran

The'saying Ang taong talagang duwag, tumatakbo’t walang sugat, (A coward runs away from the fight even before he is wounded) show’s that we as a people do not consider it honorable to surrender before uncertainty or challenge. In many situations, specially in the field of making a living, our confidence or lakas loob is justified, because almost all of us are intelligent and literate enough to read, write, and count. We are very quick to adjust to new and strange situations. It is not surpris ing why there is plenty of mobility among our countrymen; and it is not unusual to find inter-province migration as precipitated by the love for pakikipagsapalaran (adventure). That is risk-taking.

4.

G aya-gaya

Our inclination to learn and adjust to new ways of doing things may also be seen in our talent for gaya-gaya or imitations. Of course as one matures in an entrepreneurial career,/ one really has to be more creative and innovative to make one's products and services more sat isfying to customers. But, for those who are only starting a business doing gaya-gaya of other products (mostly imported) do contribute to the training and preparation of many Filipinos for an entrepreneurial career.

5.

U ta n g na loob, hiya, aw a, bayanihatt

Aside from the family, there are others around us who can give much needed support. There may be the ninong and ninang, kababayan, kumpare, kumare, kaeskwela, katokayo and others who are willing to assist us simply from goodwill, in return for some past utang na loob or the expectation of some future time when they, in turn, need our assistance. In business, this may seem that we can expect them to buy from us. If they do that on utang (credit) they have to pay because of hiya. (loss of face) or awa (compassion), to sell us supplies on consignment, or to give necessary consultancy services to us when we are in trouble.

6.

JKasipagan

Another value that has to do with industriousness or kasipagan is an essential attribute of an entrepreneur. We have our own ways to deal with the "Juan Tamad" (lazy Juan) around us, through banters and proverbs such as: Ang tamad namamatay sa gutom (The lazy man starves to death) Ang hipong tulog tinatangay ng agos (The sleeping shrimp is carried away by the current)

28


7. F a g t it ip id

We also assign a high value on pagtitipid (thrift). You are familiar with "Asyong Aksaya" (Asyong the spend-thrift) who has been immor talized both on film and cartoon as the model of the extravagant and unprogressive Filipino. In the past, our parents taught us to be wise spenders and savers. They would say: Kung may isinuksok, may hinuhugot. (Put aside something today that you may draw upon it tomorrow). Ubos-ubos biyaya, pagkaubos tutunganga (Splurge today and woe unto you tomorrow) Habang maiksi ang kumot, magtiis na mamaluktot (Flex yourself smaller underneath a short blanket). Frugality and being industrious usually come together like iden tical twins. It is hard to unwisely spend your hard-earned money. Indi viduals who save eventually have enough to set their own firm; and as , entrepreneurs, they do not drastically spend on things that do not pay back in terms of profit. 8. P a g t it iis

Filipinos are also considered as persistent, persevering people. We do not easily give up in the face of difficulty. Note, for example, how for centuries our forebearers silently suffered exploitation, dis crimination and abuse during the Spanish Regime. We have always admired those who are mapagtiis (enduring). And how else can we describe the poor living in the squatter shanties in many depressed urban areas? While many of them believe that poverty is chiefly caused by social or economic injustices, this does not stop them from hoping for a better future. Even the poorest of the poor believe that by hard work, they can see a brighter future. 9. P a g titim p i

Another sign of our endurance is our emphasis on pagtitimpi (self-control). We do not allow ourselves to show, verbally or otherwise, our emotions at the slightest provocation. We like to wait until mapuno na ang gatangan (thg cup overflows). This capacity to bear emotional or physical stress can serve as well in an entrepreneurial career where we will be constantly battered by many stressful situations. 10. K a ta p a ta n

The Philippines is considered the largest Christian nation in Asia. We have a heritage for strong religiosity, which demands that we should be honest in our dealings with others. We do not like to exploit others, otherwise we are branded as masamang tao (worthless persons). We would rather use katapatan (sincerity) or kalinisan ng loob (purity of heart). Business in General

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These traits are very useful in business because exploitative ways are always self-defeating in the long run.

S O C IA L A N D E C O N O M IC C O N T R IB U T IO N S OF ENTREPRENEURSHIP 1. Entrepreneurship creates employment

When entrepreneurs put up a business, they oftentimes need to hire or employ at least one or two other people in order to get things done. Some businesses, in fact, employ hundreds of workers. At the third quarter of 1998, it was reported that about half of 38 million, (that •is about 19 million) employed Filipinos were employed by non-farm enterprises. About 15 million were employed by manufacturing firms alone. When entrepreneurial activities slow down, the country's unem ployment rate goes up. In 1987 for example, at the peak of the economic crisis, at least 2,212 business establishments stopped operating. As a result, at least 93,886 people lost their jobs. It was also estimated that between January to October of 1987, a monthly average of only 201 jobs were available for every 10,000 workers in Metropolitan Manila, and that for every 10,000 workers an average of 221 lost their jobs because of the decline of entrepreneurship and entrepreneurial activities. Every society wants all its qualified members to be gainfully employed. When individuals are employed, they are able to raise their children, support them through school, provide them with decent homes, acquire medical services whenever needed, and contribute to government income through the payment of income taxes. 2. Entrepreneurship improves the quality of life

Entrepreneurial ventures contribute significantly to the continu ous improvement of living standards. The development of new prod ucts and the delivery of needed services make life easier and comfort able for society in general. 3. Entrepreneurship contributes to more equitable distribution of income taxes and therefore eases social unrest.

When income is more evenly distributed, entrepreneurship also grows. People will have more money with which to buy the products and services they need, bringing in more profits to entrepreneurs. They 30


may also have enough money to invest on enterprises of their own, thus increasing the supply of entrepreneurs. Income that is evenly distrib uted means less poor people. The eradication of poverty will help solve social problems like crime, juvenile delinquency, and malnutrition.

4. Entrepreneurship utilizes and mobilizes resources for greater national productivity. The Philippines will develop faster economically if none of its resources were left idle or unused. For example, we have plenty of iron ore that can be processed to supply the needs of industries that manu facture spare parts for cars and machines. Putting up a metal factory to process iron-ore does not only utilize the raw material but also feeds other local industries. It also saves much for the country m terms of dollars and time since local industries need no longer be dependent on its iron-ore imports all the time. 5. Entrepreneurship brings social benefits through the government.

With the revenues the government collects from taxes, duties and licenses paid by the entrepreneurs (Not to mention income taxes the entrepreneurs' workers also pay), the government allocates for commu nities. These services and projects come in the form of infrastructure facilities such as roads and bridges; educational and medical facilities and services; maintenance of peace and order; among others.

S M A L L B U S IN E S S A S S O C IA T IO N S IN T H E P H IL IP P IN E S Be aware of your prospects, legal rights, and privileges as small and medium businessmen. Also be alert on the nuances of these terms. Even if you happen to be a self-employed businessman jobbing out small orders for micro enterprises, you deserve to join in lobbying for the interest of the Filipino small business sector. Joining them can also open new markets for yourself since bigger businesses can also job out smaller orders to you. Also, the more magnanimous businessmen can also introduce their buyers to you. After all, it is not often that job orders can be filled up by a single firm. Business friends are needed to fill up big ones, and intelligent businessmen know that. The following is a list of existing Filipino business associations. See next page)

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ARTIFICIAL PLANT MANUFACTURERS ASSOCIATION OF THE PHILIPPINES Address: do Tree's Company 45 Ligertad St., Mandaluyong, Manila Composition: artificial plant manufacturers ASSOCIATION OF FOOTWEAR INDUSTRIES OF THE PHILIPPINES Address: 56 J. de Jesus St., Caloocan City Composition: footwear manufacturers ASSOCIATION OF SHRIMP PRO DU CERS AND EXPORTERS Address: Domestic Insurance Bldg., Bonifacio Drive, Port Area, Manila Composition: shrimp producers and exporters CERAMICS ASSOCIATION OF THE PHILIPPINES, INC. Address: do Saniwares Standard Bldg., 151 Paseo de Roxas, Makati Composition: ceramics manufacturers and exporters CH AM BER OF FURNITURE INDUSTRIES OF THE PHILIPPINES Address: 9/f, Strata 100 Bldg., Emerald Ave., Pasig Composition: furniture manufacturers CHRISTMAS DECORS PRODUCERS AND EXPO R TERS' ASSOCIATION Address: do Makbel Enterprises, 1617 Sisa St., Sampaloc, Manila Composition: Christmas decor producers and exporters COCONUT OIL REFINERS ASSOCIATION Address: Muelle de Binondo, Manila Composition: coconut oil refiners CO FFEE EXPO RTERS ASSOCIATION OF THE PHILIPPINES Address: 191 Pasadena St., San Juan Composition: coffee exporters

BOARD OF INVESTMENTS Industry and Investments Bldg. 385 Sen. Gil J. Puyat Ave., Makati, Metro Manila DEVELOPMENT B AN K OF THE PHILIPPINES DBP Building Sen. Gil. J. Puyat Ave., Makati DEPARTMENT OF SCIENCE AND TECHNOLOGY DOST Compound Gen. Santos Ave., Bicutan Taguig, Rizal DEPARTMENT OF AGRICULTURE DA Building, Eliptica! Road, Diliman, Quezon City UNIVERSITY OF THE PHILIPPINES INSTITUTES FOR SM ALL-SCALE INDUSTRIES E. Virata Hall, E. Jacinto St. UP Campus, Diliman, Quezon City NATIONAL MANPOW ER AND YOUTH COUNCIL NMYC Complex East Service Road South Expressway, Taguig DEPARTMENT OF LO CAL GOVERNMENT PNCC Building EDSA cor. Reliance St., Mandaluyong City DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES DENR Building Visayas Ave., Diliman, Quezon City GOVERNMENT RESOURCE INSTITUTION FOR ENTREPRENEURS DEPARTMENT OF TRADE AND INDUSTRY De and Industry Building 361 Sen. Gil Puyat. Makati. Metro Manila TECHNOLOGY AND LIVELIHOOD RESO URCE CENTER TLRC Building Sen. Gil J. Puyat Ave., Makati, Metro Manila

IN T E R N A T IO N A L BUSINESS E N V IR O N M E N T Art important factor in the management of any organization is the increasing internationalization of business activities. International business activities range from exporting goods to other nations to estab lishing manufacturing operations in other nations. These activities present new challenges to managers. While not all organizations are directly involved in international business activities, events that impact on Philippine organizations oc cur, almost delaying other nations. Thus, it is increasingly important 32


that all managers understand the nature of international business activi ties. The trading of goods and services across national boundaries re sult from the principle of competitive advantage. Factors determining a country's competitive advantage include the presence of natural re sources, adequate quality and quantity of labor and capital, available technology, and the cost of these resources.

E X P O R T IN G A N D IM PO R TIN G An organization may become involved in international business activities by exporting, importing, or manufacturing in a foreign coun try. Exporting refers to the selling of an organization's goods in an other country; importing is the purchasing of goods and services from a foreign company. Organizations that make a commitment in selling their pioducts overseas must decide how to organize their exporting/importing activi ties. The organizational structure that is used depends on how critical these activities are to the overall organization. The organization may establish its own internal structure. This requires special experts on international accounting, finance, marketing, and "law. As a result, many organizations either cannot or do not desire to establish such divisions. Some contact an outside person who is sometimes called a combination export-import manager. An export-import manager serves a group of exporting/importing organizations and handles all activities involved in the exporting/importing of the organization's goods and services.

Reasons for Exporting 1. If the production process requires high volume to reduce cost per unit, the home market may be too small to absorb the output. Thus, the output may be sold overseas. Stoves, for example, are purchased by households only when they heed to replace an old one or when a new home is built. To restrict selling stoves only to the Philippines, the market could limit the number of stoves demanded below the number which is cost efficient to produce. 2. The demand for the firm's product may be seasonal and ir regular. By expanding the firm's market to other countries, production costs may be lowered by more effective production scheduling. 3. All products undergo what is called the product life cycle when the products are first introduced, there is usually a big demand and the introducing firm is the only supplier. As the product reaches Business in General

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maturity, this competitive edge is reduced and can be maintained only by creating new markets, where it re-enters the growth stage. 4. In selling goods or services, the organization may not fac competition as stiff as it does in the Philippines, thus, its marketing cost may be reduced. By selling its established goods in new overseas mar kets, the organization is also able to increase its profits without risking new-product development.

Reasons for Importing 1. The goods may be needed but not available in the importing country (e.g., crude oil). 2. Many foreign-made products have prestige value and are de manded by the home market (e.g., French perfumes, sport carts from Germany). 3. Some foreigr goods are Jess expensive due to lower produc tion costs.

M U L T IN A T IO N A L C O R PO R ATIO N S (M N C ) The Multinational Corporation (MNC) has become a well-known entity in international business. Yet, a common definition of that entitydoes not seem to exist. Measure used to determine if a business is multinational include percentage of total sales by majority-owned for eign affiliates, percentage of earnings due to foreign operations, and percentage of new capital investment destined for overseas facilities. However, for the purpose of this book, an MNC is defined as any busi ness that maintains a production, assembly, sales or service presence in two or more countries. The internationalization of big companies has been dramatic, with companies such as IBM, Eastman Kodak, Bank of America, Coca Cola and Honda having large and growing international activities.

R E V IE W Q U E S TIO N S 1. 2. 3. 34

What are the elements of a business system? Which is the most important? What is a profit move? Explain its role in the business, world. What would you consider to be a reasonable profit? What are the responsibilities of business enterprises? Management for Filipinos

4. 5. 6. 7. 8. 9.

Explain the relationship between a business enterprise and the economy. How does the business contribute to the economy? Discuss the role of business. How does it contribute to the well being of society? Discuss the major changes in the Philippine economy over the last two decades. In what ways may an organization enter into international business activities? What is exporting? importing? Describe some problems faced by organizations engaged in interna tional business activities.

D IS C U S S IO N Q U E S T IO N S

1. 2.

Do you think the old saying:
E X P E R IE N TIA L EXERCISES

1.

2. 3. 4.

Imagine yourself as part of the business system. List some of your activities which are related to business enterprises. Analyze the enterprise in terms of the four elements discussed in the chapter. Think of a specific business enterprise. Explain how it is related to the economy. Identify some business enterprises which are active in social activi ties and discuss their major contributions. List your own needs. Identify the business activities that will satisfy these needs. Compare your needs with those of your parents.

REFERENCES

1.

Abasolo, Pacita and Isidro Jose. Personnel Management. Quezon C'ty: Katha Publishing Company, 1991.

2.

Damaso, Jimeno, How to Start Your Own Business. Metro Manila: Sinagtala Publisher, Inc., 1982.

3.

Department of Trade and Industries, Bureau of Small and Medium Busi ness Development, 1997. Business in General

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4.

Ignacio, Monico H. An Introduction to Business Management. Metro Ma nila: Sinagtala Publishers, Inc., 1989, pp. 11-16.

5.

Joon Eng Chuz, et al. Management of Business. Singapore: McGraw Hill Book Company, 1997.

6.

Limjoco, Angel Jr. "Story of Advanced Management Program in the Far East." Philippine Manager Vol. 1 No. 1 (2nd Quarter, 1968).

7.

Meredith, Geoffrey. The Practice of Entrepreneurship. ILO. 1992.

8.

Muro, Vicente. Preparing Project Feasibility Study. Vol. One. Quezon City: Phoenis Press, 1992.

9.

Musselman, Vernon A. and Hughes, Eugene. Introduction to Modern Business. New Jersey: Prentice-Hall, 1990.

10.

Putti, Joseph. Managements Functional Approach. Singapore: McGrawHill Book Company, 1997.

11.

Small Enterprises Research and Development Foundation. Introduction to Entrepreneurship. Diliman, Quezon City. 1997

12

Shubbin, John. Business Management. New York: Banes and Noble, Inc., 1987.

13.

Weimer, Arthur M. Introduction to Business: A Management Approach. Richard D. Irwin, Inc., 1996. p. 7.


W orksheet No. 1.2

BUSINESS IN GENERAL

N am e:

Year/Section:

Professor-

Date-

TEST YOUR POTENTIAL AS AN ENTREPRENEUR Take this test to help you find out whether you have the drive to realize your entrepreneurial dream. After each sentence (except for questions 21 through 25), choose a letter to mark your reaction: a) strongly agree; b) moderately agree; c) moderately disagree; d) strongly disagree; 1.

2.

3. 4. *

5. 6. 7. 8.

9. 10. 11. 12.

» 13.

I generally try to take charge of matters when I am with people. I am acutely aware of the passage of time and often press myself to complete a task. I dislike taking orders from others. I would want my employees to be content, but not at the expense of the business. Given reasonable odds, my efforts can successfully influence the outcome. Things that typically unnerve most people do not ruffle me. I seem to have a much higher energy level than most people. I believe that there is a proper time for everything and things can't be rushed. I have often been in the position of leading projects or groups. When confronted with a complex task, I am generally able to and, in fact, I enjoy pulling it all together. Even if I dislike doing it, I would be able to fire an employee who was not productive. Once I've launched a venture, I find it very difficult to change my course even though the prospect of success is exceedingly dim. I would readily leave a well-paying, high-status job to start my own business, even if it meant tightening my belt considerably for a while. Business in General

37

__ 14. I can do just about anything I set my mind to. __ 15. Others say I have a sharp, analytical mind. __ 16. I have worked long, hard hours for lengthy periods of time, and I would do it again if necessary. __ 17. I have a low tolerance level and get easily frustrated. __ 18. I get bored easily with routine tasks and thrive on challenges. __ 19. It is important for me to be the best in whatever I undertake. __ 20. I would choose to work with a difficult but highly competent person rather than a congenial but less competent one. 21. My age i s _____. a) 20 to 28 b) 29 to 37 c) 38 to 46 d) 47 or older 2 2 .1 have h a d _____year(s) of experience in the industry in which I plan to start a business. a) 0 b) 1/2 to 1 c) 1 to 2 d) more than 2 years 2 3 .1 have had business experience i n _____. a) a management position in a successful firm; b) a management position in any firm; c) no management experience. 2 4 .1 have missed_____days of work due to illness over the past three years. a) 0 to 5 b) 6 to 10 c) 11 to 15 d) 16 or more 25. I generally need at least_____hours of sleep to function effectively. a) 8 b) 7 c) 6 d) 5 or fewer' Answers:

1. 2. 3. 4. 5. 6. 7. 38

a = 4, a = 4, a = 4, a = 4, a = 4, a = 4, a = 4.

b = 3. c = 2, b = 3, c = 2, b = 3. c = 2, b = 3, c = 2, b = 3, c = 2, b = 3. c - 2, b = 3, c ■* 2,

d= 1 d= 1 d= 1 d= 1 d=1 d= 1 d=1

Management for Mllplnos

8. 9. 10. 11. 12. 13. 14.

a a a a a a a

= « = = = = =

1, 4, 4, 4. 1. 4, 4,

b* bb= b= b= b= b*

2, c ■ 3, d = 4 3, c = 2, 3. c = 2. 3. c = 2, 2. c = 3, 3, c = 2, 3, c = 2,

d d d d d d

* = * ■ = =

1 1 1 4 1 1

15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.

a a a a a a a a a a a

= = = = = = = = = = =

4, 4, 1, 4, 4, 4, 2, 1, 4, 4, 1,

b b b b b b b b b b b

= = = = = = = = = = =

3, 3, 2, 3, 3, 3', 3, 2, 3, 3, 2,

c c c c c c c c c c c

= = = = = = = = = = =

2, 2, 3, 2, 2, 2, 3, 3. 1 2, 3,

d d d d d d d d

= = = = = = = =

1 1 4 1 1 1 1 4

d= 1 d =4

S c o re :

(94 (85 (75 (74

to 100) to 93) to 84) and below)

What are you waiting for? A good bet. Risky business. Stay right where you are.

No matter how you scored in this test, only you can answer the ques tion. Are you an entrepreneur? Look inside yourself for all these traits - the willingness to work hard, good health, secure self-image, confidence, intelli gence, excitement when challenged, commitment to excellence, caring realism, creativity, and a sense of urgency. If you find these characteristics in yourself and can couple them with technical competence, management skills, and finan cial acumen, you have what it takes to become a successful entrepreneur.

Business in General

39

40


Chapter 2

Nature and Concept of Management Learning Objectives: At the end of the chapter, the student is expected to understand the following:• Significance of Studying Management • Definition of Management • Universally Accepted Functions of Management • Management as a Science and as an A rt • Evolution of Management Theories • Principles of Management by Henri Fayol • Scientific Management of Frederick Taylor • Gilbreths and Motion Study • Major Components and Related Major Events of Management Movements • Advanced Management Program in the Philippines •T h e MBA Story

"Everybody thinks o f changing humanity, and nobody thinks o f changing himself. ” - Leo Tolstoy

S IG N IFIC A N C E OF STU D Y IN G M A N A G E M E N T

ur study of management begins with presenting the basic prin ciples and concepts which give a common reference outline within which management is normally applied. Substance is placed on the meaning of management, its historical' development in the country, the influence of the manager's philosophy and values, and the effect of both internal and external factors. Ac cepted current management trends and practices are taken up and the importance of accomplishments in modem management is clearly ex plained. Throughout the text, the central idea is developed by studying management from the side of what management does. These activities make up a distinct process - a management process - some of which may be changed by different approaches or schools of thought consid ered especially helpful to the individual to which management is being applied. Hence, application to both theory and the study of manage ment is included. More often than not, managers delineate their objectives as given by exact statements of the problems to be solved or barriers to be dis carded in outlining the work to be done. From the practical and oper ating viewpoint, a manager is expected to formulate objectives, giving sufficient attention to the various constraints within which the goals must be achieved. In order to achieve an objective, the available basic resources including men and women, materials, machines, methods, money and markets should be put together. These resources are what we call the six M's of management which are used and related harmoniously so that the expected end-result may be attained, all within the anticipated problems of time, effort, and expense. Management is the most important subject in business because it deals with people, establishing and achieving objectives. It is conse quently used in almost every human activity. Management exists to some degree in the factory, office, school, bank, store, labor union, hotel, church, armed forces, hospital, or home.

42


D E F IN IT IO N OF M A N A G E M E N T

Management is defined in so many ways depending upon the viewpoints, beliefs, and interpretations of the manager. For ex ample, some persons define management as “the force that runs an enterprise and is responsible for its success and failure.” Others claim, “management is the performance of conceiving and achieving desired results by means of group effort consisting of utilizing hu man talents and resources.” Still others state that management is simply “getting things done through people” while others claim that it can be summarized as “planning and implementing.” An addi tional definition is “satisfying the economic and social needs by be ing productive for the human being, for the economy, and for soci ety.” Some state, “management is a resource used by everybody to achieve goals.” All these definitions have merits. However, .for the purpose of this book, the following generally accepted definition is used: Management is a distinct process of planning, organizing, staffing, directing, and controlling (POSDICON), performed to deter mine and accomplish stated objectives by the use of human being and other business resources. In other words, there are different activities that make up a management process. Furthermore, these activities are performed to accomplish stated objectives, and they are performed by men with the help of other resources. (See Figure 2 . 1) BASIC RESOURCES 6 M’S

FUNDAMENTAL FUNCTIONS THE PROCESS OF MANAGEMENT

STATED OBJECTIVES END-RESULTS

Figure 2.1 The Meaning of Management

Nature and Concept of Management

43

UNIVERSALLY A CCEPTED F U N C T IO N S OF M A N A G E M E N T

Planning Planning refers to the formulation of objectives, programs, poli cies, procedures, rules and regulations, in order to achieve the goals of the business. Planning is related to decision-making. It involves selecting the best course of action that a business or other enterprises and every department will follow. There are various types of plans, ranging from the company purpose and objective to the most detailed individual action plan, e.g., when ordering special spare parts for a certain prod uct, or hiring and training workers needed for production, the first thing to do is to plan a study, an analysis, or a proposal, but not a real plan.

Planning involves forecasting, that is, making decisions in ad vance. Planning is used to further accomplish the objectives today and its relationship in the future. Although a future business condition can seldom be predicted with accuracy, unforeseen events may disrupt the best-laid plans. Furthermore, planning is thinking before doing. (See Figure 2.2)

O rganizin g Organizing is the grouping together of people, establishing rela tionship among them, and defining the authority and responsibility that 44


the personnel have in the use of the company's material resources to attain predetermined goals and objectives. Organizing is also the iden tification or grouping of work to be done, the delegation of authority and responsibility, and the establishment of relationships among them in order to use to maximum advantage the company's material re sources in the attainment of a common objective. People working together in groups to achieve goals must have roles to play, much Idee-the actors in a drama. Whether their roles are developed by themselves must be defined by someone who wants to make sure that men can contribute in a definite way to the group effort. This role illustrates that what men do has a specific purpose and objec tive. Their activity is a situation where they know how their job fits into the group effort and where they have the necessary rolls and informa tion to accomplish it. This can be seen as a simple group effort like setting up a fishing expedition. Organizing, then, is that part of manag ing that involves establishing an intentional structure of roles for men to fill in an enterprise. It is intentional in the sense that it makes sure that all the tasks necessary to accomplish goals are assigned to men who can do them best.

Staffing Staffing involves filling and keeping filled the positions provided in the organization structure. It delineates manpower requirements for the job to be done, which includes recruiting and selecting candidates for position, compensation, and training or otherwise developing both candidates and current job holders to accomplish their tasks effectively.

D ire ctin g Directing has to do with the predominantly interpersonal aspect of managing. All managers will agree-that their more serious problems arise from people, their desires and attitudes, their behavior as indi viduals and in groups, and the need for effective managers to be effec tive leaders, too. Leadership implies followership, and people tend to follow the man on who they see a means of satisfying their own needs, wishes, and desires. It is, therefore, understandable that this area of management involves motivation, leadership styles and approaches, and communication.

C o n tro llin g Controlling is the process of measuring and correcting the activi ties of subordinates md the company itself to assure conformity to plans. Thus, it measures performance against goals and plans, shows Nature and Concept of Management

45

where negative deviations exist, and, by actions to correct deviations and help assure the success of plans. Although planning must precede controlling, plans are not self-achieving. The plans guide managers in the use of resources to accomplish specific goals. Activities are then checked to determine whether they conform to planned action. Control activities generally relate to the measurement of achieve ment. Such control devices as the budget for expense, inspection records, and the record of labor hours lost are generally familiar. Each has the characteristics of measuring; each showing whether or not plans are working out. If abnormal deviations persist, correction is indicated. Compelling events to conform to plans mean locating the person who is responsible for negative deviations from planned action and then taking the necessary steps to improve performance.

M A N A G E M E N T A S A S C IE N C E A N D A S A N A R T

Management is both art and science. It is an art because it results in the accomplishment of objectives through the use of human efforts. It requires skill and careful study in the management of any endeavor. Management is a science because it is a systematic body of knowledge. It gathers'and analyzes facts and formulates general laws or principles from these facts. As an art and as a science, therefore, management seeks to inte grate into a unified, coordinated whole the essential factors that make up an organization. Management is a broad field of knowledge with its own areas of specialization - personnel, finance, production, sales or marketing, purchasing and procurement, administration, and advertis ing.

E V O L U T IO N O F M A N A G E M E N T T H E O R IE S One wonders how organizations came to existence and how they grew. Their existence, growth, and modernity can be explained through some theories or schools of thought. While several theories have been advanced in the effort to explain the structure, functioning and njanagement, and organizations, to date, none is considered complete, or is accepted as being final. Each theory has some limitations, and the field of management theory is in the process of evolving. However, the vari ous thoughts and views discussed can be included in four schools of thought or theories. They are: • The Classical or Traditional School • The Human Relations School 46


• The Management Science or Quantitative School • Modem Management

The Classical or Traditional School The concept of management is not new, it has been practiced for thousands of years. Some traditional institutions such as the Roman Catholic Church have survived to this day.because of their outstanding administrative abilities. The Catholic Church has made some significant authority, scalar chain, and so on. The classical theory of management is built on principles. These principles have been suggested by theories such as those presented by Mooney, Reiley, Urwick, Gullick, Fayol, Emerson, and Taylor. Classical theorists believed and prescribed certain principles that would aid in . setting up and managing organization. One of the classical theorists, Henri Fayol, laid down a number of principles.

Principles of Management by Henri Fayol Henri Fayol was a French industrialist who was the first to issue a complete statement on a theory of general management, which is used today. Bom of relative well-to-do parents, Fayol graduated as a mining engineer. He started in 1860 as a janitor then rose to become the executive of a coal mining and iron foundry company. In 1888, tire company was near to bankruptcy. Fayol took over as managing director and rapidly turned the company into a financially sound organization. Upon his retirement in 1918, Fayol lectured and popularized his theory of administration. Possibly, Fayol's greatest contribution was his discussion of man agement principles and elements. Fayol gave the following "14 Prin ciples of Management" (He stressed flexibility in the application of these principles and the making of allowances for different and chang ing circumstances.) 1. Division o f Work - this is the assignment of specialized jobs to various departments and/or positions. It has been shown in many cases that when work is specialized, people learn the task more easily and perform them more effectively. This is the specialization which the economists consider necessary to efficiency in the use of labor. Fayol applies the principle to all kinds of work, managerial or technical. 2. Authority and Responsibility - Henri Fayol finds authority and responsibility to be related and inseparable. Fie sees authority as the power or the right entrusted to make the w'ork possible and respon sibility as the duty or work assigned to a particular position. Nature and Concept of Management

47

3. Unity of Command - this means that ceive orders from one superior/manager only. 4.

e m p lo y e e s

should

Subordination of Individual Interest to General Interest -

re

The

interest of one employee or group of employees sh o u ld not prevail o v e r the interest of the business. 5. Remuneration - remuneration and method of payment should be fair and afford the maximum possible satisfaction to employees and

(PRESIDENT, VICE PRESIDENTS, CORPORATE SECRETARY, CORPORATE TREASURER, ETC.)

TOP MANAGEMENT

MIDDLE MANAGEMENT

(DEPARTMENT HEADS, SECTION CHIEFS, SUPERVISORS, ETC.)

LOWER LEVEL OR RANK AND FILE

(CLERKS, MESSENGERS, TYPISTS, ETC.)

Figure 2.3 The Organization Pyramid

employer. It is sometimes called compensation. This principle is based on "equal pay for equal work." 6. Centralization - without using the term centralization of au thority, Fayol calls it the extent to which authority is concentrated. It is a system of management wherein major policies are made only by the top management. This is the opposite of decentralization. 7. Scalar Chain - Fayol thinks of it as a "chain of superiors" from the highest to the lowest ranks. This can be properly described by the use of the pyramid of organization consisting of top management (president, vice-president, etc.); middle management (department man agers, supervisors, chiefs, etc.). (See Figure 2.3) 8. Stability of Tenure - unnecessary labor turnover could be the cause and the effect of bad management. Fayol points out its dangers and costs. Employees should be given enough time and period to prove his worth to the company. This can be applied through probationary appointment (maximum period of six months, as provided by law). 9. "Esprit de Corps" - this principle explains that "in union there is strength," as well as an extension of the principle of unit of com mand. It emphasizes the need for teamwork and the importance of communication in obtaining it. 10. Span of Control - it refers to the specific and limited number of subordinates that a manager can effectively handle and control. It is 48


determined by the optimum level of effective supervision. 11. Simplicity - unnecessary elements should be eliminated from all activities as well as from the process and procedures established for carrying them. 12. Unity o f Direction - one boss and one plan for a group of activities having the same objective. 13. Order - ensures a place for everything. 14. Equity - results from kindness and justice. Fayol developed his list of principles from the practices he had used most often in his own work. He used them as a broad and general guidelines for effective management. His real contribution was not the 14 principles themselves, many of these were the products of the early factory system, but rather his formal recognition and synthesis of these principles.

Scientific Management by Frederick Taylor Frederick Taylor's Scientific Management is identified with his school of thought. Taylor put forth his ideas in a book entitled, Prin ciples o f Scientific Management.' Taylor's first job was an apprentice with the Enterprise Hydraulic Works. Finishing his apprenticeship in 1878, Taylor joined Midvale Steel Company as a common laborer. In six short years, he rose through eight positions to chief engineer. During his earlier years at Midvale, Taylor worked with and observed production workers at all levels. It did not take him long to figure out that many workers put forth less than 100 percent effort. Taylor referred to this behavior of Taylor's Qifaker-Puritan background, it was hard for him to understand and accept this situation. Taylor quickly saw that workers had little or no reason to pro duce more because most wage systems of that time was based on atten dance and position. The piece-rate system had been, tried before but generally failed because of poor use and weak standards. Taylor be lieved a piece-rate system would work if the workers believed that the standard had been fairly set and the management would stick to it rather than to tradition and custom for setting work standards. Taylor's efforts became the true beginning of scientific management. Taylor re lied primarily on the stopwatch, since he focused on the amount of time required to complete a particular job. Thus, he is usually called the "father of time study." In his writings, Taylor presented a balanced view of scientific management. He believed that a "mental revolution" would have to take place before management and workers could see that their posi tions were compatible. He pointed out that as productivity rose, the Nature and Concept o f Management

49

salaries of both managers and employees would also arise. At the same time, he emphasized that managers must avoid such practices as rates cutting, because they lead to employee hostility toward management. Taylor even advocated the concept of units, a worker would be paid a. higher rate per unit for any additional units he proceeds and the rate per piece would increase after each succeeding level had been reached.

Taylor's Four Principles of Scientific Management: 1. Develop a science for each element of a man's work, to replace the old rule-of-thumb method. 2. Scientifically select and then train the worker. (In the past the worker had chosen his own work and trained himself as best he could). 3. Heartily cooperate with the men to ensure that all the work done is in accordance with the principles of the science develop for the work. 4. Divide the work and the responsibility equally between man agement and the workers. Management should take over from the workmen all work for which it is better fitted. (In the past almost all of the work and the greater part of the responsibility had been thrown upon the workers.) In essence, Taylor's scientific management stresses the need for developing the best way of performing each job; training and preparing workers to perform that job; and establishing harmonious cooperation between management and workers so that the job is performed in the desired way. Taylor's ideas have led to two managerial practices: piecerate incentive system and time-and-motion study. The purpose of the piece-rate incentive system is to reward the worker who produced the maximum output. Taylor felt that relating pay directly to output served both the worker's interest and management's requirements. Under this system, if the worker met the established standards of performance, he earned the base rate set by the management using scientific methods. If the worker's output exceeded the set standards, his wages would go up. The increased wages rate was calculated so that companies would be making more profits from the increase in output, even though they would be paying more in wages.

The Gilbreths and Motion Study Two other researchers, Frank and Lilian Gilbreth (1912), empha sized the ideal motions required to perform a job in an optional fashion. These researchers developed the concept of the therblig (Gilbreth spelled backward except for the transposition of the H and T for ease of pronun ciation); a therblig is an elemental hand or arm motion. According to the Gilbreths, tnere are seventeen therbligs. To pinpoint the therbligs suitable 50


for a particular job/ the Gilbreths photographed the worker in action and then observed the film in slow motion. The Gilbreths used motion study successfully in many different situations. In one study, they analyzed the work of stonemasons-skilled work with a centuries old tradition. The Gilbreths noticed that each stonemason soon got tired because he had to bend continually to pick up bricks which were arranged in a small pile before him. To eliminate wasted motions, the Gilbreths constructed a special adjustable stand for the bricks. Productivity rose to 200 percent.

Human Relations School The human relations theory emphasizes exactly what the classi cal theory ignored: the human element. The beginnings of this school of thought can be traced back #> the famous Hawthorne Studies at the Hawthorne Plant of the Western Electric Company in the United States. These studies were conducted by Elton Mayo and his associates from Harvard University. Initially, the researchers were interested in investi gating the relation between the illumination factor and productivity. A detailed analysis of these studies shed some light on the human behav ior in work situations. The Hawthorne employees interpreted the ex perimentation with illumination as evidence of >the fact that manage ment was interested in them and their welfare and the result was an increase in productivity. The powerful role played by the informal groups and interpersonal relations were' also recognized as a result of these studies. > The purpose of the human relations movement, as claimed by the theorists, was not to replace the classical school of thought but to re orient its thinking, from the financial to the human factor. The human relations theory draws its backing mainly from the field of social psy chology and from other related fields. Drawing a theoretical framework from these fields, concepts such as leadership, motivation, change, con flict, and communication were studied and researched in the context of the industrial situation. As a result of these studies, several prescrip tions were offered to solve various industrial problems. The practitio ners in the field of management learned how to overcome resistance to change; how to motivate employees with long-range effects; how to improve communication techniques and methods; how to provide good leadership, and so on. Theorists like Argyris, Barnard, March, Simon, Likert, McGregor, and others have made valuable contributions to this school of thought. The human relations theorists contend that an employee must be treated as a human being and not as a mere factor of production. Critics contend that the human relations theorists have placed too much em Nature and Concept of Management

51

phasis on the human aspect in the organization. Business organizations are not social welfare organizations and to survive in the highly com petitive environment, they have to consider many other factors besides the human factor. Perhaps not surprisingly, the criticisms of both the classical theory and the human relations theory have led to some new thinking in the field of organization theory, the management science or quantitative school of thought.

Management Science or Quantitative School of Thought The management science approach stresses the use of quantita tive techniques and methods in decision making. According to the theo rists who belong to this school of thought, management simply make a series of decisions. The whole emphasis is on decision making. This school of thought is also known as the quantitative school of thought because a wide variety of quantitative tools for analyzing information in the decision making process. The quantitative approach was initiated during the 1940s. The management science or quantitative approach advocates a logical sequence of problem formulation, gathering information and data, constructing mathematical models, exploring tentative solutions, testing the suggested solutions, and executing them. Since the emphasis is on quantitative approach, it requires, the skills of individuals with mathematical, statistical, engineering, economics, and general business background. Since one individual may not have a varied background, this school of thought suggests a team approach to decision making. Quantitative tools commonly used are: waiting line theory or queueing theory, linear programming, program evaluation review tech nique (PERT), critical path method (CPM), Monte Carlo method, deci sion theory, simulation theory, probability theory and so on. Some of these techniques will he discussed in the chapter dealing with decision making. In general, the use of quantitative techniques in the decision making process is known as operations research. Miller and Star define operations research (OR) as "applied theory," in which the manager attempts to achieve rationality in dealing with problems by using any scientific, logical, or mathematical means. Some theorists attempted to describe the decision-making pro cess, drawing knowledge and skills heavily from economics and psy chology. This approach is known as descriptive decision theory. There are those theorists who attempted to prescribe how decisions should be made, given the goals and resources of the organization. It will be quite a laborious task to identify all those who contrib uted to this school of thought. They go by various titles ranging from management analysts to operations researchers. 52


However, they share certain common characteristics such as: 1. The application of scientific approach to managerial problems and situations. 2. The main concern is for the improvement of manager's decision-making. 3. A high regard for economic effectiveness. 4. A reliance on the use of quantitative tools or mathematical models. 5. The use of electronic computers in decision making and other areas of management.

Modern Management There is no such theory as the modem management theory since there is no one theory accepted by all theorists in the field. The modem management theory is not a single view or theory expressed or formu lated by a particular theorist. It has taken different directions and it is still in the process of evolving. The contributors to modem manage ment theory come from the behavioral sciences, operations research, management science, and contingency or situational theory. No com promise has been reached among these contributions as to what consti tutes the complete modem management theory. Harold Koontz contends that the development of modem man agement theory has led to a kind of destructive jungle warfare and the management theory looks like a jungle. Let us briefly look at some significant views taken by theorists in developing the modern manage ment theory and finally, examine the attempt made by Scott to integrate all these views and theories into one theory. Modem management can be classified into three different levels: Top M a n a g e m e n t:

• Develops and reviews long-range plans and strategies. • Evaluates overall performance of various departments and ensures cooperation. • Involves in the selection of key personnel. • Consults subordinate, manages on subjects or problems of general scope. M id d le M a n a g e m e n t:

• Makes plans of intermediate range and prepares long-range plans for review by top management. • Analyzes managerial performance to determine capability and readiness for promotion. • Establishes departmental policies. Nature and Concept of Management

53

• Counsels subordinates on production, personnel or other problems. • Selects and recruits personnel. Supervisory M anagem ent:

• • • • •

Makes detailed, short-range operating plans. Reviews performance of subordinates. Supervises day-to-day operations. Makes specific task assignments. Maintains close contact with operative employees.

Major Components and Related Major Events of Management Movements MANAGEMENT MOVEMENT COMPONENTS

RELATIVE MAJOR EVENTS

U.S. Industrial Revolution (prior to 1875)

Steam power (1700-1810) Railroad boom (1830-50) Telegraph (1844) Formation of corporate giants: John D. Rockefeller (oil) Andrew Carnegie (steel) Cornelius Vanderbilt (shipping and railroads) Henry Toione, "The Engineer as Economist, 1886 Frederick W. Taylor's Work (1895-1915) Carl Bath Morris Cooke Henry Lazvrence Gantt Frank and Lilian Gilbreth Harrington Emerson Henri Fayol, Administration Industrielle et Generale, 1916 Founding of professional management societies (1920s) Mooney and Reiley, Onward Industry 1931 Hawthorne Studies, led by Elton Mayo (1924-32) Mary Parker Follet (1920-33) Chester Barnard, Functions of the Executive, 1938

Captains of Industry (1875-1920)

Scientific Management era (1895-1920)

Period of solidification (1920 to early 1930s)

Human relations movement (1931 to late 1940s)

54


Management process period (early 1950s to early 1960s)

Management theory jungle (early to late 1960s) Systems approach (late 1960s to early 1970s) Contingency approach (1970s)

International movement (1970s-1990s)

Storrs' translation of Fayol's work (1949) Ralph Davis, Top Management Planning, 1951 George Terry, Principles of Management, 1953 Koontz and O'Donnell, Principles of Management, 1955 Process approaches Quantitative approaches Behavioral approaches Integrating various approaches to the study of management Theorizes that different situations and conditions require different management approaches Increased awareness of international and global markets managerial approaches.

A D V A N C E D M A N A G E M E N T PROGRAM IN T H E PH ILIPPINES During the period of our ancestors, organization and manage ment were already existing. This kind of organization vâs in a form of structure called "barangay" or "balangay" headed by a "datu" or chief tain. These "barangays" were created as protection and security against invaders. When the Philippines was colonized by Spain, the Spaniards in troduced the modem Roman form of government. For almost three hundred years this type of organization and management proved very effective and formidable. Eventually, the Spanish government instituted this structure to promote and protect its personal interest in the country. After World War II, a professional and management organization called the Association of Management and Industrial Engineers in the Philippines (AMIEP) was organized in September, 1953, under the lead ership of Dr. Lilian Gilbreth, a well-known authority on scientific man agement and human relations. Some of its objective were: 1. to give professional assistance to practitioners and students of management and industrial engineering; Nature and Concept of Management /

55

I 2. 3. agement 4.

to introduce the concept ot Taylor's scientific management; to develop continuous study and research in the field of man and engineering; and to install professionalism among its members.

Another significant event transpired when a management con vention of the Advanced Management Program (AMP) in the Far East was convened in August, 1950 in the Philippines. Administrators, su pervisors, heads of the various sectors, the government, business, and industry participated in this professional exercise. This program became possible when some Filipino business managers attended the AMP at Harvard. Based on their experience and exposure in the program, they encountered the problems of time and money for travel and stay in the United States. With this in mind, the Filipino executives negotiated with the dean of Harvard School for approval of the proposed program. The dean thought that the proposal was realistic and constructive, so that the first program was conducted in the Philippines on June 25, 1956. It was officially opened at the Pines Hotel in Baguio City. The "Baguio Program" was known as the Asian Institute for Advanced Management (ALAM). The Filipinos who attended the various sessions of the program realized the importance of the course in the development of business and industry in the country. Later, the program was jointly sponsored by Ateneo de Manila, De La Salle, and the University of the Philippines which, incidentally, are the pioneer schools in the field of management. Other schools fol lowed the footsteps of the three universities by organizing their own advanced management course (Master in Business Administration). A management institution was established in the country whose objective is to develop the managerial skills of the Filipino entrepreneur as well as his Asian brothers. This school is popularly known as AIM or Asian Institute of Management which is located at Makati City. The cost of taking the MBA program in the Philippines is vari able. It ranges from P3,000 to P8,000 or even P20,000 in one semester depending on the school's standard and the number of units taken. Normally, the allowed minimum number of units is three and a maximum of nine or twelve units per semester.

56


T H E M B A STORY

The MBA Program, Past and Present In the history of professional education, training is a relative newcomer. Up to the end of the 19th century, business training for the most part meant apprenticeship, either in the family firm or as a trainee in one of the larger trading houses or merchant banks. This is under standable because, business in those early days was a relatively uncom plicated affair. Business enterprises were generally very small by mod em standards, and a trade was limited in terms of both distance and products. Business practices were simple and traditional. Indeed it's been said that a Venetian entrepreneur of the 14th century would have Pennsylvania, made possible by an endowment from the American in dustrialist, Joseph Wharton. The school, one of the most prestigious in the world, bears his name to this day. By the end of the century, busi ness schools had been established at the University of Chicago, and the University of California at Berkeley. Four more were established in 1900 and by 1925 there were 183. The University of Chicago was the first to offer a graduate busi ness program, but it was the Harvard Graduate School of Business, established in 1908, which pioneered the development of the MBA pro gram. Importantly, Harvard geared its graduate program towards stu dents with non-business undergraduate degrees. This pattern is similar to the study of law and medicine, and unlike other professional training like engineering. The Harvard prototype, two years of graduate busi ness education following a non-business undergraduate degree, charac terizes the vast majority of MBA programs today. From its humble beginnings at the turn of the century, MBA programs have grown immensely. In 1963, five thousand MBA degrees were awarded in the United States. By 1994, this has increased by more than ten-fold to 80 thousand. Part of this is explained by growth in all graduate education, but it is also true that the MBA program has be come more popular among students. In 1963, just 6 percent of all mas ters degrees were in business, by 1994 this had grown to 40 percent. Today, approximately 800 American business schools offer MBA. Some of these have established programs abroad, and of course there are a number of foreign institutions, particularly in Canada, Aus tralia, United Kingdom, and the Philippines which offer the degree.

W hat is Taught? While there are variations, most MBA programs have a similar core curriculum. This is true for American schools and for foreign insti tutions which rely heavily upon the American model. The core encom Nature and Concept of Management

57

passes five broad subject areas: foundation subjects, functional subjects, behavioral subjects, environmental subjects, and integrative subjects. Included among the foundation subjects are economics, statistics, mathematics and more recently, data processing. These disciplines form the tool kit for the study of business subjects. For example, statistics play a vital role in marketing and finance. Often students whose under graduate training included these subjects are excused from this course in the MBA program. The functional subjects are those most often associated with the study of business. They include accounting, finance, marketing, pro duction management, operations research, international business, and personnel management. These subjects parallel functional areas within the business enterprise and prepare the MBA student with the tools depending upon the course being taught, and the instructor's preferred method for teaching.

T h e Future There is no question that the MBA degree has been an immense success. Explaining the popularity of the degree, the dean of the Wharton School, Thomas P. Genity said: "Companies think they are getting bright, articulate, educated people. The market wants more of these people, and the market will continue to want them as long as we continue to get top people. It feeds off itself" (Business Week, March 9, 1999). So what lies ahead for the MBA degree? Experts in the field of business education acknowledge that MBA students have been welltrained in problem solving and policy implementation, but many now are sounding a note of alarm over the lack of a third, and crucial still: entrepreneurial leadership. H.J. Leavit, in his article? "Management and Management Education: What's Right and What's Wrong?" argues that management education over the past thirty years has been preoccupied with teaching the use of analytic methods to solve problems. What's been missing is an emphasis on what he calls path-finding, a mix of "vision," values and determination which adds soul to the organiza tion." Can leadership be taught in graduate business schools? Leavit thinks it possible, but doing it is the challenge facing MBA programs >ver the next decade. R E V IE W Q U E S T IO N S 1. 2.

Evaluate the concept of management as "getting things done through other people." Give a comprehensive definition of management and discuss its meaning. How does your own definition differ from this/ I

58


3. 4.

Is management a science or an art? What are the different organizational levels and what are the char acteristics of each? 5. . State the four classifications of management theories and briefly describe each purpose. 6. What is scientific management? Who proposed it? Discuss the four main principles of scientific management. 7. Will all these schools of management ever be merged? Give your reasons. 8. What was Henri Fayol's major contribution to the management movement?

D IS C U S S IO N Q U E STIO N S 1. 2. 3.

4.

5. 6. 7.

How do Taylor's and Fayol's approaches to the management pro cess differ and how do they compare similarly? Why have Taylor and scientific management been misunderstood by many people as inhumane? Management has often been described as an yniversal process, meaning that the basics of management are transferable and appli cable in almost any environment. Comment on this statement. How does one decide who is and who is not a manager in a given organization? For example, is the operator of a one-person business, such as a comer grocery store, a manager? Can management be learned through books and study or only through experience? Discuss the following statement: "All entrepreneurs are managers, but not all managers are entrepreneurs." "Successful managers adapt their style to the situation." Discuss your views on this statement.

E X P E R IE N TIA L EXERCISES 1. 2.

Discuss how you can make use of or apply the concept of manage ment in your routinary/daily activities. Think of a concrete situation in which you can use the following principles of Taylor and Fayol: a. Scientific Management b. Division of Work c. Unity of Command d. Remuneration Nature and Concept of Management

./ 59

3.

4.

e. Stability of Tenure f. "Esprit de Corps" g. Span of Control h. Centralization/ Decentralization Bring to class copies of undergraduate and/or graduate manage ment programs (prospectus, curriculum, brochures, etc.) of any col lege or university. Evaluate their relevance to the present business conditions. Make an appointment with a manager, officer, or an administrator of a company, hotel, hospital, government department or and other organization. The person whom you have chosen can be at any level of management. Find out from him/her the following details: a. His/her position in the organization. b. Number of subordinates under him/her. c. Activities or functions performed in his/her role. d. Skills he /she thinks are necessary to be successful in the job. e. How he/she spends an average day at work.

REFERENCES

1.

Terry, George R. Principles o f Management. Illinois: Richard D. Irwin, Inc., pp. 2-4.

2.

Koontz, Harold and O’Donnel, Cyrill. Essentials o f Management. New Delhi: Tata-McGraw-Hill Publishing Co., Ltd., 1998.

3.

Martinez, Esdras T., et. al. Management Theory and Practice. Manila: GIC Enterprises, Inc., 1997, p. 20.

4.

Dale, Ernest. Management Theory and Practice. New York: McGraw-Hill Book Company, 1996, p. 10.

5.

Putti, Joseph. Management: A Functional Approach. Singapore: McGrawHill Book Company, 1997.

6.

Joon Eng Chua, et. al. Management o f Business. Singapore: McGraw-Hill Book Company, 1997.

60


W orksheet No. 2.3

NATURE & CONCEPT OF MANAGEMENT

Name: _________________ _____________ Year/Section: ----------------Professor: __________________________

Date: -----------------------------

Discuss how you can make use of or apply the concept of Management in your routinary / daily activities.


61

■


W orksheet No. 2.4


Name: _________________ _____________

Year/Section:

Professor: __________________________

Date: ---------

Think of concrete situations in which you can use the following prin ciples o f Taylor and fayol PRINCIPLES

ORGANIZATION/ INDIVIDUAL

HOW USED/SITUATION

1. Scientific M anagem ent

l

2. Division of Work


63

PRINCIPLES

ORGANIZATION/ INDIVIDUAL

3. Unity of Command

4. Rem uneration

5. Stability ,of Tenure

64


HOW USED/SITUATION

P R IN C IP L E S

O R G A N IZ A T IO N / IN D IV ID U A L

H O W U S E D /S IT U A T IO N

6. Esprit de Corps

*

7. Span of Control

8. Centralization/ Decentralization

©


65

Worksheet No. 2.5


Name: _______________________ _

Year/Section:_________

Professor ____________________ ___ Date:________________ Bring to the class, copies of undergraduate and / or graduate manage ment programs (prospectus, curriculum , brochures, etc.) of any college or university. Evaluate the relevance of the program to the present business conditions. NAME OF SCHOOL

MANAGEMENT PROGRAM /

(U n d e rg ra d u a te a n d / o r G ra d u a te )

M A JO R O F F E R E D

O B J E C T IV E S O F

M A NA G EM EN T SUB JECTS

T H E P R O G R A M / M A JO R

OFFERED

Nature and Concent of Manaoement

67

RELEVANCE OF THE PROGRAM / MAJOR TO THE PRESENT BUSINESS GLOBAL CONDITIONS

68


W orksheet No. 2.6


Name: _____________________________

Year/Section: -----------------

Professor: _________________________

Date: -----------------------------

Find out from him / her the following details: Make an appointment with a manager, officer, or an administrator o f a company, hotel, hospital, government and / or other type of organization. The person whom you have chosen can be at any level of management. Position in the Organization Number of subordinates under him/her Activities or functions performed in his / her role.

Skills he/she thinks are necessary to be successful in the job.

How he/she spends an average day at work.


69

•u

70


Management Functions **,

Chapter 3: Planning Chapter 4: Organizing Chapter 5: Staffing Chapter 6: Directing Chapter 7: Controlling

M«n*jj«*n*nt for Filipinos

Chapter 3

Planning Learning Objectives: At the end of the chapter, the student is expected to understand the following: • Definition o f’Planning • The Nature of Planning • Major Types of Plans • Basic Steps in Business Planning • Other Types of Plans • Decision Making • Planning Techniques and Tools • W hy Managers Fail in Planning

“ We all have ihe right to make bad decisions; that's how we learn to make goods ones" - Larry Williams

D E F IN IT IO N O F P L A N N IN G

P

A LANNING is a logical and systematic approach of formulating the objectives, programs, policies, procedures, budgets, rules and regu lations, and other types of plans. Planning is considered the most basic of all managerial functions (organizing, staffing, directing, and controlling). Without this basic function, the other four functions of the manager cannot be tackled efficiently and effectively. Therefore, a manager organizes, staffs, di rects, and controls in order to guarantee the attainment of objectives and the other types of plans made.

T H E NATURE OF P LA N N IN G

Four major factors summarize the essential nature of planning. These are: 1. Contribution to purpose and objectives

Planning is required to facilitate accomplishment of business purposes and objectives. This statement is taken from the nature of organizeu business. 2. Planning as the first basic function

Since managerial functions of organizing, staffing, directing, and controlling are designed to support the accomplishment of business objectives, planning is logically performed before the execution of all other managerial functions. Besides, a plan must be formulated to ac complish the objectives before any manager knows what kind of orga nization structure and job description and qualifications are needed, how to direct subordinates, and what kind of control technique is to be applied. Inevitably, all the managerial functions must be planned if they are to be effective and efficient. 3. Planning as a function of all managers

Planning is a function of all managers, although the character and scope of planning will differ from one authority to another. The broader scope of planning goes far in clarifying the issue on the part of some students of management to distinguish between policy making and administration or between the “manager" and the "admin 74


istrator" or "supervisor". One manager, because of his authoniy or position in the organization, may do more planning than another, or the planning of one manager may be more basic and applicable to a larger portion of the business than that of another.

4. Planning for efficient organization The efficiency of a plan is evaluated by the amount it contributes to purpose and objectives as offset by the expenses and other things required to formulate and implement it. A plan contributes to the at tainment of objectives, but sometimes at too high or unnecessarily high costs. Plans may also become inefficient in the attainment of objectives by affecting group satisfaction. The new president of a company that was experiencing bankruptcy attempted quickly to reorganize and cut expenses by wholesale and drastic lay-offs of key employees. The? re sults are fear, resentment and loss of morale affecting productivity and thereby defeat his objective of eliminating losses and making profits. Attempts to install management evaluation and development program fail because of group resentment of the method used, regardless of the basic effectiveness of the programs.

MAJOR TYPES OF PLANS A n u m b e r o f d iffe re n t ty p e s o f m a n a g e m e n t p la n s e x is t. F o r t h i s p u rp o s e , c e r t a i n ty p e s o f p la n s h a v e b e e n s e le c te d . OBJECTIVE GENERAL —

DEPARTMENTAL

->

ENTIRE COMPANY TO COMPETE WITH CHRISTIAN COMPANY IN THE PRODUCTION AND SALES OF BALLPENS NEXT YEAR (2001)

- > SALES DEPT.

PRODUCTION DEPT.

PERSONNEL DEPT.

FINANCE DEPT.

TO MANUFACTURE 100,000 PIECES OF BALLPEN BY NOVEMBER 30, 2001

V

T,

MANUFACTURING

PLANNING & CONTROL

V GROUP

- > PURCHASING TO GET QUOTATIONS, COMPARE BIDS, PLACE ORDERS FOR ALL ITEMS AND MATERIALS

TO PREPARE AND RELEASE PRODUCTION QUOTAS TO DEPARTMENT HEADS.

TO PREPARE AND RELEASE PRODUCTION SCHEDULES.

Y SECTION

SECTION NO. 1

SECTION NO. 2

SECTION NO. 3

TO MANUFACTURE 30,000 PIECES OF BALLPEN BY JULY 15; AUGUST 4; SEPTEMBER 22, 2001.

Planning

75

INDIVIDUAL-------------------- >

WORKER A

4'

^

WORKER B

WORKER C

TURN OUT PARTS NO. 371 AT AN AVERAGE OF 75 PER HOUR.

WORKER D

TURN OUT PARTS NO. 948 AT AN AVERAGE OF 40 PER HOUR.

NOTE: ALSO RELATED TO MBO (MANAGEMENT BY OBJECTIVES).

Figure 3.1 Hierarchy of Objectives

Objectives or Goals Quite frequently goals and objectives are used interchangeably. The intended goal prescribes definite scope and suggests direc tion to maximize the efforts of a manager. It is also synonymous to aim, purpose, goal and mission. Objectives are the prime parts of the plans in the definition, we have stated that planning involved determination of desired future events. These results or events are objective and also go by the name of goals, targets, and so on. A n objective has to do with the direction in which an individual or organization wants to move. It is an estimated result expected in the future. Objectives are established at organizational, departmental, or individual level. To train five technicians in a particular skill on a given period, say in the next six months, can be an objective of a foreman. Objectives are usually expressed in quantifiable manner.

Mission It is the purpose or reason for the existence of an organization. The mission can be defined in terms of an organization's product/services or markets/customers. Marketing pharmaceutical products can be the mission of a drug manufacturing company.

Long-Range and Short-Range Objectives Long-range objectives generally go beyond the current fiscal year of the organization. They must support and not conflict with the orga nizational mission. But they may be quite different from the organiza tional mission and still support it. For instance, the organizational mis sion of a fast-food restaurant might be to provide a rapid hot food service to a certain area of the city. One long-range objective might be to increase sales to a specific level within the next four years. Obviously, this objective is quite differ ent from the organizational mission; but it still supports the mission. Short-range objectives should be derived from an in-depth evalu ation of the organization's long-range objectives. Such an evaluation 76


should result in a listing of priorities. Then short-range objectives can be set to help achieved the long-range objectives. All levels within the organization should set objectives of the organization based on the long-range objectives and short-range objec tives of the firm. Objectives at any level must be coordinated with and subordinated to, the objectives of the next higher level. All objectives are then synchronized and not working against each other. Objectives should be clear, concise, and quantified when pos sible.

Guidelines in Implementing Management by Objectives (M B O ) 1.

2.

3. 4.

5.

6.

7.

8.

9.

10. 11.

Adapt your objectives directly to organizational goals and strate gic plans. Do not assume that they support higher-level manage ment objectives. Quantify and target the results whenever possible. Do not formu late objectives Whose attainment cannot be measured or at least verified. Test your objectives for challenge and achievability. Do not build cushions to hedge against accountability for results. Adjust the objectives to tire availability of resources and the reali ties of organizational life. Do not keep your head either in the clouds or in the sand. Establish performance reports and milestones that measure progress toward the objective. Do not rely on instinct or bench marks to appraise performance. Put your objectives in writing and express them in clear, concise, and unambiguous statements. Do not allow them to remain in loose or vague terms. Limit the number of statements of objectives to the most relevant key result areas of your job. Do not obscure priorities by stating too many objectives. Communicate your objectives to your subordinates so that they can formulate their own job objectives. D o not demand that they do your goal setting for you. Review your statements with others to assure consistency and mutual support. Do not fall into the trap of setting your objectives in a vacuum. Modify your statements to meet changing conditions and priori ties. Do not continue to pursue objectives which have become obsolete.

To summarize, an M BO system in its simplest form, must meet the following minimum requirements: Planning

77

T H E E S S E N T IA L E L E M E N T S

T H E M AJO R S TEPS

>

1. F o rm u la te lo n g -ra n g e o rg a n iza tio n a l o bjectives.

> O b je c tiv e setting

2 . D e v e lo p specific divisional o bjectives.

- > 3 . E stab lish d e p a rtm e n ta l o bjectives. A ction planning 4 . S e t individual jo b o bjectives.

-£> 5 . F o rm u la te action plans. R e c y c le - > 6 . Im p le m e n t an d ta k e corrective action. S e lf- c o n tr o l

-> 7. R e v ie w progress tow ard o bjectives. P e rio d ic review s - > 8 . A p p ra is e o verall p e rfo rm a n c e , reinforce behavior, and streng th en m otivation through: a . M a n a g e r training a n d s e lf-d e v e lo p m e n t b. C o m p e n s a tio n c. C a re e r an d m a n p o w e r

Figure 3.2 The MBO Process

78


1. Individual objectives are jointly set by the subordinate and the superior. 2. Individuals are periodically evaluated and receive feedback concerning their performance. 3. Individuals are evaluated and rewarded on the basis of objec tive attainment.

Program It is th e a ctu a l c o u rs e o f a ctio n d e sig n e d to c a r r y o u t th e estab lish ed ob jective. To im p ro v e th e q u a lity lev el o f a p r o d u c t, a c o m p a n y m a y in stitu te a q u a lity a w a re n e ss p ro g ra m . It is a c o m p re h e n s iv e p la n th a t in d ica te s u se o f d iffe re n t re so u rce s in a n in te g ra te d p a tte rn a n d e sta b lish e s a se q u e n ce o f req u ired a ctio n s a n d tim e sch e d u le s fo r e a c h in o rd e r to a c h ie v e s ta te d objec tiv es. E x a m p le s : M a rk e tin g P ro g ra m , P e rso n n e l P ro g ra m , F in a n cia l P ro g ra m , etc. A p ro g ra m c a n b e ea sily a n d sy ste m a tic a lly s h o w n b y u sin g a p ro je c t sc h e d u le . P ro je c t sc h e d u lin g re fe rs to th e id e n tific a tio n a n d a n a ly sis o f th e activ itie s fro m the p ro je ct p la n n in g s ta g e u p to th e s ta rt o f n o r m a l o p e r a tio n s . In d e te r m in in g th e v a r io u s a c tiv itie s o f th e p ro je ct, a ss u m p tio n sh o u ld b e m a d e in to u ch in g all a s p e c ts o f th e s tu d y s u c h a s the p la n t site a n d lo ca tio n , b u ild in g co h s tru c tio n , e tc. To co n cre tiz e th e se q u e n ce o f th e v a rio u s activ itie s, a G a n tt C h a rt sh o u ld b e u s e d a s a p la n n in g a n d co n tro l to o l o f s tu d y in g the p ro je ct p ro p o sa l. It w a s fo rm u la te d in 1 9 1 7 b y H e n ry L . G a n tt, a n o te d p io n e e r in the field o f in d u stria l m a n a g e m e n t, a s a d e v ice fo r co n tro llin g the p ro d u c tio n o f ra w m a te ria ls. It is n o w w id e ly u se d fo r a v a rie ty of p u rp o s e s to su it p e r f o r m a n c e /o u tp u l/a c tiv itie s a g a in st a .tim e req u ire m ent

(See Figure 3.3)

P o lic ie s T h ese a re b a sic g u id elin es fo r a ctio n . T h e y in d ica te d w h a t is p e rm itte d an d w h a t is n o t p e rm itte d . P ro m o tin g p e o p le fro m w ith in c a n b e a p e rso n n e l p o licy of a co m p an y . P olicies are b ro a d , g e n e ra l g u id e s fo r a ctio n w h ic h co n stra in o r d ire ct o b jective a tta in m e n t. In this lig h t, p o licie s c h a n n e l h o w m a n a g e m e n t sh o u ld o rd e r its affairs a n d its a ttitu d e to w a rd m a jo r issu e s; they d ic ta te th e in ten t o f th o se w h o g u id e th e o rg a n iz a tio n . In o th e r w o rd s , p olicies d efin e th e u n iv e rse fro m w h ich fu tu re s tra te g ie s a n d p la n s are d e riv e d . " I t is th e p o licy of th e p u b lic re la tio n s d e p a rtm e n t to a n s w e r in w ritin g all w ritte n c u s to m e r c o m p la in ts " is a n e x a m p le o f su c h a policy. P lan n ln n

7Q

2001

1.

l

2002

lEnannEsaaanszEHH

. A C T I V I T I E S

PLANNING STAGE

2. PUTTING UP OF EQUITY 3. REGISTRATION 4. OBTAINING OF FINANCING 5. RIAN T SITE ACQUISITION 6. BUILDING CONSTRUCTION 7. HIRING & TRAINING OF PERSO NNEL 8. M ACHINERY SU PP U E S SELECTION 9. O RD ER AND RECEIPT O F MACHINES 10. INSTALLATION OF MACHINES 11. START OF NORM AL OPERATIONS

Figure 3.3 Gantt Chart

P o licy sta te m e n ts o ften cp n tain th e w o rd s to e n su re , to follow , to m a in ta in , to p r o m o te ,.to b e , to a c c e p t a n d sim ila r v erb s. P o licie s e x ist a t all le v e ls o f a n o rg a n iz a tio n . A ty p ica l o rg a n iz a tio n h a s so m e p olicies th at re la te to e v e ry b o d y in th e o rg a n iz a tio n a n d so m e th a t relate o n ly to ce rta in p a rts o f d ie o rg a n iz a tio n . A p o licy su c h a s " th is co m p a n y w ill a lw a y s try to fill v a c a n c ie s a t all lev els b y p ro m o tin g fro m w ith in " w o u ld re la te to e v e ry o n e in th e o rg a n iz a tio n .

P ro c e d u re s P ro c e d u re s a re series o f re la te d ste p s e x p re s s e d in ch ro n o lo g ica l o rd e r fo r a sp ecific p u rp o s e . P ro c e d u re s a n d ru les d iffer fro m p o licies o n ly in d e g re e . A p ro ce d u re d efin es in ste p -b y -ste p fash io n th e m e th o d s b y a n d th ro u g h w h ich p o licies are a ch ie v e d . T h e y o u tlin e p re cis e ly h o w a r e c u r r in g a c tiv ity m u s t b e a c c o m p lis h e d . P ro c e d u re s a llo w little flexib ility a n d d e v ia tio n . A c o m p a n y 's p o licy m a y b e to a c c e p t all c u s to m e r re tu rn s su b m itte d w ith in o n e m o n th o f p u rc h a s e ; c o m p a n y p r o ce d u re s w o u ld o u tlin e e x a c tly h o w a re tu rn sh o u ld b e p ro ce ss e d . W ellesta b lish e d fo rm a l p ro c e d u re s rue often k n o w n as sta n d a rd o p e ra tin g p ro c e d u re s (SO P s). T h e se a re in stru ctio n s a s to h o w a p a rtic u la r th in g sh o u ld b e d o n e . A se t o f p ro ce d u re s m a y b e p re sc rib e d in o p e ra tin g a m a c h in e o r h a n d lin g e m p lo y e e g rie v a n ce s. 80

Management for Fllipinoi

Rules Rules require specific and definite actions for a given situation. Rules leave little doubt about what is to be done. They permit no flex ibility and deviation. Unlike procedures, rules do not have to specify sequence, for example: "No smoking in the conference room" is a rule. These are very specific actions to be taken with respect to a situ ation. Wearing uniforms or reporting to work at a particular time are some examples.

Budget A plan stated in financial terms is called a budget. It is an esti mate qf income and expenditures for a future period. The use of budget enables executives to perform their management functions more effec tively since budget provides them with the proper guidance in matters of disbursement.

P h ilo s o p h y The values and beliefs an organization holds as the guiding light is the company's philosophy. These are usually passed on by the founder of the organization. Providing quality products at reasonable prices, providing comfort and enhancing the quality of life of society was the vision of Mr. Konosuke Matsushita, the founder of the electron ics firm bearing his name.

S t ra t e g y It is the method of shaping a company's future and involves determining the long-run direction of the organization. A company may have the strategy to diversify into related businesses within the next few years. From the above classifications, we can see that objectives are not the same as policies, rules, procedures, mission, strategy, philosophy, and programs. Although they are not the same, there are some relation ship among them. The word strategy originated with the Greeks around 400 B.C. It pertained to the art and science of directing military forces. A strategy outlines the basic steps and management intends to do to achieve its objectives.

Planning

81

BASIC STEPS IN BUSINESS P LA N N IN G

Business planning created through time as a series of ideas is gradually developed. Effective plans are not written in one sitting. Each part of the plan leads into the next. Each influences the other; all the parts are interdependent. The following are the basic steps in business planning: 1.

Define the business idea.

Write a description of the business idea. Get it into paper as con cisely as possible. This is by far the most important and most difficult part of the business plan. The more precise and specific this description, the easier the rest of the planning process. 2.

Establish goals and objectives.

There may be a wide range of goals or objectives that may be desired by the various units and elements of a company. Management by objectives, commonly referred to as MBO, can be a process for ex plicitly teaching the objectives of the organization. Applying manage ment by objectives involves participation in a sharing of important management functions by workers at all levels within the organization. Generally, the approach will involve the identification of goals for indi viduals, for groups and for the entire organization. Conversely, the goal sets for individuals are subsets of the entire goal set for groups, which are themselves goal subsets of the entire organization goals. Subordi nates and superiors jointly determine and agree upon the results they seek to achieve along with the standards that will be used to measure the results. 3.

Evaluate the ideas, goals, and objectives.

This is to determine whether or not a specific idea makes sense, whether or not it can work, and whether or not it can fulfill the series of goals and objectives identified in the preceding steps. Once the busi ness idea and the goals and objectives have been defined in writing, they can be compared to determine where complements and gaps may exist. 4.

Forecast cash needs.

It indicates the cash investment associated with different sets of alternatives. These funding or investment requirements include the specifications of need for capital, equipment, other capital needs, and the amount of working capital necessary. 82

M anagem ent fo r Filipinos

5.

Identify sources of funds.

Funds are potentially available to business from a wide variety of sources. These can possibly be taken from personal equity or borrowing from any banking institution, one's own funds, and what additional funds can be obtained from various outside sources. 6.

W rite a business plan.

A completed business plan is a summary and evaluation of the business idea. It is written as a result of the planning process. It shows the probability of success, the principles' ability to. make it work, the sources and uses of funds, and projected income flows and cash needs.

O T H E R TYPES OF PLANS Plans can be classified in a number of ways on the basis of fre quency of use and the time horizon. Let us take a look at some specific types of plans.

Standing Plans These plans serve as guidelines to managerial action. Managerial efficiency is enhanced because once the decision is made, it stands with out the necessity of deliberation each time â s’milar situation arises. These plans bring consistency to the operations. A bank granting loans for house construction is an example. It does not need a different plan to handle each loan. It uses one standing plan that anticipated in ad vance whether to approve or not any request for a loan. Standing plans are used where an activity occurs repeatedly.

Single-use Plans These plans are designed for a specific purpose or period. The plan ceases to exist when the goals are achieved. One common single use plan is the budget. A plan to set up a warehouse is another example of a single-use plan.

Long-range Plans These are the strategic plans of the organization. To become a leader in its industry may be a long-range plan for an organization. It takes time to achieve this goal. Under this plan, assumptions must be made about uncontrollable and controllable variables. Technological change is an uncontrollable variable, over which a manager may not have any control because it takes place in the external environment. A manager may have control over the product line of the organization. The time span'of long-range plans cannot be stated specifically because Planning

83

Relationship Between The Planning Process And The Business Plan B U S IN E S S P L A N I.

D escription o f th e B usiness 1. C o m p a n y ’s N a m e 2. P ro d u c t/S e rv ic e 3 . Industry

II. M a rk e tin g A s p e c t 1. T a rg e t M a rk e t 2 . M ark e tin g P ro g ra m a. P ro du ct S tra te g y b. P la c e S tra te g y c. P rom otion S tra te g y d. Pricing S tra te g y

III. M a n a g e m e n t/O rg a n iz a tio n A s p e c t 1. F o rm of O w n e rs h ip 2. O rg a n iza tio n a l Structure 3 . Job A nalysis 4 . C o m p e n s a tio n S c h e d u le 5. P ro ject S c h e d u le (G a n tt C h a rt)

IV.

P rodu ctio n/T echn ical A s p e c t 1. D escription o f th e P roject 2. M an u fa c tu rin g P ro cess 3 . P la n t S iz e a n d Production S c h e d u le 4 . M a c h in e ry an d E q u ip m e n t 5. P la n t Location 6. P la n t Layou t 7. Building an d Facilities 8. R a w M a te ria ls and S up p lies 9. W a s te D isposal

FINANCIAL PLAN

V.

Finan cial A s p e c t 1. Total P ro ject C o s t 2 . S o u rc e s o f Fin an cin g 3. Financial S ta te m e n ts 4 . Financial Analysi.s

84 •


circ u m sta n ce s v a r y fro m o rg a n iz a tio n to o rg an iz a tio n . In p ra c tic e they m a y ra n g e fro m 3 to 5 y ears.

Interm ed iate Plans T h e se p lan s fo llow o n ce th e lo n g -ra n g e p la n s a re fo rm u la te d . To b e co m e a le a d e r in its in d u stry (th e lo n g -ra n g e p la n a n o rg a n iz a tio n m a y p la n to se t u p re g io n a l sales offices). In te rm e d ia te p la n s a re m a d e fo r th e rea liz a tio n o f lo n g -ra n g e g o a ls. T h ese p la n s u su a lly c o v e r a one to th re e -y e a r p erio d .

Sh o rt-range Plans T h ese p la n s p ro v id e the g u id elin es fo r d a y -to -d a y a ctio n s in the o rg a n iz a tio n . T h ese p lan s m a y c o v e r u p to a year.

M arketing Plans T h e c o m m o n objectives o f m a rk e tin g p la n s a re to in cre a se th eir p re se n t m a rk e t sh are an d d e v e lo p n e w p ro d u c ts . T h e se o b jectives are co n v e rte d in to o p e ra tio n a l p lan s.

Production Plans T h e se fo c u s o n p ro d u c in g th e d e s ire d a m o u n t o f g o o d s d e m a n d e d a t th e m a rk e t p lace. P ro d u c tio n p la n n in g in v o lv e s ro u tin g , sch ed u lin g , a n d d isp atch in g p ro ce ss e s. R o u tin g d e te rm in e s th e p a th fo r th e flow o f p ro d u c tio n . S ch ed u lin g se ts u p a tim e-tab le. D isp a tch in g sig n als th e flo w of tim e an d fin d re a s o n s fo r d elay s.

Financial Plans T h ey p ro v id e a q u an titativ e b asis fo r d e cisio n m a k in g a n d c o n trol. T h e fin an cial d a ta tells m a n a g e rs h o w w e ll th e y a re d o in g , the n e e d fo r w o rk in g cap ital, the n e e d fo r e x p a n sio n a n d th e s o u rce s of fu n d s.

Manpower Plans T h ese in v o lv e a sy ste m a tic w a y o f d e te rm in in g th e ty p e s o f p e r son n el n eed ed in the lon g a n d s h o rt-ra n g e fo r a n o rg a n iz a tio n . P e rs o n n el of v ario u s qualities a n d q u an tities m u st' b e re c ru ite d a n d m a d e availab le a t a p p ro p ria te tim es. To a ch ie v e this, fo re ca s ts a re n e c e s s a ry as to the d em an d a n d su p p ly o f labor.

Strategic Plans These in v o lv e d eterm in in g th e m a jo r g o a ls o f th e e n tire o rg a n iz a tion an d the p olicies to g u id e th e a ch ie v e m e n t o f th ese g o als. T h is o c c u rs a t h ig h er levels and in v o lv e s a lo n g e r p e rio d o f tim e . A ll ty p e s of fo recasts are n e e d e d for this ty p e o f p lan n in g .

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Tactical Plans They deal with the determination of the short term-specific uti lization of the resources of the organization in achieving its strategic goals. The reliance for tnese plans is on past performance and as to how an organization previously allocated its resources.

Planning Horizon: Short-Range Versus Long-Range Short-range plans generally cover up to one year. Long-range plans start at the end of the current year and extend into the future. How long should a long-range plan be? The question cannot be an swered specifically. The right time frame varies with the organization and tire nature of the specific environment and activity. What may be long-range given a specific environment and activity.' What may be short range when operating in a relatively static environment. In prac tice, most long-range plans span at least three to five years, with some extending as far as 20 years into the future. While long-range planning is possible at any level in the organization, it is primarily carried out at the top level of the organization.

Functional Plans In addition to being long-range or short-range, plans are often classified by function or use. The most frequently encountered types of functional plan are sales and marketing plans, production plans, finan cial plans, and personnel plans. Sales and marketing plans are for de veloping new products/services and setting both present and future products/services. Production plans deal with producing the desired product/services on a time schedule.

Operational versus Strategic Plans Strategic planning is the process which sets forth organizational objectives to be achieved, strategies and policies needed to reach those objectives, and short-range plans to make sure that the strategies are successfully implemented. For practical purposes, the strategic plan ning is analogous to top-level long-range planning. The terms strategic planning, top-level long-r^nge planning, and corporate planning basi cally means the same thing and are interchangeable. Operational or tactical planning is short-range planning and con centrate on the formulation of functional plans. Production schedules and day-to-day plans are examples of operational plans. However, the distinctions between strategic and operational planning are relative, not absolute. The major difference is the level at which the planning is done. Strategic planning is primarily done by top-level managers; op erational planning is done by managers at all levels in the organization and specially by middle-and lower-level managers. 88


D E C IS IO N M A K IN G This is the process of choosing a specific procedure or course of action from among several possible alternatives. In the business world, a great investment in time, economy, effort, personnel, and materials may be involved in making a decision. The extent to which these things are involved, as well as the total effect of their involvement, depend on the business level'at which the decision is made. Judgment is important in decision making. Decision making can be determined by non-quantitative means, such as intuition, facts, experiences, and opinions. Many decisions in management are also determined by quantitative means such as operations research, linear programming, simulation, Monte Carlo, gaming, and program evaluation review technique (PERT). A number of sophisticated techniques are available which aid the decision making process. Some of these techniques have already been discussed in the chapters dealing with planning and controlling func tions. In this section, we .will discuss some other techniques used in the decision making process. Our discussions will cover only the basic as pects of these techniques.

Marginal Analysis This tool is used in decision making to figure out how much more output will result if one more variable (worker) is added. Samuelson defines a marginal product as the extra product or output added by one extra unit of that factor. While other factors are being held constant. This technique is particularly useful for evaluating alternatives in the deci sion making process.

Financial Analysis This is another tool in decision making used for estimating the profitability of an investment, calculating the payback period, and ana lyzing cash inflows and outflows. Investment alternatives can be evalu ated using a discounted peso analysis of cash inflows and outflows.

Break-even Analysis This is another tool which enable a manager to see the effects of alternatives available based on price, fixed cost, and variable cost per unit. With this tool it is possible to determine what will be the break even point for a company as a whole or any of its product. At break even point, total revenue equals total cost and there is no profit.

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Ratio Analysis It is an a cc o u n tin g too l u sed fo r the in te rp re ta tio n o f a cc o u n tin g in fo rm atio n . T h e b asic fin ancial ra tio s c o m p a re c o s ts an d re v e n u e fo r a p a rtic u la r p e rio d . T h ese ratio s b rin g o u t a relatio n sh ip b e tw e e n tw o fin an cial asp e cts. Som e ra tio s are: C u r r e n t A s s e ts

C u r r e n t a s s e ts

C u r r e n t lia b ilitie s _______T o ta l d e b t_______

D e b t to e q u ity

E q u ity S a le

In v e n to r y tu r n o v e r

I n v e n to ry N e t o p e r a tin g p ro fit

N e t o p e r a tin g m a rg in

S a le s N e t p ro fit a f t e r t a x e s

R e tu r n on c a p ita l

N e t w o rth

Operations Research Techniques O p e r a tio n s re s e a rc h in v o lv e s th e a p p lic a tio n o f q u a n tita tiv e m e th o d s to d ecisio n m ak in g . O p e ra tio n s R e se a rc h (O R ) h a s b e e n d e fined b y M iller a n d S ta rr a s "A p p lie d D ecisio n T h e o ry ," in w h ich the d ecisio n m a k e r seek s scientific, lo g ical, o r m a th e m a tic a l m e a n s. O b ser v a tio n , an aly sis, h y p o th e sis fo rm u la tio n , a n d e x p e rim e n ta tio n are the m e th o d s g en e ra lly u sed in O R tech n iq u es.

1. Queueing

or

Waiting-line Method

T h is m e th o d u ses m a th e m a tica l tech n iq u es fo r b a la n c in g w a itin g lin es a n d se rv ice s p ro v id e d . W h e n th ere is irre g u la r d e m a n d , w a itin g lin es o c c u r an d the m a n a g e r m u s t d e cid e h o w to h a n d le th e situ atio n . If p e o p le w a itin g in q u eu es are n o t g o in g to b e p ro v id e d q u ick se rv ice , th e y m a y g o elsew h ere.

2.

Linear Programming

T his tech n iq u e is u sed re so u rce o r lim ited re so u rce s least co st, h ig h e st m a rg in , an d a lte rn a tiv e u ses. T his m e th o d

in d e cisio n s in v o lv in g the allo ca tio n o f to re a c h a p a rtic u la r o b jective su ch as, so on. W h e n th ese re s o u rc e s h a v e se v e ra l is u se d fo r so lv in g sim p le, co m p le x , a n d

ro u tin e p ro b le m s. In o rd e r to ap p ly this m e th o d , the situ a tio n m u st in v o lv e tw o o r m o re activ ities co m p e tin g fo r lim ited re s o u rc e s a n d all rela tio n sh ip s in th e situ atio n m u s t b e linear. 88


3.

C a m e T h e o ry

This involves selecting the best strategy, taking into consideration one's actions and the action of one's competitors. Thus, it is a "conflict of interest" situation where one individual tries to win. McDonald con tends that the strategic situation is the theory which lifes in the instruc tion between two or more individuals, each of whose actions is based on an expectation concerning the actions of others over whom he has no control. When one individual wins, the other losses. Minimizing the maximum loss (minimax) and maximizing the minimum gain (maximini) are the two concepts used in the game theory. 4.

S im u la tio n

This technique involves the building of a model that represents a real or an existing system. These models are useful in evaluating^ and selecting the best one. The blueprint of a proposed building is an ex ample of simulation. In recent years, computers are being widely used in simulation techniques. Role playing or teaching concepts through case studies are some form- of simulation techniques. A L T E R N A T IV E S C H A N C E E V E N T if good m arket

P120,000

T1 if poor m arket

P 40,000

T1 if good m arket

P 80,000

T1 if poor m arket

P 50,000

T1

Figure 3.4 Decision Tree

5.

D e c is io n Tree

This is an interesting technique used in analyzing a decision. Through a graphic illustration, the alternative solutions can be identi fied and probability estimates are assigned to these alternatives and pay-offs relating to alternatives can be determined. Figure 3.4 shows that the decision involves two alternatives: (a) buying a new machine and (b) repairing the existing machine. Under Planning

89

the decision to buy a new machine are conditions where a good market exist and where poor market conditions exist. This follows also for the alternative of repairing the old machine. The payoff under each of these cOhditions is shown at the end. In more complex decision trees, prob ability estimates and expected values of various alternatives will be shown. Whether decision making uses these techniques or not, the man ager must bear certain facts in mind. A clear understanding of objec tives is essential for effective decision making. These objectives include not only decision objectives, but also organizational objectives. Some decision makers simply rely on reports for information without actually examining what is going on in their departments as well as in the entire organization. This reality-checking improves the objectivity in decision making. By encouraging the participation of those who are affected by the outcome of the decision, the decision maker can anticipate any re sistance and thus focus his attention on reducing or eliminating this resistance. This will assure the smooth implementation of a decision once it is made. Strengthening of internal communication is another important area a decision maker must look into. He must realize the importance of communication in the decision making process. Commu nicating is the medium for decision making. The reliability and validity of information cannot be achieved without good communication tech niques and practice. Some decision makers tend to develop the habit of "crisis deci sion-making." This involves deciding under stress. The decision mak ing is not good in this case. When the right moment is passed, even an excellent decision may not have any value.

The Decision Making Environment The business system model helps to place the decision makiftg environment in its proper perspective. Most companies have three lev els of management: operational, tactical, and strategic. • Strategic-level managers determine long-term strategies and set corporate objectives and policy consistent with these objectives. • Tactical-level managers are charged with the responsibility of implementing the objectives and policies set forth at the strategic level of management. To do this, the manager identifies specific tasks that need to be accomplished. • Operational-level managers complete specific tasks as directed by tactical-level managers. Everybody has problems, and since decisions are made to solve problems, everybody makes decisions. Some are made with a casual nod of the head, others are gut-wrenching experiences for the decision 90


m ak er. A s a ru le of th u m b , th e h ig h e r th e d ecisio n m a k e r is in the o rg a n iz a tio n , th e m o re co m p le x a n d ^difficult th e d e cisio n h e h a s to m ak e. A lso , the n u m b e r of p e o p le affected b y the d ecisio n in c re a s e s a t th e level of th e d ecisio n m ak er. F o r d ecisio n s m a d e a t the s tra te g ic an d ta ctica l lev els, e a c h a lte rn a tiv e w ill h a v e a v id p ro p o n e n ts (a n d o p p o n e n ts). To a m u c h le sse r e x te n t, th is is also tru e o f o p e ra tio n a l level d ecisio n s. A s a resu lt, the d ecisio n m a k e r is co n sta n tly sm o o th in g w ith n e w in sig h t a n d in fo rm atio n . Im p o rta n t c o rp o ra te d e cisio n s are se ld o m m a d e on a w h im . D ecisio n m a k e rs are influ en ced b y av ailab le in fo rm a tion , b u t they, a re a lso in flu en ced b y c o rp o ra te policy, tra d itio n , v a rio u s p re ssu re g ro u p s (fo r e x a m p le , v e n d o rs), an d p eers. D ecisio n m a k e rs w a n t to m a k e su re th a t e a ch a lte rn a tiv e h a s b een th o ro u g h ly e v a lu a te d ; in so d o in g , the d ecisio n m a k e r is su b jected to inten se p e e r p re ss u re an d often b ia se d in fo rm a tio n . U n fo rtu n ately , p e e r p re ssu re ca n , o n o cca sio n , b e m o re in flu en tial th an reaso n . H o w e v e r, this is the d ecisio n m a k in g e n v iro n m e n t. E v a lu a tin g in fo rm atio n a t face v a lu e is n o t e n o u g h . The d ecisio n m a k e r m u s t h a v e th e ability to p la ce ea ch p iece o f in fo rm a tio n in its p ro p e r p e rsp e c tiv e .

The Decision Making Process W h e th e r a d elib erate actio n o r n o t, p e o p le w h o m a k e in fo rm a tio n -b a se d d e cisio n s g o th ro u g h a d ecisio n m ak in g p ro ce ss. T h e ste p s in th e d ecisio n m a k in g p ro ce ss are to: 1.

S et objectives.

2. 3. 4.

Id en tify co n strain ts. Id en tify altern ativ es. G a th e r a p p ro p ria te in form ation .

5. 6.

E v a lu a te a ltern ativ es. C h o o se th e m o st a ccep tab le altern ativ es.

T h e ste p s in the d ecisio n m ak in g p ro ce ss are illu stra te d in

Figure

3.5. S te p I : S e t O b je c tiv e s

T h e e x iste n ce o f a p ro b le m im p lies th e n eed for a d e cisio n m a k e r to m a k e a t least o n e d ecisio n , an d ty p ica lly a series o f d ecisio n s, to re so lv e a p ro b lem . In this first step , the d ecisio n m a k e r sets the objec tiv es fo r the d ecisio n . S te p 2: Id e n tify C o n s tra in ts

C o n stra in ts in so m e w a y lim it the d ecisio n m a k e r's ch o ice s. C o n strain ts co u ld be d efin ed b y legal, e co n o m ic , o r p o litical co n sid e ra tio n s. Planning

91

D ecision co n stra in ts a re so m e tim e s p re se n te d in te rm s o f d e sire d sp e ci ficatio n o r p e rfo rm a n c e sta n d a rd s. S te p 3: Id e n tify A lte rn a tiv e s

T h e d ecisio n m a k in g p ro ce ss in v o lv e s m a k in g a ch o ic e b e tw e e n tw o o r m o re a lte rn a tiv e s. In this ste p , th e d e cisio n m a k e r iden tifies a lte rn a tiv e so lu tio n s th a t m e e t th e co n stra in ts o u tlin ed in ste p 2 . In m o s t ca s e s, th e a lte rn a tiv e s are ch o se n b e ca u s e th e y p ro v id e d a so lu tio n to th e p ro b le m , b u t o ften on e o f th e a lte rn a tiv e s is to d o n o th in g .

Figure 3.5 Steps In the decision making process

S te p 4: G a t h e r A p p ro p ria te In fo rm a tio n T h e in fo rm a tio n re q u ire m e n ts fo r a g iv e n d ecisio n v a r y c o n s id e r a b ly d e p e n d in g o n the co m p le x ity a n d sc o p e o f th e d e cisio n to b e m a d e . D u rin g this step , the d ecisio n m a k e r g a th e rs in fo rm a tio n th a t m a y p ro v id e in sigh t as to w h ich a lte rn a tiv e to ch o o se. S te p 5: E v a lu a te A lte rn a tiv e s

In this step , th e d ecisio n m a k e r e v a lu a te s e a c h a lte rn a tiv e . A d e cisio n ca n b e re n d e re d b a se d o n a v a ila b le in fo rm atio n .

92


S te p 6: C h o o se th e M o s t A c c e p ta b le A lte r n a tiv e

In this step , the m a n a g e r e x a m in e s the ra n k in g o f a lte rn a tiv e s a n d se le cts th e m o s t a cce p ta b le a lte rn a tiv e , w h ich is o ften th e top ra n k e d a lte rn a tiv e . O n o cca sio n , e x te n d in g circ u m sta n ce s c a u s e d m a n a g e rs to lo o k p a st the h ig h e st-ra n k in g a lte rn a tiv e a n d se le ct a lo w erra n k in g alte rn a tiv e . D ecision s, e sp e cia lly th o se m a d e co lle c tiv e ly by se v e ra l m a n a g e rs, are often the re su lt o f creativity.

P L A N N IN G T E C H N IQ U E S A N D TO O LS T h ere a re v a rio u s q u an titativ e an d scientific te ch n iq u es th a t are a v ailab le to aid the m a n a g e r in h is p la n n in g p ro ce ss. S o m e o f th ese are th e fo llo w in g : /.

F o re c a s tin g

T h is is an a tte m p t to foretell o r p re d ic t fu tu re tre n d s, e v e n ts, o r co n d itio n s fro m k n o w n d a ta an d to p re p a re fo r the e x p e cte d ch a n g e s in b u sin ess o r in d u stry . M a n y d ecisio n s are b a se d o n e stim a te s o f w h a t is lik ely to h a p p e n in th e fu tu re. S u ch d ecisio n s are m a d e a lm o s t d a ily b y b o th b u si n e ss m e n a n d e co n o m is ts e m p lo y e d b y the g o v e rn m e n t. T h ese e stim a te s o f fu tu re e co n o m ic co n d itio n s o r tre n d s, b ased ' o n th ro u g h a n a ly se s of th e p a st a n d p re se n t, are called fo recasts. B o th sh o rt-te rm a n d lo n g -te rm fo re ca s ts a re u sed . U n d e r this tech n iq u e, p a st an d p re se n t o r c u rre n t in fo rm a tio n is u se d to p re d ic t fu tu re ev e n ts o r co n d itio n s. S o m e m a n a g e rs re ly on th e ir Own in tu ition in p re d ictin g the fu tu re ev e n ts. T h e y are able to d o th is b e ca u s e o f th e ir e x p e rie n c e on the job. B u t the co m p le x ity o f e n v i ro n m e n t m a k e s it n o lo n g e r an effective w a y o f fo recastin g . Since d e p a r tu res fro m h isto rica l tre n d s are b e co m in g freq u en t, it is g e ttin g difficult to fo re ca st fo r tw o y e a rs o r lon g er. T h e lo n g -ra n g e p la n n e rs m u s t a cc e p t th is reality. In re ce n t y e a rs, a n u m b e r of so p h istica te d tech n iq u es h a v e b e e n d e v e lo p e d fo r fo re ca stin g p u rp o s e s. A lth o u g h th ere a re n o u n iv e r sal fo re ca stin g m e th o d s, so m e co m m o n ly u se d m e th o d s o f fo re ca stin g a re th e s u rv e y m e th o d , the tren d m e th o d , a n d e co n o m e tric m e th o d . T h e s u rv e y m e th o d in v o lv e s p ro b in g th e c u s to m e r o r re sp o n d e n t th ro u g h q u e stio n a ire s o r in terv iew s. U s u a lly a sa m p le g ro u p is ch o se n fo r this p u rp o s e . S o m e so p h istica te d sa m p lin g te ch n iq u e s are av ailab le. T h e sa m p le ch o se n m u s t b e re p re se n ta tiv e of th e g ro u p w h o se o p in io n s th e o rg a n iz a tio n is so lic itin g . B a s e d o n th e in f o rm a tio n , o b ta in e d th ro u g h s u rv e y s , fo re ca sts a re .m ade. T h e tre n d m e th o d o r tim e-series an aly sis is a n o th e r tech n iq u e of fo re ca stin g . U n d e r this m e th o d , the fu tu re is p re d icte d b y p ro jected Planning

93

trends using past data or information. This method brings out a rela tionship between sales and time as shown in Figure 3.6.

Fig. 3.6 The Trend Method

The use of econometric models is another method of forecasting. These models are based on statistical methods of analyzing data and making predictions. They help to find the historical relationship be tween sales volume and a number of independent variables. For in stance, the Gross National Product (GNP) is used to predict future sales based on their past relationship. Even with all these sophisticated techniques, management deci sion is still needed. These techniques don't replace managers or mana gerial intuition and judgment. Forecasts have not been taken seriously by some top managers. This may be due to the fact that some forecasts have been wrong in the past. Reliable information is more crucial to the successful use of forecasting techniques.

2.

Break-even Analysis Break-even charts are used for planning purposes. The mechanics of break-even charts are discussed in the chapter dealing with control function. Almost every manager makes a profit plan and break-even analysis is useful for developing it. In order to make profits, total cost must not exceed total revenue. Using the break-even charts, a break even point, that is, the point at which total cost equal total revenue, can be determined. Using these charts, a manager can say whether the com pany can sell enough products to breakeven and plan accordingly.

94


3.

S c h ed u lin g

This is the term used for planning time for various activities in an organization. A number of scheduling techniques are available, ranging from simple to complex. Network analysis is a quantitative technique used for scheduling. Two well-known network analysis methods are Program Evaluation Review Technique (PERT), and Critical Path Method (CPM). These techniques help to plan complicated and exten sive projects in which co-ordination is essential for cases. Two basic concepts in these two techniques are: events and activi ties, an event is an identifiable accomplishments that occurs at a defi nite point in time. Activities are the work required to complete the event. Events show the beginning and end of an activity. While events are shown as circles in the network, activities are indicated by arrows. A network consists of a series of interconnected events and activities. In using this network, three types of timings are estimated for each activity, that is, the time between two circles (events). These tim ings are: optimistic time (the minimum time it could take); pessimistic time (the maximum time it could take); and the most probable time. An average of these times (expected) is computed and placed above the arrows. For example, the optimistic time for activity between A and B is 4 days, pessimistic time 8 days, and probable time 6 days, then, the average time is: Expected time

=

4 +8 +6 18 —------------ = ------ = 6 days 3 3 6 days (A )----------------- ► (B)

This diagram is the same as the previous one but time schedules from activities are shown on this diagram. The circles are events and the arrows are activities for instance, if we are going to construct a network for a house building project, putting on floors is an event and the work one does to achieve that event is an activity. The diagram above shows the following paths and times. Thus, the four basic steps in developing PERT are: 1. Identify and list major tasks in a project. 2. Determine the order in which these tasks must be carried out, in terms of which one comes first, second, and so on and which activities can be carried out simultaneously. 3. Figure out a pessimistic, probable or most likely, and optimis tic times for each activity or task. 4. Estimate the expected completion time by averaging the above times. 5. Draw a PERT network showing the sequence and times. Planning

95

T h e critica l p a th u se d in P E R T sh o u ld n o t b e co n fu se d w ith the C ritica l P a th M e th o d , a n o th e r fo rm o f n e tw o rk a n aly sis. T h e a p p ro a c h o f th e critica l m e th o d is essen tially th e s a m e a s th e P E R T e x c e p t the critica l p a th m e th o d u ses o n e e stim a te of the tim e , w h ile P E R T u se s m o re th a n o n e e stim a te of th e item . . T h e a d v a n ta g e o f th ese tech n iq u es is th a t th e y fo cu s th e m a n a g e r to e n g a g e in p lan n in g , id en tify in g critica l a re a s a n d c o rre c tin g th em . W ith th e h e lp o f th ese tech n iq u es, a m a n a g e r w ill b e able to m o n ito r th o se activ ities m o s t critica l to the su cce ssfu l c o m p le tio n o f a p ro ject.

4. Management by Objectives P e te r D ru ck e r u se d this te rm in 1 9 5 4 a n d a p p lie d it to a n a p p ro a c h to p lan n in g . S in ce th e n M a n a g e m e n t b y O b jectives (M B O ) h a s d ra w n a g re a t d e a l o f a tte n tio n a m o n g th e a c a d e m ic s a n d p ra ctitio n e rs . M B O is an a p p ro a c h to m a n a g e m e n t d e sig n e d to e n c o u ra g e ini tia tiv e a n d p re v e n t w o rk in g a t c ro s s-p u rp o se s , o r in d e e d , fo r n o p u r p o s e a t all. It is a w a y to h elp m a n a g e rs a cc o m p lish th eir job w ith in th e fra m e w o rk o f o rg a n iz a tio n n e e d s a n d re so u rce s. In this a p p ro a c h , th e b o s s a n d su b o rd in a te s fu n ction as a te a m in se ttin g o b jectives a n d a c co m p lish in g th o se objectives th ro u g h co o p e ra tio n . O n e a p p ro a c h to se ttin g objectives th a t h a s en jo y ed co n sid e ra tio n o r co n sid e ra b le p o p u la rity is the co n c e p t o f m a n a g e m e n t b y objectives. M B O is a p h ilo s o p h y b a se d o n co n v e rtin g o rg a n iz a tio n a l o b jectiv es into p e rso n a l o b jectives. It a ss u m e s th a t estab lish in g p e rso n a l o b jectiv es, elicits e m p lo y e e c o m m itm e n t w h ich le a d s to im p ro v e d p e rfo rm a n ce . T h e M B O p ro c e s s is s u m m a riz e d in F ig u re 3 .2 . M B O h a s a ls o b e e n ca lle d m a n a g e m e n t b y resu lts, g o als, co n tro ls, w o rk p la n n in g a n d re view , a n d g o a ls m a n a g e m e n t. A ll th ese p ro g ra m s are sim ilar a n d fo llow th e sa m e b a sic p ro ce ss.

W H Y M A N A G E R S F A IL IN P L A N N I N G T h ere a re m a n y re a s o n s w h y m a n a g e rs fail in p la n n in g . T h e m o re o b v io u s o n e is b e c a u s e p la n n in g re q u ire s c o m m itm e n ts to b e m a d e to d a y fo r an u n ce rta in fu tu re. E v e n ts o ften d o n o t tu rn o u t as w e e x p e ct. A m o n g th e m o s t im p o rta n t re a s o n s fo r ineffectiv e p la n n in g a re th e follow in g: f.

L a c k o f r e a l c o m m itm e n t In p la n n in g .

D esp ite the a v o w e d in terest in p la n n in g , th e re is often a la ck o r re a l co m m itm e n t b y m a n a g e rs fro m th e to p lev el d o w n to th e lo w e st lev el su p e rv iso r. T h ere is a n a tu ra l te n d e n c y to le t to d a y 's p ro b le m p u sh asid e p la n n in g fo r to m o rro w 's o p p o rtu n itie s. It is a lm o s t ce rta in ly tru e th a t m o s t p e o p le w o u ld ra th e r fig h t fires, m e e t crise s o r kill sn ak e" S6


th an p la n . T h is is la rg e ly b e c a u s e su c h activ ities se e m m o re im p o rta n t a n d m o re in te re stin g a n d rap id -fire d e cisio n m a k in g , w ith o u t h a v in g to thin k , is fu n . T h is m e a n s th a t m a n a g e m e n t n e e d s a clim a te th a t fo rce s p e o p le to p lan .

2. Interchanging planning studies with plans. N o th in g is p la n n e d u n less it in clu d es a d e cisio n o f s o m e k in d . Y et m a n y o rg a n iz a tio n s a n d p e o p le b eliev e th ey h a v e p la n n in g w h e n all th e y h a v e a re p la n n in g stu d ies.

3. Folium to develop and Implement sound strategies. A s w e fo u n d in the p re v io u s ch a p te rs o f this b o o k , stra te g ie s a re th e k in d o f p la n s w h ic h g iv e u n ified d ire ctio n to th e e n te r p r is e s " p la n n in g effo rts. W ith o u t a so u n d strateg y , w h ich is o ften th e c a s e , p la n s g o in th e w ro n g d irectio n . M o reo v er, u n less a s tra te g y is im p le m e n te d b y a n a ctio n p la n , it b e co m e s o n ly a sta te m e n t o f w ish es a n d h o p e s .

4. Lack of meaningful objectives and goals. P la n n in g ca n n o t b e effectiv e u n less g o a ls a re cle a r (D o p e o p le u n d e rs ta n d th e m ? ), a ttain ab le (C a n th e y b e a cc o m p lish e d a n d v erifi ab le?) L ik e su p p o rtin g p la n s, g o als m u s t b e d e fin e d in th e lig h t o f stre n g th s a n d w ea k n e sse s a n d the m a n y in tern al an d e x te rn a l e n v iro n m e n t fo rce s th a t m a y in flu en ce th eir a c h ie v e m e n t

5.

Tendency to underestimate the Importance1of planning premises.

If p la n s a n d d e cisio n s in an o rg a n iz a tio n s are to b e co n siste n t; th a t is, to fit o n e an o th er, th e y m u s t b e im p le m e n te d if a s y s te m o f p la n n in g is to b e co m p le te .

6. Failure to see the scope of plans. S o m e m a n a g e rs g e t so w ra p p e d u p in d e v e lo p in g m a jo r a n d m in o r p ro g ra m s th a t th e y n e g le ct to see th a t th ere a re o th e r ty p e s o f p lan s: m issio n s o r p u rp o s e s, objectives o r g o a ls, s tra te g ie s, p o licie s, ru les, p ro c e d u re s an d b u d g e t as w ell a s p ro g ra m s . A ll m u s t in v o lv e a n aly sis a n d d ecisio n m a k in g a n d m u s t b e im p le m e n te d if a s y s te m o f p la n n in g is to b e co m p le te .

7. Failure to see planning as a rational process. P la n n in g is p ra c tic a l e x e rc is e in ratio n alizatio n . It re q u ire s d e a r g o als, a k n o w le d g e o f a lte rn a tiv e s, a n ability to a n a ly z e a lte rn a tiv e s in th e lig h t o f g o a ls so u g h t, in fo rm a tio n a n d a d e sire to c o m e u p w ith th e b e st p o ssib le an sw er.

8. Too much reliance on experience. E x p e rie n c e a s h a s b e e n in d ica te d is lik ely to b e a d a n g e ro u s te a ch e r sim p ly b e ca u s e w h a t h a p p e n e d in th e p a s t m a y n o t lik ely fit a fu tu re situ atio n . Planning

97

9.

Failure to use the principle o f lim iting factor.

It will be recalled that this principle requires managers to search out those factors that would make the most problem situation, there are so many variables that no one can solve for all of them. 10.

La ck o f top m anagem ent support.

Planning is not like to be very effective if top management does not believe in it, encourage it, or make the necessary decisions that will allow its subordinates to make their plans. 11.

La ck o f clea r delegation.

It is obviously very difficult for people to plan if they do not know what their jobs are, if they are unaware of how their jobs relate to others in an organization, and if they do not have clear authority to make decisions. 12.

La ck o f adequate control techniques and Inform ation.

Since the task of managerial control is to follow up plans and to assure that these are actually succeeding. Planning can hardly be very difficult but effective unless the people responsible for these know how well they are working.

SH O R T CASE STUDY: P LA N N IN G (See

Chapter 12, suggested format for case study)

N A T IO N A L B O O K C O M P A N Y

Delia de los Reyes was the founder and president of a publishing company specializing in collegiate textbooks. Because of her personal ability, expertise, and effective marketing promotion, the company grew rapidly and its sales of 10,000 in the first year reach P10 million five years later. The publication, production, and sales force also in creased. How'ever, the company was faced with a serious problem. New and old employees were making conflicting decision. One of the De Los Reyes partners suggested that the company needed planning and clearcut policies and programs to guide decision making, but the president was not impressed. She maintains that if she concentrates in formulat ing plans and policies today, she might not have a company tomorrow. She believes it is best to solve problems as they happen.

98


R E V IE W Q U E S TIO N S 1.

W h a t is p la n n in g ? W h y is it n e c e s s a ry to p la n ? D iscu ss th e relatio n sh ip b e tw e e n p la n n in g a n d d e cisio n m a k in g .

2.

B riefly d escrib e th e v a rio u s ty p es o f p lan s.

3.

D efine: (a) P o licy

4.

(b) P u rp o s e (c) S tra te g y (d ) P ro ce d u re E n u m e ra te th e ste p s in th e b u sin e ss p la n n in g p ro ce ss.

5.

W h a t is th e p u rp o s e of fo re ca st? B riefly e x p la in so m e o f th e

6.

m o s t c o m m o n m e th o d s o f fo re ca stin g w h ich h elp m a n a g e rs p lan . D escrib e w h a t e a c h o f th e fo llo w in g are a n d h o w th e y m ig h t b e u se d to h e lp m a n a g e rs plan. (a )

PERT

(b)

Break-even analysis

7.

H o w is M B O u se d in p la n n in g ? D escrib e the step s

8. 9.

in th e M B O p ro ce ss. W h a t is m e a n t b y th e te rm , d e cisio n m ak in g ? B riefly d escrib e v a rio u s ty p es o f d ecisio n s, citin g o n e o r tw o

10.

e x a m p le s o f e a ch . D escrib e b riefly h o w the fo llo w in g tech n iq u es are u se d in d ecisio n m ak in g : (a ) M a rg in a l a n aly sis

(b) R atio a n a ly sis (c) B re a k -e v e n an aly sis 11. W h a t is m e a n t b y the te rm : o p e ra tio n s re se a rch ? 12. B riefly e x p la in the ap p lica tio n of th e fo llow in g tech n iq u es to th e d ecisio n m a k in g p ro ce ss: (a) L in e a r p ro g ra m m in g (b) G a m e th e o ry (c)

S im u la tio n

D IS C U S S IO N Q U E S T IO N S

._________

1.

W h a t p e rce n ta g e o f m a n a g e rs d o y o u th in k h a v e a cle a r u n d e r

2.

s ta n d in g o f w h a t th e y a re s u p p o se d to d o ? M a n y m a n a g e rs b eliev e: "P o lic y sh o u ld a lw a y s b e m a d e a t th e

3.

t o p ." W h a t c a n y o u sa y a b o u t this? D iscu ss th e fo llo w in g sta te m e n t: "P la n n in g is so m e th in g m a n a g e rs sh o u ld d o w h e n th e y h a v e n o th in g else to d o ."

Planning

99

E XP E R IE N TIA L EXERCISES 1. It has been stated that a firm can have multiple objectives. What do you think would be the objectives of the following companies and organizations with regard to their interrelationships with society? (a) Bank of the Philippine Islands (b) Department of Labor and Employment (c) Shoe Mart (d) Catholic Women's League (e) University of the Philippines 2. Assume you have determined your objectives which is to get a grade of 95% or 98% this semester. Develop a personal program, policies, and procedures which would affect your objective. 3. Formulate some of the following types of plans in accordance with your business proposal: (a) Company Objectives (b) Programs (You may use the Gantt Chart) (c) Activities (d) Procedures (e) Rules and Regulations (f) Budget 4. As decision makers, in a one-hour period during the day, list the top five decisions you made. Were they based primarily on intuition, the scientific approach, or the professional approach? Why? 5. Approach a manager or an administrator and find out how he or she plans and what difficulties he or she had encountered in the plan ning process.

REFERENCES 1.

Koontz, Harold and O’Donnel, Cyrill. Essentials o f Management. New Delhi: Tata-McGraw-Hill Publishing Co., 1998. pp. 51-59; 146-166.

2.

Terry, George R. Principles o f Management. Illinois: Richard D. Irwin, Inc., 1997. p. 97.

3.

Osgood. William. Basics o f Successful Planning. New York: McGraw-Hill Book Company, 1995. pp. 40-42.

4.

Martinez, Esdras T., et. al. Management Theory and Practice. Manila: GIC Enterprises, Inc., 1997. p. 31.

5.

Drucker, Peter F. The Practice of Management. New York: Harper & Broth ers Publishers, 1998.

6.

Putti, Joseph, Management: A Functional Approach. Singapore: McGrawHill Book Company, 1997.

100


W orksheet No. 3.7

PLANNING - OBJECTIVES

N a m e : _____________________________ _ _ _

Y ear/S ection: -------------------

P r o fe s s o r :___________ ________________ _

Date:

............ — __ _______

It has been stated in the book that a firm can have multiple objectives. What do you think mould be the objectives of the folloiuing companies and organizations with regard to their interrelationships with society? a) Bank of the Philippine Islands

b) Department of Labor and Employment

c) Shoe Mart

d) Rotary Club of Manila

e) University of the Philippines

Planning

101

102

___


/

Worksheet No. 3.8

PLANNING ■ OBJECTIVES / OTHERTYPES OF PLANS

N a m e : _____________________________ ___________

Y e a r /S e c tio n :

P ro fe s s o r:

D a t e : -------------

____________________________________

Assume that you have determined your objective which is to get a grade o f 95% or 98% this semester. Develop your personal program, policies, and procedures which would affect your objectives.

Planning

103

Worksheet No. 3.9 N a m e : _________ ' P ro fe s s o r:

PLANNING - TYPES OF PLAN

_________________________

___________________________________


------------------------

D a t e : ----------------------------------------

Formulate some of the following types of plans in accordance with your business proposal. BUSINESS PROPOSAL

PROGRAMS (You may use the Gantt Chart)

Planning

105

PROCEDURES

RULES AND REGULATIONS

BUDGET

.106


Worksheet No. 3.10

PLANNING - DECISION-MAKING

N a m e : ________________________________________


P ro fe s s o r:

D a t e : ----------------------------------------

________ __ ________________________

------------------------

As a decision-maker, in a one hour period during the day, list the top five decisions you made. Were they based primarily on intuition, the scientific approach, or the professional approach? Why?

Planning

107


Chapter 4

Organizing Learning Objectives: A t the end o f the chapter, the student is expected to understand the following:

• Definition of Organizing • Nature of Organizing • Organizing as a Process •T h e Nature and Development of Organization • Types of Organization Structures • The Nature of Line and Staff Relationship • Organization Chart • Results of Good Organization • The Elements of Delegation • Informal and Formal Organization • Centralized and Decentralized Organization

"It is not necessary fo r a business to grow bigger, but it is necessary that it constantly grows better." - Peter F. Drucker

D E F IN IT IO N O F O R G A N IZ IN G

o

\ / R G A N IZ IN G is th e p ro ce ss o f g ro u p in g to g e th e r o f m e n a n d estab lishin g relatio n sh ip s a m o n g th e m , d e fin in g th e a u th o rity amd re sp on sib ility o f p e rso n n e l b y u sin g th e c o m p a n y 's o th e r baisic re s o u rc e s to attain p re d e te rm in e d g o a ls o r objectives. O rg a n iz in g is th e iden tifi ca tio n of th e g ro u p ih g o f w o rk to b e d o n e , th e d e le g a tio n o f a u th o rity a n d resp on sib ility to th e e m p lo y e e s, a n d th e e sta b lish m e n t o f rela tio n sh ip s a m o n g the p e rso n n e l in o rd e r to u se to m a x im u m a d v a n ta g e the co m p a n y 's b a sic m a te ria l re so u rce s in th e a c c o m p lish m e n t o f a c o m m o n goal. M en w o rk in g to g e th e r in g ro u p s to a ch ie v e a g o a l sh o u ld h a v e th eir resp ectiv e ro les to play, sim ilar to b ask etb all p la y e rs . W h e th e r th eir roles a re d e v e lo p e d b y th e m se lv e s m u s t b e d efin ed a n d d e sig n e d b y so m eo n e w h o w a n ts to m a k e su re th a t m e n c a n co n trib u te in a definite w a y to g ro u p effort. A ro le w o u ld m e a n th a t w h a t m e n d o h a s a specific p u rp o s e a n d o b jective. T h eir a ctiv ity is a situ a tio n w h e re th ey k n o w h ow th e ir job s fit in to g ro u p effo rt a n d w h e re th e y h a v e the n e ce ssa ry to o ls a n d in form ation : to a cco m p lish it. T his ca n b e d e m o n strated in a sim p le effo rt as p u ttin g u p c a m p o n a fish in g e x p e d itio n .

N A T U R E O F O R G A N IZ IN G It h as b e e n p ro v e n th a t a w e a k n e ss in th e o rg a n iz a tio n is a p o si tiv e sign b e ca u s e it in d u ce s the p e o p le to atta in te a m w o rk , sin ce th ey k n o w th at th ere sh o u ld b e co o p e ra tio n to a cc o m p lish so m e th in g . Sub sequently, th o se p e o p le co u ld w o rk to g e th e r m o re e ffectiv ely if th e y k n ow the ro les th e y w a n t to p e rfo rm in a n y g ro u p u n d e rta k in g an d h o w th eir ro les re la te to o n e an oth er. T h is is p o ssib le in b u sin e ss o r g o v e rn m e n t as it is in b ask etb all o r v o lley b all. TTie d e sig n a n d stru c tu re an d im p ro v e m e n t o f th e s e 'sy ste m s o f ro les are b a sica lly th e m a n a g e ria l fu n ction of o rg a n iz in g . O rg an iz in g is a b ro a d te rm th a t ca n be in te rp re te d d ifferen tly b y m a n y m a n a g e m e n t th eo rists. S o m e b eliev e it in c lu d e s the b e h a v io r of all m em b ers o f the g ro u p . O th e rs s a y it is th e to ta l s y ste m o f so cial an d cu ltu ral relatio n sh ip s. G enerally, m o s t m a n a g e rs thin k th a t th e te rm s m e a n a fo rm alized d esig n o f in ten tio n al stru c tu re s , ro les, a n d p o sition s.

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O R G A N IZ IN G A S A P R O C E S S

O rg a n iz in g a s a p ro ce ss sh o u ld c o n sid e r s e v e ra l fa c to rs o r fu n d a m e n ta ls . F irs t, th e s tru c tu re m u s t reflect o b jectives a n d p la n s b e ca u s e a ctiv itie s o f th e o rg a n iz a tio n a re b a s e d o n th e m . S e co n d , th e stru c tu re m u s t re fle ct a u th o rity g iv e n to to p a r d m id d le m a n a g e m e n t. T h ird , o rg a n iz a tio n s tru c tu re , like a n y o th e r p lan , sh o u ld re fle ct th e ir e x te rn a l e n v iro n m e n t. L ik e w ise , th e p re m ise s o f a p la n m a y b e e c o n o m ic , te ch n o lo g ica l, p o litica l, so cia l o r eth ical, w h ic h a re a lso tru e o f a n o rg a n iz a tio n s tru c tu re . T h e o rg a n iz a tio n estab lish es s tru c tu re in o rd e r to p e rm it co n trib u tio n s b y m e m b e rs o f th e g ro u p , a n d to h e lp p e o p le g a in objec tiv e s efficien tly a n d e ffe ctiv e ly in a ch a n g in g fu tu re . In th is c a s e , a so u n d o rg a n iz a tio n s tru c tu re c a n n e v e r b e e ith e r m e c h a n istic o r static. T h u s , th e re is n o sin g le b e st o rg a n iz a tio n stru c tu re fo r v a rio u s o p e ra tio n s. F o u rth , th e o rg a n iz a tio n m u s t b e m a n n e d . G ro u p in g s o f a ctiv i ties, a n d th e a u th o rity o f a n o rg a n iz a tio n s tru c tu re m u s t co n s id e r the p e o p le 's lim itatio n s, c u s to m s a n d tra d itio n s. T h is d o e s n o t m e a n th a t th e s tru c tu re m u s t b e b a s e d a ro u n d the in d iv id u a ls in ste a d o f a ro u n d th e g o a ls a n d su p p o rtin g activ ities. B u t a v e ry im p o rta n t co n sid e ra tio n is th e k in d o f p e o p le w h o a re to staff it. T h is is sim ilar to e n g in e e rs w h o c o n s id e r p e rfo rm a n c e - stre n g th s a n d w e a k n e sse s o f m a te ria ls in th eir p ro je cts, a n d th e o rg a n iz e rs w ho co n s id e r th e ir m a te ria ls - p e o p le .

T H E N ATU RE A N D D EVELO PM EN T O F O R G A N IZ A T IO N

A lth o u g h th e re a re d ifferen ces o f in te rp re ta tio n s a s to th e e x a c t n a tu r e o f o rg a n iz a tio n , it is an u n d en iab le fa c t th a t th e p ro p e r o rg a n i z a tio n is th e b a ck b o n e o f th e su cce ssfu l e n te rp rise , th e so lid fo u n d a tio n u p o n w h ic h th e e n tire b u sin e ss is b u il t

W h a t is an O rganization? T h e te r m "o rg a n iz a tio n " h a s se v e ra l d efin itio n s. O n e (W e b s te r's ) is th e " e x e c u tiv e s tru c tu re of a b u s in e s s ." T h is d efin itio n in d ica te s th a t o rg a n iz a tio n is th e fra m e w o rk o r b a ck b o n e b y w h ic h th e w o r k of a b u sin e ss, m a n a g e ria l o r o th e rw ise , is p e rfo rm e d , th a t it p ro v id e s the re q u ir e d ch a n n e ls , p o in ts o f o rig in , a n d flow o f m a n a g e m e n t d ire ctio n a n d co n tro l. " O r g a n iz a tio n " a lso co n n o te s a cre a tiv e p ro ce ss . A ll th e p a rts of Organizing

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a business do not come into existence spontaneously. They are the re sults of managerial efforts to carry out a predetermined course of ac tion. (You can see from these two definitions that there is a specific relationship between organization and management.) The term organi zation is sometimes used to mean the total business organization, in cluding facilities, materials, money, and manpower. This final definition refers to the term "concept," to which a member is assigned specific duties and under the term of which all employees work effectively together within a framework of superior and subordinate relationship.

TYPES OF O R G A N IZ A T IO N STRUCTURES It has been stated that organization structures may differ in terms of the specific needs of a given business enterprise. There are, however, four principal organization types with different degrees of complexity appropriate to the business in terms of its size and type of product. These types are:

1.

Line organization

This is the simplest form cf structure and refers to a direct straight-line responsibility and control from the top management to the middle management and to the lower level. It acquired this name because there are direct single lines of au thority and responsibility between the manager and his subordinates. It is the oldest form of organization structure based on the classical prin ciple of the Scalar Chain. In this form of structure, authority passes responsibility-directly to his immediate superior. Figure 4.1 shows an illustration of a Line type organization struc ture. This form of organization is common in many small and medium sized companies. The managers of the departments are given complete authority and responsibility over the activities involving their func tional areas. One of the disadvantages of this type of structure is that a manager of a department must be familiar with diverse activities re lated to the operation of the department. A Sales Manager, for instance, must have knowledge in personnel activities. He has to recruit sales men, train them, and take care of their benefit programs. Thus, he is over-burdened with various activities. The Line type of structure has some advantages. Authority and responsibility are clear in this type of organization and the clarity helps to avoid several organizational prob lems.

2.

Line and staff organization This utilizes the assistance of experts 01 specialists. Business

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Figure 4.1 Line Type

leaders have recognized - as their companies expand from simple to complex organizations - that a small number of managers could not personally assume direct responsibility for all functions, such as re search, planning, distribution, public relations, industrial relations, and many other activities of business. Therefore, one option toward reorga nization as a company expands in size and complexity is to appoint assistants to managers. Specific advisory responsibility is delegated to these assistants. Managers and general foremen retain supervisory au thority and control over the activities of personnel of their respective departments. They are the coordinating force that work toward the preservation of harmony and good personnel relations between the workmen and the special executive assistants. These assistants fre quently carry the title of process engineer, design engineer, industrial engineer, or budget officer. As the activities of these assistants increase, other personnel are added to assist. Eventually, the centering around ot a special assistant is organized into a department known as a staff department, supporting the line organization of the enterprise.

Figure 4.2 Line and Staff Type Organizing

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3.

Functional organization

It utilizes the pure services of experts or specialists. The develop ment of staff departments and positions led quite naturally to attempt complete reorganization on a functional basis. This removed the staff specialist from his "assisting" capacity and gave him the pure authority and responsibility for supervision and administration of the function, replacing the operating foreman. The movement as indicated in Figure 4.3, each worker in the production department has eight supervisors. The Gang boss prepares for the production and the worker has to ap proach him for direction in this area. The Speed boss is assigned with the responsibilities of introducing men and getting the set standards of production. The Inspector is in charge of checking the quality of work. The Repair boss takes care of the equipment and tool repairs. The job of Order-of-Work Clerk is to plan and schedule order. The Instruction Card Clerk determines the best way to do the job. The information relating to cost and production is maintained by the Time and Cost Clerk. The Personnel Activities are handled by the Shop Disciplinarian.

Figure 4.3 Functional type

Taylor felt that the advantage of functional specialization will b e achieved to a great extent under this method of organization. But this type of organization violates one of the traditional principles of organi zation, namely, the "Unity of Command." According to this principle, no one subordinate can have more than one supervisor. Reporting to several bosses may create organizational problems such as lack of clar ity of authority, inadequate control, confusion, and conflicts.

4.

Committees Committee is another common organizational form

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u s e d .in sifeu-

ations where group participation and decision are required. Two types of thinking seem to be common when it comes to the use of the com mittee form of organization. On one side, the committee approach has been taken for granted and committees are automatically set up with out even considering the purpose and the need for such committees. On the other side, managers are totally reluctant to use committees because of a fear of diverse opinions. These are created to undertake special activities rather than routinary activities. Any manager or supervisor has the right to form a committee if it is needed by his department or company. In order to facilitate a cooperative relationship within a large industrial enterprise, many companies add a network of committees to the line and staff organization. Committees may be classified as: a. Ad Hoc Committee. This undertakes temporary activities; or b. Standing Committee. This is sometimes called permanent com mittee which undertakes permanent activities, such as the budget com mittee. A committee is a tool for the development of ideas and proce dures. It is a means by which ideas can be pooled and offered for criticism. It is the strong right arm of a tactful administration that real izes the importance of getting its people to work together in the solu tion of its own problems. Committees, like other phases of organization, should be varied in terms of the needs of a given enterprise. However, there are at least four basic principles to be considered. 1. The organization of a committee should grow out of a need that is recognized by the representatives of the departments and the personnel affected. 2. The members of a committee should be representatives of the function and the personnel concerned who have variations in opinion among them. 3. Duties, authority, and responsibility must be clearly defined. 4. The organization and operation of a committee should be a cooperative development.

O R G A N I Z A T I O N C H A R T ________________________________ An organization chart is a diagram or drawing showing the im portant aspects of an organizational structure. It shows the re-ationship unong positions as to authority, responsibility and accountability, and the people who occupy them. As defined by George Terry: "An organization chart is a diagrammatical form which shows important aspects of an organization including the major functions and Organizing

their respective relationships, the channels of supervision, and the rela tive authority of each employee who is in charge of each function."

Purpose of an Organization Chart An organization chart assists one to view the firm's structure as a whole. It shows the principal divisions and lines of formal authority and responsibility. It assists management to divide the different duties or functions in the business establishment so that they will be pe. formed effectively and efficiently. A well-prepared chart shows all of those involved in any undertaking, what each of them is to do and to whom each is responsible. It shows the grouping of departments for easier direction, and control of activities. It is a way of sorting the responsibilities of the positions so that time and effort are not duplicated and, therefore, wasted.

Types of Organization Chart Some organization charts show positions and/or departments; others show only the functions to be performed. Others would show either, both positions and functions, or departments, individuals, and functions. 1. M aster Chart or Chart o f Authority. The master chart shows the entire organizational structure. It is a master plan of the principal departments, with lines of authority and responsibility and the mutual relationships of all departments or major components. 2. Functional Chart. The functional chart shows at a glance the functions and activities of the positions and/or departments. It shows the m ajor responsibilities of departments or positions. Listed below each job title are brief statements of the responsibilities. 3. Personnel Chart. The personnel chart shows the departments in the same relative manner as the functional chart. But instead of list ing the functions, the titles of the positions of the names of persons are indicated. The chart also shows the class titles of all positions in the department together with their locations in the organization.

How to Draw an Organization Chart An organization chart may consist of an entire business, for each department or for each section of a business. Before drawing an organization chart, one should observe the following procedures. First, gather the necessary information on the following: 1. existing positions and/or departments; 2. objectives, functions, and activities of positions and/or departments; 3. organization; 116


4.

lin es o f a u th o rity an d resp o n sib ility fro m top m a n a g e m e n t

5.

to m id d le m a n a g e m e n t; functioned relatio n sh ip s b e tw e e n lin e a n d staff p o s itio n s /

6. 7.

d e p a rtm e n ts ; p o sitio n s a n d job titles; p h y s ic a l lo ca tio n o f e a ch p o s itio n /d e p a rtm e n t.

T h e se co n d step is to d ra w a te m p o ra ry c h a rt a n d c h e c k it fo r a c c u r a c y w ith the m a n a g e rs of th e v a rio u s d e p a rtm e n ts o r sectio n s. Fin ally, th e c h a rt as d ra w n m u s t b e su b m itte d a n d re c o m m e n d e d to to p m a n a g e m e n t fo r a p p ro v a l a n d im p le m e n ta tio n . T h e lin es o f c o m m u n ica tio n , a lso k n o w n a s th e flo w o f a u th o rity a n d resp o n sib ility , sh o u ld b e sp ecific a n d clear. T h q o rg a n iz a tio n c h a rt sh o w s th e w o rk to b e p e rfo rm e d , th eir d iv isio n s, a n d th e ir in te rre la tio n sh ip s. It sh o w s th e v ital fu n ctio n s of the to p m a n a g e m e n t a n d th e su b o rd in a te fu n ctio n s in s u c c e s s iv e ly d e sc e n d in g p o s itio n s , th e re b y in d ica tin g a h ie ra rch y of p o sitio n s fro m top m a n a g e m e n t to ra n k a n d file. T h e ch a in o f c o m m a n d sh o u ld b e cle a rly esta b lish e d . S taff d e p a rtm e n ts /p e rs o n n e l sh o u ld b e p ro p e rly in d ica te d b y u s in g d o tte d lin es o r b ro k en lin es. W h e n it is d ra w n , it is g e n e ra lly in a p y r a m id sh a p e , w ith th e few w o rk a t th e to p a n d an in cre a sin g n u m b e r o f w o rk to w a rd th e b a se . P o sitio n s c a rry in g o u t w o rk a t the top o f th e c h a r t h a v e th e g re a te s t m a n a g e ria l a u th o rity a n d respon sib ility, w h ile th o se a t th e .b o tto m h a v e th e le a st a u th o rity a n d responsibility. P o s itio n s /d e p a r tm e n ts o n th e sa m e h o riz o n ta l le v e l o n th e ch a rt in d ica te eq u al resp o n sib ility a n d a u th o rity in the o rg a n iz a tio n . T h e job titles o r the n a m e s o f the jo b s's h o u ld b e sh o w n cle a rly on th e ch a rt. Briefly, a n o rg a n iz a tio n c h a rt h e lp s m a n a g e m e n t to v is u a liz e the d ifferen t d iv isio n s, d e p a rtm e n ts , a n d se ctio n s of th e b u sin ess. Sim ilarly, a n e n g in e e r m a k e s a b lu e p rin t p la n a s a g u id e in th e co n stru ctio n o f a b u ild in g , facto ry , o r b rid g e . T h e o rg a n iz a tio n c h a rt sh o w s the m a n a g e rial p o sitio n s in th e fo rm o f b o x e s c o n n e cte d b y th e solid lin es th a t in d ica te th e line o f th e c o m m a n d ; a u th o rity flo w in g fro m o n e p o sitio n a t th e to p d o w n to the v a rio u s h e a d s o f d iv isio n s, d e p a rtm e n ts , sectio n s o r u n its a n d fin ally to e m p lo y e e s a n d w o rk e rs a t th e b a se o f th e p y r a m id . A s e a c h n e w u n it is cre a te d , th e n u m b e r of p a rts m u ltip lies. T h e o rg a n iz a tio n c h a rt sh o u ld b e s u p p o rte d b y w ritte n job d e scrip tio n s sta tin g th e d u tie s a n d resp o n sib ilities of e a c h job a n d also a w ritte n job sp ecifica tio n w h ic h in d ica te s th e q u alificatio n re q u ire m e n ts fo r th e job. T h e fo llo w in g ru les sh o u ld b e o b s e rv e d in d ra w in g an o rg a n iz a tio n c h a r t (See Figure 4.4): 1. B o x e s o r re c ta n g le s re p re se n tin g v a rio u s p o s itio n s /jo b s in the Organizing

117

Figure 4.4 Typical example of an Organization Chart

organization should be grouped and placed according to their levels (top management, middle management, rank and file) in the organiza tion. 2. The boxes indicating the organizational functions on the same level should be of the same sizes, i.e., top management level, 3/8" x 2 1 / 2 ".

3. Solid/block lines should connect boxes or rectangles to desig nate managerial control or line of authority. Lines of authority do not pass through a box or rectangle. Each box should have lines indicating its relation to the organizational units above and below it. These lines should connect the box at the top center and then either at the bottom center or at the side of the box or rectangle. Dotted/broken lines should indicate service in staff relationship. 4. When an assistant to the head of an organizational position acts in the capacity of a staff or technical assistant without exercising managerial authority over the line organization, the box should be drawn to the side of the line organization. It could either be on the right or left side. 5. Staff and service functions are placed under the office or units served, usually to the right using the dotted lines. They should be drawn of the same sizes. ,118


R E O R G A N I Z A T I O N

Reorganization is the process by which an existing organization undergoes changes in the size and shape of the organization structure. The change may range from simple to complex.

Figure 4.5 Matrix Structure

In Figure 4.5 the organization is structured along two dimen sions. In one dimension, the structure shows basic functional depart ments such as Research and Development, Engineering, Manufactur ing, and Marketing. The Department Head in each of these functional areas plans and controls the dimension, a Project Director plans and controls the efforts for all projects currently in that phase of develop ment. In the other dimension, a Project Director plans and controls an entire project currently in that phase of development. In the other di mension, a Project Director plans and controls an entire project through all the functional areas necessary to its completion by placing personnel from each of the appropriate functional departments. Thus, two hierarchal structures intersect one another. While the former is functionally oriented, the latter is often project-oriented.

D EPA R TM EN TA TIO N ______________________________ Departmentation results from the grouping of work, the desire to obtain organization units of manageable size, and to utilize managerial ability An organization structure and design are shaped significantly by the departmentation followed. Examples of departments are Account ing Department, Personnel Department, Sales Department, etc. Organizing

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It se e m s q u ite a p p a re n t th a t if the sta te d g o a ls an d o b jectives o f a n o rg a n iz a tio n a re to b e a tta in e d , ce rta in activ itie s h a v e to b e p e r fo rm e d . A n d it w o u ld a lso se e m th a t th e o rg a n iz in g fu n ctio n o f a man a g e r w o u ld in v o lv e g ro u p in g th e fu n ctio n s a n d activ itie s n e c e s s a ry to a t ta i n th e g o a ls o f a n e n te r p r is e . T h e t e r m f o r t h a t p r o c e s s is D e p a rtm e n ta tio n (o r D iv isio n o f O rg a n iz a tio n ). A s sta te d a b o v e , the p ro ce ss o f g ro u p in g th e fu n ctio n s a n d a ctiv itie s in an o rg a n iz a tio n is k n o w n as D e p a rtm e n ta tio n . It g iv e s a h o riz o n ta l d im e n sio n to a n o rg a n iz a tio n . G ullick sets u p fo u r b a se s fo r d e p a rtm e n ta liz in g a n o rg a n iz a tion . T h e y are D e p a rtm e n ta tio n b y fu n ctio n , p ro d u c t, p ro c e s s , a n d g e o g ra p h ica l locatio n . D e p a rtm e n ta tio n by- fu n ctio n in v o lv e s id en tify in g m a jo r fu n ction s to b e p e rfo rm e d in a ch ie v in g th e g o a ls o f a n o rg a n iz a tion a n d g ro u p in g th e o th e r re la te d fu n ctio n s an d activ itie s a cco rd in g ly . F ig u re 4 .6 sh o w s D e p a rtm e n ta tio n b y fu n ction . M a n a g in g D irecto r

P ro du ctio n 'M a n a g e r

M arketin g M anager

F in a n c e M anager

P erso nn el M anager

L egal A d v is e r

R & D D ire c to r

Figure 4.6 Departmentation by function T h e p rim a ry o r m a jo r fu n c^ o n s u se d in this e x a m p le a re : P ro d u c tion , M a rk e tin g , F in a n ce , P e rso n n e l, L e g a l, a n d R e se a rc h a n d D e v e lo p m e n t. A fte r th e p rim a ry fu n ctio n s are id en tified , th e n e x t ste p is to id en tify s e c o n d a ry fu n ctio n s a n d g ro u p th e m a cco rd in g ly . A t th e n e x t step , e a c h o f th ese s e c o n d a ry fu n ctio n s m a y be fu rth e r s u b d iv id e d in to n a r r o w e r w o rk a reas. T h is n a rro w d iv isio n of fu n ctio n h e lp s to a ch ie v e th e a d v a n ta g e o f sp e cia liz a tio n b y fu n ctio n . D e p a rtm e n ta tio n b y p ro d u c t in v o lv e s g ro u p in g th e a ctiv itie s a n d fu n ctio n s o n th e b a sis o f p ro d u cts m a n u fa ctu re d b y tfye co m p a n y . F o r e x a m p le , a n e le c tric a l m a n u fa c tu rin g c o m p a n y m a y h a v e th e stru c tu re sh o w n in F ig u re 4 .7 .

Figure 4.7 Departmentation by product 120


Each of these divisions may be further divided into departments based on the components of these products or by functions performed. Likewise, a service organization may structure its work by the service it offers. According to Dale, an industrial engineer, grouping by product or service has the advantage of bringing together and coordinating in one place major activities required to make a particular product. Of course, this method of grouping involves duplication of some of the activities and hence for this reason it may be costly. In some organizations the grouping of activities is done on the basis of the nature of work being done, that is by process. For example, a textile manufacturing company may have to go through the process of receiving raw material, separating, spinning, weaving, bleaching, dyeing, inspecting, packaging and transporting in marketing its prod uct The figure for this type of organization is shown in Figure 4.8.

Figure 4.8 Departmentatlon by process

Finally, the grouping may be done on the basis of geographical location. In this method, the entire service area of the organization is divided into geographical locations or territories. For instance, a sales organization may have groupings like: NCR DIVISION, LUZON DIVI SION, VISAYAS DIVISION, and MINDANAO DIVISION. In many in stances, it may be practical to bring together all operations performed in a particular geographical location, or any of the other methods dis cussed above. The figure for departmentation by geographical location is shown in Figure AS.

Figure 4.9 Departmentatlon by geographical location Organizing

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RESULTS OF G O O D O R G A N IZ A T IO N 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

A good organization would result in the following: establishing responsibility and preventing "buck passing." providing for easier communication; eliminating jurisdictional disputes between individuals; helping develop executive ability; aiding in measuring a person's performance against his charges and iesponsibilities; aiding in equitable distribution of work, functions, and/or person nel supervision; permitting'expansion and contraction without seriously disrupt ing the structure; pointing out "dead-end" jobs; affording movement in the direction of the "ideal" organization, in times of change; establishing closer cooperation and higher morale; delineating avenues of promotion; preventing duplication of work; making growth possible with adequate control and without liter ally killing top executives through overwork; and aiding in wage and salary administration through forced job analysis and description.

T H E E L E M E N T S O F D E L E G A T IO N

Delegation is the process of entrusting and transferring responsi bility and authority by the top management to the lowest level. The elements of delegation are the following:

1.

Responsibility This is the work or duty assigned to a particular position. Re sponsibility involves mental and physical activities which must be per formed to carry out a task or duty. This can be delegated. The work of the manager can be divided into two categories: First, the management functions which cover planning, organiz ing, staffing, directing, and controlling activities; and, second, the op erative functions which include all activities that have to do directly with their specialization. 2. A u th o rity It refers to the power or the right to be obeyed. It is also the sum of the powers and rights entrusted to make possible the performance, of 122


the work delegated. Authority includes such rights and powers with regard to receipt and disbursement of money, and hiring and dismiss ing of employees. It may sometimes be limited only to the power to make, consult, or give service which is related to the staff function. Other types of authority aside from what has been mentioned are: those that result out of one's knowledge which is called the author ity of knowledge; those arising out of one's nearness to those with line authority. These should be differentiated from delegated authority. It is significant that an understanding of our concept of authority is clarified. There are three current concepts of authority - the tradi tional, the behaviorist, and the functional. Knowledge of these concepts can give us a better view of authority. The traditional concept uses Henri Fayol's statement: “Authority is the right to command and the power to make oneself obeyed." A latter interpretation of the statement is “Authority is the right to give others orders and the power to exact obedience." This view is present among those who claim themselves belonging to the scientific school of management, where the worker is seen as a mere tool in the organiza tional machine. The behaviorist or social scientist treats authority differently as opposed to the traditional concept. They explain authority to be a rela tionship between the supervisor and the worker. They believe that au thority is given by subordinate to superior. The direction of authority is, therefore, upward instead of downward. The real source of power is the subordinate and not the superior. The ultimate source of power is the group, and as long as the group allows itself to be under the authority, the management can exercise that power.

3. Accountability This is the answerability of the obligation to perform the del egated responsibility and to exercise the authority for the proper perfor mance of the work. Accountability cannot be delegated. Accountability is given to the person who accepts the responsibility and is accountable only to the .extent that he is given the authority to perform. Each person can be accountable to only one person, his immediate boss. The superior can only exact responsibility to the extent that standards of performance are defined.

T H E A R T O F DELEG ATIO N Delegation is considered an art and a science. It is an art because it is a skill that the manager performs effectively if he practices it. Organizing

123

Delegation should first and foremost be tackled before the estab lishment of goals and objectives and a clear definition of responsibility and authority has been made. T o 'b e effective, the m a n a g e r m u s t m o tiv a te th e su b o rd in a te s to w o rk o n the delegated resp o n sib ility a n d au th o rity . P o s itiv e m o tiv a tio n , in ste a d o f n egative, sh o u ld b e g iv en . P o sitiv e m o tiv a tio n m a y b e d e scrib ed as p sych ological as w ell a s m o n e ta ry a n d o th e r tan g ib le b e n efits. T h e technique of u sin g g ro u p p a rtic ip a tio n a n d effectiv e c o m m u n ica tio n can p ro vid e the su b o rd in a te s a sen se o f b e lo n g in g in th e g ro u p . T h is con d ition w ou ld in d u ce the p e rs o n to in te g ra te h is o b jectiv e w ith o rg an izatio n objectives. T h e m a n a g e r sh o u ld a lw a y s ch a lle n g e the su b o rd in a te s in the form of p ro v id in g w o rk th a t a re d ifficu lt b u t n o t im p o s sible to attain to rem o ve the effects o f b o re d o m . T h e su p erior sh ou ld see to it th a t tra in in g is g iv e n to su b o rd i n a te s w h en necessary. L astly, the m a n a g e r sh o u ld n o t d e le g a te re s p o n sibility a n d then forget a b o u t w h a t h e d e le g a te d . If th is h a p p e n s , th e n e x t tim e you delegate the job , it w ill b e th e s u b o rd in a te 's tu rn to fo r g et.

T H E E X C E P T IO N P R IN C IP L E T h e excep tion p rin cip le (also k n o w n as m a n a g e m e n t b y e x c e p tio n ) is closely related to the p a rity p rin cip le. T h e e x ce p tio n p rin c ip le sta te s th a t m an ag ers sh o u ld c o n c e n tra te th eir effo rts o n m a tte rs th a t d e v ia te significantly from th e n o rm a l a n d let su b o rd in a te s h a n d le ro u tin e m a tte rs. The idea h e re is th a t m a n a g e rs sh o u ld c o n c e n tra te o n th o se m a tte rs that require th eir abilities a n d n o t b e c o m e b o g g e d d o w n w ith d u tie s that their su b o rd in ates sh o u ld b e d

section treating the design of organizations. However, an understand ing of the major forms of organization will greatly facilitate our compre hension of Bureaucracy. In this section we turn our attention to this topic, relyipg heavily on the work of Max Weber (1947) a German Social Scientist who was a contemporary of Henri Fayol.

FO RM A L A N D IN FO R M A L O R G A N IZ A T IO N S Every organization structure has two systems of operation: the formal and informal. The formal system is composed of the recognized and formalized lines of communication, authority, and control. This system is frequently pictured in the official organization chart. The sec ond, or informal system, is much more subtle and invisible in the orga nization chart.

Figure 4.10 Contrasting formal and Informal structures

FO RM AL

IN F O R M A L

• have planned structure - not formally planned • deliberate atl?mpts to create - arise spontaneously as a result of interactions patterned relationships - not depicted in a chart • usually shown by a chart Organizing

125

• traditional theory advocates formal organization.

- human relations theory stresses informal organization

While the formal organizations have a rigid organization struc ture, showing the functional roles, the informal organizations lack rigid structure. Often the informal organizations are formed for the purpose of satisfying some social needs. These organizations may exist within the" formal organizations or may exist and operate independently. Vari ous clubs, teams, associates, and similar other groups come under this category. All business, industrial organizations and educational institu tions are formal organizations.

Figure 4.11 Organization chart with four informal organizations Indicated by broken lines.

C E N T R A L IZ E D A N D D E C E N T R A L IZ E D O R G A N IZ A T IO N S One of the most important questions that a company must an swer as it grows is whether or not to continue management that is centralized in one person, or to decentralize management by delegating some of its authority to subordinates.

i

126


Figure 4.12 The many functions of staff (World Executive Digest)

In a centralized management organization, major decisions are made by a few top executives, subordinates exercise little (if any) ini tiate in decision making. Even when there are multiple branches, most decisions are made at the main office rather than at the local branch. Chain department and grocery stores frequently adopt a central ized management scheme. Centralized management in these organiza tions assume that the responsibility for buying, advertising, marketing, accounting, and other functions will be conducted at one location even though there are many operating branches. A decentralized management organization represents a system atic effort to delegate to lower levels all authority, except that which can only be exercised at the highest level. In a centralized organization, authority rests only in a few hands and most of the decisions are made by these few. On the other hand, in a decentralized organization authority is dispersed throughout and decision making is distributed throughout the organization. Let us look at some characteristics of these two types of organizations. C E N T R A L IZ E D

D E C E N T R A L IZ E D

Control by few because men at the top believe they are indispensable. Don't trust subordinates, and like to build empires within.

Control by many because men at the top believe that participation will increase efficiency and effectiveness. Organizing

127

As a result of the above attitude, decisions are made by the top management.

As a result of the above attitude, decisions are made throughout the organization.

The drawback is potential paralysis of decision making and poor moral.

The drawback may be controlled by many.

T H E NATURE O F LINE A N D STAFF R ELA TIO NSH IP

Another way to improve coordination is to distinguish clearly between line and staff positions so that organization members clearly recognize the degree of responsibility associated with each organiza tional position. As defined previously, line personnel are those who contribute directly to the accomplishment of organizational objectives. For example, a vice-president for production or a worker who actually makes the product the firm sells. Staff personnel advise and assist the line personnel. Some common examples of staff employees in large or ganizations are those in research, personnel, training, and industrial relations. When an organization is small and uncomplicated, all. or most of its members are line personnel. As the organization matures, though, it usually begins to increase its staff personnel because of the complexity of the work; it is simply no longer possible to use only line. personnel. There have been conflicting opinions made by educators, authors, and managers as to what lines and staffs are. Subsequently, there is probably no area of management which causes more difficulties and more loss of time and effectiveness. Nevertheless, line and staff relation ship is important to any kind of organization, and the authority rela tionship of members of an organization can also affect their roles in the operation of the business. One accepted concept of the line and staff is that which has direct responsibility for accomplishing the primary objective of the business. Therefore, we can classify production and sales (and sometimes finance) as line functions, and purchasing, accounting, personnel, plant mainte nance and quality control as staff functions. Simply speaking, a department or a position is called a line if its objectives are directly in line with the company's objectives. On the other hand, a department or a position is called a staff if its objectives are indirectly in line with the company's objectives.

128


Figure 4.13 Tall structure

Figure 4.14 Flat structure

“ FLAT” and “TALL” STRUCTURES As the span of supervision or control increases (the namber of subordinates being supervised), the organization' develops a “flat" structure. On the other hand, narrow spans lead to a “tall" structure. See Figures 4.13 and 4.14. In the diagram, both organizational structures have ten subordi nates under a top person. The “tall" structure has four levels with a span of two. TheJ'flat" structure has two levels with a span of ten. As can be seen from the figures, the “tall" organization structure involves more organizational layers or levels than the "flat" structure. There is no way of saying that both have certain limitations and advantages. While the “flat"*structure permits general supervision. The “tall" struc ture leads to close or tight supervision. Communication is much faslei in an organization with a wide span of control than in an organization with a narrow" span. Organizations such as banks, accounting firms, and research laboratories may find the "flat" structure ideal.

O rganizing

i ;

SH O R T CASE STUDY: O R G A N IZ IN G T H E POW ER C O M PA N Y (See Chapter 12, suggested format for case study)

"I do not believe in organization charts or position descriptions of any kind in this company," declared Johnny Ramos, president and founder of the Power Company, manufacturer of men's ready-to-wear (RTW) suits and jackets. "We are a successful and fast-rising company where I want all managers and labor to work as a team. Organization charts and job descriptions make people believe they own a position on a chart and want to keep it. We grew from a small company with PI 00,000 annual sales to a P5 million enterprise because we pooled our resources, coming up with competitive products at low costs. We are not San Miguel Corporation with its complex organiza ion charts." Mr. Silang, the company comptroller, strongly defended the president, emphasizing that teamwork, not organization charts, is the key co success. Linda Ignacio, head of manufacturing, believed otherwise and declared the president's view "absurd and unprogressive." Ms. Ignacio said, "I could not run my department without organization charts and position descriptions. As a matter of fact, I have them hidden in my desk where Johnny Ramos never sees them!"

R E V IE W Q U E S T IO N S 1.

As a manager, do you think you would prefer a large (more than seven) or small (seven or less) span of management? Why, and what are the implications of your choice? 2. What is the scalar principle? 3. What is the exception principle? 4. What are line functions? What are staff functions? 5. What is an organization? 6. Classify organization into different groups and give specific ex amples of each. 7. What is meant by organization structure? 8. What does the organization chart illustrate? 9. What factors must be considered in structuring organizations? 10. Define departmentation? 11. D escribe each of the four maf^r types of departmentation. Under w hat condition is each type of departmentation appropri ate?

12. What is span of control? 130


W h a t f a c to r s m u s t b e co n sid e re d in d e te r m in in g t h e s p a n o f 13.

c o n tr o l? H ow d oes a n o rg a n iz a tio n w ith a f la t s t r u c tu r e d iffe r fro m a ta ll s tru c tu re ? H o w do f la t s t r u c t u r e s b e co m e ta ll s t r u c tu r e s a n d v ic e v e r s a ?

14. 15.

W h a t is a n a d E x p la i n : (a ) (b) (c )

hoc The The The

c o m m itte e ? fu n c tio n a l ty p e lin e ty p e lin e a n d s t a f f ty p e

DISCUSSION QUESTIONS 1.

H o w ca n y o u ju stify th e u se o f a m a trix stru c tu re sin ce it cle a rly

2.

v io la te s th e u n ity -o f-c o m m a n d p rin cip le? D iscu ss th is sta te m e n t: "W h e n th e a p p ro p ria te o rg a n iz a tio n stru c tu re is d e te rm in e d , th e firm n o lo n g e r h a s to w o rry a b o u t stru c

3.

tu r e ." H o w w o u ld y o u re sp o n d to th e follow in g sta te m e n t: "T h e re is n o

4.

D o y o u th in k th a t d iv isio n o f lab o r h a s b een e m p h a siz e d to o m u ch

5.

D iscu ss th e re a s o n s fo r o rg a n iz in g .

w a y to g ro w a n d k eep th e c o rp o ra te staff s m a ll." in to d a y 's h ig h ly m e c h a n iz e d a n d efficient so cie ty ?

EXPERIENTIAL EXERCISES 1.

E n u m e r a t e t h e v a r io u s d e p a r tm e n ts in th e fo llow in g o r g a n iz a tio n s t h a t m a y be c la s s ifie d a s lin e d e p a r tm e n t o r s t a f f d e p a r t m e n t. a . ) P e p s i C o la B o ttlin g C o m p a n y

2. 3.

4.

b . ) S y c ip , G o rre s , a n d V elayo c . ) U n iv e r s ity o f t h e P h ilip p in e s D ra w a n o r g a n iz a tio n a l c h a r t sh o w in g th e d iffe re n c e s b e tw e e n c e n tr a liz e d a n d d e c e n tra liz e d ty p e s o f o rg a n iz a tio n . I n t e r v i e w o n e e m p l o y e e b e lo n g i n g t o a n i n f o r m a l g r o u p (barkada) a n d d e s c rib e t h e p re d o m in a n t to p ic /s u b je c t in o n e o f t h e i r in f o rm a l c o n v e r s a tio n s , a n a ly z e h o w i t c a n c o n tr ib u te to t h e a t t a i n m e n t o f t h e c o m p a n y ’s o b je ctiv e . D r a w t h e o rg a n iz a tio n c h a r t o f y o u r p ro p o se d b u s in e s s s t r u c t u r e a n d c la s s ify t h e ty p e s o f o rg a n iz a tio n a l s t r u c t u r e s u se d . E x p la i n .

Organizing

131

REFERENCES 1.

Damaso, Gimeno M. How to Start Your Own Business. Manila: Sinagtala Publishers, Inc., 1982, pp. 7-9.

2.

George, Claude, Jr. S. Management for Business and Industry. New Jersey; Prentice-Hall, Inc., 1993.

3.

Gutierrez, Pura Garcia. Business Organization and Management. Quezon City: R.M. Garcia Publishing House, 1994. p. 101.

4.

Jeon Eng Chua et al. Management o f Business. Singapore: Mc-Graw-Hill Book Company, 1997.

5.

Koontz, Harold and O’Donnel, Cyril. Essentials o f Management. New Delhi: Tata-McGraw-Hill Publishing Co., 1998. pp. 169-185; 219-290.

6.

Lazzaro, Victor. Systems and Procedures. New Jersey: Prentice-Hall, Inc., 1993.

7.

Martinez, Esdras T. Management Theory and Practice. Manila: GIC En terprises, Inc., 1997, p. 79.

8.

Putti, Joseph. Management: A Functional Approach. Singapore: McGrawHill Book Company, 1997.

9.

Sison, Perfecto S. Personnel and Human Resources Management. Quezon City: Rex Printing Company, 1991. pp. 43-45.

132

Mgn%_
Worksheet No. 4 .1 I

O R G A N IZIN G - LINE A N D STAFF

N a m e :____________ _________________

Year/Section:

Professor: __________________________

Date: ----------

Enumerate the various departments in the following organizations that may be classified as line department or staff department. ORGANIZATION

LINE DEPARTMENTS

STAFF DEPARTMENTS

1. PEPSI COLA BOTTLING COMPANY Organization's Objectives:

2. SYCIP, GORRES & VELAYO (SGV) Organization’s Objective:

3. UNIVERSITY OF THE PHILIPPINES Organization's Objective:

Organizing

133

\

S

134


Worksheet No. 4.12

O R G A N IZ IN G - C E N T R A L IZ E D & D E C E N T R A L IZ E D O R G A N IZ A T IO N

N am e: __ ______________________________

Y ear/S ection: -------------------

P r o fe s s o r :_____________________________ Date: ------------------------------------•

Draw the typical organization charts showing the differences between centralized and decentralized types of organization. .TRALIZED ORGANIZATIONAL CHART

DECENTRALIZED ORGANIZATIONAL CHART

Organizing

135

136

Manag«m«nt for Filipinos

Worksheet No. 4 .12

ORGANIZING •INFORMAL ORGANIZATION

Name:

Year/Section:

Professor:

Date: ----------

Interview one employee belonging to an informal group (barkada) and describe the predominant topic / subject in one of their informal conversations. Analyze how it can contribute to the attainment of the company's objective. COMPANY NAME

TOPIC/SUBJECT OF INFORMAL CONVERSATION

ANALYZE HOW IT CAN CONTRIBUTE TO THE ATTAINMENT OF THE COMPANY'S OBJECTIVE

Organizing

137

Worksheet No. 4 . 12

ORGANIZING - TYPES OF STRUCTURE

Name: _____________________________

Y ear/S ection:-----------------

Professor: __________________________

D a te :-----------------------------

Draw the organization chart of your proposed business structure and classify the type/s of organization structures used. (Is it centralized or decen tralized?) Explain. BUSINESS PROPOSAL

PROPOSED ORGANIZATION CHART

TYPE OF ORGANIZATION STRUCTURE

IS IT CENTRALIZED OR DECENTRALIZED? EXPLAIN

Organizing

139

■

vK ,:'


Chapter 5

Staffing Learning Objectives: At the end of the chapter, the student is expected to understand the following: • Definition of Staffing •* Nature of Staffing • Recruitment • Selection • Training ■ «

• Identifying Training Needs • Types of Training • Human Asset Accounting • Movements of Personnel

"To handle yourself, use your heart; to handle others, use your heart." - The English Digest

D E F IN IT IO N OF STAFFING

Q

V p TAPPING is the process of recruiting, selecting, and training of men. It means putting the right men on the right jobs. The managerial function of staffing involves manning the organizational structure through proper and effective evaluation, selection, and development of people to perform the roles. However, some educators and authors in management consider staffing as part of organizing. This book treats it as a separate managerial function for a number of reasons. First, the actual recruitment and selection .of organization positions include pro cedures not usually discussed in the function of organizing. The second reason is that all managers are responsible in the recruitment, selection and training of men within their respective departments and have too often overlooked the essential nature of their responsibility that should not be assigned only to the personnel manager. Finally, staffing has developed into a relevant and important part of knowledge and prac tice in management.

N A TU R E OF STAFFING All business organizations should focus their attention and be concerned about the effectiveness and efficiency of their employees, especially their managers. The function of staffing has to do with man ning an organization structure so that it can completely operate in the present and the future. This function must be considered as part and parcel of the whole system of management. The staffing function in cludes the determination of manpower needs, the discovery of persons to fill these needs, their recruitment and employment, their placement and orientation and the rearrangement of team members through pro motion and transfers. Every manager, including the chairman of the board of the company, must handle some phases of staffing, even though the personnel department may provide technical help. The de gree of importance given to the staffing function depends upon the size of the organization. In small organizations, the chairman of the board of the company performs this function.

R E C R U IT M E N T Recruitment is the process of encouraging, inducing, or influenc ing applicants to apply for a certain vacant position. Whenever there 142


are vacancies, it is necessary to find a person to fill those vacancies. Some organizations do not wait until the vacancy arises, but they antici pate such vacancies and new opening? in the short and long run and thus plan for the future needs. This approach gives more time to re cruiting and also increases its effectiveness. The results obtained from recruiting, selecting, placing, training, developing and motivating em ployees, depend directly upon the effectiveness of the planning and forecasting phases of employment development.

Steps in Recruitment Step one - S tu d y in g the D ifferent Jo b s in the C om pany a n d W riting Jo b D escrip tio n s and Specifications (Job A nalysis) Job description defines the duties and responsibilities of a par ticular position. A description of the duties and responsibilities attached to the job enables the employment officer to determine the special quali fication which an individual must possess in order to do the job suc cessfully. Job specification gives the specific qualifications required for the position, such as the following: amount and type of experience needed to perform the job, special training, skill and physical demands, special abilities and aptitudes, age, physical qualifications, and other requirements. Example of Job Analysis N am e

M a rie tta T a m a ra y

P osition

A ccounting S up erviso r

O rg a n iz a tio n R elation sh ip R e p o rts to

C h ie f A ccou n tan t

S u p e rv is e s

B o o k k e e p e r II Bookkeeper I A ccounting R e p re s e n ta tiv e s

D e p a rtm e n t

O ffic e o f th e C o n troller

S e c tio n

A ccounting

C om pany

G o o d M orning C orpo ratio n

Job Description S u p e rv is e s an d conducts activities relative to th e m a in te n a n c e o f c o m p le te , a c c u ra te , and u p -to -d a te acco un tin g records of tran sactio n s, control a n d h and lin g o f funds, p re p a ra tio n o f required reports and costing o f p ro d u cts. P a rtic ip a te s in th e form ulation o f m a n p o w e r and m a te ria l re so u rces w ith in h e r jurisdiction.

Duties and Responsibilities 1.

P la n s an d p re p a re s w o rk p ro g ram s and en s u re s effective im p le m e n ta

2.

V e rifie s d aily e ach position reports to e n s u re p ro p e r im p le m e n ta tio n of

tion th ereo f. s y s te m o f c ash handling.

Staffing

143

3.

V erifies p etty c ash re s o u rc e s , effe c ts p ro p e r charging o f acc o u n ts ,

and

e n s u re s th a t re im b u rs e m e n t o f e x p e n s e s is in a c c o rd a n c e w ith fin a n c e policies an d p ro ced u res. 4.

C h e c k s an d counts petty c ash fund h a nd led by acco un tin g re p re s e n ta tiv e s and ta k e s n o te o f u n a u th o rize d a n d unliquidated a d v a n c e s .

5.

C o o rd in a te s activities o f b usin ess to e n s u re p ro p e r tim e ly p re p a ra tio n s an d subm ission o f re q u ire d reports.

6.

C o n d u cts studies a n d re c o m m e n d s a m e n d m e n ts o r su gg e s tio n s to s y s te m a tize activities and p ro cedu res.

7.

E n s u re s im p le m e n ta tio n o f th e a d h e re n c e to c o m p a n y policies an d .p ro ced u res, conducts investigations of violations th e re o f, a n d re c o m m e n d disciplinary m e a s u re s .

8.

C o n d u cts p e rfo rm a n c e e v a lu a tio n o f subord inates and re c o m m e n d a p pro priate personnel action; m o tivates, trains, g uides an d c o un sels s u b o rd in a te s a n d m a in ta in s h arm o n io u s relationships a m o n g th em .

9. 10.

P re p a re s m onthly s c h e d u le o f accounts re c eivab le. P e rfo rm s o th e r re la te d functions.

Job Specifications •

C P A , p re fe ra b ly M B A and w ith e x p e rie n c e in co m p u ter o p eratio n

•

A t le a s t five y e a rs e x p e rie n c e on a D e p a rtm e n t M a n a g e r’s level

•

F e m a le , a t le ast 3 5 y e a rs old

•

R e lia b le and trustw orthy

•

O f goo d 'm o ral c h a ra c te r

Step Two

-

Requisition of New Employee

To inform the personnel department, the line supervisor or the department head concerned should accomplish a formal requisition form, indicating the position to be filled, the date when the new em ployee will be needed, his pay rate, the required qualifications of the employee, the job description, approval by the responsible official of the company, and other pertinent data.

Step Three - Actual Recruitment o f Applicants Recruitment is the process by which prospective applicants are induced to apply in the company in order that their qualifications for present and anticipated vacancies can be evaluated through sound screening and selection procedures. To make the selection truly dis criminating there must be several qualified applicants from whom the final choice can be made. In this maimer the chance of drawing out the most qualified applicants for the position may be more discerning. Sources of Labor/Applicants: a) Internal - employees recruited within the company. b) External - applicants recruited through schools, references, advertisements, placement agencies, etc. 144


S E LE C TIO N Selection is the process of getting the most qualified applican from among different job seekers.

Steps in Selection S t e p o n e - R e c e p tio n o f A p p lic a n t s

Not all applicants are allowed to go through the entire process of selection. Some of them are limited by means of "preliminary screen ing" or "sight screening," whereby the undesirable applicants are quickly eliminated on the basis of rapid appraisal of their apparent characteristics, such as age, height, physical condition, etc. Screening is the process by which the applicants are being inter viewed and classified under two categories - those to be given exami nations and further interviews, and those who should not be consid ered at all. The first interview is preliminary, and its purpose is to eliminate those applicants who are clearly unqualified. S te p T w o —

Preliminary Interview

The purposes of the interview are: (a) to find out how qualified the applicant is for the vacancy; (2) to give the applicant the information he needs in order to decide to take the job if offered to him; and (3) to create goodwill for the company. No company hires an applicant without conducting an emploj ment interview of some kind. Some companies give more emphasis to the impressions created by the applicant in the interview; others do not use any other tool in employee selection except the interview. This shows the importance of the interview as a major selection and place ment tool. For his guidance, the interviewer uses the applicant's records of previous employment, employment tests, and other background in vestigation. The written comments and evaluation of the interviewer are helpful in comparing applicants and for future re ferenee. S te p T h re e -

Application Form

The application form is used: 1. As a guide when interviewing the applicant. 2. As a basis for eliminating applicants with unfavorable per sonal data. 3. For matching the qualifications of the applicant with the job requirements as indicated in the job description and job specification. 4. For checking on the applicants' school records, references, and former employers. S taffing

145

5. As part of the employee's permanent record and for commu nicating -vith the employee or his family. S te p

Four - Employment Test

The employment officer goes over the application forms. On the basis of the information it contains and from the impression the officer gathers at the preliminary interview, he decides who should be called in to take the employment tests. The purpose of testing is to measure the applicant's abilities which cannot be gauged through interviews. They also help make an objective comparison among applicants. S te p

Five - Final Selection by Immediate Supervisor or Department Head

Employment involves three decisions: 1. Management's decision as to whom among the applicants would best fit the job and should be hired. 2. The applicant's decision as to whether or not the job is the right one for him after the supervisor has discussed the job duties. Is he really interested in the job and does he want to work for the company? 3. The supervisor must decide if the applicant is the kind of man who can be at work with him in his team. The supervisor must look into his personality and see if he is able to work well with the members of his team. The supervisor or head of the unit making the request for the new employee makes the final choice from among the applicants who have passed screening by the employment office. Some firms use the "Rule of Three" in the final choice of appli cants for the job, the three best qualified, as determined by the employ ment officer, are then referred to the supervisor who needs the new employee. The supervisor then interviews the three and makes his final choice among them. This method gives the line supervisor, who will have direct responsibility for the prospective appointee, the final choice from among the applicants certified by the personnel office.

Step Six - Physical and Medical Examination The selected applicant is required to pass a physical and medical examination. In small companies, the applicant may be referred to a company physician or to a medical consultant for the medical and physical check-up. In some cases, the new employee is simply asked to present a certification from a private physician as to his health condi tion. Large companies, however, usually have their own medical de partments or retain the services of hospitals or clinics for the purpose. T>.e purposes of physical and medical examination are: .. To, prev ent contamtfvrtfon of contagious disease. 146

Management or Filipinos

2. To prevent the hiring of liability employees which may result in absenteeism, hospitalization expenses, etc.

Step Seven -

H irin g

When a candidate has passed all the selection requirements and is chosen, he is finally sent to the personnel department for the comple tion of the hiring process.

Step Eight -

O rie n t a tio n /I n d u c tio n /In d o c t rin a t io n

New employees are oriented on company policies, rules and regulations, and inducted or briefed about his job by the immediate supervisor or by the training officer. The orientation from co-workers is usually unplanned and unofficial, and it can provide the new employee with misleading and inaccurate information. This is one of the reasons that it is important to have an orientation provided by the organization. An effective orientation program has an immediate and lasting impact on the new employee and can make the difference between a new employee's success or failure. Job applicants get some orientation to the organization even before they are hired, sometimes through the organizaition's reputation: how it treats employees and the type of prod ucts or services it provides. Also during the selection process, appli cants often see other general aspects of an organization and what their duties, working conditions, and pay will be.,

TRAINING Training, according to the Labor Code of the Philippines, is the systematic development of the attitude/knowledge/behavior patterns for the adequate performance of a given job or task. It is a day to day, year-round task. All employees on a new job undergo a learning pro cess whether or not formal training exists. Learning to perform or be more efficient in performing a job is made easier for employees where •there is formal training. For the growth of the individual and the orga nization, these act vities.are carried out continuously in many organiza tion. Usually a separate department or unit is set up to look after this responsibility. Generally, the new employee's manager has primary re sponsibility for training on how to perform the job. Sometimes this i« delegated to a senior employee in the department. Regardless, the q> ' ’ ity of this initial training can greatly influence the employee'; j;.sb aiutude and productivity. Economic, social, technological, and governmen tal changes also influence the skills needed in an organization. Changes in these areas can make current skills obsolete in a short time. Also, planned organizational changes and expansion can make it necessary for employees to update their skills or apply new ones. Staffing

147

R afeclon of com pery by «pp*car.t RECRUITMENT * PERSUASION TO COME TO EMPLOYMENT OFFIC E

-JT71

D isin te re st in c o m p a n y opportunity

RECEPTION O f APPLICANTS

r'd | I

Unfavorable im p rtttio n of company or selfdisquaiification (of a tz e n s only)

Unfavorable impresaion of job opportunity

PRELIM IN ARY INTERVIEW

|

Refusal to wait for interview COMPLETION O f APPLIC ATION B O N K AND EVALUATION

|

Refusal to complete blank or self-disquall-

|

ficabon because of content or conditions. Refusal to taka tests, self-disqualification

|

EMPLOYMENT TESTS

by answers. Unsatisfactory information about company, j

qualOei or backgrouv) EMPLOYMENT INTERVIEWS

or jcb. Dislike of interviewer INVEST IOAT:ON O r P E R 3 » L HIS TORY ANO W ORK RECORD REFER ENCE CHECKS (PERSONAL. SCHOOL. WORK). SECURITY CHECK (FINGER 7 PRINTING) i f REQUIRED. HOUSE VISIT p r e l im in a r y e v a lu a t io n

Inability to g-va references, cioar security 1

of

INFORMATION AND SELECTIO N BY EMPLOYMENT OFFIC E WAITIN G LIST-ACTIVE FILE OF INFORMATION APPLIC ANTS OR OFFER O f EMPLOYMENT

Refusal o( offer im mediately or when called

VISIT TO W O R K AREA ANO FINAL , 0 SELECTIO N BY SUPERVISOR(S).

Not physcaly M for job or com pufty insurance

Unfavorable im pression of work area end supervision

PREEMPLOYMENT PHYSICAL EXAMINATION

Discovery of udtvoraQle

dale not considered m poor evaluation

Refusal to be examined or to sign waivers

COMPLETIO N OF EMPLOYMENT FORMS. PHOTOS. PASSES ORIENTATION TRAJN1NO ANO INTRODUCTION ON JOB

F o / e m Imtfal job assign m en t or reassignment

Discovery of unfavorable consideraions | such'as wages, rate b'eioi expectancy or inon shop Decision that job or com pany is __ unsatisfactory or not worth coming to work for

PROBATIONARY FOLLOW -UP * SUBSEQUENT COUNSELING

Sense of job faikre inability to ' fit In", "JSTaopointment m Tc£7")oo a s s jr* '' personal or ransportaion problems

|

FINAL EMPLOYMENT

Continuation for reversal of prior decision to leave company ejection of company by applcsnt

Figure 5.1

Showing the Employment Procedure as a series of screenings in which the applicant is either rejected or passed along to the next step until final employment. The applicant may refuse to go to the next at any point and thus reject the company. At any rejection point a formal or informal "exit interview" completes the procedure. (Based on a shorter chart by R.S. Uhrbrock, Personnel. Vol. 12, No. 4, p. 231)

ID E N T IF Y IN G T R A IN IN G NEEDS Trainings must be aimed at the accomplishment of some organi zational goals, such as more efficient production methods, improved quality product/services, or reduced operating costs. An organization should only commit its resources to training that can help in achieving it objectives. Deciding on specific training activities in an organization requires a systematic and accurate analysis of training needs. There are many methods that can be used to determine an organization's training 148'

iVlanagement for Filipinos

needs. Company reports and records provide clues to internal troubl spots. Records on absenteeism, turnover, tardiness, and accident rate provide objective evidence of problems. Because this type of informa tion already exists, it can be collected and examined with minimal effor and interruption of the work flow. Interviews with employees, ques tionnaires, and group discussions can also be used to locate training needs. Personal observations of work being performed can also give insight into performance problems that may be corrected through train ing.

C O M M O N TYPES OF T R A IN IN G 1. On-the-job Training and Job Rotation On-the-job Training (OJT) is normally given by a senior em ployee or supervisor. The trainee is shown how to perform the job and allowed to do it under the trainer's supervision. One method of on-thejob training is job rotation, sometimes called crosstraining. Under OJT, an employee learns several different jobs within a work unit or depart ment and performs each for a specified time period. One positive point of job rotation is that it allows flexibility in the department. For ex ample, when one member of the department is absent, another can perform the job.

2. Vestibule Training In vestibule training, procedure and equipment similar to those used in the actual job are set up in a special working area called a vestibule. The trainee is then taught how to perform the job by a skilled person and is able to learn a job at a comfortable pace without the pressure of production schedules. The main advantage of this method is that the trainer can stress theory and use of proper technique rather than output, and the student can learn by actually aoing the job. How ever, this method is expensive, and the employee still must adjust to the actual production environment. Vestibule training has been used for training typists, word processor operators, bank tellers, clerks, and oth ers in similar jobs.

3. Apprenticeship Training Apprenticeship training dates back to biblical times. It is fre quently used to train personnel in skilled trades, such as carpenters, bricklayers, electricians, mechanics, and tailors. The apprenticeship period generally lasts from one month to one year. During this time, the trainee works under the guidance of a skilled worker. Staffing

149

4. Classroom Training Classroom training is conducted off the job and is probably the most familiar method of training. Classroom training is an effec tive means of quickly getting information to large groups with lim ited or no knowledge of the subject being presented. It is useful for teaching actual material, concepts, principles, and theories. Portions of orientation programs, some aspects of apprenticeship training and safety programs are usually presented with some form of classroom instruction. However, classroom training is used more frequently for technical, professional, and managerial employees.

5. Programming Instruction The increased availability and lower cost of computers have made the use of programmed instruction more attractive. Programmed instruction requires the trainee to read material on a particular subject and then to answer questions about the subject. If the answers are cor rect, the trainee moves on to new material. If the answers are incorrect, the trainee is required to read the material and answer additional ques tions. The material in programmed instruction is presented either in text form or on computer video displays. Regardless of the type of presentation, program instruction provides active practice, a gradual increase in difficulty over a series of steps, immediate feedback, and an individualized rate of learning. It is normally used to teach factual in formation.

6. Management Development Program Management development program is a systematic process of training and growth by which individuals gain and apply knowledge, skills, insights and attitudes to manage work organizations effectively. There is a change of attitudes to manage work organizations effectively. Management development needs to be a planned, systematic process that integrates the organization's response to changing external and internal environments with the aspirations of individuals within. The change of attitudes and the eventual change of personality is a long process. Such an approach must be flexible enough to accommodate any environmental change. The increasing complexity of problems, both technological and environmental, demands more rigorous skills and talents from managers. The development programs must sense this and re-structure their programs to meet new objectives and goals. Man agement development is concerned with developing the attitudes and skills necessary to become or remain an effective manager. To be suc cessful, it must have the full support of the organization's top execu 150


tives. Management development should be designed, conducted, and evaluated on the basis of the goals of the organization, the needs of the managers involved, and probable changes in the organization's man agement team. Some of the most popular methods of management development program are the following:

Understudy Assignments Understudy assignments are generally used to develop an em ployee to fill a specific job.

Coaching Coaching by experienced managers stresses the responsibility of all managers for developing subordinates. Experienced managers ad vise and guide trainees in solving management problems. Coaching should allow the trainee to develop individual approaches to manage ment with the counsel of a more experienced person.

Experience Development through experience is used in many organizations. Employees are promoted into management jobs and allowed to learn on their own, from their daily experiences. The primary advantage lies with the manager when he tries to perform certain jobs. He may see the need for development and look for a way to get it.

Job Rotation Job rotation is designed to give an employee broad experience in many different areas of organization. In understudy assignments, coaching, and experience, the trainee generally receives training and

Figure 5.2 Job rotation offers variety S .jffln g

151

development for one particular job. In job rotation, the trainee goes from job to job within the organization, generally remaining in each from six months to a year. This technique is often used by large organizations for training recent college graduates. S p e c ia l P r o je c t s a n d C o m m it t e e A s s ig n m e n t s

Special projects require the employee to learn about a specific subject. For example, a trainee may be told to develop a training pro gram on safety. .This would require learning about the present internal safety policies and problems and about the safety training done by other companies. The person must also learn to work and relate to other employees. However - and this is critical - the special assignment must provide a developing and learning experience for the trainee and not just busy work. Committee assignments, similar to special projects, can be used if the organization has standing or ad hoc committees. An employee works with the committee on its regular duties; thus, the person develops skills in working with others and learns through the activities of the committee. Lectu res

With lecturing, the trainer has control and can present the mate rial as desired. The lecture is useful for presenting facts; however, its value in changing attitudes and in teaching skills is somewhat limited. C a s e S t u d ie s

This technique was popularized by the Harvard Business School. With this method, sample situations are presented to the trainee to ana lyze. Ideally, the case study should force the trainee to think through problems, propose solutions, choose among them, and analyze the con sequences of the decision. One primary advantage of the case study method is that it brings a note of realism to the instruction. However, case studies often are simpler than the real situations faced by manag ers. R o le P la y in g

In the role playing method, trainees are required to act out as signed roles in a realistic situation. They learn from playing the roles. The success of this method depends on the ability of the trainees to act realistically. Videotaping allows for review and evaluation of the exer cise to improve its effectiveness.

152


In-Basket Technique This technique stimulates a realistic situation. It requires the trainee to answer one manager's mail and telephone calls. Important duties are mixed with routine matters. One call may come from an important customer who is angry; another from a local civic club re questing a donation. The trainee analyzes the situation and suggests possible actions.

Business Management Games Business games generally provide a setting of a company and its environment and requires a team of players to make operating deci sions. Business games also normally require the use of computer facili ties. Often, several different teams in a business game act as companies within an industry. This method forces trainees to work not only with other group members; they also must deal with competition within the industry. Advantages of business games are: they simulate reality; de cisions are made in a competitive environment; feedback is provided about decisions; and decisions are made with less than complete data.

University and Professional Association Seminars Many colleges and universities both offer credit and non-credit courses to help meet the management development needs of various organizations. These courses range from principles of supervisions of advanced executive management programs. Professional associations such as the Philippine Council of Management, also offer a wide variety of management programs. Many of the classroom techniques discussed in this chapter are used in these programs.

H U M A N ASSET A C C O U N T IN G Human asset (for human resources) accounting attempts to place a value on an organizatiqn*s human asset. It evaluates costs incurred by organizations in recruiting; -hiring, training and developing their hu man assets. Primarily, the proponents of human asset accounting feel that the quality of the human resources in an organization should be shovyn on its balance sheet. Several methods have been suggested for finding the financial value of an organisation's human resources, 1. Start up costs - Derive the original cost of hiring and training personnel as well as the costs of developing working relationships. 2. Replacem ent costs - Estimate the costs of replacing current employees with others of equivalent talents and experience. Staffing

153

3. Present-value-method - Multiply the present value of the wage payments for the future five years times the firm's efficiency ratio (which is a measure of a firm's rate of return in relation to the advan tage rate of return for the indusuy). 4. G oodw ill method - Allocates a portion of the company's earn ings in excess to the industry average (goodwill) to human resources.

M O VEM EN TS OF PERSONNEL Since transfer and promotion are such important phases of per sonnel function, a definite and clearly understood policy regarding them must be established. A company that does not establish such a policy risks poor employee morale and high labor turnover.

Transfer The term "transfer" refers to the shifting of an employee from one position to another without increasing his duties, responsibilities, or pay. Every business finds it necessary to transfer workers to different positions. There may come a time when older workers must be given assignments that require lighter work. Or if a worker has been assigned to a job which was satisfactory, he may be shifted to another. There are times, too, when the workload in some departments are heavier than in others, or when it is desirable to rotate workers into and out of danger ous positions. Occasionally, transfer is necessary because of personal differences among employees, or because of personality conflicts be tween workers and supervisors. Also employees are often rotated from position to position as a training device. When a transfer has been made, management has to double-check to make sure that there are valid reasons for it, and that the employee will not suffer any setback as a result of it. And, it is important for management to tell employees its reason for moving them to make them feel that they are being treated fairly and are not being shifted merely for the convenience of someone else. Rules and policies relative to transfer should be clearly stated and understood by the members of the firm. Management should also tell people their shifts, whether the transfer is permanent or temporary, and if it is temporary, how long will they be wo king in the new job.

Promotion The term "promotion" refers to the shifting of an employee to a new position to which both his status and responsibilities are increased. Higher pay does not always accompany a promotion, although it usu 154


ally does or at least follow soon after. Promotions are advantageous to the firm as well as to the employee. Management knows that deserving employees should be taken care of. The workers are situated where they can produce the most and that the cost of orienting and training new people has been reduced. When a promotion is made however, it should be deserved. An employee should not be given a promotion when he has not earned it or when others are better qualified and more deserving. Length of service must also be considered. When employees are equally deserving to be promoted as far as ability and performance are concerned, promotion usually goes to the person who has seniority. An advancement in pay that does not involve a move into a new job classification is called a horizontal promotion. An advancement that moves an employee into a job with a higher rank or classification is called a vertical promotion.

Separation Separation from the employment of the company may either be temporary or permanent, voluntary or involuntary. 1. Lay-off is temporary and involuntary, usually traceable to a negative business condition. It is customarily assumed that those who are laid off will be re-employed as soon as business returns to normal. The usual procedure is first to lay-off those workers with the least se niority. 2. A discharge is a permanent separation of an employee, at the will of the employer, a person may be discharged if he is not competent in his job even after (as often happens, but not always) an honest effort has been made. Though transfers are done to find a suitable job for him, a worker guilty of breaking rules may be also be subject to a discharge if the seriousness of the infraction merits such action, or if the worker has a history of delinquency, as far as rules are concerned. Insubordina tion is also just cause for discharge. When the workers of a company are members of a union, the conditions that govern discharge are included in the labor agreement entered into or agreed upon by the company and the union called Collective Bargaining Agreement (CBA). 3. Resignation is the voluntary and permanent separation of an employee due to low morale, low salary, etc. In some instances, forced resignation is used as a good substitute for discharge. This is because resignation connotes a positive meaning while discharge is negative. 4. Retirement can either be voluntary or involuntary. It is volun tary if an employee retires upon reach ;ng the number of years of ser vices in the company as provided ior by its policies. It is involuntary if one retires upon reaching the retirement age of 65. When employees leave the company of their own free will, management should make a sincere attempt to find out the reason for their departure, for it can use Staffing

155

this information to improve conditions, and thus, reduce labor turn over. The basic reasons why employees leave business to take positions elsewhere are: inadequate pay (wages below the going rate in the area), lack of opportunity for advancement, lack of consideration or apprecia tion by the employer, internal policies, too much overtime, and favor itism shown to certain employees.

CASE STUDY: STAFFING (See Chapter 12, suggested format for case study)

CHR ISTIAN CORPORATION

The department manager holds a regular staff meeting with her four section heads confining each meeting to one chief problem. On this day, the subject was the 'poor' quality of the twenty supervisors report ing to the section heads. "We have a rather poor record in selecting good supervisors," she began. "We may have five or six who are outstanding, but there are too many who are not. What do you people consider when you recom mend candidates to me?" "I think my best technical people make the best supervisors," said one section head. "They have the respect of their associates and subordinates, who rate their technical competence highly. They can train new staff members very effectively, and pitch in to do the most demanding jobs themselves." "Maybe that is just the trouble," said the department manager. "People like them may never learn to manage because they spend their time on technical work." Another section head said, "I made my recom mendation on the basis of seniority. It has popular appeal because ev eryone expects to be along this line." "Do you think," said the manager, "that age is the only, or most important criterion for supervision?" Such a practice conveniently ig nores everything learned about managing, or it assumes that the candi date has the capability to become proficient in management after get ting the job. Is this realistic?" In the course of the meeting, other factors such as getting along with people, making good impression, having the capability for further promotion, and being able to exact responsibility were also considered. The department manager was clearly frustrated and, as she ended the meeting, she remarked, "No wonder we have a 40% failure rate in selecting supervisors."

156


R E V IE W Q U E S T IO N S 1. 2. 3. 4. 5.

D istin g u ish re c ru itm e n t fro m selection . H o w d o e s staffing relate to the o rg a n iz in g fu n ctio n ? W h a t is a job an aly sis? A job d escrip tio n ? A job sp e cifica tio n ? A skill in v e n to ry ? W h a t is selectio n ? D escrib e th e step s in the selectio n p ro ce ss. W h a t is tran sfe r? A p ro m o tio n ? A se p a ra tio n ?

D IS C U S S IO N Q U E S T IO N O n e co m m o n m e th o d o f h a n d lin g p ro b le m e m p lo y e e s is to tra n s fer th e m to a n o th e r d e p a rtm e n t of the o rg a n iz a tio n . D iscu ss y o u r feel in g s o n th is p ra ctice .

E X P E R IE N T IA L E X E R C IS E S 1.

C o n s u lt the cla ssifie d a d s. E v a lu a te th e re q u ire m e n ts th a t are av a ila b le fo r the fo llow in g p osition s. F o rm u la te a g e n e ra l p a tte rn o f job d e scrip tio n an d job specification .

2.

a. P e rso n n e l M a n a g e r /H u m a n R eso u rces M a n a g e r b. C o m p u te r P ro g ra m m e r A s s u m e th at y o u are a m a n a g e r fo r the fo llow in g ty p e s of firm s an d h a v e a v a c a n c y th a t req u ires the. skills id en tified b elow . W h a t s t a g e / s of the selectio n p ro ce d u re d o y o u b e lie v e w o u ld req u ire sp ecial a tten tio n ? a. C o m m e rc e facu lty m e m b e r o f a u n iv ersity b. A la b o re r fo r a co n stru ctio n firm c. A c le rk -se c re ta ry w h o is req u ired to take d ic ta tio n a n d ty p e 70

3.

4.

5.

w o rd s p e r m in u te. d . A first-lev e l p ro d u c tio n su p e rv is o r M ak e a n a p p o in tm e n t w ith a p e rso n n e l m a n a g e r a n d find o u t the ste p s a n d m e th o d s h e u se s in re cru itin g an d se le ctin g p e o p le for h is o r h e r o rg a n iz a tio n . Talk to a train in g m a n a g e r a n d find o u t h o w train in g is v ie w e d in h is o r h e r o rg a n iz a tio n a n d the m e th o d s o f tra in in g n o n -m a n a g e rial a n d m a n a g e ria l p erso n n el. In relatio n to y o u r b u sin e ss p ro p o sa l, e n u m e ra te the ste p s to be u se d in y o u r re c ru itm e n t an d selection of e m p lo y e e s.

Staffing

157

REFERENCES

1.

B eag h , D a te S .

Personnel: The Management of People at Work. N e w

York: T h e M cM illan C o ., .1 997, p. 2 1 0 . 2.

K oo n tz, H arold and O ’D o n n e l, Cyrill.

Essentials of Management. N e w

D elhi: T a ta -M c G ra w -H ill P ublishing C o ., 1 9 9 8 . pp. 3 0 1 -3 7 3 . 3. 4.

Labor Code of the Philippines. P resid en tial D e c re e 4 4 2 . M a rtin e z , E s d ra s T.

Human Resources Management. M a n ila : G IC E n te r

prises, In c., 1 9 9 7 . p. 2 4 4 . 5.

M o o m a n , Eric.

The Manager and the Organization. London: P a n B ooks,

Ltd., 1 9 9 1 . 6.

Putti, J o s e p h .

Management: A Functional Approach. S in g a p o re : M c G ra w -

Hill B oo k C om pan y, 1 9 9 7 . 7.

S is o n , P e rfe c to S .

Personnel and Human Resources Management.

Q u e z o n City: R e x P ublishing C o m p a n y , 1 9 9 1 . pp. 1 6 2 -1 8 0 .

158


Worksheet No. 5.15

STAFFING ■ RECRUITMENT

N a m e : ________________________________________


P ro fe s s o r:

D a t e : ----------------------------------------

------------------------------------------------------------

------------------------

Consult the classified ads. Evaluate the requirements that are available for the following positions. Formulate a general pattern o f job descriptions and specifications. JOB TITLE: 1) Personnel Manager

JOB DESCRIPTIONS:

JOB SPECIFICATIONS:

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159

JOB TITLE: 2) Computer programmer

JOB DESCRIPTIONS:

JOB SPECIFICATIONS:

160


W orksheet No. 5.16

STAFFING - SELECTION

N am e:

Year/Section:

P r o fe s s o r :

Date:

Assume that you are a manager for the following types of firms and have a vacancy that requires the skills identified below. What stage/s of the selection procedure do you believe would require special attention? 1) Commerce faculty member of a university

2) A saleman

3)

A clerk-secretary who is required to take dictation and type

4)

A first-level production supervisor

Staffing

161

162


W orksheet No. S.I8

STAFFING - RECRUITMENT & SELECTION

N a m e :_______________________ ._____

Year/Section: -----------------

P r o f e s s o r : ___________________________________ D a t e : __________________________

In relation to your business proposal, enumerate the steps to be used in your recruitment and selection of employees. Business Proposal

Recruitm ent Procedure

Selection Procedure

Staffing

163

■f

164


Worksheet No. S.I6

STAFFING - SELECTION

N am e:


P r o fe s s o r :

D a t e : ________

Fill up the application form and evaluate the relevance of the fixed data to your line o f specialization.

APPLICATION FOR EMPLOYMENT Position Applied For Attach 1" x 1" Photograph

Date of Application

P E R S O N A L

(PRINT) LAST NAME FIRST NAME

MIDDLE NAME

NICKNAME

PRESENT ADDRESS

SINCE WHEN

PREVIOUS RESIDENCE ADDRESS

NEXT PREVIOUS ADDRESS

CHECK ONE [ ] OWN HOME [ 1 BOARD

[ J RENT f 1

DATE OF BIRTH

AGE

HEIGHT

WEIGHT

MARITAL STATUS [ ] SINGLE

RELIGION

[ ) WIDOWED

IF ENGAGED TO BE MARRIED, WHEN?

IF MARRIED, NO. OF CHILDREN

[ ] LIVE WITH PARENTS

PLACE OF BIRTH

[ ] MARRIED

TEL. NO.

SEX [ ] Male ( ] Female

[ ] SEPARATED NATIONALITY

GIVE NAMES AND DATES OF BIRTH OF CHILDREN

Staffing

165

LIST BELOW NAMES, ADDRESS AND OCCUPATION OF MEMBERS OF YOUR FAMILY, INDICATE IF PARENTS ARE DECEASED. NAME

RELATIONSHIP

OCCUPATION/ WHERE EMPLOYED

ADDRESS

Wife/Husband Father Mother (Brothers or Sisters)

ARE YOU RELATED TO ANYONE NOW WORKING FOR US? [ ] YES

IF YES, GIVE NAME(S) AND RELATIONSHIP^)

[ ] NO

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[ ] PLACEMENT AGENCY

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] CLASSIFIED ADS

[ ] SCHOOL

[ ] OWN INITIATE

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E D U C A T I O N

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DEGREE EARNED OR HIGHEST ATTAINMENT

AVERAGE GRADE OR CLASS STANDING IN . . HIGH SCHOOL COLLEGE, UNIVFRSITY

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W O R K

E X P E R I E N C E

INDICATE ALL OTHER EMPLOYMENT IN CHRONOLOGICAL ORDER EMPLOYMENT DATES FROM TO

COMPANY AND ADDRESS

POSITION

REASON FOR LEAVING

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I

MAY WE CONTACT YOUR PRESENT EMPLOYER WITHOUT JEOPARDIZING YOUR POSITION?

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ARE YOU LICENSED [ ] YES TO PRACTICE ANY TRADE OR PROFESSION? [ ] NO

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OTHER KINDS OF WORK IN WHICH INTERESTED

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WHAT ARE YOUR REASONS FOR SELECTING THIS/THESE FIELD(S)?

WHAT ARE YOUR PLANS FOR THE FUTURE?

DO YOU HA’ 'E ANY OUTSIDE BUSINESS INTERESTS? IF SO, PLEASE EXPLAIN.

WILL YOU ACCEPT PROVINCIAL ASSIGNMENT? [ IV E S [ ] NO

DATE AVAILABLE FOR EMPLOYMENT

STARTING SALARY DESIRED

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ADDRESS

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I HEREBY CERTIFY THAT THE STATEMENTS I HAVE MADE IN THIS APPLI CATION ARE TRUE AND CORRECT AND THAT ANY MISREPRESENTATION, FALSI FICATION, OR WILLFUL OMISSION HEREIN SHALL BE SUFFICIENT REASON FOR DISMISSAL FROM, OR REFUSAL OF EMPLOYMENT BY THIS COMPANY. I AUTHO RIZE THIS COMPANY TO INVESTIGATE THE ACCURACY AND COMPLETENESS OF THE INFORMATION CONTAINED HEREIN. I AGREE TO SUBMIT MYSELF TO PHYSI CAL EXAMINATION AS A PRE-REQUISITE TO CONSIDERATION FOR EMPLOYMENT AND SUCH OTHER FUTURE EXAMINATIONS WHICH MAY BE REQUIRED. I FUR THER STATE THAT I AM NOT AND NEVER HAVE BEEN A MEMBER OF ANY ORGA NIZATION WHICH ADVOCATES TO OVERTHROW THE GOVERNMENT OF THE RE PUBLIC OF THE PHILIPPINES.

(SIGNATURE OF APPLICANT)

SOCIAL SECURITY NO. --------------RES. CERT. NO. A --------------------ISSUED AT ---------------------------------ON ___________________________

IN CASE OF EMERGENCY, NOTIFY:

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Chapter 6

Directing Learning Objectives: At the end of the chapter, the student is expected to understand the following: • Definition of Directing • The Nature of Directing • Motivation • Theories of Motivation • Communication • Types of Communication • Barriers of Communication • Leadership • Types of Leadership

"We rarely think about the other fellow until we become the other fellow

D E F IN IT IO N OF D IR E C T IN G

D ir e c t in g is the fourth universal function of management and it refers to the process of motivation, communication, and leadership. It deals with the relationship of managers and non-managers. Planning, organizing, staffing, and controlling could be done effectively, but it must be supported by an understanding of people's behavior by good communication and an ability to lead. Managers as leaders should understand the motives of people, and they should maintain or im prove the interpersonal relationship in an organization so that people can be satisfied from contributing to the achievement and development of objectives of the enterprise.

M O T IV A T IO N In examining the various leading theories of motivation and motivators, one seldom hears reference to "the carrot and the stick." This is of course, the use of rewards and penalties in order to influence desired behavior. This comes from the old story that the best way to make a donkey move is to put a carrot out in front of him or jab him with a stick from behind. Despite all researchers and theories of motivation that have come to fore in recent years, it should not be forgotten that reward and pun ishment are still strong motivators. At the same time, in all theories of motivation, the inducements brought by some kind of carrot are recognized. Often this is money in the form of pay or bonuses, even though it is somewhat fashionable for writers to say that money is no longer a strong motivator. To be sure, it is not the only motivating force, but it has been and will continue to be an important one. The disadvantage of the money "carrot" approach is that too often everyone gets a carrot regardless of performance, through such practices as salary increase and promotion by seniority, automatic "merit" increases, and executive bonuses, even if it is not based on individual manager's performance. It is as simple as this: if a person puts a donkey in a pen full of carrots and then stood outside with a carrot, would the donkey be encouraged to come out of the pen? The "stick" in the form of fear - fear of loss of income, reduction of bonuses, demotion, or some other penalty has been and continues to be a strong motivator. Yet it admittedly is not the best kind. It often gives rise to defensive or retaliatory behavior, such as union organiza tion, poor-quality workmanship, executive indifference, failure of a 172


manager to take any risk in decision-making, or even dishonesty. But fear of penalty cannot be overlooked, and most managers never fully appreciate the power of their positions. Whether they are first-level supervisors or chief executives, the power of their position to give or withhold rewards or impose penalties of various kinds give them an ability to control, to a very great extent, the economic and social well being of their subordinates. It is hardly a wonder that a substantial number of managers have "yes-men" reporting to them and seldom realize it.

Figure $.1

The Influence of motivation on performance. A manager has two Ways to Improve performance: training and motivation. Assume that the training of subordinates Is equal. When training Is combined with a tow level of motivation, only a very small Increase in performance occurs (A). When training Is combined with a high level of motivation, perfor mance Increases dramatically (B) Source: Andrew Grove, H ig h O u tp u t M a n a g e m e n t (New York: Random House, 1983, p. 158).

The word motivation comes from the Latin word "movere" which means to move. Numerous definitions are given for the term. Usually include are such words as aim, desire, end, impulse, intention, objective, and purpose. These definitions normally include three com mon characteristics of motivation. First, motivation is concerned with what activates human behavior. Second, motivation is concerned with what directs this behavior toward a particular goal. Third, motivation is concerned with how this behavior is sustained. Directing

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Motivation can be analyzed using the following causative s._ quence: Needs or Goals

^ Drives or Motives

> Achievement

In motivation, needs produce motives which lead to the accom plishment of goals. Needs are caused by deficiencies, which can be either physical or psychological. For instance, a physical need exists when an individual goes without sleep for 48 hours. A psychological need exists when an individual has no friends or companions. Indi vidual needs will be explored in much greater depth latter in this chap ter. A motive is a stimulus which leads to an action that satisfies the need. In other words, motive produces actions. Lack of sleep (the need) activates the physical changes of fatigue (the motive) which produces sleep (the action, or in this example, inaction). Achievement of the goal satisfies the need and reduces the mo tive. When the goal is reached, balance is restored. However, other needs arise which are then satisfied by the same sequence of events. Understanding the motivation sequence in itself offers a manager little help in determining what motivates people.

TH EO R IES OF M O T IV A T IO N The theories of motivation described in this chapter help to pro vide a broader understanding of what motivates people. They include: traditional theory; need hierarchy theory; preference-expectancy theory; achievement-power-affiliation theory; motivation-maintenance theory; and reinforcement theory.

Figure 6.2 Cash as a Basic Motivator 174


Traditional Theory The traditional theory of motivation evolved from the work 'Of Frederick W. Taylor and the management movement that took place at the turn of this century. Taylor's ideas were based on his belief that existing reward systems were not designed to reward individuals for high production. He felt that when highly productive people discover that they are being compensated basically the same as less productive people, then the output of highly productive people will decrease. Taylor's solution was quite simple. He designed a system whereby an employee was compensated according to individual production. Thus, under Taylor's system, employees could in many cases significantly increase their pay for production above the standard. The traditional theory of motivation is based on the assumption that money is the primary motivator. Financial rewards are directly related to performance in the belief that if the reward is great enough, employees will produce more.

The Hierarchy of Needs As discussed in Chapter 1, one of the most important theories of motivation is the hierarchy of needs theory postulated by industrial psychologist Abraham W. Maslow. He stated that human needs in the form of a hierarchy should be satisfied in order, from the lowest to the highest needs.

The physiological needs are basically the needs of the human body that must be satisfied in order to sustain life. These needs include Directing

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food, sleep, water, exercise, clothing, shelter, and so forth. Safety needs are concerned with protection against danger, threat, or deprivation. Since all employees have (to some degree) a dependent relationship with the organization, safety needs can be critically important. Favorit ism, discrimination and arbitrary administration of organizational poli cies are all actions which arouse uncertainty and therefore affect the safety needs. The third level of needs is composed of the social needs. Gener ally categorized at this level are the needs for love, affection, belongingall are concerned with establishing one's position relative to others. This need is satisfied by the development of meaningful personal relations and by acceptance into meaningful groups of individuals. Belonging to organizations and identifying with work groups are means of satisfying these needs in organizations.

N E E D H IE R A R C H Y TH E O R Y

MOTIVATION M A IN TEN A N C E TH E O R Y

Self-actualization Motivational

Esteem or ego

Status

Social

Interpersonal relations Superior Subordinates Peers Supervision Maintenance

Safety

Company policy and administrator Job Security Working conditions

Physiological

\

Salary Personal life

Figure 6.4 Comparison of the Need Hierarchy Theory and Motivation Maintenance Theory 176


The fourth level of needs is composed of esteem needs. These needs influence the development of various kinds of relationships based on adequacy, independence, and the giving and receiving of in dications of self-esteem and acceptance. The highest-order need is con cerned with the need for self-actualization or self-fulfillment that is, the need of people to reach their full potential in applying their abilities and interests to functioning in their environment. This need is concerned with the will to operate at the optimum and thus receive the rewards that are the result of that attainment. The rewards may not only be in terms of economic and social remuneration, but also in terms of psycho logical remuneration. The need for self-actualization or self-fulfillment is never completely satisfied; one can always reach one step higher.

How can Managers Use Maslow’s Theory According to a research made on the realities of Maslow's hierar chy of needs, there were questions about the accuracy of the hierarchi cal aspect of these five needs. Although the identification of the differ ent needs appears to be useful, there is no doubt that if primary needsphysiological and security are clearly unsatisfied, this situation can have a material effect on motivation. But even these needs are fairly elastic. How much is enough? Take clothing and shelter for example. One person might be reasonably well satisfied with a level that to an other person would be inadequate. Likewise, research indicates that even the rank and file employee has needs for self-esteem and selfactualization, although what might represent status or pride of accom plishment to one person would not be at all satisfying to another. One has only to look at the esteem attached to such things as office space. A first-level supervisor might be very happy with a smaU, simple office, while a top executive would be satisfied only with a large well-fur nished office. In the office, this means that perceptive managers must take situ ational or contingency approach to the application of Maslow's theory. What needs they appeal will depend on the personality, wants, and desires of individual. In any case, managers should not forget that most people, especially in a developed society, have needs that spread over the entire range of Maslow's hierarchy.

Achievement - Power - Affiliation Theory Closely related to the need hierarchy theory is the achievementpower-affiliation theory, primarily developed by David McClelland. This theory holds that all people have three needs: (1) a need to achieve, (2) a need for power, and (3) a need for affiliation. The need for achieve ment is a desire to do something better or more efficiently than it has Directing 17 7

been done before. The need for power is basically a concern for influ encing people - to be strong and influential. The need for affiliation is a need to be liked - to establish or maintain friendly relations with others. McClelland maintains that most people have a degree of each of these needs that the level of intensity varies. For example, an individual may be high in the need for achievement, moderate in the need for power, and low in the need for affiliation. This individual's motivation to work will vary greatly from that of another person who has a high need for power and low needs for achievement and affiliation. Accord ing to this theory, it is the responsibility of managers to recognize the dominating needs in both themselves and their employees and to inte grate these differences effectively. An employee with a high need for affiliation would probably respond positively to demonstrations of warmth and support by the manager; an employee with a high need for achievement would likely respond positively to responsibility. Through self-analysis, managers can gain insight as to how they tend to respond to employees. They may then want to alter responses to employees to best fit the employee's needs.

Motivation-Maintenance Theory Frederick Herzberg, Bernard Mausner, and Barbara Syndeman developed a theory of work motivation which has wide acceptance in management circles. The theory is referred to by several names: moti vation-maintenance theory, dual-factor theory, or motivation-hygiene theory. Initially, the development of the theory involved extensive inter views with approximately 200 engineers and accountants from eleven industries in the Pittsburgh area. The purpose of this work was summa rized as follows: To industry, the payoff for a study of job attitudes would be increased productivity, decreased absenteeism, and smoother working relations. To the individual, an understanding of the foices that lead to improved morale would bring great happiness and greater self-realiza tion. In the interviews, researchers used what is called the critical in cident method. This involve asking subjects to recall work situations in which they had experienced periods of high and low motivation. They were asked to recount specific details about the situation and the effect of the experience over time. It was found through analysis of the interviewee's statements that different factors were associated with good and bad feelings. The findings fell into two major categories. Those factors that were most frequently mentioned in association with a favorably viewed incident concerned the work itself. These factors 173


were achievement, recognition, responsibility, advancement, and the characteristics of the job. But when subjects felt negatively oriented toward a work incident, they were more likely to mention factors asso ciated with the work environment. These included status; interpersonal relations with supervisors, peers, and subordinates; technical aspects of supervision; company policy and administration; job security; work conditions; salary; and aspects of their personal life that were affected by the work situation. The latter set of factors were called "hygiene" or "maintenance" factors because the researchers felt that they were preventive in nature. In other words, they do not produce motivation but can prevent moti vation from occurring. Thus, proper attention to hygiene factors is a necessary but not sufficient condition for motivation. The researchers contended that these factors, when present in addition to the hygiene factors, provide true motivation. In summary, the motivation-maintenance theory contends that motivation comes from the individual, not from the manager. At best, proper attention to the hygiene factors keeps an individual from being highly dissatisfied but does not make that individual motivated. Both hygiene and maintenance factors must be present in order for true motivation to occur. From these we can conclude that satisfiers are as sociated with the job itself and dissatisfiers with the context in which the job is performed. The findings of Herzberg and his associates sug gest that workers can be motivated best by satisfying the needs of the individuals for the satisfiers. ;

McGregor's Theory X & Y McGregor categorizes the assumptions upon which traditional organizations are based into theory "X," and the assumptions consisted with the modem organizations and current research literature into theory "Y." Some of these assumptions bring out the differences be tween traditional and modem approaches to motivation. Theory "X " views human beinf s as inherently lazy and hence must be motivated by force. The individual must be threatened with punisnment in order to make him increase his productivity. The direction and control comes from outside the individual to motivate him. On the other hand, theory "Y " contends that external force or punishment is not the best way of motivating individuals because they are capable of exercising self-direc tion and self-control. Besides monetary needs, the individual also has self-ego and self-realization needs. Fulfillment of these needs can be achieved by giving freedom of action as a responsibility of the indi vidual. Directing

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McGregor emphasizes that motivation of employees is best achieved when management creates an environment that encourages members involving both intrinsic and extrinsic rewards, by directing their efforts towards the goals of the organization. Attention must be given to the lower level and higher level needs in creating the proper organization environment. At the lower level, management should pro vide, on an equitable basis, extrinsic rewards for all contributions to productivity. At the higher level, importance of planning, organizing, staffing, directing and controlling should be stressed so as to provide as appropriate environment that will permit and encourage employees to seek intrinsic rewards at work.

Achievement Theory According to this theory proposed by David McClelland, an individual's ambition to do things better or achieve something is due to a very specific motive or need. McClelland calls this motive the need for achievement. This need is not something "inborn" but it can be ac quired through training and teaching the trainees to think and behave in terms of achievement. Such training was given to American, Indian, and Mexican business managers and it was found that those who at tended this training proved to be better performers after the training. The achievement-oriented person likes situations in which he takes personal responsibility for finding solutions to problems. He depends on his own abilities, not on chance. He has the tendency to get concrete feedback as to how well he is doing.

Barnard-Simon’s Theory of Equilibrium '’’his theory states that the inducements provided by the organi zation must be kept in equilibrium with the contributions made by the employees. In other words, equal wages must be paid for equal work. If the inducements (wages and other benefits) are not kept in balance with contributions of the workers, then their motivation will be af fected. This theory probably deals with sustaining motivation rather than increasing motivation. Inducements (Provided by management)

Contributions (Provided by employees)

The equity theory contends that the individual evaluates not only his personal position but that of others as well. People are motivated not only by what they get but also y what they see or believe others are getting. They make a social comparison of inputs (education, efforts, 180


1 s t le v e l A ctio n

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Figure 6.5 Vroom’s Preference - Expectation Theory

time spent, etc.) and rewards (money, work conditions, recognition, etc.) for themselves and others in the organization.

Vroom’s Preference-Expectancy Theory This theory is based on the premise that an individual assigns values to the outcome of each alternative course of action. The assign ment of values reflect the individual's expectations and order of prefer ences among the alternative courses of action and their outcomes. The expected outcome, however, in some cases are/rot truly valid. The out come may give the person greater satisfaction than he anticipated, or it may cause him harm which he failed to anticipate. Motivation is a result of the actual or perceived rewards available to an individual for accomplishing some goals. Motivation is a result of the actual or per ceived rewards available to an individual for accomplishing some goals. Motivation is equal to the summation of valence times expect ancy oriented. Motivation = E Valence x Expectancy The individual is faced with a set of alternative outcomes. These outcomes occur at two levels - first level and second level. The choice of outcome is based upon how the choice of first level outcome is re lated to second level outcomes. The preference for a particular outcome is based upon the strength (valence) he attaches to that outcome. The preference he attaches depends on his second level outcome. The per ception of this relationship is known as instrumentality. Expectancy is the probability that a specific action will be fol lowed by a particular first level outcome. A subjective probability rang ing from 0 to 1 can be assigned to this. Valence is measured by asking employees to rank important in Directing

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dividual goals and instrumentality by using a rating scale that deter mines the strength of perceived relationship between the first and the second level outcomes. Let us say that an employee is asked to rank salary, ‘ working conditions, decision autonomy, and security. The as signment of values, the individuals expectations, and order of prefer ences among the alternative courses of action and their outcomes. The expected outcome, however, may in certain cases not be truly valid. This theory does not place the needs of all employees into one basket, instead, it recognizes the individual differences, and the differences in their goals and expectations. The preference-expectation theory recog nizes that preferences and expectations differ among individuals but it makes no attempt to describe the differences or to categorize individu als in any way. The more sure the employees are of their estimates of expectancies and instrumentalities, the more likely it is possible to pre dict their behavior accurately. Because of its complexity, practitioners as well as researchers find it an unattractive option.

Reinforcement Theory B.F. Skinner's theory of motivation is known as the reinforcement theory. According to Skinner, the following are the components of motivated behavior: 1. Stimulus: The environmental setting in which behavior occurs (performance). 2. Response: The behavior level itself. 3. Reinforcement: The reward given for good performance only. Performance is conditioned by reward-giving. For example, when performance is high, an employee will get a pay increase. If the employee perceives this relationship, he will tend to strive for high performance because he knows he will be rewarded. This theory as sumes that the results or consequences of an individual's behavior will determine his level of motivation.

Maturity Theory Chris Argyrie proposed a theory of motivation on maturity-im maturity. He contends that as people grow (psychologically) and ma ture they strive toward the highest level of need in Maslow's need hierarchy: self-actualization. Immature people are dependent on others and lack self-initiative, mature people are independent. Their characteristics are:

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IMMATURE Passive Dependent Short term perspective Subordinate position Lack of self-awareness

MATURE Active Independent Long term perspective Equal or superordinate position Awareness of self

By their rigid and formal structure and practices, many organiza tions keep their people in a state of immaturity. As a result, they tend to be passive, dependent and submissive. To motivate them, Argyrie recommends a psychologically healthy environment in which individu als can strive toward self-actualization, that is "to become everything that one is capable of becoming."

Job Enlargement This involves redesigning of jobs so that related activities are added to those currently being performed. It is the process of allowing individual workers to determine their own working place (within lim its) to serve as their own inspectors by giving them responsibility for quality control, to correct their own mistakes, to be responsible for their own machine set-up and repair, and to attaih choice of method. This method motivates the individual by offering challenge, interest, and meaning.

Job Enrichment A modem and a more permanent approach to motivation is through job enrichment. This involves putting meaning into j.obs. In other words, it is putting Herzberg's two-factor theory into effect by building motivators into the job. These motivators include achievement, growth, responsibility, advancement, and recognition.

C O M M U N IC A T IO N The problem in defining communication is best shown by the fact that one study found over 95 definitions of the term. Many were supposed to be "the one true" definition. In this text, communi cation is defined as the transfer of information that is meaningful to those involved - in general, the transmittal of understanding. CommuDirectlng

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nication can occur in many forms ranging from face-to-face contact in volving facing expressions and body movements. Although communication has application to all phases of manag ing, it is particularly important in the function of directing. Good com munication has been defined as the interchange of thought or informa tion; it brings about mutual understanding and confidence. In this book, communication is viewed as the transfer of information from one person to another, whether or not it gives rise to confidence. But the information transferred must be understandable to the receiver. It should never be forgotten that nothing can logically be called informa tion unless it is understood.

Types of Communication Communication has developed to the point where it is regarded as a major function in the coordination and performance of an organi zation. Communication is an important means of attaining organization goals. In organizational situations, there are formal communications, informal communications, communication between groups, interper sonal communications, upward, downward, lateral communications and so on. Formal and downward communication appear to be the more common methods of communication in many organizations. Under this approach, the information flows down through the formal channels in the organization. E N C O D IN G

T R A N M IS S IO N

S y m b o ls C o d e s Etc.

FEED BA CK

Figure 6.6 The Communication Process 184


D E C O D IN G

The downward communication is classified into 1. Specific task directives: job instructions 2. Information regarding understanding of the task and its position in the organization 3. Information on procedures and practices 4. Subordinates' performance feedback 5. Information on mission-indoctrination of goals The information sent down will be in the form of orders, instruc tions, and routine information. The channels used to carry the informa tion downward are: posters and bulletin boards, company magazines and newspapers, letters and pay inserts, employee handbooks and pamphlets, information racks, loudspeaker or intercom systems, annual reports, and so on. Can you think of any other channel used for down ward communications? A study conducted by Maier illustrates the efficiencies of a sys tem which relies heavily on downward communications. The superior and subordinate were asked independently to describe the subordi nates' job with regard to the different job factors, such as duties, re quirements, future changes, and performance obstacles. The results showed a great difference in their thinking as to what constitutes a subordinates' job. Downward communication often takes things for granted. Superiors overestimate the amount of information the subordi nates receive.

Figure 6.7 Downward (Formal) Flow of Communication

Upward communication is encouraged by some innovative orga nizations. Future growth and efficiency through innovations and the correction of problems are enhanced by upward communications sys te m s. Likert's study shows that when managers were asked to think of th e most difficult communication problem they had faced during the previous six months, about 80 percent said it dealt with downward Directing

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communication while only 10 percent said it involved upward commu nication. Trust is a very important element which facilitates more up ward communication. Also, the subordinates tend to provide the right kind of information when he knows that the boss can get the correct information from another source. The upward flow of communication can be facilitated through the grievance procedure, the complaint system, counselling methods, survey questionnaires, an open-door policy, exit interviews, special meetings, suggestion system, and other participative techniques. Lateral communications or peer-level communications enable members of a particular level in the organization to share information and thus improve their decisions and decision making skills. This type of communication takes some pressure off the supervisors. Landsberger found that much goes on in the lateral pattern of communications be fore the vertical processes are called upon to mediate a conflict or bring about action and decision. According to Simsson, the state of technol ogy determines the need for lateral communications. He found lateral communication among foremen because of the mechanized nature of work. Committees, conferences, group discussions and other ap proaches are some ways by which lateral communications can be fos tered. Distribution of written communication across departmental lines is also another method for improving lateral communication. The sub ordinates also developed a strong sense of self-confidence under this approach. It is unfortunate that some organizations put restrictions on lateral communication.

Grapevines Many informal paths of communication also exist in organiza tions. These informal channels are generally referred to as grapevines. During the civil war, intelligence telegraph lines hung loosely from tree to tree looked similar to a grapevine. Messages sent over these lines were often garbled; thus, any rumor was said to be "from the grape vine." The organization grapevine often results from the organizations' informal work groups. Although generally not sanctioned formally, the grapevine al ways exists. As the name suggests, it does not follow the organizational hierarchy. It may go from secretary to vice-president or from engineer to clerk. Not limited to nort-management personnel, the grapevine also operates among managers and professional personnel. In normal work situations, over three-fourths of grapevin infor mation is accurate. The errors can, of course, completely change the information; so the grapevine probably produces mpre misunderstand ing than its small percentage of wrong information indicates. 186


The grapevine aids management in efficiency. 1. The grapevine is a permanent part of the formal organiza tional structure. It should be used to facilitate effective communication. 2. Managers should have a knowledge of what the grapevine is communicating and why. 3. Managers' inputs into the grapevines are spread to a greater number of employee-most employees hear grapevine information for the first time from management. Therefore, all levels of management should be provided with the total and accurate information so that the messages they communicate through the grapevine are accurate.

Ways to Communicate There are many forms of communication. William Exton, Jr. enu merate? twelve ways to communicate. These are: 1. Informal talk or "grapevine" communication. This is the most fundamental form of communication usually adopted by an informal organization. 2. Memoranda 3. Telephone calls 4. Interoffice News 5. Letters 6. Reports 7. Conferences/Conventions 8. Meetings 9. Bulletin Board Notices 10. Exhibits and Displays 11. Visual Aids

Downward and Lateral Information Flow It is understandable, too, that downward and lateral (that is, across lines of an organization) information for decision making is im portant to subordinate managers in an enterprise. If manages at all levels have to make decisions and to follow up on these decisions, then they should be able to get any needed information as soon as possible. Obviously, downward flow of information through organization levels is a time consuming process. Indeed, delays are so frustrating that most alert managers insist on information flowing directly to where it is required. One chief executive, for example, adopted the posi tive rule that no superior was to receive information concerning a subordinate's area of operation before the subordinate received it. He thus initiated a lateral flow of information so that everyone in the com pany would be informed as rapidly as possible about his or her area of information and would have an opportunity to undertake needed cor rections. Directing

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Upward Flow of Information Information moves upward from the supervisory level and is summarized for the consumption of department managers, who take action within the scope of their authority.’ They, in turn, move this in formation upward one level, say, to the division manager's level, at which point it is again summarized for their action and for transmittal to the chief executive for decision purposes. This idea may fit the think ing of some systems and computer-oriented people, but it is not realis tic. First, all managers have other source of information that they bring to support their decisions. They are not dependent solely upon this data flow. For example, personal observation is notably important in this regard. Second, looking at information differently, much of the summa rized information may not be needed for varying periods, and the need for new information may be extremely important. Some approaches for improving communication are: 1. An attitude of reasonable access and an open mind and ear. 2. Suggestion systems that are objective. 3. Availability of counselling and grievance system. 4. Encouragement of employee letters. 5. Participation in social activities which provide an opportunity for information conversation. 6. Communicating with employees' families. 7. Utilizing employee attitude surveys and exit interview data. 8. Providing opportunities for subordinates to make presentations.

Communication Networks Communication networks refer to the pictorial depictions of in formal channels. Several research studies have been conducted to deter mine the type of communication network that would result in better performance. One such study was conducted by Alex Bavelas and his associates. Each network was first given a simple task to complete and then a more complex task was given. In the first experiment, each of the five members of the network received six colored marbles, of which only one color was common to all the members. The task assigned was to find the common color. In the second experiment, the approach was the same, but multi-colored marbles were used to complicate the problem. Certain rules were laid down for the participants. In attempting to find the answers, each participant was allowed to communicate only accord ing to the channel line established for each network. For instance, in the case of the wheel network, the outer members had only one-way com munication with the member in the center, while each of the members 188


in the circle had two-way communication with members on either side. The results of this study showed the wheel to be faster for the simple task and the circle for the complex task. Since organizational situations involve, complex tasks and decisions, two-way communication network appears to be the best approach. Two-way communication involves feedback and participation. In other research study, it was found that the effective groups involved in complex tasks used decentralized com munication patterns, while routine tasks involved centralized commu nication patterns.

BARRIERS TO COMMUNICATION There are several barriers in an organization which reduce the effectiveness of communication. The supervisor must be able to identify and recognize such barriers. Successful supervisory performance re quires the ability to recognize these barriers and to deal with them effectively. These barriers are:

1. Distance The physical distance between the supervisor and his subordi nates results in less face-to-face communication. We know that less faceto-face communication may lead to misunderstanding or lack of under standing of the message being communicated. The physical distance also makes it difficult for supervisor and subordinate to seek clarifica tion.

2. Distortion This occurs when an individual fails to distinguish actual data from his own views, feelings, emotions, etc. Carl Rogers contends that the major barrier to communication is the tendency to make value judg ments on the statements of others. Sometimes the supervisor and sub ordinates tend to interpret the information in the light of their own views, values, opinions and background rather than interpreting the message objectively. There are supervisors who are closed-minded.

3. Semantics This deals with the language aspect of communication. Graham states that the structure of our language leads to misrepresentation of the true nature of events. In the English language and in other lan guages, there are certain words which have multiple meanings.

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•Example: Charge a fee, Charge an account, Charge a battery. Charge a horse. Words with multiple meanings in a message may lead to misin terpretation of the message.

4. Lack of Levelling This refers to various differences in the levels of supervisors and subordinates. For instance, there is a difference in the level of knowl edge and expertise of a supervisor and subordinate. If a supervisor communicates with his subordinates on his own level of knowledge and ignore the level of the subordinates, then communication breaks down. Sometimes, supervisors tend to use supervisory jargon, either technical or administrative, which is totally alien to the subordinates.

5. Lack of Trust This barrier has to do with the previous experiences of subordi nates' dealings with supervisor. Based on the past experiences, if the subordinate feels that it is not good for him to report bad news to the supervisor, then he will withhold such information from the supervisor. On the other hand, if he feels that the supervisor is considerate and helpful, then he will not filter bad news or unfavorable information. There are some supervisors who use subordinates for their own selfish interest, such as promotion, merit increase and good image. Such activi ties may change subordinates' trust in the supervisor.

6. Inaccessibility In some organizations we find supervisors who are often out, or keep themselves busy with trivial things and therefore are not available to subordinates for consultation, discussion, or guidance. Such inacces sibility results in communication breakdown. This affects the motiva tion of subordinates in seeking proper direction from the boss and relies more on trial and error approaches. The inaccessibility is not necessarily physical, it can be psychological.

7.

Lack of Clear Responsibilities

When the responsibilities, assigned to the subordinates are not clear, they find scapegoats or come out with excuses. Often we hear people say, "I thought this is what you wanted me to do," or "I thought this should be done by Robert." Lack of clarity in duties and responsi bilities result in status and role ambiguities, which simply means the position and the role which are occupied and played by the subordinate are unclear to him.

190

M anagement for Filipinos

8. Personal Incompatibility Often the personality of the supervisor and the subordinate clash and thus create communication blocks. Rather than viewing things ob jectively, personality factors dominate and issues become personalized.

9.

Refusal to Listen

There are some supervisors, who by their careless attitude or arrogant nature, refuse to listen to their subordinates. Such an attitude blocks effective communication. Refusal to listen may be due to a supe riority complex feeling of "I know everything," or an inferiority com plex feeling of "I am no good."

10. Failure to Use Proper Media Several types of media are available in the organizational situa tion for communication purposes. The effectiveness of communication depends on how a supervisor chooses the proper media for his own situation. Some supervisors take great pride in sending written memos loaded with jargon to their subordinates who lack reading and compre hension skills.

11. Communication Gap This refers to the defects or loopholes in the formal network of communication. In large and complex organizations, this kind of barrier is a common occurrence. The formal communication networks are built along the authority-responsibility lines of the organization. As the orga nization grows and expands, the networks tend to become large and complex. Without much planned effort. Under such circumstances de fects start to develop in the communication network.

12.

Lack of Direction

A lack of direction in message content may present a barrier. Some messages have two types of content: the manifest or evident meaning and the latent or real meaning. In some cases, the manifest meaning of the message is made so attractive that the real meaning is lost.

LEADERSHIP Leadership is an important aspect of managing. Indeed as will be made clear in this book, the ability to lead effectively is one of the keys to being an effective manager. It should also become clear that under standing the other essentials of managing and doing the entire mana gerial job has an important bearing on assuring that a manager w ill be Directing

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an effective leader Managers must exercise all the elements of their role to combine human and material resources to achieve desired group objectives. The key in doing this is the existence of a clear role and a degree discretion or authority to support managers' actions. Thus, all managers should become good leaders. Leadership is generally defined as the art and science of influenc ing people so that they willingly move toward the achievement of the group goals. This concept can be enlarged to imply not only willingness to work but willingness to work with zeal and confidence. Zeal arid confidence reflect experience and technical ability. To lead is to guide, conduct, direct, and proceed. We can say that all managers must be good leaders, but not all leaders could be good managers. Leadership is a process of influencing the activities of members of a group in performing their tasks of goal setting and goal achieve ment. The ability- to obtain followers and influence them makes a leader. Generally, influence results when one person presents informa tion in such a way as to convince the other members of the group that their situation will be improved if they behave in a certain way. A leader is the person who takes the central role in this interaction by influencing the behavior of other members of the group. Managers are in a leadership role because they can influence the behavior of members of the formal work group. However, that does not mean the manager is effective ;n the role. A manager's leadership can be measured by the contribution of the group toward the "Organization's objectives (such as increased profit or service to customers).

TYPES OF LEADERSHIP A large amount of research has been directed toward finding the characteristic type of leaders that are most effective. Different leader ship types have been identified and have provided a framework for the manager in selecting the approach to directing. The styles of leadership have been grouped under four types: 1. The dictatorial leader accomplishes tasks through fear of penalties, and maintains a highly critical and negative attitude in rela tions with subordinates. As a boss, such a person expects subordinates to perform well or be subject to punishment or replacement. At times this approach apparently is effective in the short run, but it does not provide a solid foundation for continued performance, because it does not give lasting satisfaction for those being led. 2. The autocratic leader assumes a paternalistic role which forces subordinates to rely on the leader for their satisfaction. If this type of leadership is to be successful, the leader must be an exception ally strong and wise individual who, by force of personality, generates 192


respect and allegiance. The satisfaction of the subordinates to this type of leader depends solely on the goodwill of their superior. Because this leader makes decisions without the participation of others, subordi nates have little chance to develop leadership qualities. This type re sults in dependency on the continued presence of the leader, and work deteriorates when that person is absent. 3. Democratic leader depends not only on their own capabili ties but encourage consultation of subordinates. Subordinates are in vited to participate in planning, decision-making, and organizing. They tend to venture on their own initiative and to communicate freely with their fellow subordinates. This type of leadership results in a coopera tive spirit and the development of managerial abilities on the part of subordinates. Satisfaction is gained through a feeling of group accom plishment. 4. The laissez-faire leader depends completely on subordinates to establish their own goals and to make their own decision. This leader assumes the role of just another member of the group. Under these conditions, members of the group are permitted to act individually and, therefore, may easily head in different directions.

Power, Authority, and Leadership Power is the ability to command or apply force. It is necessarily accompanied by authority. Through power, people can be influenced by someone to do something that they would not otherwise do. The use of or desire for power is often viewed negatively in our society because power is often linked with the capacity to punish. There are, however, other forms of power as: Authority which exists in the formal organization- is the right to issue directives and expend resources. Authority has been viewed in the past as a function of position in- the organizational hierarchy, flowing from the top to the bottom of the organization. Basically, the amount of authority' that a iLianager has relied on the amount of coercive, reward, and legitimate power that the manager can exert in a certain position. The subordinate has the power either to accept or to reject a superior's command; if the subordinate rejects the authority of a superior, this authority does not exist. Bernard viewed disobeying or ignoring a su perior as a denial of the latter's authority.

Leaders’ Attitudes Douglas McGregor developed two attitude profiles, or assump tions, about the basic nature of people. These attitudes were termed Theory X and Theory Y, McGregor maintained that many leaders in Directing

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Figure 6.8 Leadership Styles

■essence subscribe to either Theory X or Theory Y and behave accord ingly. A Theory X leader would likely use a much more authoritarian style of leadership than a leader who believes in Theory Y assumptions. The real value of McGregor's work was the idea that a leader's attitude toward human nature has a large influence on how that person behaves as a leader. The relationship between a leader's expectation and the resulting performance of subordinates has received much attention'. Generally, it has been found that if the manager's expectations are high, productiv ity is likely to be high. On the other hand; if the manager's expectations are low, productivity is likely to be poor. McGregor called this phenom enon the self-fulfilling prophecy. It has been also Pygmalion in manage ment.

Assumptions about People Theory X 1. 2.

194

The average human being has an inherent dislike of work and will avoid it, if possible. Because of their dislike of work, most people must be corrected, controlled, directed, or threatened with punishment to get them to put forth adequate effort toward the achievement of organiza tional objectives. Management for Filipinos

The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition, and wants security above all.

Theory Y 1. 2.

3. 4. 5.

6.

The expenditure of physical and mental effort in work is as natural as play or rest. External control and the threat of punishment are not the only means for bringing about effort toward organizational objectives. Workers will exercise self-direction and self-control. Commitment to objectives is a function of the rewards associated with their achievement. The average human being leans, under proper conditions, not only to accept but to seek responsibility. The capacity to exercise a relatively high degree of imagination, ingenuity, and creativity in the solution of organizational problems is widely, not narrowly, distributed in the population. Under the conditions of modem industrial life, the intellectual poten tialities of the average human being are only partially utilized.

M A N A G E M E N T SKILLS Another approach to examining the management process is in terms of the types of skills required to perform the work. Despite variations in the duties and responsibilities of a manager, there are several skills that all managers must develop. Once again, there are differences of opinion among scholars and researchers as to what skills are essential for performing various managerial functions. Katz has identified three basic types of skills - technical, human, and conceptual - which he says are needed by all managers. Technical skill is the ability to perform a manager's job. An ac countant, doctor, engineer or a musician all have technical skills in their respective fields of specialization. A manager must possess technical skill. Human skill is the ability to work with others by getting along with them, motivating them, and communicating effectively w'ith oth ers. The manager must focus his attention on improving his interper sonal relations with peers, subordinates and his own supervisors. Conceptual skill is the ability to coordinate and integrate the entire organization's interests and activities. A manager must have the ability to see the organization as a whole and not make decisions from his own departmental point of view. He must be able to see how his department is affected by the decisions of others. Directing

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Katz contends that although these skills are necessary for effec tive managerial performance, their relative importance varies according to the level of management. At the first-line management level, technical skill is most impor tant and it becomes less important as we move up the chain of com mand. On the other hand, the importance of conceptual skill increases as we move up the hierarchy. Human relations skill is important at all levels of management. In a survey, the presidents of several corporations were asked to list the characteristics they would like their replacements to have. They came out with the following characteristics: 1. The successful executive has a high tolerance for frustration. He doesn't blow up when provoked. 2. He encourages participation. 3. He continually questions himself and is willing to examine himself carefully. 4. He understands the rules of competitive warfare. He is able to play it cool and doesn't feel distressed if a colleague shows a little fight. 5. He expresses hostility tactfully. 6. He accepts both" victories and defeats with controlled emo tions. 7. He snaps out of defeats without feeling personally shattered and can quickly start thinking of the next goal.

M A N A G E M E N T ROLES Henry Mintzberg has proposed another method of examining what managers do by introducing the concept of managerial roles. A role is defined as an organized set of behaviors belonging to an iden tifiable job. But remember that the delineation of managerial working roles is essentially a categorizing process - just as itwas with the mana gerial functions. Mintzberg identifies ten managerial roles, which he divides into three major groups: interpersonal roles, informational roles, and deci sional roles. The manager's position is the starting point for defining his roles. Formal authority gives the position status. Authority and status together generate certain interpersonal roles for a manager. Finally, ac cess to information, authority, and status place the manager at a central point in the organizational decision-making process. Mintzberg further suggests that the management level and the types of work that the manager directs significantly influence the vari1GS


F IR S T -L IN E MANAGEMENT

M ID D L E MANAGEMENT

TOP MANAGEMENT

C on cep tu al C o n c e p tu a l

H um an

H um an

Technical Technical

Figure 6.10 Skills needed at different levels

ety of roles that the manager must assume. For example, managers at lower levels of the organization spend more time in the disturbance handler and negotiator roles and less time in the'figurehead role. On the other hand, the chief executive of an organization concentrates more on the roles of figurehead, liaison, spokesperson, and negotiator.

Interpersonal 1. Figurehead: Manager represents the organizational unit in all matters of formality. 2. Liaison: Manager interacts with peers and other people outside the organizational unit to gain information and favors. 3. Leader: Manager provides guidance and motivation to the work group and also defines'the atmosphere in which the work group will work. Inform ational 1. Monitor: Manager serves as a receiver and collector of informa tion. 2. Disseminator: Manager transmits special information within the organizational unit. 3. Spokesperson: Manager disseminates the organization's informa tion into its environment.

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Decisional 1. 2.

3. 4.

Entrepreneur: Manager's role is to initiate change. Disturbance handler: the manager must assume when the organi zation is threatened, such as conflicts between subordinates, the sudden departure of a subordinate, or the loss of an important customer. Resource allocator: Manager decides where the organization will expand its resources. N egotiator: Role the manager assumes when the organization finds itself in major non-routine negotiations with other organiza tions or individuals.

F o r m a l a u th o r ity a n d s ta tu s

Source: From the Nature of Managerial Work by Henry Mintzberg, 1973. Figure 6.9 Ten managerial roles

In practice, management skills are so closely interrelated that it is difficult to determine where one begins and another ends. However, it is generally agreed that lower-level managers need more technical skills than managers at higher levels. Human relations skills are essential to 198


effective management at all levels. Finally, decision-making, planning, and administrative skills become increasingly important as a person moves up the managerial ladder.

M A N A G E R IA L GRID In line with the Ohio State studies, Robert Blake and Jane Mouton (1964, 1969) developed a distinctive approach to the study of lead ership: the managerial grid. They began their analysis by focusing on the two basic aspects of leader behavior - concern for production (task orientation) and concern for people (consideration). Each of these di mensions was measured on a scale that ranges from one (low) to nine (high). For instance, the 1,1 leader is neither task-oriented nor consid erate; the 9/1 leader is very considerate but not task-oriented; the 5,5 is somewhat task-oriented and somewhat considerate; and the 9.9 leader is both very task-oriented and very considerate {sec figure 6-11) According to Blake and Mouton, the 1,1 leader avoids making decisions, is neutral when conflict occurs, creates an apathetic organiza tional climate, provides little motivation for subordinates, and rarely offers feedback on performance. The results are that creativity is stifled and subordinates want only to survive as best they can. The 9,9 leader operates in exactly the opposite fashion. The leader based his decisions on a consensus among members of the group, confronts and resolves conflict and problems associated with it, creates an organizational cli mate based on trust and acceptance, motivates subordinates by means of job content factors rather than hygiene factors, and provides subor dinates with ratings and criticism that are specific, spontaneous, and candid. The results are that the subordinates share in the creative ap proaches to problems and integrate their work and goals with those of the leader and the organization. Blake and Mouton describe the remaining three styles in terms of the same categories. For example, the 1,9 leader tends to abdicate his role as a decision maker, to smooth over difficulties and problems be tween individuals and subordinates, to create a pleasant organizational climate,'to motivate subordinates primarily by means of hygiene fac tors, and to provide praise as a substitute for a genuine rating of per formance. Under these circumstances the employee's commitment to the organization is limited mainly to social activities, such as attending formal functions. The 9,1 leader railroads decisions, suppresses conflict, creates a win-lose organizational climate, relies on threats for motivat ing subordinates, and provides only negative feedback to the employ ees about their performance. The results are that the subordinates be come anti-organizational and attempt to beat the system as often as possible. Finally, the 5,5 leader relies on traditional voting to make Directing

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HIGH

9

1.9

9.9

Country Club Management

Team Management

Thoughtful attention to need of people for satisfying relationships leads to a comfortable friendly atmosphere and work tempo.

Work accomplishment is from committed people, interdependence through a common stake in organization purpose leads to relationship of trust and respect.

UJ

aUJ 6

5.5 Organization Management

Ol

Adequate organization performance is possible through balancing necessity to get out work with ' maintaining morale of people at a “ satisfactory level.

U. 5° O

z

S

y4 1.1

9.1

Improverlshad Management

Authority-Obedience Management

Exertion of minimum effort to get required work done is appropri ate to sustain organization membership.

Efficiency in operation results from arranging conditions of work in such a way that human elements interfere to a minimum degree.

1

LOW

3 LOW

4

5

6

CONCERN FOR PRODUCTION

7

9 HIGH

Figure 6.11 The Managerial Grid d e cisio n s, h as difficu lty m a k in g u p h is m in d a b o u t w h e th e r co n flic t is a cc e p ta b le , c re a te s a m a n ip u la tiv e o rg a n iz a tio n a l clim a te , u se s a c a rro t a n d stick a p p ro a c h to m o tiv a tin g su b o rd in a te s, an d p ro v id e s Superfi cia l fe e d b a ck on p e rfo rm a n ce . U n d e r th is le a d e rsh ip the s u b o rd in a te s' cre a tiv ity is lim ited to p ro v id in g id e a s th ro u g h the su g g e stio n b o x a n d is fo cu se d o n m ain ta in in g th e sta tu s quo.

M A N A G E M E N T F IL IP IN O S T Y L E S M anagem ent A ’la Pinoy D o y o u m a n a g e "b y kayod" o r " b y lusot"7 S eek in g to c o m p re h e n d the F ilip in o m a n a g e r's v a lu e s a n d in clin atio n s, E rn e s t A . F ra n c o , e d ito r of th e book, M a n a g e m e n t in th e P h ilip p in e S e ttin g , id en tifies five ty p e s of Filip in o m a n a g e rs. 200


M anager “ By

K ayod”

Kayod is a Filip in o w o rd th at m e a n s to g iv e oneself to h a rd w o rk . T his m a n a g e r is a ctio n -h u n g ry an d c o m m itte d , a n d h is m a n n e rs are ra th e r se rio u s an d those o f an in tro v e rt. A fo rm a l a n d se rio u s w o rk er, h e w o n 't g iv e in to b rib e ry o r an y a n o m a lo u s d eals.

M anager “By

L u s o t"

Lusot m e a n s av ailin g o n a lo o p h o le. T his m a n a g e r w ill a lw a y s find lo o p h o le s to av o id h a rd w o rk o r u tilize an e x cu s e fo r failu re. G iv en to sh o rtcu ts a n d u n co n v e n tio n a l o r e v e n illegal m e a n s to a tta in objec tiv es. G en erally a n in tro v e rt, h e d e a ls w ith p e o p le inform ally.

M anager “ By

L ib ro "

Libro is*,a S p an ish w o rd fo r " b o o k ." T his m a n a g e r literally goes b y th e b oo k . S cientific, th o ro u g h a n d an aly tical, h e g e n e ra lly h a s a d e q u a te ly fo rm al •training in m a n a g e m e n t.

M anager “By

O id o "

T h is m a n a g e r acq u ires his m a n a g e ria l skills b y p la y in g it b y ear. (O ido c o m e s fro m S p an ish oir, " t o lis te n "). D ep en d s o n p ra c tic a l e x p e rie n ce to c o m p e n sa te for h is lack o f n o rm a l m a n a g e m e n t e d u c a tio n th e o p p o site o f the "lib ro " m an ag er.

Figure 6.12 Manager by Libro (World Executive Digest, Oct. 1996)Directing

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iManager “By

U gnayan”

T h e h y b rid o f the a b o v e m e n tio n e d ty p es. A gifted re co n cile r of all p h ilo so p h ies a n d beliefs h eld b y th e v a rio u s ty p es o f m a n a g e rs. P a rtic ip a to ry an d co o rd in a tiv e , h e in te g ra te s v a rio u s sty les d e p e n d in g o n th e c o m p a n ie s ' n e e d s a n d co n d itio n s. T h e "Oido" a n d "Libro" m a n a g e rs , b e in g job co n te n t-o rie n te d , m o stly b e co m e th e p la n n e rs a n d th in k ers in an o rg a n iz a tio n . T h e p r o ce s s-o rie n te d “Kayod" a n d "Lusot" m a n a g e rs , o n the o th e r h a n d , b ein g p rim a rily in v o lv es w ith h o w to d o a job b est-o ften are im p le m e n to rs an d d o e rs in the co m p an y . "Ugnayan" m a n a g e rs exem p lifies h ig h ly re silien t, h ig h ly a d ap ta b le m e n of the first order.

SH O R T CASE STUDY: D IR E C TIN G (See Chapter 12, suggested format for case study)

E D S A R A D IO A N D T V C O M P A N Y B o n g T ad iw an fo u n d e d a sm a ll ra d io m a n u fa c tu rin g p la n t in E D S A in 1991. T his b u sin ess g re w to b e c o m e o n e o f the n a tio n 's la rg e st ra d io , TV, an d ap p lia n ce p ro d u c tio n co m p a n ie s. By 1 9 9 9 , its sa le s a p p ro a ch e d P 3 0 0 m illion an n u ally w ith 1 5 ,0 0 0 e m p lo y e e s an d ten m a n u fa ctu rin g p lan ts. T h ro u g h o u t th e c o m p a n y 's g ro w th , the fo u n d e r w a s its a ctiv e , im ag in ativ e , a n d d riv in g fo rce. In e a rlie r d a y s , h e k n ew e v e ry m a n a g e r a n d w o rk e r a n d ca lle d th e m b y th eir first n a m e i. W h e n the c o m p a n y g re w fairly larger, p e o p le still felt th a t th e y k n ew the fo u n d e r a n d p resid en t, a n d this stro n g feelin g of p e rso n a l lo y alty h e lp e d m ak e fo r th e a b sen ce of a c o m p a n y u n ion . H o w e v e r, as the co m p a n y p ro sp e re d , B o n g T ad iw an w o rrie d th at it w a s lo sin g its " s m a ll-c o m p a n y " sp irit. H e a lso w o rrie d th a t'h is p h i lo so p h ies a n d objectives w e re n o t u n d e rs to o d b y the e m p lo y e e s an d th at d u p lica tio n s tak e p lace b e ca u s e o f p o o r c o m m u n ica tio n o f c o m p a n y p o licie s a m o n g w o rk e rs , th u s a ffe ctin g th e d e v e lo p m e n t a n d m a rk e tin g of n ew p ro d u cts. To so lv e the' co m m u n ica tio n p ro b le m , h e h ired a d ire cto r o f c o m m u n ic a tio n , w h o re p o rte d to h im , a n d to g eth er, th e y u tilized e v e ry c o m m u n ic a tio n d e v ice o th e r c o m p a n ie s u se : b u lle tin b o a r d s in all the c o m p a n y 's offices a n d p la n ts; a re v ita liz e d h o u s e n e w sle tte r c a rry in g n e w s item s from all co m p a n y p la n ts; a c o m p a n y m a n u a l fo r e v e ry e m p lo y e e g iv in g sig n ifica n t in fo rm a tio n a b o u t th e firm ; p ro fit-sh a rin g s c h e m e ; c o m p a n y -s p o n s o r e d c o u r s e s o n c o m m u n ic a tio n ; m o n th ly m e e tin g a t the m a in office fo r th e to p e x e cu tiv e s ; an n u al th re e -d a y m e e tin g s o f 1 ,2 0 0 le v e l-m a n a g e rs a n d sp ecial c o m m itte e s to d iscu ss co m p a n y m a tte rs. 202


After much time, effort and expense, Mr. Tadiwan was disap pointed to find that his problems of lack of communication and the loss of "small-company" feeling still exist. In short, his measures failed sig nificantly.

R E V IE W Q U E S T IO N S I.

2. 3. 4. 5. 6. 7. 8. 9.

10. II.

D escrib e the follow in g th eo ries of m o tiv atio n : a. T rad ition al theo ry b. N eed h ierarch y theo ry c. A ch iev em en t-p o w e r-a ffilia tio n th eo ry d. M o tiv atio n -m a in te n a n ce thed ry e. P re fe re n ce -e x p e c ta n cy th eo ry f. R ein fo rcem en t theo ry W h a t is m o tiv atio n ? W h a t are the co m p o n e n ts of m o tiv a tio n ? W h a t d o es the classical th eo ry o f m o tiv a tio n sa y ? W h a t are the five n e e d s in M a slo w 's h ie ra rch y ? W h a t re le v a n c e do th ey h a v e to the stu d y of m o tiv a tio n ? W h a t d o e s H erzb e rg m e a n b y -hygiene fa cto rs an d m o tiv a to rs ? G iv e so m e e x am p le s of each . E x p lain V ro o m 's p re fe re n ce -e x p e cta tio n theory. D iscu ss briefly the a p p lica tio n of so m e of the th eo ries o f m o tiv a tion w e h a v e exa m in e d in this ch ap ter. D efine lead ersh ip . W h a t is the so u rce of a le a d e r 's a u th o rity ? D escrib e in d etail the follow in g le a d e rsh ip styles: a. A u to c ra tic b. L aissez-faire c. D em o cratic D escrib e the M an a g e ria l G rid. W h a t are the assu m p tio n s o f m a n a g e rs w h o b eliev e in th e o ry X a n d th eo ry Y styles of lead ersh ip ?

12. 13. 14.

W h a t is co m m u n ica tio n ? W h a t is sem an tics? W h a t is feed b ack , an d h o w d o e s it affect the co m m u n ic a tio n pro

15.

cess? D escrib e the follow in g o rg a n iz a tio n a l c o m m u n ica tio n sy ste m s: a. b.

D o w n w a rd co m m u n ica tio n sy stem s U p w a rd co m m u n ica tio n sy ste m s

D IS C U S S IO N Q U E S T IO N S 1.

D escrib e so m e w a y s in w h ich the g ra p e v in e ca n be u se d effec tively in organ izatio n s.

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2.

E x p lain w h y the fo llo w in g q u estio n is raised freq u en tly b y m a n y m a n a g e rs: "W h y d id n 't y o u d o w h a t I told y o u to d o ? "

3.

D iscu ss the follow in g sta te m e n t: "M e a n in g s are in p e o p le , n o t w o r d s ."

4.

"W a tc h w h a t vye d o , n o t w h a t w e sa y ." Is this a g o o d p ra ctice in o rg a n iz a tio n s ? E xp lain .

5.

P o o r co m m u n ica tio n o f the o rg a n iz a tio n 's g oals is often g iv en as the reason for low p e rfo rm a n ce of the o rg a n iz a tio n . D o y o u think th at this is u su ally a valid exp la n a tio n ?

E X P E R IE N T IA L E X E R C IS E S 1. By u sin g M a slo w 's h ie ra rch y o f n e e d s m o d e l, g iv e co n cre te m o tiv a tio n a l situ atio n s for e a ch n eed affectin g the tw o levels of an o r g a n iz a tio n (M id d le M a n a g e m e n t an d R an k an d File). 2. A s a m a n a g e r/s u p e rv is o r , w rite a m e m o ra n d u m a d d re ss e d to y o u r ran k an d file e m p lo y e e s (clerk , typ ist, m essen g er, e tc.). C h o o se an y to p ic /s u b je c t. .3 .

A s a m a n a g e r, w h a t kind of lead ersh ip sty le is su ited to y o u r

b u sin ess o rg a n iz a tio n ? Ju stify y o u r a n sw e r by citin g its p ro s an d co n s. 4. E x a m in e the ty p e o f co m m u n ica tio n w h ich exists in an o rg a n i z a tio n y o u are fam iliar w ith - (co lleg e, sch o o l, ch u rch , clu b , o r an y o th e r-o rg a n iz a tio n ) in te rm s of: a. b.

T yp es o f co m m u n ica tio n P eo p le in v o lv e d

c. d.

B arriers to co m m u n ica tio n M ed ia u sed

e.

A n y o th e r a sp e c t m en tiorted in the ch ap ter.

5.

A ssu m e that y o u are a te a ch e r a n d o n e o f y o u r im p o rta n t

task s is m o tiv a tin g y o u r stu d e n ts. In a cla ss o f 3 5 stu d e n ts, y o u m a y h a v e sttid en ts w ith d ifferent p erso n alities, abilities, n eed s, an d p e rfo r m a n ce . S u p p o se y o u h a v e the fo llo w in g stu d e n ts , w h a t kind of stra te gies w ill y o u e m p lo y in m o tiv a tin g th ese stu d e n ts for b e tte r p e rfo r m a n ce ? H o w w ill y o u g o a b o u t im p le m e n tin g these stra te g ie s? a. A s tu d e n t w ith p o o r p e rfo rm a n c e (g e ttin g p o o r m a rk s .o r g ra d e s con sisten tly .) * b. A stu d e n t w h o is tro u b le so m e in th e class b u t p e rfo rm s sa tis fa cto rily in stu d ies. c. A stu d e n t w h o p e rfo rm s w ell so m e tim e s an d p e rfo rm s p o o rly so m e tim e s. In d esign in g m o tiv a tio n a l stra te g ie s, y o u m a y utilize the in fo rm a tion p ro v id e d in the ch a p te r, su ch as m o tiv a tio n a l m o d e l, th eo ries, a p p lica tio n of th eo ries, etc.

204


6. In d a y -to -d a y life, w e co m e a cro ss le a d e rs fro m v a rio u s w alk s o f life su ch as religion , p olitics, m ilitary, in d u stry , e d u c a tio n , scien ce a n d s p o rts. N o w thin k o f the le a d e r y o u a d m ire m o st. Take a few m o m e n ts a n d co m e o u t w ith a list o f ch a ra c te ris tics o f th e m a n or w o m a n y o u a d m ire m o st a s a leader. A n s w e r the fo llo w in g q u estio n s. a. W h y d o y o u thin k h e o r sh e is a g o o d le a d e r? b. W h ^ t are h is o r h e r stro n g p o in ts o r ch a ra c te ris tics ? c. W h a t are h is o r h e r w e a k p o in ts o r ch a ra c te ris tics ? d.

D o y o u think the le a d e r y o u h a v e ch o se n w ill be e ffectiv e for

all tim es a n d fo r all situ atio n s? e. C a n y o u id e n tify so m e le a d e rsh ip c h a ra c te ris tic s y o u m a y p o sse ss? f. Do (a) (b) (c) (d )

y o u co n sid e r y o u rs e lf as: (ch e ck one) e m p lo y e e -c e n te re d p ro d u ctio n -ce n te re d su p p o rtiv e sty le? th e o ry X style?

(e) th e o ry Y sty le?

REFEREN CES 1.

Allen, Louis. Management and Organizationst New York: McGraw-Hill Book Company, Inc., 1992.

2.

Blake, Robert R. and Mouton, Janet S. The Managerial Grid. Houston, Texas; Gulf Publishing Company, 1964. p. 10.

3.

Bryans, P. and Cronin. T. Organization Theory. London: Mitchell Beazley Publishers, 1993. p. 91.

4.

Franco, Ernesto. Pinoy Management. Manila: National Bookstore, Inc.,

i 1986.

5.

Koontz, Harold and O’Donnel, Cyrili. Essentials o f Management. New Delhi: Tata-McGraw-Hill Publishing Co., 1998. pp. 417-420, 438, 457-458.

6.

Lester, Bittel R. What Every Supervisor Should Know. New York:' McGraw-Hill Book Co., 2nd Edition, p. 51.

7.

Putti, Joseph. M an ag em en ts Functional Approach. Singapore: McGrawHill Book Company, 1997.

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206

Management for Fillplnoi

Worksheet No. 6.19

DIRECTING - M O TIVATIO N

N a m e : ________________________________________


P r o f e s s o r : ____________________________________

D a t e : ________

By using Maslow’s theory o f needs model, give concrete motivational situations for each need affecting the two levels of an organization. N EED S

M ID D L E M A N A G E M E N T

R A N K & F IL E

1. P h y sio lo g ica l

2 . S afety

3 . S ocial

4 . S elf-E steem

5 . S elf-Fu lfillm en t

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.

■

.

1

20 8


Worksheet No. 6.20

DIRECTING - C O M M U N IC A TIO N

N a m e :_____________________________

Year/Section: -----------------

Professor: __________________________

D a te :-----------------------------

/4s a manager/supervisor, write a memorandum addressed to your rank and file employees (clerk, typist, messenger, etc.). Choose any topic/subject.

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-

•

'


W orksheet No. 6.21

DIRECTING - LEADERSHIP

N a m e :_________________________________ Year/S ection: ----------------------P rofessor: _____________________________

D a t e :---------------------------------

As a manager, what kind of leadership style is suited to your business organization? justify your answer by citing its pros and cons.

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\

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I t i

t

Chapter 7

Controlling

Learning Objectives: A t the end o f the chapter, the student is expected to understand the following:

• Definition of Controlling • The Nature of Controlling • The Control Process • Characteristics of Control • Types of Control • Control Methods and Systems • Accounting Concepts and Techniques as Control Devices

"Our greatest glory is not in never failing, but in rising every time we fa ll -

Goldsmith

D E F IN IT IO N OF C O N T R O L LIN G

c CONTROLLING is the process of measuring and correcting ac tivities (plans, organization, personnel, etc.) of an organization. Control ling determines what is being tackled by evaluating the performance and, if there is a deviation, by applying corrective measures so that the activities take place according to plans. Controlling can be considered as the activity for knowing and correcting important changes in the activities that are planned. Normally, a business organization experi ences some errors and negative performance so that the function of controlling is necessary. However, it is important to keep in mind that the objective of controlling is positive to achieve the goal within stated constraints, or by means of the planned activities. Controlling should never be considered negative; it is a managerial necessity and a help, not an impediment or a hindrance.

NATURE OF C O N TR O L LIN G In a situation where the other fundamental functions of manage ment (planning, organizing, staffing, directing) are performed perfectly, controlling is still inevitable, for it is used to further effect some im provements. There can only be effective controlling if there are the other four fundamental functions of management. For instance, to meet the energy crisis, the management trims manufacturing and administrative costs by formulating the company's cost reduction program and using material substitutions (planning), centralizes or downsize structure for its diverse manufacturing operations (organizing), and emphasizes par ticipation in decision making and adopts employees' enrichment pro grams (directing). The consequence of controlling these new manage ment practices means big savings of millions of pesos in operation. The work is accomplished at less cost but without sacrificing product qual ity. Planning is related to controlling. As previously discussed, plan ning identifies the things to do for future accomplishment. The failure of controlling would mean failure of planning, and success of planning means success of controlling. After measuring the plans, and knowing that the plans are not realistic, a modified or new plan must be formu lated. As stated above, management controls alert the manager to po tentially critical problems. At top management level, a problem occurs 214


when the organization's goals are not being met. At middle and lower levels, a problem occurs when the objectives for which the manager is responsible are not being met. These may be departmental objectives, production standards, or other performance indicators. All forms of management controls are designed to give the manager information regarding progress. The manager can use this information to: 1. Prevent crises. If a manager does not know what is going on, it is easy for small, readily solved problems to turn into crises. 2. Standardization outputs. Problems and services can be stan dardized in terms of quantity and quality through the use of good •controls. 3. Appraise employee performance. Proper controls can provide the manager with objective information about employee performance. 4. Update plans. Remember that the final step in the planning process is to control the plan. Controls allow the manager to compare what is happening with what was planned. 5. Protect an organization's asset. Controls can protect assets from inefficiency,-waste, and pilferage.

Budget Costs: The Basis for Cost Control Types o f Cost

Componen ts

Direct labor

Wages and salaries of workers who are tngaged in the direct generation of goods and services. This typically does not include wages and salaries of support or office personnel.

Materials

Cost of materials which become a tan gible part of finished goods and ser vices.

Production overhead-variable

Training new employees, safety train ing, supervision and clerical, overtime premium, shift premium, payroll taxes, vacation and holiday, retire ment funds, group insurance, sup plies, travel, repairs and maintenance.

Production overhead-fixed

Travel, research and development, fuel (coal, gas, or oil), electricity, wa ter, repairs and maintenance, rent, de preciation, real estate taxes, insuran e. Controllina

215

Figure 7.1 Cost Reduction and Cost Control

TH E C O N T R O L PROCESS Most of the definitions of control include the steps or elements of the control process (Figure 7.2). In exercising the control function, a manager measures the performance of an individual, plans, or pro grams against their predetermined standards and take corrective ac tions if there are any deviations. Thus, control involves: 1. Establishing standards. 2. Measuring performance against the established standards. 3. Comparison of actual performance. 4. Taking corrective action when and where deviations from the standards occur. 5. Making sure recommended corrective actions are followed through.

I. Establishing standards. It would be helpful on the part of the manager to first focus on what he hopes to achieve, although we usually focus on profits or share of the market. A more general way of looking at what constitutes good performance is in terms of productivity or output, expenses, utilization of basic resources (men, money, methods, market, machines, materials). Standards are desired levels of performance and constitute the foundation of the control process. These serve as the criteria against which the performance is evaluated by the manager. Just imagine how we can evaluate any performance without establishing standards which is not an easy task. This is specially true if the task is complicated, long, time-consuming and involves many intangible factors. It is difficult to 21 6


set specific standards to measure the performance of an executive. For operative or production types of jobs, setting standards is relatively easy. Some commonly used standards are: quantity, quality, time and cost. For instance, a worker must produce a number of units per day or per week (quantity); he must maintain a rejection rate of not more than 3 percent (quality); complete his work within six months of the assign ment (time); and not exceed the stated costs in producing a specified number of units (cost). One precaution must be taken in determining performance stan dards. It is not always possible to achieve or maintain the established standards. Certain unforeseen circumstances may require some changes •or modifications in the established standards. A cushion effect must be provided in the control process by specifying on acceptable level of degree of variations from the established standards. To overcome this problem, in some industries, standards may be in terms of ranges, such as 3 to 4 percent rejection rate and so on. A participative approach in setting performance standards may be more effective. Such an approach is encouraged under the management by objective method.

2. Measuring performance against the established standards. In evaluating the results of the various activities, the manager views performance both in terms of quantitative measures and those aspects that are difficult, if not impossible, to quantify (i.e., leadership, communication, etc.) If performance standards are clearly established and made known to the performer of a job, then measurement of performance becomes easy. Where it is difficult to establish standards, measurement also becomes hard. For many production type jobs and similar other activities, motion and time study technique is used in setting up stan dards and as a result measurement of actual performance tend to be simple. Wherever vague standards exist, measurements are often equally vague. In recent years, new methods and techniques were de veloped in the area of performance measurement. Such methods and techniques help to achieve objectivity and accuracy. Whatever the tech nique or lnethod is involved, the basic procedure is to check the actual level and quality of output. The concept of measuring activities would result in what is being accomplished. This is significant because it provides the real docu mented information which is subsequently compared with the estab lished standard. The most common means of measurement are personal observations and the use of statistical data and reports, both oral and written. In measuring an entity, there is always the question of what cri teria to consider. In general cases, the most helpful criteria are: Controlling

217

D e te rm in e P e r fo r m a n c e S ta n d a r d s

M e a s u re m e n t M o n ito r in g S ta g e

v

o f A c tu a l P e rfo r m a n c e

C o m p a r is o n o f R e v ie w in g

S ta g e

------- -------------------------

A c tu a l a n d P la n n e d P e rfo r m a n c e

C o r re c tin g

F o llo w -u p

S ta g e

---------------------------------->

S ta g e

T a k e C o r r c e tiv e A c tio n

F o llo w -T h r o u g h A c tio n s

Figure 7.2 The Control Process

Quality. The performance for each group/department can be controlled based on the quality of its output. What is produced com pared to what should be produced, based on reasonable expectancy for the group/department, can be discovered. This is parallel to effective ness. Quantity. This can be used as the control tool by finding out the amount or number of the output of the group/department. The results could then be used to judge the efficiency of the group/department. This is parallel to efficiency. Time. This can be employed by formulating a timetable for achieving certain goals at certain dates. If actual performance deviates from the scheduled time, corrective action should be applied. Cost. The cost of production can be predetermined by using the object tool as a guide to actual production efforts and keep them within desired and expected limits. 218


3. Comparison of Actual Performance This is the core of the control process. This phase of the control process involves checking to determine whether the actual performance meets the predetermined or planned performance. Managers must con stantly seek to answer, "How well are we doing?" When a production supervisor checks the actual output or performance of the department with the production schedule, he is performing the comparison aspect of control. When an executive evaluates the performance of his subor dinates once in six months or annually, he is performing the compari son aspect of control. Checking return on investment isâ comparison place of control.

4. Taking corrective action when and where deviations from the standards occur. Minor corrections or fine tuning may be necessary to improve results or some major efforts (temporary redesign, overtime, more staff or equipment) to meet a particular emergency, rush order or project, and unexpected bottlenecks. When a significant discrepancy occurs between the actual output or performance and the planned or predetermined performance stan dards. Specific action must be taken to correct the situation. We have already examined two types of controls which specifically apply to cor rective action of the control process. Some innoyative people and orga nizations have already built-in corrective actions in their control pro cess, if the deviations are due to controllable factors. Some even go the extent of identifying the uncontrollable factors and developing alterna tive actions for deviations. When deviations occur and the procedure regarding corrective actions are given in advance to the performance of job, actions can be taken without delay.

5. Follow-Through. Recommendations or recommending corrective actions also are not sufficient and the manager should not assume that his responsibil ity is over. Often the control process is ineffective or fails because the corrective actions recommended is not followed through. Specific pro cedures must be established and the responsibility must be clearly as signed to carry out the corrective actions. For instance, the performance evaluation of a subordinate indicates weaknesses in supervisory prac tices - the superior of this individual recommends a corrective action by which the individual is to undergo some training in supervisory prac tices. The responsibility for that corrective action is not over just by making this recommendation. The superior must follow through his recommendation to see whether the individual participates and makes progress in the training program and to what extent he relates to his actual work situation whatever he has learned in the training program. Controlling

219

C H A RACTERISTICS OF C O N T R O L The function of control is to keep work moving on schedule as planned towards the established objectives and goals. To achieve this, control should meet certain characteristics; • Attuned to the activity. Controls should reflect the needs of people using them. For instance, manufacturing people may require a kind of control which may not be applicable for marketing people. • Deviations must be identified quickly. What is the use of checking the process or parts after they break down? • Control must be forward-looking. Rather than relying on past indicators or historical reports all the time, forecasts and other forwardlooking devices must be used. For instance, focusing on probable prob lem areas and thus drawing attention for corrective action improved effectiveness. • Control must be strategically oriented. This involves selecting of the crucial points at which control is applied. Care should be exer cised in selecting these crucial points. • Control should be flexible. Controls should permit for unex pected changes or,situations. Rigidity destroys effectiveness of control. • Control should be economical. The cost of establishing and maintaining controls should not exceed the benefits to be derived from them. • Control should be easy to understand. Unless people under stand their purpose and the operations, they become useless. • Control should indicate corrective .action. Who or what is causing deviations and vyhat should be done about it is the important aspect of control.

TYPES OF C O N TR O L There are many different types of control to be used for differ ent purposes. A clear understanding of these types of control would enhance a manager's skill in exercising the control function. Jerome offers a classification of control based on the use to which a given con trol is put: 1. Controls used to standardize performance. This helps to increase efficiency and decrease costs. Control mechanisms used for this purpose are: motion and time studies, inspection, written procedures, and production schedules. 2. Controls used to safeguard company assets. The assets of a company must be protected from theft, vandalism, wastage, and mis use. An adequate system of record keeping, custodial, and maintenance activities serves as control mechanisms. 220


3. Controls used to standardize quality. These help to main tain the specified quality level of products. Examples include blue prints, inspection, and statistical quality control methods. 4. Controls designed to set limits within which delegated authority can be exercised without further top management approval. Manuals, procedures, policy statements and internal audits are some examples of this category. 5. Controls used to measure job performance. Special reports, output data, performance appraisals, and internal audits are typical examples. 6. Controls used for planning and programming operations. This type of controls include sales and production forecasts, budgets, cost standards and standards for work measurement. •7. Controls necessary to allow top management to keep the firm's various plans and programsin balance. Master budgets, policy and organizations manuals, committee approaches, and the use of out side consultants come into this category. 8. Controls designed to motivate individuals. Such controls would involve methods of recognizing achievement through promo tions, awards and so on. Hodges and Ziegler point out specific controls used in various areas of the organization. These specific controls are listed under five types of control such as, company wide controls, divisional controls, departmental controls, operational controls, and functional controls. This comprehensive list includes every aspect of the organization and the control network covering these aspects.

C O N T R O L M E TH O D S A N D SYSTEMS There are two kinds of control methods: behavior control and output control. Behavior (or personal) control is based on direct, per sonal surveillance. The first-line supervisor who maintains a close per sonal watch over subordinates is using behavior control. Output (or impersonal) control is based on the measurement of outputs. Tracking production records or sales are examples of output controls. •Research has shown that these two categories of control are not substitutes for each in the sense that a manager uses one of the other. The evidence suggests that output control occurs in response to a manager's need to provide an accurate measure of performance. Behav ior control is exerted when performance requirements are well known and personal surveillance is needed to promote efficiency and motiva tion. Thomas Peters and Robert Waterman strongly emphasize the need Controlling

221

for managers at all levels to take a hands-on approach to managing. By hands-on, they mean regularly mixing with subordinates and visiting them at their workplaces. Thus, organizations need to use a mix of output and behavior controls; each serves different organizational needs. A budget is statement of expected results or requirements ex pressed in financial or numerical terms. Flexible Budgets. In order to overcome many of the shortcomings resulting from inflexibility, flexible (variable) budgets are designed to vary with the volume of sales or some other measure of output. Because of their nature, flexible budgets are.generally limited to expense bud gets. The basic idea is to allow material, labor, advertising, and other related expenses to vary with the volume of output. Because the actual level of sales or output is usually not known in advance, flexible bud gets are more useful for evaluating what the expense should have been under the circumstances; they have limited value as planning informa tion for the overall budgeting program. Zero-Base Budgeting. Zero-Base Budgeting is one approach to budgeting that has received attention over the last several years. It re quires each manager to justify an entire budget request in detail, from scratch. The burden of proof is on each manager to justisfy why any money should be spent. Under z°ro-base budgeting, each activity un der a manager's discretion is identified, evaluated, and ranked by im portance. Then, each year every activity in the budget is on trial for the life and is matched against all the other claimants for an organization's resources.

Direct Observation A store m anager's daily tour of the facility; a company president's annual visit to all branches; a methods study by a staff industrial engineer - all of these are examples of control by direct ob servation. Although it is time-consuming, personal observation is some times the only way to get an accurate picture of what is really happen ing. One hazard is that employees may misinterpret a superior's visit and consider such action as meddling. Also behavior changes when people are being watched or monitored. Another potential inaccuracy lies in the interpretation of the observation. Visits and direct observa tions can have positive effects when viewed by the workers as a display of the superior's interest.

W ritten Reports Written reports can be prepared on a periodic or "as necessary" basis. There are two basic types of written reports, analytical and infor mational. Analytical reports interpret the facts they present; informa tional reports only present the facts. Preparing a report is a four- or fivestep process, depending on whether it is informational or analytical. 222


The steps are: (1) planning the attack on the problem; (2) collecting the facts; (3) organizing the facts; (4) interpreting the facts (this step is omitted with informational reports); and (5) writing the report. Most reports are prepared for the benefit of the reader, not the writer. The reader wants useful information not previously available ones. The need for a report should be carefully evaluated. Such unnec essary reports are a waste of organizational resources. Another ten dency even with necessary reports is to include useless information.

Audits Audits can be conducted either by internal or external personnel. External audits are normally done by outside accounts and are limited to financial matters. Most are to be done to certify that the organization's accounting methods are fair, consistent, and conform to existing practices. Most outside audits do not focus into nonfinancial matters such as management practices. The internal audit, similar to the external audit, is performed by the organization's own personnel. When an audit looks at areas other than finances and accounting,. it is known as management audit. Management audits attempt to evaluate the overall management practices and policies of the organiza tion. They can be conducted by inside staff and can easily result in a biased report. Break-Even Charts depict graphically the relationship of volume of operations to profits. The break-even point (BEP) is the point at which sales revenues exactly equal expenses. Total sales below the BEP results in a loss; total sales above the BEP results in a profit. Figure 7.3 shows a typical break-even chart. The horizontal axis represents output, the vertical axis represents expenses and revenues. It is not required, but most break-even charts assume that there are linear relationships and all costs are either fixed or variable. Fixed costs do not vary with output, at least in the short run. They include rent, insurance, and administrative salaries. Variable costs vary with output. Typical variable costs include direct labor and materials. The purpose of the chart is to show the break-even point and the effects of changes in output. A break-even chart is useful for showing whether revenue and/ or costs are running as planned.

Time Related Charts and Techniques . Gantt charts, the critical path method (CPM), and the program evaluation review technique (PERT) are tools used to plan and sched ule. These same tools can also be used for controlling once the plans have been put into action. By tracking actual progress compared to planned progress, activities that fall behind schedule can quickly be spotted. Controlling

223

40

_

QXJ c 03
30

c W £0

10

1

2

3

4

5

6

7

8

9

10 11 12 13 14

VOLUME Figure 7.3 Break-Even Chart

Management by Objectives Management by objectives (MBO) is an effective means for set ting objectives. It also can be used for control purposes. As with many of the control techniques discussed in this chapter, the development of an MBO system is part of the planning function. However, once MBO is implemented, it is used for control purposes.

Management Information System In recent yârs, the term management information system (MIS) has become popular. The Management Information System is a formal system for providing information to managers. While not essential, most management information systems include the use of a computer. The basic idea behind each MIS is to provide information in a system atic and integrated manner, rather than in a sporadic and piecemeal manner. A good MIS aids managerial control by giving managers better information on a timely basis. 22 4


A C C O U N T IN G C O N C E P T S A N D T E C H N IQ U E S A S C O N T R O L D E V IC E S Besides budgets, there are other accounting and financial con cepts and techniques which are used as control devices. These include responsibility accounting, cost accounting, standard cost approach, di rect costing, and ratio analysis. Under responsibility accounting, re sponsibilities for each manager are identified and accounting records are designed to suit these responsibilities. Thus, each manager can see the accounting analysis related to his responsibilities. Cost accounting helps to provide information and control costs. This approach deals with detailed analysis of costs and show the cost of providing particular products and operating particular departments. Cost accounting uses standard costs as a measure in its approach. Stan dard costs are estimated for each product prior to production and after production they are compared against actual costs. Thus, they serve as control devices. Direct costing takes only labor and material cost as variable costs. Analysis through the use of ratios are also utilized by managers as control mechanism. This position of the financial study gauges the project's profit ability, liquidity, cash solvency, and growth over time. It should be noted that the functions elaborated below are meaningful only when compared with other functions of the same typ^ completed in one year intervals. Charts and other visual devices may be used to present the analysis more effectively. 1.

Tests of liquidity - These measures are used to determine a firm's

ability to meet short-term obligations, and to remain solvent in the event of adversities. a. Current ratio = Current asset? Current liabilities b. Quick or acid-test ratio = Current, asset? - inventories Current liabilities c. Liquidity of inventories = — Cost of sajes— Average Inventory d. Defensive position = Cash + marketable securities. + receivables Projected operating expenditure/No. of days 2.

Tests of debt service - These tests are employed to present the

project's ability to meet long-term obligations. a. Debt-to-networth ratio = Total Liabilities Total Equities b. Total capitalization = Long-term liabilities __ Long-term liabilities & equities Controlling

225

3.

Tests of profitability - T h e se sh o w the o p e ra tio n a l p e rfo rm a n ce a n d efficien cy o f the p roject. a. Net profit margin

= Net income after tax Sales b. Operating profit margin = Eiofit before ffitgigstiffid taxes Sales c. Gross profit margin = GrPSS profit Sales d. R etu rn on fin a n c ie r's in v e stm e n t =

e. f. g. h.

4.

N g t in co m e + m tgregt___

Stock equity &c long-term liability Return on owner's investment = Net ingoing Stock Equity Return on net operating profit = Profit before .interest & taxes Total tangible assets Asset turnover = ---------- Sales---------Total tangible assets Return on assets, or earning power = — Ngt.ffigQ.me-----Total tangible assets

Test of total debt coverage = Erofit before interest and taxes

(interest + principal payments) (1/1 - income tax rate) 5.

Funds-flow analysis - This technique is employed to determine the major uses and sources of funds. a.

Cash-flo w analysis:

1) Sources o f funds: a) Net decrease in any asset other than cash b) Net increase in any liability c) Proceeds from the sales of stocks a) Funds provided by operations 2) Uses of funds: a) Net increase in any asset other than cash and fixed asset b) Gross increase in fixed asset c) Net decrease in any liability d) A retirement of stock e) Cash dividends b.

W orking-capital flow analysis:

1)

226

Sources o f funds: a) Net decrease in any asset other than current assets

Management tor Filipinos

b) Net increase in long-term liabilities c) Proceeds from the sale of stock d) Funds provided by operations 2) Uses of funds: a) Net increase in other assets b) Fixed increase on fixed assets c) Net decrease in long-term liabilities d) Retirement of stock e) Cash dividends

6. Tests of operating leverage - These functions indicate how the projects employ assets for which it pays a fixed cost. Before these tests are applied, a clarification should be made on what "variable" and "fixed" costs are. Generally, "fixed" costs are expenses which affect net income despite the fact that they are incurred by the company irrespective of the production volume. A firm is charged with its fixed costs whether it produces goods or not. .Usually entered under this type of costs are depreciation charges on machinery, equipment, buildings, and land improve ment, the amortization cost of prepaid expenses, deferred charges, and intangible assets; estate taxes; fixed assets insurance; general and administrative salaries, wages and fringe.benefits, research and development; donations, and office supplies; administrative heat, light and power; and borrowing costs. On the other hand, "variable" costs vary more or less directly with changes in production volume, such as direct materials, indi rect materials, direct labor, heat and power requirement of produc tion machinery, maintenance of factory machinery, supplies for manufacturing, engineering costs associated with unit output, etc. It should be noted that cost accounts are always predetermined "per se" as either "variable or fixed," since their classification de pends on the company's situation. Thus, water supply is either a fixed or a variable cost depend ing upon wF ether it varies directly with production volume or not. If water is a main component of a product to be manufactured such as soft drink, it is a variable cost to the extent that it is not incurred when no goods are produced. The same account, however, is a fixed cost if it is allocated to a manager's office, since office utilities generally do not affect the production rate, a. Break-even-volume analysis Fixed costs BEV --------------------------------------------------Selling price - variable cost/unit Controlling

227

b. Break-even cash analysis

Cash fixed costs

BEC =

Selling price - cash variable cost/unit c.

Break-even-selling-price analysis BESP =

Variable costs + fixed costs Unit volume Total cost x Selling price Sales

d. Break-even-sales analysis BES

=

BESP x unit volume Fixed Cost 1 - (Variable cost/net sales)

7.

Test of financial leverage - These techniques present how a project employs funds which pay a fixed return. a.

Earnings per share =

Net income -----------------shares

Net income-pref. stocks divided-retained earnings b. Dividends per share --------------------------------------------------- -------Common share 8.

Tests of capital investment - These financial tools evaluate the justification for investing in the project. a. Average rate of return

=

Average net income --------------------------------Average net investment Initial year cash outflow

b. payback period in years

Succeeding annual net cash flow c.

Capital recovery or cash pay off period in years

Stock Annual cash dividends

Quality Control Quality control deals with setting up of quality standards in ad vance in such areas, as physical characteristics, composition of the products, weight, size, color, strength, and performance, and comparing these with actual standards. Before mass producing or even during the 228


'mass production stage, the quality of the product must be tested to see whether the standards are met. The products which do not meet the standards are rejected. Sometimes the rejected products can be repro cessed and at other times they become scrap. If no method is designed to check the quality of the product and the product reaches the con sumer, the company has to face several problems. Poor quality or prod uct with defects may create a poor image of the corporation in the consumer's mind and he will therefore reject all the products produced, by that company.

Production Control Production control is the backbone of any production system. The aim of production control is to produce the right product in the proper, quantity and quality, at the right time, and by the best and least costly methods. A basic activity of production control is the supervision of workers while at production. Production control consists of planning the individual production orders, releasing them for production, and following them through to completion, thereby assisting management control in their execution. Tools such as the Gantt Chart, CPM, PERT and others are used in production control. Gantt chart is a graphical illustration of production scheduling and controlling the work of various production departments and machines. From these charts, it can be easily seen which depart ment or machine is functioning according to schedule and which one is falling behind. PERT (Program Evaluation Review Technique) is an arrow diagram, showing pictorially diagram helps to identify the CPM (Critical Path Method) to achieve goals most effectively. The outer cover can be assembled in 10 days, and the engine in 15 days. The assembly of the engine (the bottom path) is .the critical path. Any delay in this assembly may delay the final production. With the help of these diagrams, delay can be identified and action can be taken during the process. In recent years the EDP (Electronic Data Processing) system or computer and information systems are used in production scheduling and controlling.

Inventory Control Inventory control is an essential sequence of a business opera tion. By maintaining an excess inventory, huge sums of money are tied up, resulting in lost of interest or gain. By not maintaining adequate inventory, delays are caused in the production process and as a result products do not reach the market in time and sales are lost. In order to run an efficient and effective production system, a balance must be Controlling

229

Figure 7.4 PERT Diagram

maintained between these two conditions. Inventory control techniques help to strike this balance. By comparing inventory cost with cost of sales, inventory turn over rate can be computed. Relating this rate to industry standards or with previous turnover rates will give an idea as to the effectiveness of inventory control. Cost of goods sold Inventory turnover = -----------------------------------Cost of average inventory In order to maintain effective inventory control, minimum and maximum inventory levels must be maintained. Of course, it is not that easy to come out with a formula to determine these levels. Factors such as fluctuations, obsolescence or deterioration enter into the decision process. For instance, minimum inventory level is maintained where the product is perishable in nature. In case of speculative buying, main taining maximum level may be considered. Where the inventory consists of standardized items, the maxi mum amount to be carried in inventory may be considered a safety stock or minimum reserve stock. An important principle is that this level cannot safety be permitted to drop to zero. When the inventory reaches this level, reorders are issued.

Economic Order Quantity Economic order quantity (EOQ) is issued to determine the most economic level of inventory. At this level, the purchase quantity mini mizes total cost of purchase by balancing costs associated with small orders. The costs associated with large orders are cost of money tied up in inventory and warehouse space. The cost related to small orders are loss of quantity discounts, cost of stockholders and clerical costs in placing orders. These costs are labelled as: Carrying Cost (cost of main taining the inventory) and Ordering Cost, (cost involved in placing orders). Let us say for instance, a large quantity of order is placed, the 23 0


ordering cost is lowered because fewer orders must be placed instead of placing many small orders. But placing a large order means, increase in carrying cost, because more inventory must be in storage. The math ematical formula used in determining the economical level of inventory

where EOQ

= S c V i

Economic Order Quantity = Sales of the firm = Cost of placing an order = Value of each unit of inventory = Inventory cost

Example: If a firm's sales is 6000 units, "the cost of placing an order is P20; inventory cost 10 percent (usually carrying or inventory costs are calcu lated as a percentage of the value of the inventory on hand); and the value of each unit is P15 then the Economic Order Quantity is:

2 x 6000 x 20 15 x 0.10 240000 1.5

\J 160,000 400 units every time the order must be placed for 400 units to arrive at an economic level.

Maintenance of Inventory When the inventory is received, people in the receiving depart ment check the number and quality of the inventory and compare it with orders. The inventory is sent to the stockroom. Proper arrangement of inventory in stockrooms saves costs and delays. When inventories are large, proper identification such as the following are used: • A lphabetical: Based on same predetermined scheme, a letter or group of letters are used. Controlling

231

• M n e m o n ic : The use of letters in some combination such that they suggest the classification name of the particular item. • N u m e ric a l: The use of numbers to identify the item. • S ig n : The use of symbols or signs to identify the items. • C o m b in a tio n : The use of &ny two of the above methods. A good record-keeping system is essential for an effective inven tory control system. Records kept under the perpetual inventory system require the entry of inventory items on records of every receipt and withdrawal of items from stock. By referring to stock cards, it is pos sible to check the inventory level. Under physical inventory it is neces sary to correct the errors that occur in the record-keeping system.

Control by Reports A manager, supervisor or a foreman cannot be everywhere to check everything at all times. He has to defend any reports for feedback of information. Reports constitute the backbone of control. As part of training, managers learn to write reports of various sorts and interpret them. Failure to handle the reports would affect their decision making ability because feedback of information provided through the reports serves as input for many supervisory and managerial decisions. These are various types of reports in an organization. Profit and loss-statements, balance sheets, budgets, performance appraisal, annual reports, project reports, sales reports are some of them. If reports are issued without much delay and supply enough information to enable the manager to determine why and where deviations from, standards and plans occur. A great deal of control can be exercised through these reports.

SH O R T CASE STUDY: C O N T R O L L IN G (See Chapter 12, suggested format for case study)

CHARMIE CONSOLIDATED INDUSTRIES, INC. "I heard it in a management conference I attended," remarked Marie Ayala, president of Charmie Consolidated Industries, Inc., a small company whose new pleasure-boat products contributed to the company's growth of P5 million in annual sales since its founding five years ago. "This idea of running a company by allowing department .and section heads develop their own budgets seems sound. But I can't afford it in this company. If I did, these people would spend so much money that we will soon be bankrupt. As long as I am President, I will tell my people how much they should spend. There will be no blank 232


checks and I will make sure the company comptroller gives the profit I expect. I have heard of too many fast-growing companies going red. This idea of variable budgets is even worse. What would happen if I let everyone vary his budget every month, quarter, or year?"

REVIEW QUESTIONS 1. 2. 3. 4. 5. 6.

7.

What is the difference between fixed and variable overhead ex penses? What costs affect the economic order quantity? Define quality. Explain the various phases of the control process. In order to accomplish its function, control should have certain characteristics. What are these characteristics? Briefly describe: (a) Behavior control (b) Zero-Base budgeting (c) Liquidity test (d) Inventory control (e) Economic order quantity In what way can budget be used as a control tool?

DISCUSSION QUESTIONS 1. 2.

3. 4. 5.

6.

Discuss the production control problems that can arise when de mand is continually changing. It has been said that good inventory management can make the difference between success and failure in certain industries. Name several industries in which this statement is particularly applicable and discuss the reasons for your answer. Since quality is a relative concept, how does a manager ever know if the quality level is optimum? What factors should you consider before installing tighter controls? How might you evaluate these factors? If you were implementing a new control system designed to check more closely the expenses of your sales people, what actions might you take in order to minimize negative reactions? Why are many managers reluctant to take the actions necessary to correct the deviations?

Controlling

233

EXPERIENTIAL EXERCISES 1.

2.

3.

Think of the different types of business managers. What type of controlling technique do you believe must they have to ensure that they accomplish their plans or objectives? Describe briefly the possible errors and their remedial actions af fecting these four managerial functions: a. Planning b. Organizing c. Staffing d. Directing Interview a manager or an administrator to discover the method he or she uses to assess the performance' of subordinates in his or her organization. Study the forms and procedures used in assessing employees' performance.

REFERENCES 1.

G in sbu rg , S ig m u n d G . M a n a g e m e n t: A n E x e c u tiv e P e rs p e c tiv e . Texas: R o b e rt D a n e , In c., 1 9 9 4

2.

pp. 3 0 -3 2 .

H astin g s, P au l G . F u n d a m e n ta ls o f B usiness E n te rp ris e . N e w Jersey: D. V a n N orstran d C o ., 1 9 9 5 . p. 2 0 0 .

3.

K o o n tz, H a ro ld a n d O ’D o n n e l, Cyrill. E s s e n tia ls o f M a n a g e m e n t. N e w Delhi: T a ta -M c G ra w -H ill P ublishing C o ., 1 9 9 8 . pp. 4 8 7 -4 8 9 , 5 4 1 .

4.

L a z z a ro , Victor. S y s te m s a n d P ro c e d u re s . N e w Jersey: P re n tic e -H a ll, Inc., 1993.

5.

Putti, J o s e p h . M a n a g e m e n t: A F u n c tio n a l A p p ro ach . S in g a p o re : M c G ra w Hill B oo k C om pan y. 1 9 9 7 .

234


Worksheet No.

7 .2 2

CO NTRO LLING

N a m e : ________________________________________


P ro fe s s o r:

D a t e : ________________________

___________________________________

------------------------

Think of the following types of business managers. What type of con trolling technique do you believe must have to ensure that they accomplish their plans or objectives.

A) Sari-sari store

b) College or university

c) Banks

d) Restaurant

Controlling

235

236


Worksheet No. 7.23

CO NTRO LLING

N a m e : ____________________ ___________________

Y e a r /S e c t io n :

P r o fe s s o r : ____________________________________

D a t e : ________

Describe briefly the possible errors and their remedial actions affecting the four managerial functions. FUNCTIONS

POSSIBLE ERRORS/ DEVIATIONS

REMEDIAL ACTIONS

1. PLANNING

2. ORGANIZING

3. STAFFING

4. DIRECTING

Controlling

237

238


Worksheet No. 7.24

CO NTRO LLING

N a m e : _________________________ _______________ Y e a r /S e c t io n : P r o fe s s o r :

____________________________________

D a t e : -------------

Select a business proposal, for example, putting up a restaurant busi ness, then discuss how you can use the management functions (POSD1CON) as a manager o f the organization.

Controlling

239

' /

■

i

-

■ '! 240


PA RT^

Applications

Chapter 8:

Introduction to the Different Areas of Management

Chapter 9:

Management Information Systems

Chapter 10: Social Responsibility Chapter 11: Career Opportuni ties in Business Chapter 12: Scientific Analysis of Business Cases Chapter 13: Productivity Technologies in the Philippines

242


Chapter 8

introduction to the Different Areas of Management Learning Objectives: A t the end o f the chapter, the student is expected to understand the following:

• Marketing Management • Production Management • Materials and Procurement Management • Financial Management • Human Resource Management • Office Management

"There is no saturation point to education"

-

T h o m as J . W atson, Sr.

M A R K E T IN G MANAGEMENT

HUMAN RESOURCE M ANAGEM ENT

M A R K ETIN G M A N A G E M E N T

M

J L T J L arketing management is the process of planning, organizing, staffing, directing, and controlling the marketing activities. Modem technology has improved the person's purchasing power and offered him a better choice of goods and services for his consump tion. A number of people have enough income not only for them to live but also for them to grow. Consumers' needs and waists are affected by social, cultural, and economic changes. Every business must adopt a market-oriented approach to cap ture a growing share of the market. It must develop and satisfy de mand, identify the needs and wants of its potential customers more effectively than its competitors. Consequently, the interaction of the .forces of supply and demand leads to the satisfaction of needs and wants which, in a free economic enterprise, is a primary concern of all business organizations. The operational set-up of marketing may be the responsibility of one department, but everyone should be market-oriented. In big orga nizations where division of labor draws a distance between work and marketing, market orientation becomes imperative. It is important be cause the market will decide the success or failure of any project that businessmen and managers undertake. 244

Management far Filipinos

There are some businesses that consider business marketing un necessary and wasteful. There may be excesses and abuses made by some business enterprises for bigger return on investments, but an option to a free but controlled market can sometimes be less wasteful but which at all times is less dynamic, less creative and less resourceful. All economic systems are part and parcel of a marketing system - rang ing from a state-run monopoly or commune-run, to aggressiveness and proliferation of enterorise-run; from central planning in a socialist economy to-personal decision in a free enterprise economy.

Figure 8.1 A system approach elements of the Firm’s Marketing System and Environment (Adopted from Kotler, 1976, p. 23)

The term “market" connotes many things. Its scope includes a wide range of activities. For example, some cities call it “the farmers' market," a trading place where all types of fresh fruits and vegetables are traded. At other times, the term “market" may refer to sales trends or fluctuations in consumer demand, such as when the appliance mar ket is picking up or the car market is done, indicating strong or weak demand. To many people, the “stock market" refers to the sales of corporation stocks in the stock exchange. To the economist, the market for specific economic goods (or services) is the sum of all transactions between buyers apd sellers of goods at any designated time or place. Thus, a market must have a buyer and a seller, a commodity or service, an exchange and an agreed selling price.

The Nature and Scope of Marketing Marketing is the performance of business activities that direct the flow of goods and services from producer to consumers or users for the latter's ultimate, consumption. It refers to all activities involving the Introduction to the Different Areas of Management

24 5

processing, sale and physical distribution of goods from the time they are produced up to the time they are delivered to their ultimate con sumer. It also includes marketing research, transportation, product packaging, and the use of advertising and credits as the means of sat isfying consumer needs and influencing consumer patronage. Today, the marketing function begins even before goods enter the manufacturing process. The emphasis in marketing is no longer focused on things; but a business that is market-oriented is broadly concerned with consumers and their needs. Thus, strictly defined, marketing is the system of interrelated business activities-of designing, promoting, pric ing, and distributing goods and services to satisfy the needs and wants of potential users. This definition is comprehensive, but it is more or less synony mous with distribution. It covers merchandising, promotion, selling, and transportation, which are limited in scope. Marketing emphasizes the management function with the idea that the whole scheme of busi ness activities should be customer-oriented. It presents marketing as coordinated and integrated rather than fragmented. Focus

Media

End

Products

Selling and promotion

Profits through sales volume

(a) THE SELLING CONCEPT

Customer needs

Integrated marketing

Profits through customer satisfaction

(b) THE MARKETING CONCEPT Figure 8.2 The Sales and Marketing Concept Contrasted (Theodore Levitt, “Marketing Myopia," Harvard Business Review, July-August 1995, pp. 45-46).

Marketing and production are the two major areas of business, each sharing approximately equally the consumer money. The term "market" has varied meanings, depending upon the purpose of the one using it. As defined here, it refers to the system of interrelated business activities of product development, designing, promoting, pricing, and distributing goods and services to ultimate consumers. Marketing pro vides employment ranging from one-fourth to one-third of the labor sector. 246


The arrangement of the different aspects of marketing into an integrated function is the role of marketing management. Goods and services are distributed and rendered into two different markets: the industrial market and the consumer market. The marketing of goods is attained by the performance of varied activities or functions. Buying and selling are considered the primary functions because they influence changes in ownership until the goods are sold to the consumer. Other essential functions are transporting, storing, standardizing, risk-bearing, pricing, financing, and providing market-information. All these functions must be tackled even when the goods are sold directly by the producer to the consumer. The control of marketing practices has been the concern of gov ernment for many years. The purpose of most government legislation is to preserve competition in business and to protect the public. Marketing provides a variety of job opportunities for men and women with college preparation. Salaries are commensurate with the individual's ability to perform for the business.

P R O D U C T IO N and OPERATIONS M A N A G E M E N T Production management is the process of planning, organizing, staffing, directing, and controlling the production activities. Production is the creation of anything of value such as goods, services, or ideas that people want and are willing to pay for. Produc tion is thus the operation stage of any business. With reference to manu facture, production is the processing of materials into a new expected form. Today consumers buy almost anything manufactured, except fruits and vegetables. Products are a blend of raw materials extracted from the earth or the oceans. The process of getting these raw materials from the mines, oceans, forests, and farms is part of the broader process of production. Production includes - in addition to the raising of crops and the removal of lumber and minerals - manufacturing, which is the process of making finished goods.

Industrial Research Industrial research is as old as production, but this area has not been given the same importance as sales and finance until recently. The research industry made its appearance at the turn of the twentieth cen tury with a few small research laboratories. Initially, researchers were concerned with solving special problems. Subsequently, the develop ment of new processes aimed at product improvement was undertaken. For the past two decades, there has been a drastic growth and expan sion of research development. Introduction to the Different Areas of Manat* >ment

247

The most important function of research is product improvement. A product can never be perfect, and unless it is improved, its manufac turer may discover that other similar products have already dominated the market. The evaluation and analysis of the standing of competitors products is a continuing research-testing process. Basically, research always involves futu-a development. Research personnel play an important role in supporting management in plan ning for the future. Management seeks the help of research departments for scientific and systematic advice regarding products and processes.

Manufacturing Process The process of manufacturing a finished product follows after the raw materials have been procured. A finished product in one industry may be considered a raw material in another industry that uses it in the. manufacture of a more complex product. For example, in a copper mine the mineral is separated from the earth and rocks that surround it. The mineral, is, so to speak, the finished product of the mine. When it is sent to the smelter, however, it is regarded as raw material, and is processed to produce pure copper as a raw material used in manufacturing fin ished products, such as wire and cooking utensils. In order to manufacture the wide variety of goods that we use in this country, modem industry has seen different types of production processes. The term "manufacturing process" refers to the method used to change the form of materials. Most processes fall into one of the following classes or types: extractive, analytical, synthetic, and fabricat ing.

The Extractive Process The raw materials used in making a new product are taken from the land, the air, and the ocean. The term "extractive process" means using methods, such as'mining or quarrying, in digging out these raw materials. Examples of extracting industries are salt, coal, copper, zinc, sil ver, gold, and refineries that extract petroleum products. Some minerals, such as magnesium, chlorine, and sodium, are taken from the ocean. Nitrogen and oxygen are extracted from the air.

The Analytical Process An analytical process is one in which a raw material is broken up into its components. After petroleum is extracted from the earth, it is refined. Refining is an analytic process by which petroleum is broken Up into gasoline, lubricating oils, fuel oil, and basis for the making of pe troleum, paraffin, vaseline, tar, asphalt, etc. The chemical industry is another example of the analytic process whereby raw materials taken 24 8 >

M anagem ent fo r FUtpInoi

from the air, water, or minerals are refined into a wide assortment of useful products. The meat packing industry is still another well-known example of the analytic process. The main product is dressed meat, and the hides from which finished leather is derived, and the waste from which fertilizers, soap, chicken food, and dog food are made, are con sidered by-products. One of the problems faced by management in industries that use the analytical process is getting all the products to "come out even," not in the sense of equal volume, but from the standpoint of production time and marketing schedules. The processing of the main product often is a job big enough to continuously support a full complement of workers.'In contrast, some of the minor products may be produced only irregularity, and this can cause the people employed to be busy only for a certain period of time, so that during the off-periods, some other works must be provided for them. VENDOR SECTION MATERIALS REQUIREMENTS

PURCHASE ORDERS

CURRENT PRODUCTION REQUIREMENTS LINE CAPACITY LABOR INVENTORY GROSS REQUIREMENTS MATERIAL INVENTORY OPERATIONS PROGRESS NEW OATA

NEW HIRES LABOR REQUIREMENTS

ASSIGNMENT OF LABOR FORCE

\

EQUIPMENT REQUIREMENTS ACTUAL

BILLING ACCOUNTS ITS lAI f RECEIVABLE

4 NI

EQUIPMENT SCHEDULE

SALES

1

PRODUCTION REQUREMEMTS

\ \

DEPARTMENT FINISHED GOOOS

FORECASTED SALES

ON KANO STATISTICS

\ \ FINISHEO GOOCO INVENTORY - WORK FLOW v • INFORMATION FEEDBACK

L.

n V

PRODUCTION PRODUCTION SCHEOULE

/

PERFORMANCE

\

STANOAftS

i CONTROL

\

0EM3.OPMENT

\

JOURNAL ENTRIES PERFORMANCE

Y

J

Figure 8.3 Integrated Production Management System, Skeleton Flow Chart Introduction to the Different Areas of Management

249

The Synthetic Process The synthetic process is exactly the opposite of the 'analytic-to synthesize is to put together. The synthetic process combines raw ma terials to form new products. Plastics, paints, drugs, fertilizers, and concrete are examples of products made by the synthetic process. The fact that such processes require several different types of raw materials in varying quantities sometimes gives rise to serious shortage problems. Manufacturers must exercise care to ensure that adequate supplies of all needed materials are on hand.

The Fabricating Process To fabricate is to put together things to form a whole. The fab ricating process includes the shaping of materials into new forms (stamping an auto fender from sheet metal, for instance) as well as the assembling of many parts into an integrated product. The automobile industry is one of the best-known examples of an industry that utilizes the fabricating process. Tools and dies are employed to stamp out new designs, and manufactured parts are assembled from many sources and combined into the finished product. Other industries utilizing the fab ricating process include the manufacturers of stall files and furniture makers who construct metal tables and chairs. In all fabrication pro cesses, the work proceeds in a pre-planned, orderly sequence toward the complete product. Manufacturing pertains to the coordinated employment of men and machines to produce economic goods from raw materials. It is the cornerstone of any business because it employs directly approximately one-fourth of all gainfully employed persons, and in addition, supports many other closely-related business activities. Without manufacturing, there would be little need for transportation and communication, and few goods to merchandise. Manufacturing is characterized by the practices of specializa tion, mechanization, and mass operations. The machine is the key to modem industrial processes; manpower is utilized to supervise, main tain,1operate and coordinate mechanized operations. An ever-increasing number of production processes and machines are becoming automated in today's factories. Continuous engineering and developmental re search is required to perfect the current methods, machinery and prod ucts, and develop new ones. Procedural production control is secured through planning, routing, scheduling and dispatching. The performance control standard is obtained by time and motion studies and comparisons of outputs with expected standards. Inspection is used to maintain standards, identify defective materials and workmanship, and discover areas where improvement in the manufacturing processes are needed. 250


SALESMEN DEALERS CUSTOMERS ENGINEERS KSEJUtCH STAFF COMPETITORS TRADE SHOWS U> AGENCIES M RIKET RESEARCH FIRMS

SEUCT NEW PRODUCTS s t r a t eg y

CONCEPT TESTING DEVELOP FINAL S K C L A I TESTING CUSTOMERS USE TESTS

l,

SEAKCH 101 NEW KO D U C T ID U

EVALUATE MARKET KTEN TU l c h e« pr o d u c t fn

SCREENING

M INISTRY OF TRADE PATENT OFFICE LICENSES FROM FI RMS PRIVATE LA IS INDEPENDENT INVESTORS

EFFECTS ON OTHER PRODUCTS RAW MATERIALS SUPPLY PATENT POSITION

TEST PROMOTION METHODS CHECK REPURCHASE RATE TEST M EDIA M U MEASURE TRADE ACCEPTANCE TEST PRICES

HIRE AND TRAIN SALESMAN DEALER MEETINGS LUNCH TRADE < ADVERTISING

DEVELOPMENT AND TESTING

TESTS PRICES

M IIID PHOTOTYPE MODELS PILOT PRODUCTION PATENT APPLICATION CHECK PRODUCT SAFETY PACKAGE DESIGN

W ILD PRODUCT INVENTORIES SELECT D ISTR IIU nO N CHANNELS PRICE PROMOTION PU N S

INTRODUCTION

SO LICIT ORDERS FROM TRADE PRESS CONFERENCE (R EA R CUSTOMER ADVERT KIN G

FO IE CAST SATIS RO FTT ANALYSIS

■USINESS ANALYSIS

ANALYZE SALES DATA REVISE PROMOTION MU

EVALUATION

ADJUST PRODUCT SPEC REALLOCATE SALESFORCE PHASEO UT ITEMS

Figure 8.4 Flow Chart of the Production Development Procesa

PROCUREMENT MANAGEMENT Procurement management is the process of planning, organizing, staffing, directing, and controlling the procurement activities. To assure the successful operation of any m odem industrial manufacturing concern, it is important to consider the procedure in the proper delivery of materials and supplies at the right price, at the right time, and from the right source. This statement more or less sums up the basic elements present in carrying out the procurement function.

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251

The difference ^between the terms "procurement" and "purchas ing" is that, "purchasing" describes the process of buying, identifying the need, selecting supplies, negotiating prices, and following up to insure effective delivery. "Procurement" encompasses broader areas and covers the responsibilities performed by purchasing, as well as other functions of material supervision and management, such as in ventory control, receiving, incoming inspection, and salvage operations. Procurement covers production control, traffic, and shipping.

Importance of Procurement Generally, procurement is not as vital as the production and sisles functions of business; it is nonetheless important. When the sales de partment gets a big order, the whole organization feels good. Every employee feels a sense of pride and satisfaction in his company when a new product is introduced in the market. Procuring materials and supplies will only involve spending the company's funds, and thereby, it is not so much complimented. However, procurement is a vital func tion. If the procurement function is disregarded or not effectively handled, production may be delayed or interrupted because of lack of materials and supplies. Sales contracts may be cancelled and profits affected: If the procurement function is intelligently and competently performed the entire organization would operate more efficiently. One purchasing officer commented, "companies are only aware of the im-

IF YO U A R E H ERE. YO U AUTOMATICALLY POSITIONED A S A VENDO R. YO U M U ST S E L L Y O U R P R O D U C T IN T E R M S O F H O W W E L L IT FITS T H E C U S T O M E R 'S SPECIFICATION AT A PRICE.

Figure 8.5 Three A p p roach es to the Purchasing Pyram id

252


portance of purchasing when they have fallen on their job. When their job is well done, it is taken for granted, but perhaps that is as it should be, for purchasing is a service function, and service is best when it does not force itself upon another." Procurement, however, is more than just a function of assisting production. It has some commercial aspects. Those responsible for pur chasing may not bring in money to the company's treasury, but through the maintenance of the advantages of vendor-company relationship, they may save the business the expenses involved in operating because of properly-manned purchasing power. Procurement is vital because of the following reasons: 1. The proper utilization of money is extremely important to the survival of every individual and company. 2. Purchased materials and services include the biggest part of expenditure in most companies. 3. The investment in raw materials, parts, and supplies inventory in some companies is essential, and the efficient management of such inventory can contribute to profit.

F IN A N C IA L M A N A G E M E N T Financial management is the process df planning, organizing, staffing, directing, and controlling the financial activities. It is the management-level responsibility for capital procurement, funds allocation, capital structuring, and profit administration. This area is responsible for the liquidity, solvency profitability, and financial control of the business. This responsibility involves: finan cial planning, analysis of financial condition; and supervision of finan cial operations. To perform these functions, the finance manager uses the follow ing tools; 1. Operating statements to measure income, expenses, and profits. 2. Operating margins to identify the components of gross sales and percentage of sales. 3. Comparative operating statements to compare results for the current period against those earlier periods and the company's results against those of others in the same line of business. 4. Balance sheet analysis (comparative studies, ratios). 5. Operations budget to forecast sales, costs, expenses, and profits. 6. Cash budget to forecast short-run cash flows from operations and short-run working capital requirements. 7. Capital budget to forecast capital expenditures. Introduction to the Different Areas of Management

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Financial Planning The objective of financial planning is to appropriate the needs and cap acities of the business through a projection of the availabilityfunds for a short-term period (working capital cashflow, operating bud gets, and sources of working capital) and-for a long-range period (in vestment cashflow, capital and conditions of the capital market).

Acquisition of Funds There are two basic types of funds: (1) personal equity; and (2) borrowed funds (fixed claims by outsiders). The selection between the two would be based on the following: 1. Period of the obligation agreement. 2. Priority of claim or preference on income. 3. Priority of claim or preference on assets. 4. Participation or voice in management. Since financial management is involved with the use of money over a certain period of item, the projection of fund requirements dis tinguishes short-term, medium-term, and long-term needs. There are different sources of funds for the different lengths of time the funds are needed. The following are the general rules to consider in the acquisi tion of funds: 1. The maturity of the obligation should be well within the earn ing life of the asset or project being financed. 2. Projected regular capital requirements should be desired from long-term investors or reliable sources which can ordinarily be de pended upon for loan renewals or extensions, while short-term require ments should be covered through short-term borrowings from commer cial banks or the money market. 3. The use of the funds should generate income which is greater than the cost of the funds. For short-term financing, trade credit ("accounts payable" liabil ity for the buyer) may be resorted to, also promissory notes (one name or several names as co-maker, either secured or unsecured), assignment of receivables, and commercial drafts (the recipient of the forthcoming payment entrusts the obligated party to pay on sight or within a speci fied time the amount specified, and the obligated party to accept the draft by writing his name across the face of the instruments. Security or collaterals for promissory notes may be in the form of marketable secu rities (bonds and shares of stocks), bills of lading, warehouse receipts, trust receipts, surety bonds, or mortgages on real estate or chattel (mov able property). The development of the money market has made avail able to top-level borrowers sufficient amounts of short-term funds at competitive interest rates. 254


H U M A N RESOURCE M A N A G E M E N T Human Resource management is the process of planning, orga nizing, directing, and controlling of personnel activities. The Human Resource department has the main responsibility for personnel activities, but all managers should perform personnel func tions. The scope of control which the Human Resource department ex ercises over the total personnel function is determined by the order it receives from top management. The HRD works closely together with all other departments in the organization. It is concerned with selecting new employees, their job assignments, and their continuing development. Special tests, inter views, and physical examinations are used to ensure that the best work ers available are hired. The safety and general welfare of the employees is the general responsibility of human resource management. Satisfactory working conditions and effective supervision are provided to maintain employee morale and to reduce absenteeism and labor turn-over. Employee attitudes and their needs and wants, including ad equate and equitable compensation programs, are vital concerns of human resource management. Effective and well-understood grievance procedures are essential for maintaining high levels of morale. Com pany magazines are also utilized to keep workers jnformed. Participa tive management techniques, including suggestion plans, are used to show the employees that his ideas are important to the company and its management. You will recall that the single proprietor usually goes into busi ness on a small scale, doing all the work himself or having at best only a few employees to help him. The small businessman is usually closely associated with his helpers. He is familiar with their work and perhaps knows something of their home relationships and personal problems. And likewise, employees in a small company usually "know the boss" and may even be acquainted with members of his family. But as the business prospers and progresses, the proprietor dis covers that he can no longer be personally acquainted with each em ployee. In fact, in large organizations with several thousand employees, the management seldom knows more than a small fraction of the work force. But this does not mean that top management or the owners have no interest in their employees' welfare. It simply means that employeremployee relationship changes as a business grows or diversifies. Since owners and top managers in large organizations cannot maintain personal contact with each employee, there is a need to orga nize the large company into smaller units or departments with person nel designated to oversee each. The small units make it easier for per Introduction to the Different Areas of Management

T55

sons in management positions to be personally acquainted with their

employees and thus ensure that each worker contributes to the efficient functioning 6f the organization. If a worker is to contribute effectively to the operation of his company, a few basic conditions must first be met. Management must study thoroughly the job required and must define the personal require ments for doing it. Then, management must scientifically select the person whose qualifications satisfy those job requirements. And if, as sometimes happens, the person hired possesses only the minimum qualifications tor doing the job, then management must train him to ensure proficiency. It should go without saying that the very conscious employee ought to know how to perform knowledgeably and skillfully the tasks for whioh he is responsible. But proficiency takes more than knowledge and skill alone; it also takes into consideration the desire to do a good job. Indeed, even the most informed and able worker may perform at a low level if he is not interested in what he is doing. The effective employee is one who has a genuine desire and interest to do the best possible job, and strives constantly to improve his performance. And hardly less important, he works effectively alone as well as with others. One of the major concerns of the personnel function is to help provide an environment in which people can function well as members of a group. Effective, highly-motivated employees are essential to the effi cient operation of every business. Owners or managers working alone cannot get the job done. They must have cooperation from those work ing with them. So that in every business, the personnel function at tempts to build a team of effective employees who have high morale, a spirit of teamwork and cooperation, and a desire to see a business grow and succeed. Human resource management is not the sole concern either of the HRD or of top management. It is part of the job of every manager, for the personnel function is necessary in every operation where people are employed. Human resource management has the responsibility of plan ning, organizing, directing, coordinating, and controlling all activities . that concern employees: selecting, developing compensating, and meet ing their needs in a number of respects. It is a goal of Human resource management to utilize effectively each employee's talents so that com pany objectives are attained efficiently and economically. This implies that each employee is able to use his competence, interests, and oppor tunities to his and the company's benefit.

256


OFFICE M A N A G E M E N T Office management is the process of planning, organizing, staff ing, directing, and controlling office activities and those performing them in order to achieve determined objectives. In a broader sense, it covers managerial efforts over office work anywhere in-the company. It is not confined strictly to the activities of the office manager or some official with a similar position, nor is it limited to the work performed in the office only. Office management is not routinary as some people view it. The effective application of the fundamental functions of office management is taught with great difficult. Office management requires ingenuity, decisiveness, and creativity. It is inevitable that the supervisor, wherever he is located in the company, will have to perform office management functions. In general, the supervisor's operational activities may be divided into two groups: those that contribute directly to the creation of his group's production unit (line activities); and those that provide auxil iary support to the line activities (office work). His involvement in these activities will depend on severa^factors, such as: 1. The nature of the business, whether it is manufacturing, mer chandising, or service. 2. The size of the business and the organizational level where the supervisor is located. 3. The kind of operational function and selection in performing line or staff functions. Most likely, the supervisor who is engaged in line activities will have technical and production orientation but little orientation about office work. T h e Challenges of O ffice M anagem ent

The challenges are numerous for the supervisor performing office work. Among the significant challenges are: 1. Careful analysis and involvement of remedial actions for cop ing with mounting office cost. 2. Preparation for the "electronic function'' or electronic office. 3. Extent of specialization in individual office jobs. 4. Reduction in the amount of unnecessary paper work per formed. 5. Development of better means of motivating office employees. 6. Greater delegation of authority by the office manager. 7. Attracting and acquiring the better graduates from schools to >ffice jobs. Introduction to the Different Areas of Management

257

8.

S im plificatio n o f office p ra ctice s a n d o p e ra tio n s.

9. Establishment of more and better office work standards. A. The activities in office management include, among others, the following:

1. Seeing to it that the correspondent or correspondence work stenography and typing - is performed. 2. Filing records and reports. 3. Handling incoming and outgoing mail. 4. Supplying reception and messengerial services. B. Determining the complete course of action to accomplish the work involves:

1. Being informed of latest developments in performing office work. 2. Selecting office methods and procedures. 3. Coordinating the work of the office with non-office work. 4. Maintaining power balance among the various office activities. 5. Specifying, supporting, and purchasing office furniture, ma chines, and supplies. 6. Selecting the office location. 7. Arranging the office lay-out, location of office furniture and machines. 8. Determining what would be needed for an effective work environment - adequate lighting, elimination of noise, and proper ven tilation. t C. Providing an effective office organization includes:

1. 2. 3. zational 4. 5. 6. 7. 8.

Apportioning the work among the organizational units. Identifying the organizational units. Establishing definite and known relationships among organi units. Knowing the individual jobs in the office. Assigning proper personnel to organizational units. Delegating authority. Fixing responsibility among personnel. Providing for proper work facilities.

D. Inspiring the office personnel to do their best, involves:

1. Motivating office employees 2. Giving adequate supervision

258

Management for filipinos

REFERENCES 1.

Bethel, Lawrence, In d u s tria l O rg a n iz a tio n a n d M a n a g e m e n t. Japan: McGraw-Hill Kogakusha, Ltd., 1994. p. 601

2.

England, Wilbur B. P ro c u re m e n t P rin ciples a n d C ases. Illinois: Richard D. Irwin, Inc., 1992. p. 2.

3.

Ignacio, Monico. A n Introduction to B usiness a n d M a n a g e m e n t. MetroManila: Sinagtala Publishing, Inc., 1989. pp. 36-112, 150-151.

4.

Martinez, Esdras. M a n a g e m e n t T h e o ry a n d P ractice. Manila: GIC Enter prises, Inc., 1997. pp. 213-214.

5.

Musselman, Vernon A. and Hughes, Eugene H. Introduction to M o d e rn New Jersey: Prentice Hall, Inc., 1995.

B usiness.

Introduction to the Different Areas of Management

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260


Worksheet No. 8.25

AREAS OF M ANAGEM ENT

N a m e : __________ _____________________________ P r o fe s s o r :

Y 6 a r /S e c tio n :

_________ __________________________D a t e :

----------------

Give some activities of your business proposal, affecting the various areas o f management. ACTIVITIES

AREAS OF MANAGEMENTS PRODUCTION MANAGEMENT

MARKETING MANAGEMENT

•

FINANCIAL MANAGEMENT

PERSONNEL / HUMAN RESOURCE MANAGEMENT

OFFICE MANAGEMENT

261

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Chapter 9

Management Information System Learning Objectives: At the end of the chapter, the student is expected to understand the following: • Management Information System

"Impossible is a word only to be found in the dictionary o f fools” - Napoleon

W H A T IS A SYSTEM?

P

J L erhaps the best place to begin a chapter that is devoted to dis cussing management information systems, decision support systems, and various other types of computer-based systems is with the concept of a system. Systems exist in all fields of endeavor. There are social systems, fuel-monitoring system, political systems, biological systems, electrical systems, economic systems and information systems.

Figure 9.1 Major Information Systems In Business 264.


Figure 9.2 Inform ation System Ingredient and Capability

A system is any group of components (functions, people, activi ties, and events) that interface with and compliment one another to achieve one of more predefined goals. Typically, a system accepts input. Various subsystems work in concert to reduce some kind of output. Depending on the system, the input could be aluminum, temperature, data, and so on. Again, depend"ing on the system, the input could be soda cans, coal or warm air, information, and so on. A system exists within a defined boundary. The conceptual boundary includes: 1. All components of the system. Management Information System

265 i

2. That which provides input to the system. 3. That which is influenced by output from the system.

Information System Hardware,' software, people, procedures, and data are combined to create an information system (see Figure 9.2). The term information system is a generic reference to a computer-based system that provides the following: 1. Data processing capabilities for a department or perhaps an entire company. 2. Information that people need to make better, more informed decisions.

Scope of Computers and Information Processing The fascinating field of computers and information processing encompasses everything that deals directly or indirectly with the com puter-assisted flow of information. The scope of the field includes ev erything from word processing to industrial robots to supercomputers to management information systems. The management information system or MIS for short, is commonly used in the business environment as a generic reference to all technologies, procedures, systems, and people associated with computers and information processing. The key words throughout this chapter and in virtually every conversation about the subject are computers and information. Com puters are the base technology that enables us to tap the information resource, the value of which will become vividly apparent as you read this chapter. Besides being a generic reference to the computer and information processing field, the term "MIS" is also used to refer to a particular type of computer-based system. Whether MIS is used as a generic referenc*' to the field or to refer to a type of system is usually apparent from the context in which it is used. Successful implementation of the basic planning, organizing, staffing, directing, and controlling functions of management requires that managers have adequate information: managers must first identify and'then acquire the necessary information. These two have historically been the biggest challenges of managers. The advent and maturing of electronics computers have greatly altered not only the availability of information but also the manner by which it is identified and acquired. The purpose of this chapter is to introduce and give an overview of an information system that can be especially useful to managers and students.

The Information Explosion Until the past 25 years or so, managers, almost never felt that 266

M an ag em en t fo r Filipinos

they had enough information to make decisions. Of course, information has always been available, but it was not always so easy to obtain, synthesize, and analyze. In the 1950's a manager could send a term of researchers to the local library; even then, much of the data, would not be current. Other available information sources included the radio, newspapers and professional meetings and publications. Contrast that scenario with today. Today's managers are often burdened, not with a lack of information, but rather from information overload. Information overload occurs when managers have so much information that they have trouble distinguishing between the useful and the useless infor mation.

The Computer Evolution .The first electronic computer, the EN1AC, was developed by the University of Pennsylvania in conjunction with the U.S. Army-Ordi nance Corps. The ENIAC was 8 feet high, 8 feet long, weighted 30 tons, and required about 174,000 watts of power to run. On the average, it took about two days to set up ENIAC to carry out a program. In the 1960's, large and very costly mainframe computers (such as the IBM 360 series) were in use by only the largest companies and gov ernment organizations. Not only was the hardware for the system ex pensive but they also required highly paid operations, service personnel, programmers, and systems specialists. Because of the physical size and cost of these systems, they were almost highly centralized and, more often than not, considered an extension of the accounting function. The large computers were followed by the microcomputers of the 1970's. The microcomputers were much smaller in size and cost and they were often programmed to do specific functions for a specific busi ness in size and cost and they were often programmed to do specific functions for a specific business activity. Minicomputers ushered in the concept of distributed data processing - each operational area of a jar gon to use computers. Computer technology improvements have also created some new problems for managers. Diverse computers and communications tech nologies provide a wide array of information at many different levels in the organizations. Therefore, it is no longer possible to place the infor mation function neatly on the organization chart. The need to integrate and coordinate information in an organization had led to the develop ment of the systems for doing just that. Organization has control of its own computers to better respond to the needs of the area. The decentralization first made possible by minicomputers had been taken even further by the microcomputers or personal computers. For just a few hundred pesos, a manager today can buy a microcom puter capable of processing mammoth amount of data - and it occupies more space than a typewriter. Management Information System

267

The phenomenal improvements in computer hardware have been accompanied by improvements in software and user compatibility. Modern computers are much more user friendly than those of the past. Managers today do not need to know sophisticated computer program ming languages. Three important concepts are related to one another: electronic data processing (EDP) management information system (MIS), and de cision support system (DSS). In this section we define them and de scribe how they are related to but different from one another. It is not necessary to use computers to have effective control. However, (computers are enormously helpful in the control process. The era of the modern control system can be dated to the creation of the first computer during the 1940's. Electronic data processing (EDP) represents the first attempt to control individuals, subsystems, and the total organization or system through the use of computer-gen erated data. Specifically, EDP is manipulating data or individual trans actions at a central computer facility housing a large mainframe com puter upon which thousands of pieces of information can be easily stored and manipulated. This form of control is very cumbersome, since it requires access to a mainframe computer and usually extensive -knowledge of computer programming and operations. The activities of almost all line managers were not directly af fected by EDP, which was and still is considered a staff function. EDP proved to be helpful in such areas as storing accounting and salary information, primarily because such information is standardized and can be easily manipulated by computer specialists. When line manage ment wanted such information, they would approach the EDP depart ment, and its specialists would provide it in the form of computer out put and reports. MIS is a natural extension of EDP. Line managers complained bitterly for many years that the EDP specialists provided them with information and reports that were difficult to understand. Conse quently, line management was wary about making decisions based on such information. Management information system (MIS) is the activity of taking the processed data and turning it info meaningful information or reports that managers can use. The manager still does not manipu late the data directly, but the computer programmers and specialists must tailor their reports and documents to the desires of the line man agers who will make decisions based on them. In this sense, MIS makes the line managers or end users responsible for articulating their needs so that the computer programmers can design reports tailored to them. MIS also places the burden of extracting relevant information on the manager or end user.

268

M a n a g e m e n ts Filipinos

MIS is Clearly an improvement on EDP. However, unleiss MIS is set up properly, it often fails or operates suboptijnally. Hence the need to discuss the proper method of designing an MIS. A decision support system (DSS) focuses not on the data itself (EDP) or the processed information per se but rather, on the end prod uct or the decision itself, and the manager or her assistant is encour aged to manipulate the data on a desktop computer. As this discussion implies, DSS is not meant to supplant mana gerial judgment and decision making. Rather, DSS is a hands-on ap proach to decision making, which allows the line manager to partici pate actively in the manipulation of the data. Thus, DSS is a means to facilitate managerial decision making. Denise Eriksen (1987) points out that DSS is most applicable to the area of semis.tructural decision making. For such decision making, a manager's judgment alone, is not sufficient to make a good decision; the problem is not sufficient to make a good decision; the problem is too complex or involves too many computations. Instead, the manager can use a desktop computer -to manipulate the data and make decisions based on the resultant calculations. In addition, William King has ar gued that DSS will become prominent in the area of strategies planning as top corporate and divisional line managers become accustomed to using desktop computers. Many, if not most managers of the future will need to be able to operate the desktop computer efficiently.

MIS Components Certain basic components are needed for a successful MIS. 1. Interactive computer hardware (the computer itself) and software (the program allowing the manager to use the computer). 2. A database upon which the software programs can be seen to produce the desired tables and figures, for example, a software ac counting program that allows a manager to evaluate accounting infor mation for the entire company. 3. Graphical and other displays. 4. A computer language that is user-friendly so that a line manager can use it after a few hours of training and can begin to ma nipulate company or divisional information. The actual computer, known as hardware, is one requirement. The selection is abundant and continues to expand. All computers need instructions or programs to run therm. These instructions and programs are referred to as software. Software can be purchased off the shelf for most applications. However, some organiza tions elect to write their own software. This can require anything from a single programmer to several programmers and system analysts. Pro grammers are the people who write the instructional programs that tell Management Information System

269

IVideo monitor (output) Central processing unit (processing, storage, and control)

/

Information-oriented managers and executives

Floppy disk drive (storage) CD ROM drive (storage)

Printer (output)

Keyboard (Input)

Figure 9.3 MIS Component and Computer Based System

the computer what to do. System analysts study a potential computer application and determine the type of programs needed. System ana lysts basically serve as intermediaries between the users and the pro grammers. A third necessary component is the database. A database in cludes the data needed by the user. Usually a database has information about the organization's operations. It is stored so as to be readily ac cessed. Information for a database can be very expensive. The final necessary component of the system is the management staff and executive leadership. Other components can produce informa tion; but this information must be used by information-oriented manag ers. They must know what information they need and how too use this. And they must be willing to make the effort needed to improve the information and the MIS itself. Top managers or executives must ac tively endorse and support the MIS. If the middle and lower level man agers see that top management is really not committed to the MIS, the system will surely fail. Figure 9.3 summarizes the necessary compo nents of a successful MIS.

M A N A G E M E N T IN F O R M A T IO N SYSTEMS (MIS); C O M P U TE R IMPACT O N M A N A G ER IA L A C T IV IT IE S I DR.

R O N A L D M . PASTRANA

I. Definition/Background Management Information System (MIS) is the process of provid ing managers with the right information, at the right time, on the right uses, and at the least cost. CTtt

Management for Fffipihos

Due to the complexity of business dperations, MIS has evolved from a mere basic functions of reporting financial statements and sta tistical information to sophisticated financial and statistical projections and performance reports. It has been traditionally an accounting func tion, but due to the advent of computer technology, MIS/EDP is now a separate functional area in business characterized as a support/services group.

II. As a New Functional Area As a new functional area, the MIS/EDP (Electronic Data Process ing) Department is headed by an MIS Director for large-scale busi nesses or an EDP Manager for medium-small scale operations. Under him are various staff/groups: 1. Systems Analysts - oversees the design and documentation of business systems. 2. Programmer - codes systems design into a specific language, e.g., BASIC, COBOL 3. D ata Controller - checks input/output data 4. Computer Operator - takes charge of the operation/maintenance of the computer facilities 5. Data Encoder - transcribes data inputs

F ig u re 9 .4 T y p ic a l O rg a n iz a tio n a l C h a rt

The EDP Department Manager also participates in management decisions, particularly in planning and controlling activities.

III. Impact On Managerial Functions I.

P la n n in g :

EDP technology brought faster awareness of problems and op portunities because of the speed and accuracy of information processManagement Information System

271

ing enabling managers to concentrate on other management activities, rf'also affords a lot of alternatives open to every management problem. The main strength of computers is the accuracy, reliability, and speed of providing quantitative data for management decisions, especially in the areas of budgeting and forecasting.

2. Controlling: The great impact of computers on managerial control processes are summarized as follows: a. .Economic variables are better processed with standards as inputs. b. Measurement of performance is facilitated by storing prede termined standards in all areas: (1) production (2) sales (3) finance, etc. c. Comparative analysis is done through a comparison of actual funds versus budget with variances automatically provided in video or print form. d. Control decisions are facilitated giving better opportunities for the internal audit group to check and further safeguard assets of the company. Lastly, MIS/EDP is considered as a cost cutter, the last objective of “least economical cost." However, it must be treated as an invest ment wherein the return is in the form of management efficiency.

R E VIE W QUESTIONS 1. 2. 3. 4.

Distinguish between data, and information. W hat is a management information system (MIS)? W hat is a decision support system (DSS)? W hat is electronic data processing (EDP)?

D IS C U S S IO N QUESTIONS 1.

How would you respond to the following statement: "Learning about management information system s should be reserved for com puter specialists."

2.

W hen you go into a Jast-food store and the salesperson keys your order into the cash register, how might this information be used as part of an MIS?

272


REFERENCE 1.

Pastrana, Ronald M. MBA (Ateneo de Manila University); Dean - La Consolacion College, Manila; Lecturer. University of Assum ption at Bangkok, Thailand

Managem ent Inform a tion System

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27 4


Chapter 10

Social Responsibility of Businessmen Learning Objectives: At the end of the chapter, the student is expected to understand the following: • Definition of Social Responsibility • Major Arguments for and Against Social Responsibility • Business Ethics • A Code of Ethics for Business

“Law is merely the expression o f the will o f the strongest fo r the time bein g " - B roo k e A dam s

COMMUNITY

Figure 10.1 Social Responsibility of Businessmen

D E F IN IN G SO C IA L RESPONSIBILITY

A

JL -k. re business organizations expected to be involved with social issues that are broader than their concern for producing and selling goods and services? If they are, what specific issues should be ad dressed? Should managers be expected to apply ethical standards in their day-to-day business decisions? If they are, what ethical standards should be applied? The purpose of this chapter is to examine the social responsibility of organizations and the importance of ethics in manage ment. Social responsibility is the mpral and ethical content of manage rial and corporate decisions over and above the pragmatic requirements imposed by legal principle and the market economy. Social responsibility is concerned with low individuals and orga nizations deal with current social issues. The general public has a rather • broad and all-inclusive definition of the social responsibility of business organizations. The public seems to feel that managers and business 276


organizations should provide leadership in rebuilding cities, wiping out poverty, controlling crime, and cutting government red tape. In Short, social responsibility has come to mean participation in a multitude of issues and problems. Presently, no universally accepted definition exist for the term. Managers at work show what some organizations are and are not doing in social responsibility decisions.

Major Arguments For Social Responsibility 1 2. 3. 4. 5.

6. 7. 8. 9.

10. 11. 12.

It is_in the best interest of the business to promote and improve the communities where it does business. Social actions can be profitable. It is the ethical thing to do. It improves the public image of the firm. It increases the viability of the business system. Business exists because it gives society benefits. Society can amend or take away its charter. This is the "iron law of responsibility." It is necessary to avoid government regulation. Socio-cultural norms require it. Laws cannot be passed for all circumstances. Thus, business must assume responsibility to maintain an orderly legal society. It is in the stockholder's best interest. It will improve the price of stock in the long run, because the stock market will view the com pany as less risky and open to public attack and therefore award it a higher price-earnings ratio. Society should give business a chance to solve social problems that government has failed to solve. Business is considered, by some groups, to be the institution with the financial and human resources to solve social problems. Prevention of problems is better than cure - so let business solve problems before they become too great.

Major Arguments Against Social Responsibility 1. 2. 3. 4. 5. 6. 7. 8.

It might be illegal. Business plus government equals monolith. Social actions cannot be measured. It violates profit maximization. Cost of social responsibility is loo great and would increase prices too much. Business lacks social skills to solve societal problems. It would dilute business's primary purpose. It would weaken the government's balance of payments, because price of goods will have to go up to pay for social programs. Social Responsibility of Businessmen

277

9. 10. 11.

B u sin ess a lre a d y h a s to o m u c h p o w e r. S u ch in v o lv e m e n t w o u ld m a k e b u sin ess too. B u sin ess lack s'a cc o u n ta b ility to the p u b lic. T h u s, the p u b lic w o u ld h a v e n o co n tro l o v e r its so cia l in v o lv e m e n t. S u ch b u sin ess in v o lv e m e n t lack s b ro a d p u b lic su p p o rt.

HISTORICAL PHASES OF ATTITUDES OF MANAGERS TOWARD SOCIAL RESPONSIBILITY PH A SE

1

PH A 3E 3

PH A SE 2

P R O F IT -M A X IM IZ IN G

T R U S T E E S H IP

M AN AGE

Q U A L IT Y -O F -L IF E

M AN A G EM EN T

M EN T

M A N A G E M E N T (la te

A T T IT U D E S

( 1 8 0 0 to 1 9 2 0 a )

(lit*

to p r e s e n t)

O r ie n ta tio n

R a w s e lf-in te r e s t

1 9 2 0 , to e a r ly 1 9 6 0 a )

1960s

1. S e lf -in te r e s t

1. E n lig h te n e d s e if -in t e r e s t

2 . C o n t r i b u t o r ’s i n t e r e s t

2 . C o n t r i b u t o r ’s i n t e r e s t 3 . S o c i e t y ’s i n t e r e s t

E c o n o m ic v a lu e s :

W h a t ’s g o o d f o r m e is g o o d fo r

W h a t ’s g o o d fo r o r g a n i z a t i o n s

W hat

m y co u n try .

sn d

g oo d fo r o u r c o m p a n y .

m a n a g e m e n t i s g o o d fo r

is

good

fo r

s o c ie ty

is

o u r co u n try . P r o fit s a tis f ie r

P r o f it m a x im iz e r M oney

and

w e a lth

are

m o st

M oney

is

P r o f it is n e c e s s a r y , b u t. .

im p o r ta n t, b u t

so

im p o r ta n t.

a r e p e o p le .

L e t th e b u y e r b e w a re (c a v e a t

L e t u s n o t c h e a t th e c u s to m e r

A c c o u n ta b ility

a re

m o re

im p o r ta n t

th a n m oney.

e m p to r) Labor

P e o p le

L e t th e s e lle r b e w a re (c a v e a t ven d ] to r)

is a c o m m o d it y

to

be

Labor

has

c e r ta in

r ig h ts

E m p lo y e e

d ig n ity

has

to

be

b o u g h t a n d to b e s o l d

w h ic h m o s t b e r e c o g n iz e d .

s a tis fie d



o f m anage


of

m ent

o w n ers, cu s

m e n t is

o w n ers, co n

of m anage

m e n t i s to t h e o w n e r s .

is

to

th e

to m e r s , e m p lo y e e s , a n d o th e r

to

th e

m anage

t r ib u to r s , a n d s o c ie ty .

c o n tr ib u to r s . T e c h n o lo g ic a l v a lu e a :

S o c ia l v a lu e s:

T e c h n o lo g y i s v e r y i m p o r t a n t .

E m p lo y e e

p erson al

p r o b le m s

m u st b e le ft a t ho m e

T e c h n o lo g y

is

im p o r ta n t b u t

P e o p le

are

m o re

im p o r ta n t

s o a r e p e o p le .

t h a n te c h n o lo g y

W e r e c o g n iz e t h a t e m p lo y e e s

W e h ir e th e w h o le p e r s o n

h a v e n e e d s bey o n d th e ir e c o n o m ic n e e d s .

I am and

P o litic a l v a lu e s:

a

rugged

in d iv id u a lis t,

I w ill m a n a g e

m y b u s i

I am

an

in d iv id u a lis t, b u t

re c o g n iz e th e

v a lu e

I

o f g ro u p

G r o u p p a r t i c i p a t i o n is fu n d a m e n ta l to o u r s u c c e s s

n e s s a s 1 p le a s e .

p a r tic ip a tio n .

M i n o r i t y g r o u p a r e I n f e r i o r to

M in o r ity

g ro u p s

have

th e ir

M in o r ity g ro u p

w h ite s . T h e y ro u s t b e tr e a t e d

p la c e

s o c ie ty , a n d

th e ir

p e o p le , a s y o u a n d I a r e .

a c c o r d in g ly .

p la c e is i n f e r i o r to m in e .

That

g o v ern m en t

is

best

w h ic h g o v e r n s l e a s t .

in

-G o v e rn m en t

is

a

n ecessary

e v il .

B u s in e s s m u st

and

m em b ers a re

g o v ern m en t

c o o p e ra te

to

s o lv e

s o c i e t y ’s p r o b l e m . E n v ir o n m e n ta l v a lu e s :

T h e n a tu r a l e n v iro n m e n t c o n

P e o p le

t r o l s t h e d e s t i n y o f p e o p le .

n ip u la te th e e n v iro n m e n t.

r o n m e n t in o r d e r to l e a d q u a l

A e s th e tic

A e s th e tic v a lu e s a r e o key , b u t

We

n o t fo r u s .

th e tic v a lu e s , a n d

can

c o n tro l

and

m a

We

m u st

p re se rv e

th e

e n v i

i t y li v e s . A e s th e tic v a lu e s

v a lu e s ?

W hat

th e y ?

are

m u st

p reserv e

our

o u r p a r t.

S o u rc e s :

278

R. Joseph Monsen Jr., “The Social Attitudes to Management", in Contem porary Management: Issues and Viewpoints, Ed. Joseph W. McGuire (Englewood Ciiffs, N.J.; Prentice-Hall, 1974), p. 616.


aes

w e w i ll d o

BUSINESS ETHICS S ocial resp on sib ility d e a ls w ith' h o w in d iv id u als an d o rg a n iz a tion s h a n d le cu rre n t so cial issues. B u sin ess eth ics a re c o n c e rn e d w ith th e d a y -to -d a y b e h a v io r sta n d a rd s of in d iv id u als a n d o rg a n iz a tio n s. E th ics a re s ta n d a rd s o r p rin cip les o f co n d u ct u se d to g o v e rn the b e h a v io r o f a n in d iv id u a l o r g ro u p o f in d iv id u als. E th ics are g e n e ra lly c o n c e rn e d w ith q u estio n s o f rig h t an d w ro n g o r w ith m o ra l d u ties. E th ica l sta n d a rd s ca n b e d ev e lo p e d b y an in d iv id u al, a g ro u p of in d iv id u a ls, o r society. L a w s are eth ics fo rm a liz e d b y a so ciety ; th e y a re u su a lly co n ce rn e d w ith p rin cip le s of co n d u ct. O rg a n iz a tio n a l eth ics, h o w e v e r, g e n erally d e a l m o re w ith th e b e h a v io r o f in d iv id u als o r g ro u p s o f indi v id u a ls n o t c o v e re d by the law.

A C O D E OF ETHICS FOR BUSINESS Preamble T h is C o d e of E th ics h a s b een fo rm u la te d im p elled b y the belief th a t m a n h as a d ig n ity th at m u st b e re sp e cte d , an d th a t all the re so u rce s of th e e a rth h a v e b een cre a te d fo r h is g ro w th an d d e v e lo p m e n t. A s h e re p resen te d , this C o d e is co n sid e re d a m a jo r step in th e o n g o in g a n d ch a n g in g p ro ce ss of u n d e rsta n d in g the g ro w in g ro le o f b u si n ess a ctiv ity in the d e v e lo p m e n t o f m a n , as su ch , is o p e n to fu rth e r im p ro v e m e n t.

THE TEN COMMANDMENTS FOR MORAL EXECUTIVES

,

Thou shait not bear false Witness in the books and records of thy employerThou Shalt not play games with num bers.

he'may°nof want to hear It.

Vl

?in

no1’ nor help thy brother ,0 sin fof ^ % brother's keeper.

VII. Thou shall not have "}as,9rs ' thy boss find thyself.

VI,lproflt> f 3 '1US8 n° ' S99k 19 Profit U iby of

*

employer's confidences. 'V In °thy ne'igSror when he is doing something wrong. v Thou Shalt keep thine ' eyas wide open

lx - Honor thy fath9r an(J auditors.and

^

%

X. Obey the real

Ten Commandments.

Social Responsibility of Businessmen

279

T h is C o d e seek s to e x p re s s s y s te m a tic a lly a n d co h e re n tly the p rin cip le s of b u sin ess p ra c tic e s a cc e p te d a n d p ro fe sse d b y P h ilip p in e b u sin ess a n d its b est, a n d seek s to a p p ly th ese to c u rre n t a n d ch a n g in g n eed s. It is h o p ed th a t th is C o d e w ill se rv e a s a g e n e ra l s tim u lu s to re n e w a n d d e v e lo p o r a m e n d e x istin g sta n d a rd s , a n d th a t in d iv id u a l en tities w ill e x p a n d a n d a d o p t it to th e sp ecific n e e d s o f th e ir o w n o rg a n iz a tio n s. It is a g en eral co d e in te n d e d to b e influ en tial ra th e r th an co e rciv e . It is h o p e d th a t in d iv id u a l en tities w ill co n scio u sly a d o p t a n d e m b ra ce it a s a sta te m e n t of p rin cip les a n d , h a v in g d o n e so , w ill b e u n w illin g to in c u r the sa n ctio n o f a d v e rse p u b lic o p in io n th ro u g h failu re to live u p to th e co d e . Finally, it is a co d e fo r all p e o p le , fo rm u la te d o n the p re m ise th a t th e m o d e m m a n a g e r m u st b e a stra te g is t fo r h u m a n d e v e lo p m e n t, a n d th a t th e ra tio n a le o f b u sin ess is to b u ild a n e n te rp ris e o rie n te d in the d e v e lo p m e n t of m a n .

T h e Co ncep ts B u sin ess, w h ich e m b ra c e s c o m m e rc e a n d in d u stry , is n o t a n a c cid e n ta l h u m a n a ctiv ity b u t a n in te g ra l e le m e n t o f th e so cia l o rd er. Its p rim a ry p u rp o s e is to m e e t s o c ie ty 's h u m a n n e e d s b y p ro v id in g g o o d s a n d s e r v ic e s as e fficie n tly a s p o s s ib le T h o s e e n g a g e d in b u s in e s s sh o u ld , th erefo re, re co g n iz e th e fo llo w in g b a sic co n ce p ts: B u sin ess is essen tially an e x p re s s io n o f h u m a n re la tio n sh ip s; n o t o n ly w ith th o se w h o w o rk in th e e n te rp ris e , b u t a lso w ith th o se w h o o w n an d p ro v id e fin ancial re s o u rc e s, w ith th o se w h o s u p p ly it w ith m a te ria ls a n d serv ice s, w ith th o se w h o b u y its p ro d u c ts o r se rv ice s, w ith the g o v e rn m e n t, an d w ith th e w id e r p u b lic w h o se liv es are af fe cte d b y th e b u sin e ss activity. T h e in te re s t o f all th o se m e m b e rs of s o c ie ty m u s t be ta k e n in to a c c o u n t in fo rm u la tin g b u sin e ss p olicy. T h e se in te re sts, in th e m se lv e s le g itim a te , w ill a t tim e s b e co n flictin g . W h ile co n flict a n d ten sio n ca n o f th e m se lv e s b e co n stru ctiv e , th e 'a im of b u sin e ss m u s t alw a y s b e to re c o n cile o p p o s in g in te re sts in a b a la n c e o f ju stice a n d m u tu a l co n ce rn . • T h e o w n e rs , m a n a g e m e n t, th e w o rk fo rce , th e su p p lie rs a n d su b c o n tra c to rs , th e cu s to m e rs , a n d g o v e rn m e n t co n trib u te to th e p e r fo rm a n c e of the b u sin e ss e n te rp rise , a n d a re th e re fo re e n title d to re c e iv e th e p ro p e r w o rth o f th eir co n trib u tio n s. • T h e re so u rc e s e m p lo y e d b y a b u sin e ss e n te rp ris e a re fin an cial, te ch n o lo g ica l an d h u m a n . T h e h u m a n re s o u rc e s h a v e a u n iq u e q u ality a n d sh o u ld b e e m p lo y e d in a m a n n e r c o n siste n t w ith p e rso n a l dignity. T h e in d iv id u a l sh o u ld b e g iv e n o p p o rtu n ity to u se a n d d e v e lo p h is facu lties in h is w o rk . H is co n trib u tio n to th e su c ce s s o f the e n te rp ris e 280


sh o u ld b e p ro p e rly re co g n iz e d a n d re w a rd e d . • B u sin ess en te rp rise h a s a p u b lic resp o n sib ility to u se all its re s o u rc e s efficiently. P ro fit in a sy ste m o f free e n te rp ris e is re c o g n iz e d as a fu n d a m e n ta l in cen tiv e, a n d is n e c e s s a ry fo r th e m a in te n a n c e a n d g ro w th o f th e en terp rise , fo r ra isin g the q u ality o f life, a n d fo r h e lp in g m e e t th e b ro a d e r n eed s of society. • C o m p e titio n a n d in v e n tiv e n e ss are essen tial fo r th e m a in te n a n ce a n d co n tin u in g im p ro v e m e n t o f th e q u ality o f g o o d s a n d se r v ice s, fo r g ro w th an d fo r tech n o lo g ical p ro g re ss. H o w e v e r, to g u a rd a g a in st u n fa ir fo rm s o f co m p e titio n , a co n siste n t sta n d a rd o f b u sin e ss b e h a v io r m u st b e estab lish ed a n d o b se rv e d . • In b u sin ess, as in a n y o th e r in stitu tion s of society, a n y rig h t o r a u th o rity en jo y ed b y o r e n tru ste d to b u sin ess p re su p p o se s, a n d is ju s tified by, co rre sp o n d in g d u tie s, respo n sib ilities, a n d p e rfo rm a n ce .

So m e Principles For T h e Co nd uct of Business Tow ards th e Em ployees

T h o se resp o n sib le fo r b u sin e ss p o licy sh o u ld co n sid e r n o t only th e in te re st of th e o w n e rs of the b u sin ess, b u t also the in terests o f the i affected b y th e activities of the b u sin ess. B u sin ess sh all re c o g n iz e the u n iq u e p o sitio n of em p lo y e e s as in d iv id u a ls w ith a v ita l stak e in th eir w o rk a n d a t th e sa m e tim e w ith in h eren t o b ligatio n s to th eir o w n fam i lies, a n d p ro v id e : •

•

fo r re co g n itio n th at, a lth o u g h ra te s of p a y m a y o ften b e d e te r m in ed b y u n io n , e co n o m ic an d legal p re ss u re s, w a g e s an d sa la ry p o licy sh o u ld be b a se d on th e rig h t o f the e m p lo y e e s to a fair an d im p ro v in g sta n d a rd of liv in g , irre sp e c tiv e of ra ce , se x , ag e, an d cre e d ; fo r a fair recru itm e n t p ra ctice th a t affo rd s e q u a l o p p o rtu n ity

•

to all q ualified job -seek ers; fo r job secu rity , a d e q u a te c o m p e n s a tio n fo r e m p lo y e e s in ca se s o f sep a ra tio n a n d re tire m e n t, a n d fo r o p p o rtu n itie s for

•

frin ge ben efits; fo r a safe a n d h ealth y a tm o s p h e re in the w o rk e n v iro n m e n t co n d u civ e to th e p h y sica l a n d m o ra l w ell-b ein g a n d g ro w th

•

•

of th e em p lo y e e s; fo r co n d itio n s in w h ich h u m a n p o te n tia ls a n d re la tio n sh ip s ca n b e d e v e lo p e d a t all levels of the w o rk fo rce, w ith a v ie w to p ro v id in g therein a sen se of p u rp o s e an d a ch ie v e m e n t; a n d fo r p a rticip a tiv e e lem en t so th a t the k n o w le d g e , e x p e rie n c e a n d cre a tiv ity o f all w h o w o rk in the e n te rp rise m a y co n trib u te to the d e cisio n -m a k in g p ro cess. Social Responsibility of Businessmen

281

Towards the Customers B u sin ess sh all, in th e p ro d u c tio n o f g o o d s a n d se rv ice s: • striv e afte r a q u a lity th a t w ill en ab le th e m to s e rv e th eir p u r p o se efficien tly a n d effectiv ely ; • a v o id an y th in g th a t w o u ld b e d e trim e n ta l to th e h e a lth , safety o r g ro w th o f th e p ro p e r u s e r o r b e n e ficia ry o f s u c h g o o d s an d se rv ice s; a n d • seek to a p p ly o r m a k e u se of the d is co v e rie s a n d in v en tio n s of scien ce w ith a d a p ta tio n s th a t w ill im p ro v e th eir p ro d u c ts o r serv ices, th ereb y b en efitin g c u s to m e r s /u s e r s a n d in creasin g th eir n u m b er. In its m a rk e tin g a rra n g e m e n ts , b u sin e ss shall: • d eliv er th e p ro d u c t o r se rv ice in th e quality, q u an tity , an d tim e a g re e d u p o n , a n d a t a reaso n ab le p rice , a n d a v o id the creatio n o f artificial sh o rta g e s , p rice m a n ip u la tio n a n d like p ra ctice s; • estab lish a n a fte r-sa le s a n d co m p la in ts se rv ice c o m m e n s u ra te w ith th e kind of p ro d u c t o r se rv ice su p p lied a n d the p rice p a id ; • en su re th a t all m a s s m e d ia , p ro m o tio n a l, an d p a ck a g in g c o m m u n ica tio n s b e in fo rm a tiv e a n d tru e , an d tak e in to a c c o u n t the p re ce p ts o f m o ra lity a n d th e so u n d cu ltu ra l v a lu e s o f the co m m u n ity , an d m a n ife st re s p e c t for h u m a n dignity. Tow ards th e S up p liers

B u sin ess sh all en su re: •

•

•

282

th at the te rm s of all c o n tra c ts be cle a rly s ta te d a n d u n a m b ig u ou s, an d h o n o re d in full u n less te rm in a te d o r m o d ified by m u tu a l co n se n t; th at a b u se of e c o n o m ic p o w e r in d e a lin g w ith a sm a lle r c o n cern be a v o id e d , an d th a t, in all ca se s, te rm s o f p a y m e n t be strictly a n d fully o b s e rv e d . In g e n e ra l, p a y m e n t sh o u ld al w a y s be m a d e p ro m p tly at the a g re e d tim e or, if n o sp ecific tim e is a g re e d u p o n , as q u ick ly a s m a y be re a so n a b le , g iv en th e circ u m s ta n c e s ; an d th at n o su p p lie r b e e n c o u ra g e d to c o m m it h is re s o u rc e s for a p p a re n tly lo n g -te rm p u rp o s e s u n less th ere a re re a so n a b le g u a ra n te e s th a t th e o rd e rs h e re ce iv e d fro m the b u sin e ss e n terp rise w ill n o t b e te rm in a te d a rb itra rily ;.

Management f o r Filipinos

Towards the Owners and O ther Providers o f Capital In the in terest o f th e o w n e rs an d o th e r p ro v id e rs o f ca p ita l, b u si n ess shall: •

• •

p ro v id e a n a d e q u a te ra te o f re tu rn to th o se co n trib u tin g ca p i tal to the en te rp rise , an d e n su re th e se c u rity o f th e ir invest^ m e n t; u se th eir fin ancial re s o u rc e s to p ro v id e g o o d s a n d se rv ice s resp o n sib ly an d efficiently; fu rn ish the o w n e rs a n d o th e r p ro v id e rs of c a p ita l w ith su ch in fo rm atio n as th ey m a y reaso n ab ly req u ire, p ro v id e d th a t it d o e s n o t a d v e rse ly affect the se c u rity o f efficien cy of th e b u si

•

n ess; an d p u rsu e the sp ecific objectives o f th e o w n e rs a n d o th e r p ro v id e rs of cap ital, p ro v id e d th ese d o n o t ru n c o n tr a ry to a n y of the p rin cip les sta te d herein.

Tow ards th e L o c a l G o v e rn m e n t a n d N a tio n a l

A lth o u g h it is the respo n sib ility of g o v e rn m e n t to e n a c t legisla tion an d fo rm u la te im p le m e n tin g p olicies an d p ro g ra m s , it is th e d u ty of b u sin ess: • to p a rticip a te in the d iscu ssio n o f p ro p o se d leg islatio n a n d / o r its im p lem en ta tio n affectin g se cto ra l, reg io n al, n a tio n a l an d •

in tern atio n al in terests; an d to p ro p o se so u n d p olicies in the u se of h u m a n a n d m a te ria l reso u rces.

Tow ards S o c ie ty In G e n e ra l

B u sin essm en shall re c o g n iz e in th eir d ecisio n m a k in g th e in terest of th e g en era l p u b lic a n d , realizin g th at th ey a re u tilizin g to an im p o rta n t d e g re e the n a tio n 's re s o u rc e s, shall: * tak e re g u la r sto ck of their resp o n se to the b a sic n e e d s o f so ci e ty a n d th u s e n su re th a t th ese n e e d s are tak en in to a c c o u n t in *

*

all p o licy -m a k in g d ecisio n s; d o th eir b est to e n su re th a t the w a y th ey d e p lo y th e ir re so u rce s b en efits so ciety in g e n e ra l a n d d o e s n o t co n flict w ith th e n e e d s a n d reaso n ab le a sp ira tio n o f the co m m u n itie s in the a re a s w h e re th ey o p e ra te ; p a y p ro p e r re g a rd to th e e n v iro n m e n ta l a n d s o cia l c o n s e q u en ces of th eir b u sin ess activity , w ith sp e cia l a tte n tio n to the d u ty of ren e w in g re so u rce s w h e re p ossib le a n d m in im iz in g w a s te a n d p ollu tio n , an d n o t sacrifice sa fe ty o r efficien cy in th e in terest o f s h o rt-te rm p ro fitab ility ; Social Responsibility of Businessmen

283 -

•

a s c o rp o ra te c itiz e n s m a k e su c h co n trib u tio n s as th e ir r e so u rce s w ill allow , to re s e a rch , d e v e lo p m e n t, a n d a p p lica tio n .of in d igen o u s tech n o lo g y , a n d to the fin an cin g of so cia l d e v e l o p m e n t p ro je cts;

•

co n sid e r the h u m a n a n d so cia l co sts o f m e c h a n iz a tio n an d te ch n o lo g y ;

• ' estab lish a p o licy allo w in g e m p lo y e e s, w ith in re a so n a b le lim its, to co n trib u te to the p u b lic an d c o m m u n ity se rv ice d u rin g th e w o rk tim e.

So m e Ethical Principles For the Professional Manager T h e co n ce p ts a n d p rin cip le s fo r the c o n d u c t of b u sin e ss o u t lin ed in th is d o c u m e n t a re co m m e n d e d to the m a n a g e rs of b u sin e ss e n te rp rise s. T h u s, a lth o u g h the m a n a g e r is e x p e c te d to a ct in the b est in terests o f the b u sin ess, h e c a n n o t b e e x p e c te d to a ct in a m a n n e r th at is c o n tr a ry to. the la w o r to h is co n scie n ce . In p articu la r, a m a n a g e r sh o u ld : • • •

a ck n o w le d g e th a t h is ro le is to se rv e the b u sin e ss e n te rp rise a n d th e co m m u n ity ; a v o id all ab u se of e x e c u tiv e p o w e r fo r p e rso n a l g a in , a d v a n ta g e o r p re stig e ; re v e a l the facts to h is su p e rio rs w h e n e v e r his p e rso n a l b u si n e ss o r fin an cial in te re sts b e co m e in v o lv e d w ith th o se o f the co m p a n y ;

► estab lish a p o licy re g a rd in g co n flicts of in terest b a se d o n the p rin cip le th a t d e cisio n s sh o u ld b e m a d e in th e b est in te re st of th e b u sin ess e n te rp ris e , a n d d ecisio n m a k e rs sh o u ld b e on th e ir g u a rd a g a in st allo w in g p e rso n a l co n sid e ra tio n to d isto rt th eir ju d g m e n t; an d •

n o t to lera te an y fo rm of illegal d a ta -g a th e rin g o r a n y fo rm of in d u c e m e n t th a t te n d s to d is to rt n o rm a l co m m e rc ia l ju d g m e n t;

•

b e a ctiv e ly c o n c e rn e d w ith the d ifficu lties a n d p ro b le m s of

su b o rd in a te s, tre a t th e m fairly an d b y e x a m p le , le a d th e m effectively, a ss u rin g to all the rig h t of rea so n a b le a cc e ss a n d a p p e a l to s u p e rio rs; • . re c o g n iz e th a t h is s u b o rd in a te s h a v e a rig h t to in fo rm a tio n on m a tte rs affectin g th e m , a n d m a k e p ro v isio n fo r its p ro m p t co m m u n ic a tio n u n less su c h co m m u n ica tio n is likely to u n d e r m in e the s e c u rity a n d efficien cy o f the b u sin e ss; •

• 284

fu lly e v a lu a te the lik ely effects o n e m p lo y e e s a n d the c o m m u n ity of the b u sin e ss p la n s fo r the fu tu re b efo re tak in g a final d e cisio n ; an d c o o p e ra te w ith his c o lle a g u e s a n d n o t a tte m p t to se c u re p e r so n a l a d v a n ta g e s a t th e ir e x p e n se .


T H E W A Y T O USE T H E C O D E T h e fo u n d a tio n o f a n y b u sin ess en te rp rise is its p e o p le a n d the c h a ra c te r of its p eo p le. It h a s b een p ro v e n , tim e an d a g a in , th a t a b u si n ess su c ce e d s a n d g ro w s o v e r the lon g te rm w h en the p o licy m a k e rs in cu lcate a tra d itio n of so u n d m a n a g e m e n t p olicies b a se d on h on esty, integrity, fairn ess an d a re sp e ct a n d c o n ce rn fo r its em p lo y e e s, the c o m m u n ity in w h ich it o p e ra te s, an d th e p u b lic it se rv e s. T h is b o o k co v e rs th e essen tial p rin cip les to g u id e the p o licy m a k e rs in d e v e lo p in g h u m a n re so u rce s fo r m a x im u m effectiv en ess an d g ro w th . A s w ith an y co d e , o n ly th ro u g h a th o ro u g h u n d e rsta n d in g of its p rin cip les, a n d d a y -to -d a y u se of p o licies an d p ro ce d u re s ste m m in g fro m these p rin cip les, ca n th is co d e b e o f an y real v a lu e to a b u sin ess e n terp rise. A cco rd in g ly , it is su g g e ste d to th o se e n g a g e d in b u sin ess th at m a x im u m b en efit ca n b e d e riv e d b y three sim p le step s. T h ese step s w o u ld h o ld tru e fo r an y b u sin ess e n te rp rise re g a rd le ss of size, w h e th e r p riv a te o r p u b lic, w h e th e r a p artn e rsh ip o r a sole p ro p rie to rsh ip . T h e first step w o u ld in v o lv e e x a m in a tio n , u n d e rsta n d in g an d a cc e p ta n c e of the co d e b y the p o licy m a k e rs. A s su m in g a cce p ta n ce , th en the co d e w o u ld be a d o p te d officially, a s is o r w ith su itab le m o d i ficatio n s, a s b ein g a fu n d a m e n ta l p a rt of the ru n n in g of th e b u sin ess e n te rp rise an d its p rin cip les w o u ld be d isse m in a te d to its e m p lo y ees. A s the co d e d eals w ith b asic p rin cip les an d ca n n o t c o v e r e v e ry co n ceiv ab le situ ation n o r is it su fficien tly ex p licit to g u id e an in d iv id u al in e v e ry in stan ce, the n e x t step w o u ld b e fo r the p olicy m a k e rs to d e v e lo p d e ta ile d g u id elin es a n d p o licies fo r u se by th eir e m p lo y e e s. W o rk sh o p s co u ld be o rg an ized w h ich in terested officials of the b u sin ess e n terp rise w o u ld b e free to atten d a n d p a rticip a te w ith the objective of fo rm u la tin g sp ecific guidelines. T h e th ird step w o u ld b e n ecessarily an e v a lu a tio n an d reg u lar au d it of the im p lem en tatio n of the co d e an d its p olicies an d g u id elin es. T his co u ld b e estab lish ed as an an n u al p ro ce d u re an d se rv e to en su re a d h e re n ce to the co d e as w ell as to ap p ra ise the p e rfo rm a n ce of the e n te rp rise a n d its em p lo y ees. T h is en tire p ro ce ss w ill tak e tim e b u t as the c o d e is assim ilated a n d p ra ctice d an d as its u se b e co m e s w id e s p re a d , it is h o p e d th a t a h igh d eg ree of p ro fessio n alism , h ig h e r sta n d a rd s o f c o n d u c t a n d ju stice will ch a ra c te riz e all d ealin gs in b u sin ess. T h is, in tu rn , u n d o u b te d ly w ill co n trib u te to w a rd the b asic p re m ise of the co d e - th at th ro u g h the a p p licatio n of its p rin cip les, h u m a n d e v e lo p m e n t w ill p ro sp e r in o u r so ciety an d w ith it g re a te r e co n o m ic g ro w th an d p ro sp e rity fo r the p eo p le w ill b e attain ed . Social Responsibility of Businessmen

285

R E V IE W Q U E S T IO N S 1. 2. 3.

W h a t is so cia l resp o n sib ility ? "O u tlin e th ree m a jo r a rg u m e n ts fo r so cia l responsibility. G iv e so m e re a s o n s w h y a c o d e o f eth ics is n e e d e d in o rg a n iz a tio n s.

REFEREN CES B is h o p s -B u s in e s s m e n 's C o n fe re n c e fo r H u m a n D e v e lo p m e n t. O c to b e r 2 3 , 1979.

286


Chapter 11

Career Opportunities in Business L e a rn in g O b je ctiv e s:

At the end of the chapter, the student is expected to understand the following: • C a r e e r O p p o rtu n itie s • C a r e e r M an agem ent fo r F ir s t T im e Job Se e ke rs • E m p lo y m e n t O p p o rtu n itie s fo r B usiness, C o m p u te r and S e c re ta ria l G ra d u a te s

"More men fa il through lack o f purpose than through lack o f talent" - A nonym ous

C A R E E R O P P O R T U N IT IE S IN B U S IN E S S

M

a n y o f u s ch e rish the a m b itio n o f m o ld in g o u rse lv e s fo r a su cce ssfu l ca re e r in b u sin ess. T h e field o f m o d e m b u sin e ss m a n a g e m e n t is e x p a n d in g a n d g ro w in g . W h ile th ere h a s b een e x p a n sio n a n d in n o v a tio n in the b u sin ess, th e ch a lle n g e is n o w o p e n to all th o se w h o d e sire to su c ce e d b y u sin g the req u ired skills a n d a ttitu d e . W e n o w live in an a g e c h a ra c te riz e d b y m o d e m m e a n s of tra n s p o rta tio n a n d co m m u n ica tio n , in n o v a tiv e p ro d u c ts , c o m p u te riz e d sy s te m s a n d p ro ce d u re s , e x iste n ce o f m u ltin a tio n a l c o rp o ra tio n s , a n d c o m p le x b u sin ess o rg a n iz a tio n s. T h ese d e v e lo p m e n ts a re all d ire cte d to the e n h a n ce m e n t of m o d e m life a n d th e sa tisfa ctio n o f h u m a n n eed s.

The Need For Preparation M a n a g e m e n t is classified as a ca re e r. S im ilar to all p ro fessio n s, p o sitiv e m e n ta l a ttitu d e is a b asic re q u ire m e n t in th e p re p a ra tio n o f a su cce ssfu l ca re e r in this field. P o sitiv e m e n ta l a ttitu d e m e a n s th e re a liz a tio n o f o n e 's u n d e rta k in g th ro u g h the u se of th e co n scio u s m in d (b ased o n th e five sen ses) a n d th e su b -co n scio u s m in d (b ased o n th e six th se n se o r im a g in a tio n ). A ca re e r is a p ro fe ssio n o r ca llin g d e m a n d in g sp e cia l p re p a ra tio n , u n d e rta k e n w ith a real co m m itm e n t to se rv e the p e o p le . A p ro fessio n calls fo r th e b e st th a t the q u alified p ra c titio n e r c a n g iv e. T h e re is n o ro o m fo r th ose w h o h a v e n e g a tiv e attitu d e s. M o d e m b u sin ess g iv es a p re m iu m o n talen t, h a rd w o rk , in te g rity a n d co m m itm e n t to ju stice an d p ro g re s s, a n d the rig h t k in d of attitu d e . T h e in d iv id u a l w h o d o e s n o t p o sse ss th ese req u isites w ill n o t rise a b o v e m e d io c rity as an e m p lo y e e , o r e v e n a b o v e the d a y -to -d a y u n ce rta in tie s as a b u sin e ss en trep ren eu r. B u sin ess m a n a g e rs a re all b o m w ith th eir o w n m e a s u re o f talen ts a n d a ttitu d e s w h ich th e y d e v e lo p th ro u g h o b se rv a tio n , e x p e rie n ce , an d fo rm a l stu d ies. B u t a m u c h g re a te r m e a s u re o f p re p a ra tio n is n e ce s sa ry b e fo re th e y p e rfo rm th eir ch o se n ca re e r a n d a ch ie v e su cce ss thereafter. T h e p re p a ra tio n for a b u sin ess m a n a g e m e n t ca re e r m a y co n sist la rg e ly o f fo rm al e d u ca tio n w h ich , b y th e b a sic p rin cip les o f b u sin ess a n d m a n a g e m e n t, p ro v id e s a g o o d fo u n d a tio n fo r a career. T h is b asic k n o w le d g e sh o rte n s the p e rio d o f a p p re n tice s h ip , m in im iz e s the n u m b e r o f a b e g in n e r's m ista k e s, a n d b ro a d e n s the in d iv id u a l's o u tlo o k so a s to e n h a n ce g re a tly his ch a n ce s o f b e co m in g a v a lu a b le m a n a g e r o r g o o d en trep ren eu r. T h e sch o o l also d e v e lo p s p ro p e r v a lu e s an d d esired c h a ra c te r in form atio n . 288


F o rm a l e d u c a tio n is ju st a b e g in n in g of in d iv id u a l e n d e a v o r. W h e n stu d y in g , th e s tu d e n t m u st be d e te rm in e d to d o h is b est in all his u n d e rta k in g s, to m a k e w ise u se o f h is tim e a n d effort, a n d to av ail h im self o f e v e ry o p p o rtu n ity fo r p e rso n a l im p ro v e m e n t an d a d v a n c e m e n t. W ith th e k ey to a b u sin ess career, this c a n be g u a ra n te e d fu rth e r th ro u g h p o sitiv e p e rfo rm a n ce . O n ce the fo rm u la is in h is h a n d , the rest is u p to h im . F o r the stru g g le is n o t o v e r u p o n w in n in g the fo rm u la . T h e g re a te r e ffo rt lies a h ead a fter on e h a s o p e n e d the d oor. It is silly for a p e rso n to e x p e c t o p p o rtu n itie s to c o m e h is w a y ; a n d p a ssiv e e x p e c tatio n s are th e m a rk o f the m e d io cre. H e sh o u ld se a rch fo r an d cre a te h is o p p o rtu n itie s, b e ca u s e the q u est is e n liv en in g an d the re c o rd s are g ratify in g .

CA REER M ANAGEM ENT F O R F I R S T T IM E J O B S E E K E R S A fte r y e a rs of h e a rin g H a rv a rd B u sin ess S ch o ol stu d e n ts a g o n iz e o v e r th e ir q u est fo r the p e rfe c t job , a ss o c ia te p ro fe s s o r D a v id M a iste r d e cid e d to co m p ile a sim p le set o f ru les. H is b lu n t a d v ic e a p p lies n o t o n ly to the first tim e job seek er, b u t to a n y b o d y c o n sid e rin g a ch a n g e o f c o m p a n y o r a n e w co v er. 1.

Y ou c a n 't d e cid e w h a t y o u w a n t fro m

at, job

u n til y o u 're cle a r

a b o u t w h a t y o u w a n t fro m life. S o m e p e o p le h a v e b een to o b u sy " s u c c e e d in g " to figu re o u t w h a t su cce ss really m e a n s to them . 2.

3.

4.

T h in k it th ro u g h b efo re loo k in g for a job. O th e r p eo p le - co lle a g u e s, p a re n ts, sp o u se s - w ill tell y o u w h at y o u sh o u ld w a n t fro m life. You d o n 't h a v e to a c c e p t th eir a n sw e r o r b a n the w o rd " s h o u ld " fro m y o u r job search . D ifferen t p eo p le a re im p re sse d b y d ifferen t th in g s - ch a ra c te r, m o n ey , in tellect a n d so on. W h a t d o y o u w a n t to be a d m ire d for? Ancl b y w h o m ? T h e k ey s to w h a t y o u really w a n t are the th in g s y o u d o n 't like to a d m it. "I d o n 't like to a d m it it, b u t I really w a n t to b e r ic h ." Fin e, g o o u t a n d m a k e lots of m oney. P la y to y o u r ev il se c re ts; d o n 't

5.

s u p p re s s th em . S o m e p e o p le are b ig city ty p e s, o th e rs are h a p p ie r in sm a ll tow n s.

6.

W h ic h a re y o u ? Y o u 're a lot less flexible th an y o u think. D o n 't sell-buy. You ca n e ith e r b u y y o u rse lf a job o r be b o u g h t by o n e. If y o u r n e w job d o e s n 't w o rk o u t, the a d v ice w ill be a lo t m o re

7.

p ain fu l for y o u th an fo r y o u r e m p lo y e rs. D o n 't b e afraid to ask a b o u t the job - n o th in g im p re sse s an in ter v ie w e r m o re th a n so m e o n e w h o k n o w s w h a t w e want> a n d why. Career Opportunities in Business Management

289

8.

P e o p le d o n 't c a re a b o u t h o w m u c h y o u k n o w u n til th e y k n o w h o w m u ch y o u ca re . E n th u sia s m a n d th e h a rd w o rk it in sp ires w e n t fa r m o re th a n e x tra ability.

9.

D o n 't w o rry a b o u t w h e th e r y o u 'll b e g o o d a t so m e th in g . If the job tu rn s y o u o n , y o u 'll b e g o o d en o u g h .

10.

D o n 't p lan to o fa r a h ead . In five to te n y e a rs fro m n ow , y o u 'll be a d ifferen t p e rs o n w h o w a n ts d ifferen t th in g s fro m life! Take a job b e ca u s e it w ill m a k e y o u h a p p y n ow , n o t b e ca u s e it

11.

m a y m a k e y o u h a p p y to m o rro w . Life is m e a n t to be en jo y ed - all o th e r g o a ls cure m erely w a y s o f m a k in g y o u h a p p y an d a re w o rth less g o a ls in th em selv es. Sources:

David Malster, "Take this Job and Love It," Savvy Woman, June 1984. Savvy Publications, Inc., 3 Park Avenue, New York, N Y 10016.

E M P L O Y M E N T O P P O R T U N IT IE S F O R B U S IN E S S , C O M P U T E R & S E C R E T A R IA L G R A D U A T E S COMPUTER

MARKETING

T ech n ician D a ta E n co d e r

M a rk e t R e se a rch e r

P ro g ra m m e r S y ste m s A n aly st ED P M anager E n tre p re n e u r r o lleg e T each er

MANAG EM ENT T rain in g O fficer P e rso n n e l M a n a g e r

A c c o u n t E x e cu tiv e M a rk e t D ealer S ales M a n a g e r M e rch a n d ise r P u rch a sin g O fficer

> B ra n d M a n a g e r P ro d u c t M a n a g e r M a rk e tin g M a n a g e r R ecep tio n ist

A c c o u n t E x e cu tiv e C re d it A n aly st C o n su lta n t

M a rk e tin g C o n s u lta n t P u b lic R elatio n s O fficer E n tre p re n e u r C o lle g e T each er

P u b lic R elation s O fficer E x e c u tiv e S ecre ta ry B o o k k eep er B an k Teller

C re d it In v e stig a to r L o a n O fficer

C h ie f E x e cu tiv e O fficer P re s id e n t/G e n e ra l M a n a g e r E n tre p re n e u r C o lle g e T each er

BANKING & FINANCE

S ecu rities A n a ly s t T ru st M a n a g e r S to ck b ro k er F o re ig n E x ch a n g e D ealer F in an cial A d v is e r E co n o m ist F in a n cia l A n a ly s t

290


Bank Teller Corporate Treasurer Budget Manager Finance Consultant Underwriter Financial Controller Entrepreneur College Teacher A C C O U N TA N C Y

Certified Public Accountant Bookkeeper -Financial Analyst Entrepreneur College Teacher Budget Officer Project Consultant

SECRETARIAL

Clerk/Typist Executive Secretary Entrepreneur College Teacher COMPUTER SECRETARIAL

Data Encoder Executive Secretary Entrepreneur College Teacher

EXPERIENTIAL EXERCISES 1. Interview a manager from any type of business organization. Have a list of prepared questions including, but not limited to, the following: a) How did you become a manager? b) Describe your major functions as a manager. c) What skills are necessary to be a successful manager? d) What advice would you give to a person who is interested in a career in management? e) Can one learn to be a better manager? Justify your answer. 2. Select a business proposal, for example, putting up a restau rant business, then discuss how you can use the management functions (POSDICON) as a manager of the organization.

REFERENCES 1.

G in s b u rg , S ig m u n d G . M a n a g e m e n t: A n E x e c u tiv e P e rs p e c tiv e . T exas. R o b e rt D a n e , In c., 1 9 9 0 .

2.

Ig n a c io , M o n ic o H . A n In tro d u c tio n to B u s in e s s M a n a g e m e n t.

M a n ila :

S in a g ta la P ublishing, Inc., 1 9 9 4 . 3.

R u s s e l, L a w re n c e A B C o f In terview in g . N e w York: P itm an P ublish in g C o., 1996.

Career Opportunities in Business Management

291

Worksheet No. 11.256

CAREER M ANAGEM ENT

Name:

Year/Section:

Professor:

Date:

Interview a manager from any type of business organization. Have a list o f prepared questions including, but not limited to, the following: a) How did you become a manager?

b) Describe your major functions as a manager.

c) What skills are necessary to be a successful manager?

Career Opportunities in Business Management

293

d) What advice would you give to a person who is interested in a career in management?

e) Can one leam to be a better manager? Justify your answer.

f) Others

294

Manaaement for Filioinos

Chapter 12

Scientific Analysis of Business Cases Learning Objective: At the end of the chapter, the student is expected to understand the concept of. • Scientific Analysis of Business Cases

“The whole fun o f living is trying to do this better'' - Charles F. Kettering

S C IE N T IFIC ANALYSIS OF BUSINESS CASES

T

JL h e case study approach has developed into a very effective method in improving an individual's ability to analyze a situation, establish premises, arrive at valid conclusions, decide on courses of action, and visualize consequences and results. They are exercises in the management process and in executive action, providing opportunities for applying principles learned, to business situations encountered in actuality. A case usually narrates the development of a situation over an extended period of time. The case analyst projects himself into the situ ation and visualizes it as though he is personally involved. If the case involves two or more persons, the case analyst assumes in sequence the role of each person. This is done not only for better understanding of the human relations aspect but also to learn whether each person acts in the better manner while the situation was developing. Accordingly, the case analyst will now reduce the likely impact any decision one party Would have on the others. The case analyst follows the narrated developments by identify ing and evaluating the more important factors and information needed for valid judgments. Relevant data are carefully analyzed not only to determine whether there is a problem but also to find out the company's position in the industry - what others are doing and how they are faring, and the need for collective action for collective benefits. As more cases are studied, a broad "exposure" to different situations is "experienced" by the student, thereby promoting the development of latent executive ability and self-confidence. Each case in its entirety should be given an initial cursory read ing by the student, so that he may have an idea of the situation. Then the case is read slowly to grasp the relevant information, to visualize the situation, and allow role-identification. This should be followed by a third reading where the student pauses after every paragraph to give it careful thought while at the same time doing a careful study of all tabulated data or statistical presentations. At this point, a full analysis of the situation is made to determine what was done well, what could have been done better and why, and what the outlook for the future would be. This will enable the case analyst to identify what the prob lems are, and to think out the best ways to solve them. The problem-solving process calls for the determination of all possible courses of action in solving problems; the evaluation of each option in the light of objectives, the prevailing situation, and available 29 6


resources; and the critical appraisal of the solution tentatively chosen as the best for the situation. This critique of the tentative solution may lead to the adoption of the said solution as the best, or to a further study of the problenruntil a better solution is arrived at which can be rational ized as the best. The solution may involve several correlated courses of action and is presented, as a complete statement of what is intended to be achieved, how this is to be achieved, and the time frames for its accomplishment. The solution must also foresee the new problems which may arise and how these emerging problems are to be resolved. The solution to a problem is valid only if the new problems Which it causes are lesser in magnitude or more manageable than those of the initial problems. The case analyst must, therefore, visualizes the situation as he finds it, and how it will likely be after the proposed decisions are .implemented. At times, it may be good to put the problems aside for a while and c&me back to it with a fresh mind of with new ideas. A case study is best started individually. When the tentative so lution stage has been reached the student may confer with others who could possibly help him gain further insights, situations, on whether it is a major or minor problem, or to determine the existence of a problem. The case may call, for problem-solving actions, a policy strategy for the future. Thus, the case analyst becomes more observant, discern ing, critical, articulate, and constructive. He mu'st gather and arrange relevant facts in the order of their importance; determine what is good and what is detrimental; decide what should be done to improve the situation, and present his conclusions effectively. If the case does not give enough information, the case analyst should identify the areas in need of more data. In actuality, time and cost constraints seldom allow the gathering of complete data to aid the student in making decisions. If the case analyst has first-hand information or personal insight which can be useful for particular case study, he should bring this to bear upon the case. Case study is most useful as an exercise in analysis and decision making. A case is also very informative because it presents much infor mation peculiar to business practices and conditions. In this book the cases color not only individuals, business enterprises, but also situa tions in the industry as a whole. Management, after all, must deal with internal problems, provide relevant background information, or criti cize the premises or conclusions arrived at by the student. This will move the case study closer to the desired solution. The student may have to revise his preliminary ideas until he is satisfied that he has found the most advisable if not the best conclusions. The student then proceeds to a written presentation of the case and prepares himself for an open discussion of his case with his group Scientific Analysis of Business Cases

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or classmates. The written report and the group discussion are in them selves exercises in communication, discussion, and persuasion. The stu dent improves his ability to present his ideas effectively, to defend his position, and to persuade others to view things in the same light as he; does. He learns that others will come forward with different viewpoints and different solutions; that there is no single "correct answer" as in an arithmetical problem; that different solutions can be argued. Different managers will render different decisions depending on their individual valuation of the relevant factors, viewed in the light of their knowledge and experience. This makes the decision making exercise difficult, but at the same time highly interesting and challenging. There is no one way to study and prepare a case, nor is there any one way to present the solution. The manner and quantity of the pre sentation depends upon the nature of the case, the demands for detail and supporting evidence, and the major purpose of the particular case. Without prior instructions the governing principle is brevity. A one-page report will often suffice, but it should not be said, categorically, that more is superfluous. However, the difficulties of in ducing the reader to read the entire report multiply at a greater rate than the increase in the quantity of the report. The following suggestions are offered to help in the study and preparation of case analysis: 1. Read the assigned case thoroughly and completely. If possible, put the case aside for a period of time. Then carefully re-read the case once or twice or even thrice. Try to get an accurate picture in your mind as to what is really going on in that particular situation. 2. If the case is lengthy, you would wish to make notes or sum maries of pertinent information before proceeding with your analysis. Lawyers call this "briefing" a case. The procedure may be necessary in preparing management cases if the information has been thoroughly assimilated. A principal difficulty at this stage is to sort out the impor tant information from the "red herrings" or data of little significance. 3. Formulate in writing a precise statement of the problem. This is an analytical step, not a descriptive one. It does not help much to write down a rehashed version of problem-type statements lifted from the case data. Try to state the problem in such a way to show that individual or individuals must take some sort of action, and why some kind of action must be taken at this particular time. 4. Select the several alternative decisions or courses of action which can be taken. These are hypotheses which require investigation. 5. Concerning these hypotheses, raise the question which de mand an answer. These are the crucial questions which are the heart of your analysis. 298


6. Tentatively weigh the evidences and select the hypothesis which can best be supported. 7. Organize the evidences so as to substantiate your case. Be sure to state your conclusions clearly. The above suggestions also apply to either written or oral case analysis. Putting your analysis into writing, however, requires the fol lowing ideas to be considered: 1. Clarity and simplicity of written statements are essential. 2. Use short sentences. Be sparing in the use of descriptive ad jectives.

G U ID E LIN E S IN A N A LY ZIN G BUSINESS CASES O bjectives of the Case Method 1. To make the student become more efficient and accurate in finding the cause and effect of business problems. 2. To train the student become more imaginative in formulating efficient and effective solutions. 3. To help the student apply his own special experience, and to handle new situations if he has little or no experience. 4. To develop his skill in interacting, cooperating and fostering closer working relations with his group members. Basic C h a racte ristics of a G ood C ase Analysis 1. It is based on particular situational facts. 2. There is good understanding and identification of the central problem. 3. The solution must be highly creative and have the makings of being practical and workable under the given circumstances. 4. The student's position must be supported and defensible. Note: Students commit the serious error of organizing their case analy sis around concepts instead of using the concept as a tool in the analysis of the case.

Suggested O u tlin e in Solving Business Cases Time Context I. Viewpoint II. Statement of the Problem III. Objectives IV. Must Objectives/Short-Range Want Objectives/Long-Range Areas of Consideration/Analysis V. Scientific Analysis of Business Cases

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VI. Alternative Courses of Action VII. Recommendation VIII. Conclusion/Detailed Action or Implementation Plan

O u tlin e D etails /.

T im e co n te x t.

Specify the time context (month and year) if the case fact is ex plicit about it. The time context should tell us when the problem was observed, which requires the necessity of an action. A business problem requiring an action in pre-martial law days' will have a different action if it were to be tackled today. Likewise, a' business problem requiring an action that is different from the action to be taken during a period of stable prices, as in 1987. In short, a business problem will have different solutions under different political and eco nomic environments. II.

V ie w p o in t

In solving business problems, the student must specify the view point he is taking. It is always based on the manager's viewpoint. Given a business problem, the president of a company will most likely have a different approach or solution from those of other company officers. III.

S ta t e m e n t o f th e Problem .

A problem is a deviation or an imbalance between what should be and what is actually happening. This imbalance is caused by a change of one kind or another. A problem could be answered by the question - what is wrong that needs correcting? A business case may contain a variety of issues or problems, from the trivial to the significant, from the irrelevant to the relevant. The student should focus his attention on the key or central prob lem. The elimination of the central problem will eventually result in the elimination of other peripheral problems. Specify what the problem is by describing it very accurately in terms of four dimensions: identity, loQation, time, and extent. IV.

O b je ctiv e s.

Objectives are specifications by which alternative courses of ac tion are to be developed. These are statements or functions to be per formed or undertaken by the courses of action. Must or Short-Range Objective. This objective sets the limits that cannot be violated by any alternative course of action. These objectives will help the manager recognize the screen out the impossible and 300


poorer alternatives right at the outset. These objectives are of absolute importance to the success of the decision and the survival of the orga nization. These objectives should be attained within a year. Want or Long-Range Objective. This objective does not have absolute limits but expresses relative desirability. They are of relative importance to the success of the decision but are less than absolute. These objectives should be attained beyond a one-year period. V.

A re a s o f C on s id e ra tlo n lA n a ly s Is

When the student has determined what he considers to be the central problems and has defined his objective, he must proceed to organize the facts around the possible causes of the central problem. This requires the separation of the significant areas from the unimpor tant ones, and the relevant to the irrelevant. The analysis of each area must* come from the personal opinion of the analyst and not from the case factsVI.

A lte n ra tiv e Courses o f A c tio n .

There are possible solutions to the problem. Alternatives are col lections of what appear to be at the moment the best means of meeting the individual objectives. In some cases, the alternatives are clear; in others, the student must formulate alternatives appropriate to the prob lem at hand." The student must not remain content with pre-determined alter natives. He must strive for new and better solutions. Alternatives must be mutually exclusive. Significantly, an alternative must be able to stand alone. Take each alternative and measure it individually against each of the must and want objectives. Discard the alternative that does not meet what a must objective requires. Alternatives that satisfy all must objec tives should then be evaluated further against the want objectives. Appraise the remaining alternatives and weigh their individual strengths and weaknesses. Initially, the student must make a tentative choice of the alternative which seems best to him. Assess the possible adverse consequences of the alternative deci sion or recommendation. Look for potential areas where trouble may occur if the recommendation or decision is implemented. For each pro spective critical area, the student must evolve.corresponding preventive and contingency actions. If prospective serjpus areas could not be pre vented, review other alternatives for final/ action. V II.

R e c o m m e n d a tio n .

This is the final decision or recommended course of action. The student must be decisive. He must not avoid making a final choice Of fha alternative which .seems best to him. InaJtion or a status quo posi Scientific Analysis*of Business Cases

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tio n m e a n s in d ecisio n . A m o n g th e g iv e n a lte rn a tiv e s, o n ly o n e b e st al te rn a tiv e sh o u ld b e re c o m m e n d e d .

VIII. Concluslon/Detalled Action Plan M ak e a d etailed a ctio n p la n to e n su re th e su c ce s s o f th e d e cisio n o r re co m m e n d a tio n . F o r e a c h p ro sp e ctiv e se rio u s tro u b le a re a , th e s tu d e n t sh o u ld set u p co rre s p o n d in g p re v e n tiv e a n d c o n tin g e n c y a ctio n . If p ro sp e ctiv e serio u s trou b le a re a s co u ld n o t b e p re v e n te d , re v ie w o th e r a lte rn a tiv e s for final action . T h e ch a ra cte ris tics o f a g o o d a ctio n p la n are: • It is sy stem a tic. P lan s o f a ctio n sh o u ld b e p ro p e rly e n u m e ra te d fro m th e first p lan to the la s t p lan . • It is realistic. T h e p la n m u st b e ca p a b le o f b e in g c a rrie d o u t. A n u n realistic p lan ca u s e s fru stra tio n a n d is self-d efeatin g . • It is flexible. A g o o d p la n sh o u ld b e flexib le e n o u g h to b e ch a n g e d w h e n ch a n g e is ca lle d for.

Elements of an Effective Case Presentation I. Planning the Presentation T h e reaso n s fo r p la n n in g p re se n ta tio n s are: T h e o cca sio n itself ca lls fo r it, an d o n ly p la n n in g a ss u re s quality, a n d q u a lity p resen ta tio n s a re the only kind y o u a n d y o u r a u d ie n c e are in te re ste d in. F ailu re to p la n m a y ca u s e y o u to b e in effectiv e a n d m a y re su lt in y o u r p rese n ta tio n b e in g less th a n to p quality. P la n n in g a ca s e p resen tatio n in v o lv e s fo u r b a sic step s: a. Determining what you expect to accomplish. T h is g iv es y o u a ta rg e t a t w h ich to d ire ct y o u r p re se n ta tio n tim e an d effo rts. S et th e a cc o m p lish m e n t d o w n a n d k eep y o u r m in d to it a t all tim es. b.

Considering means to secure audience interest. B asically fo cu s o n th e a u d ie n c e 's in terest, n o t y o u rs . B e su re th e en tire p re se n ta tio n is a u d ie n ce -o rie n te d .

c.

Anticipating questions you may be asked after the presenta tion. T h ere w ill b e m an y. If y o u are ca u g h t o ff-g u a rd , y o u r to ta l p re se n ta tio n w ill su ffer a n d co lla p se . H a v e y o u r a n s w e rs ready.

d.

Gathering facts to answer anticipated questions. R esearch w o rk is p a ra m o u n t. T his step b e co m e s sim p le r o n ce y o u set d o w n a n tic ip a te d q u e stio n s. T h e re a re m a n y re so u rce s o f fa ct-g a th e rin g .

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2. Making the Actual Presentation and the Defense. Seven basic steps in making the presentation: a. Always begin your presentation with the attitude that you are presenting to a very important audience. Give your audi ence the red carpet treatment. b. Get your audience's attention (and hold it throughout). c. Watch your verbal language. Words are your main communi cation. Use words that suggest action. Use forceful, simple and specific words, not generalistic. Pay attention to eu phony. d. Watch your body language. Your posture, your physical atti tude, your gestures can often do more to help you convince persuasively than words. Avoid scratching, yawning, or slumping. Seek eye contact with your audience. e. Use visual aids. They dramatize the presentation, and drama tization is a strong aid in convincing your audience. f. Cover the business case completely. g. Answer the audiencels questions satisfactorily. Questions must always be laid to rest. Follow these rules when answer ing questions: - Ask the person to restate the question. - Listen attentively. - Ask for an explanation of the question. He will often re state it in a different way which is helpful. - Listen intently and do not interrupt. - Use facts to answer the question.

REFERENCES 1.

Atmosfera, Roberto C. Case Analysis-Guidelines. Manila: Philippine Christian University, Graduate School of Business, 1992.

2.

Gordon & Howell. Higher Education for Business. State: Columbia Uni versity Press, 1993.

3.

Harvard Business Review (September, 1995).

4.

Shull, Fremont A. Assistant Professor of Management, University of Indi ana.

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Chapter 13

Productivity Technologies in the Philippines Learning Objectives: At the end of the chapter, the student is expected to understand the following basic

co nce pts:

• Productivity Improvement Program • An Introduction to 5S • Quality Circles (QCs) • Total Productive Maintenance (TPM) • Just-in-Time (JIT) •Total Quality Management (TQ M ) • Kaizen • Benchmarking

“Productivity is above all, an attitude o f mindIt seeks to continually improve what already exists. It is based on the b elief that one can do things better todav than yesterday and better tomorrow than today." -

Productivity and Development.Center Development Academe of the Philippines

P R O D U C T IV IT Y T E C H N O L O G IE S IN T H E PHILIPPINES

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J L h e pursuit of higher productivity is the key to the success of every organization. In line with this vision, m any approaches, strategies and system s have been developed for productivity improvement. The pro ductivity improvement program or a PIP has not yet gone very far beyond certain circles, but it has definitely started to revolutionize the way som e Filipino companies expedite their operations. A PIP is basically one of the basic and advanced productivity technologies which is recommended by the Productivity and Develop ment Center of the Developm ent Academy of the Philippines. Productivity and Developm ent Center (PDC) is the im plem ent ing arm of the National Productivity Organization (NPO). PDC has been at the forefront of developing, adapting, installing, and institution alizing PIP's in the public and private sectors. Together with industry associations, local and foreign organizations, PDC implements various productivity improvement programs. Although, many of the technologies which include the PIP's are derived from the Japanese and American M anagem ent principles and practices, PDC has continuously studied and promoted these technolo gies in order to suit the working and management styles of the Filipi nos. The most basic and fundam ental approach for improving pro ductivity in all types of business and recommended by PDC is the 5S, It is a Japanese derived approach which aims to m ake discipline and orderliness a way of life for or a habit of everyone in a company. Con sidering that this is the most basic approach to productivity improve m ent, 5S can serve as a foundation and primer for more advanced technologies like, Just-in-Time (JIT), Total Quality M anagem ent (TQM), Total Quality Control (TRC) and Benchmarking. 5S stands for five Japanese words, but it also has a translation in English: • SEIRI or to S O R T unnecessary items and dispose them ac cordingly; • SEITO N or to S Y S T E M A T IZ E and arrange item s in good order for use; • SEISO or to S W E E P and clean the workplace; • SEIKETSU or to S A N IT IZ E and m aintain high standards of housekeeping; 30t

fiflanagement fo r Filipinos

• SH ITSU K E or S E L F - D I S C IP L IN E or doing the necessary things without being told. 5S is a basic productivity improvement tool which covers quality improvement, cost reduction, shortening of delivery time, improvement of safety through housekeeping with the active participation of all the company employees. 5S goes beyond simply m aintaining a clean work place but also includes making the company operations more produc tive through the elimination of loss and waste. Productivity and Development Center (PDC) is instrumental in installing the 5S program in such various fields as telecommunications (Philippine Long Distance Telephone Company), garments (Dasmarihas Garments Corporation), textiles and yam s (Kewalran Philippines), con sumer health care (Johnson and Johnson), semiconductors and lighting fixtures' (Philips), and many others. A distinct approach that has m ade tremendous impact among Philippine industries is Quality Circles (QCs). Quality Circle is a small group of workers (3 to 10 workers) from the same department/division/section who m eet regularly to identify and solve problems in their work area, and for their self/mutual devel opment. Primarily, in its effort to develop the circles concept to suit the Philippine industry environment, PDC asked the assistance of a Japa nese expert through the Asian Productivity Organization (APO). Even tually, PDC has successfully installed the circles program, which it re named as the Productivity Improvem ent Circles (PICs), in many orga nizations and is now joined by several private organizations in promot ing the program within different sectors. PDC was able to install the QC or PIC program or orient em ployees in com panies like Ram itex, Mabuhay Vinyl, RAMCAR, Armco-Marsteel Alley Corporation, Philip pine Fuji Xerox, PhilaCor, C alifornia M anufacturing, Fujitsu, an Miguel Corporation, SCJohnson, Goodyear Tire and Rubber Company, Nestle Philippines, among others. Likewise, PDC has been instrumental in introducing the concept of TPM, JIT, Benchmarking and TQM in some business organizations in the Philippines. As a productivity im provem ent approach, Total Productive Maintenance (TPM) aims to "m axim ize the effective use of the manmachine system at the minimum life-cycle cost." These are technical words, but in a simplified definition, TPM is really all about removing or eliminating losses caused by m isoperation of machines, machine breakdowns, and poor machine maintenance. Just-in-Time or JIT, on the other hand, includes the reduction or elimination of obstacles to the rapid flow of materials from invoice in to Productivity Technologies iri the Philippines

307

invoi.ce-out of the final products. The main philosophy behind the JIT system is the production of oruy the necessary units in the required quantities of the desired quality at the time they are needed. If this kind of manufacturing system is applied, unnecessary inventories will be come a thing of the past and warehouses and storage areas m ay even be eliminated. Total Quality Management (TQM) is an approach which is cen tered on quality, based on the participation or involvem ent of all m em bers of a company (top management, middle m anagem ent and rankand-file), and which aims at long term success through customer satis faction and the provisions of benefits to the m em bers of the organiza tion and the society to which the organization belongs. Another signifi cant TQM concept which was introduced by M asaaki Imai, a Japanese m anagem ent consultant is KAIZEN. "K a iz en " m eans improvement. Moreover, it means continuing improvement in personal life, home life, social life, and working life. W hen applied to the workplace "k aizen " means continuing improvement involving everyone - managers and workers alike. He relates quality to "k aizen " by stating that in its broad est sense, quality is anything that can be improved. According to Imai, theê are two w ays to achieve im provem ent in bu sin ess. O ne is "K aizen " and the other is innovation. WTiile Japanese managers tend to favor "k aizen" western managers tend to prefer innovation. With the support of the Asian Productivity Organization (APO) experts, PDC laid the groundwork for the installation of TQM in com panies such as San Miguel Corporation RAMCAR, PHILACOR and DOLE Philippines. Another relatively new measurem ent tool developed by PDC is benchm arking. Benchmarking is the continuous process of comparing an organization's functions, products or processes with those of best or leader in an industry. It is intended to help em ployees learn how such organizations achieved excellence and then set out to match or exceed them. Benchmarking may be used to assess virtually any aspect of an organization. It identifies and assesses the "b e st" that in occuring else where to aid a firm in developing its own strategies or tactical plans and processes to reach that level. The Productivity and Developm ent Center has been in existence for twenty seven years and PDC has directed its effort to accomplish its objective of promoting productivity accross a wide range of sectors, effect actual productivity increases at the firm level, and develop and strengthen institutional structures vital to productivity improvement. Although, it has introduced and developed many of the country's lead ing productivity technologies, PDC will continue to discover new direc tions, venture into new areas arid build its past gains to ensure "a better tom orrow " for everyone through productivity.

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REFERENCES 1.

Productivity and Development Center, Development Academy of the Philippines, 1996.

2.

Hellriegel, Don and Slocum, John W. Management. Boston: Southwest ern College Publishing, 1997.

3.

Imai, Masaaki, Kaizen, The key to Japan's Competitive Success. 1996.

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$

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A PP EN D IX

Final Review Questions **,

“The greatest freedom man has is the freedom to discipline him self." - Bernard M. Baruch

L

_________ 12. .

This type of motivation is given in the form of discipline and criticism w hich is a challenge to greater achievement. (A ) p o s itiv e (B ) n eg a tiv e (C ) b o th (D ) n o n e o f

------------- 13.

An organization of people controlled by feelings, senti ments and attitudes is (A ) fo r m a l (B ) lin e a n d s t a f f (C ) lin e

------ ------ 14.

A written report delineating the minimum qualification requirem ents necessary to perform a job is (A) job analysis (B ) jo b sp ec ifica tio n (C ) jo b d esc rip tio n (D). jo b

------------- 15.

The (A ) tine (B ) lin e a n d s t a ff (C ) fu n c tio n a l (D ) co m m ittee type utilizes the assistance of experts.

th e a b o v e.

(D ) in fo r m a l (E ) co m m ittee.

ev a lu a tio n

III.

IDENTIFY.

1.

The m ost basic of m anagem ent functions. ______________________

2.

Any activity involved in the production, distribution, and services so as to meet the economic needs of the customers and eventually get a profit. ________________________________

3.

Each subordinate is accountable to one superior only. __________

4.

A principle in m anagem ent which explains "in union there is strength."

5.

The chain of command from the top management to the lower level. _________________________________

6.

A system of m anagem ent by which major decisions are made by the top m anagement only. _____________________________________

7.

The interest of one em ployee or group of employees should not prevail over the interest of business. ___________________________

8.

The process by which unnecessary elements should be eliminated from the activities of the b u sin e ss.---------------------------------------------

9.

A system of m anagem ent developed by Frederick W. Taylor.

10.

The risk of starting a business. __________________ _______________

11.

The first organization created during the pre-colonial- period.

12.

The right to com m and and the power to m ake oneself obeyed.

13.

The place where the first advanced management program was held in the Philippines. _______________________________ 1________

314

Answer the following statements.


14.

Laym an's term for "rule of thumb m eth o d ."_________

15.

This business is concerned with the creation of goods.

16.

He is considered the father of scientific management.

17.

An area of management which deals with planning, organizing, staffing, directing, and controlling of office work. ----------------------

18.

A system of m anagement in which m ajor decisions are made at high levels of m a n a g em en t._____________________________________

19.

The company policy m a k e r s .--------------------------------------------

20.

The father of modern management th eo ry .-------------------------------- 1

21.

A type of organization where there is a direct flow' of authority from the top position to the immediate subordinates' level.

22.

An artificial being created by operation of law, having the rights of succession and the powers, attributes, and properties expressly authorized by law or incident to its existence. ---------------------------

23. . It is a business organization which is oWned by the people it serves. _______________________________________ '----24.

Passing authority and responsibility to lower le v e ls.-------------------

25.

The process by which managers select, train, promote and retire subordinates. -------------------------------------------------------- .

26.

The most fundamental function of co m m u n ica tio n .-------------------

27.

A type of training which refers to a company group training con ducted in classroom s or training rooms. ________________________

28.

The extent to which a subordinate may be held by his superiors to be directly responsible for results. __ :____________________________

29.

The right to command and the power to make oneself obeyed.

3Q.

The excess of revenues over ex p e n se s.___ _________________ — —

31.

Organization created from an official pattern of group assignments and distribution of authority and responsibility.

Final Review Questions

315

32.

G ro uping o f activities and functions or tasks in an organization.

33.

Refers to the num ber of subordinates that an executive can effec tively and directly control. _________ ______________________ _

34.

The scientific utilization of men, money, materials, markets, m eth ods, and machines to accom plish the desired purpose.

35.

An industry involved in the changing of raw materials or second ary products into a more useful form. __________________________

36.

The process of redesigning structures to fit the present organiza tion structure. ________________________________

37.

Separation of an employee initiated by the employer due to viola tion of company rules, and regu lations.________________________

38.

An individual reports to only one superior in order to avoid con fusion and role conflict. ___________________________

39.

M ovem ent of an employee on the same le v e l.__________________

40.

A system of precisely .what is to be done (or not to be done) in the same vvay everytim e with no permitted deviation.

IV.

O R G A N IZA TIO N STRUCTURE.

Identify the type o f organization

structure on the line provided for at the top o f the chart Place the following positions in their proper places:

Chairman of the Board Executive Committee VP for Administration VP for Marketing President

316


Stockholders VP for Manufacturing VP for Employee Relations Assistant to the President

V.

M ATC H IN G TYPE.

Match

the

word(s) on the left-hand column with the

answer on the right-hand column. (Use capital letters.)

□ □ □ □ □ □ □ □ □ □

1. Commerce

A.

A rea o f m a n a g em en t w h ich is c o n c e r n e d w ith th e e ffe c t iv e rec ru itm en t, selec tio n , d e v e l o p m en t a n d u tiliz a tio n o f the m a n p o w e r reso u rces o f o r g a n iza tion .

B.

A sy stem a tic stu d y o f th e d u t ie s a n d q u a l i f i c a t i o n s f o r v a r io u s jo b s w ith in a c o m

2. Principle of Simplicity

3. Production Management

4. Job Analysis

C.

pan y. In fo rm a l sy stem o f tr a n s m it tin g in form atio n .

D. 5. Entrepreneur

6. Grapevine

E.

g o o d s a n d serv ices. B la m in g o th e r s f o r c o m m o n

F.

fa ilu r e . U n n ecessa ry elem en ts sh o u ld be elim in a ted fr o m a ll a c tiv i ties as1w ell as fr o m th e p ro cess esta b lish ed f o r c a rry in g them .

7. Program G. 8. Human Resource

B a sica lly c o n c e rn ed w ith the tra n sfer o r e x ch a n g e o f g o o d s.

H.

H ero o f C a p italism

I.

A co m p lex o f g o a ls , p o lic ie s, procedu res, a s s ig n m e n ts , ru les, tasks, a n d reso u rces to

9. Controlling

10. Planning

A rea o f m an ag em en t c o n c e r n e d w i t h •th e c r e a t io n o f

J.

b e em p loy ed . E lim in a te s g u e s s w o r k a n d w a ste o f tim e a n d m on ey.

Final Review Questions

317

VI.

CROSSWORD PUZZLE. ACROSS 1 Movement of an employee on the same level 7 Choose 8 Highest level in the manage ment hierarchy 9 Tells a subordinate what to do and what not to do 12 Way or procedure for doing a task 14 To give or pay; reward 16 Important; necessary like the functions 18 Share responsibilities with subordinates 19 Superior of a department or a division 20 Precedes all other managerial functions 21 Systematic way of stating principles involved

318


DOWN 1 A concept developed by Frank and Lilian Gilbreth to emphasize the ideal motions required to perform a job 2 Form of leadership in which the leader believes he can decide on what is best for the group 3 Kind of chart which shows the production operations, transpor tation, indirect operations and delays 4 Plan stated in financial terms 5 Norms or means of measure 6 Division of management hierar chy 10 Goods or services which satisfy wants 11 Time required between place ment of an order up to the time the order is received 12 One of the .'M's; part of fixed assets 13 Same as 12 across 15 Basic parts 16 Oral as in communication 17 Object of attack as in sales and market 20 Project evaluation review technique

SELECTED BIBLIO GRAPHY Abasolo, Pacita A. and Isidro: Jose C. Personnel Management, Quezon City: Katha Publishing Co., Inc. 1991. Allen, Louis. Management and Organization. New York: Mc-Graw-Hill Book Company, Inc. 1992. Atmosfera, Roberto C. Case Analysis-Guidelines. Manila: Philippine Christian University, Graduate School of Business, 1992. Beach, Date S. Personnel: The Management o f People at Work. New York: The McMillan Co., 1997. Beazley, Mitchell. Organization Theory. London: Mitchell Beazley Publishers, 1993. Bethel, Lawrence L., Atwater, Franklin S. Smith, George H.E., and Stackman, Harvey A. Industrial Organizational and Management. Japan: Mc-GrawHill Kogakusha, Ltd., 1994. Buffa, Elwood S. Modern Production Management. New York: John Wiley and Sons, Inc. 1991. Dale, Ernest: Management Theory and Practice. New York: Me Graw-Hill Book Company, 1995. Damaso, Jimeno M. How to Start Your Own Business. Manila: Sinagtala Pub lishers, Inc., 1982. Dearmond, Fred. The Executive at Work. Englewood Cliffer, New Jersey: Prentice-hall, Inc., 1998. Development Academy of .the Philippines. How to Develop Project Feasibility Studies. Manila: Sinagtala Publisher, 1992. Drucker, Peter F. The Practice o f Management. New York: Harper and Brothers Publishers, 1998. Flippo, Edwin B. Principles o f Management. New York: McGraw-Hill Book Com pany, 1990. Franco, Ernesto. Pinoy Management. Manila: National Bookstore, Inc., 1916. George, Claude, Jr. S. Management for Business and Industry. New Jersey: Prentice-Hall, Inc., 1993. Ginsburg, Sigmund G. Management: An Executive Perspective. Texas: Robert Dane, Inc., 1994. Hastings, Paul G. Fundamentals of Business Enterprise. Princeton, New Jer sey: D. Van Norstrand Co., Inc., 1995. Ignacio, Monico H. An Introduction to Business Management. Manila. Sinagtala Publishers, Inc., 1989 Joon Eng Chua et al. Management o f Business. Singapore: McMillan-Hill Book Company, 1997. Kotler, Philip Marketing Management. Englewood, New Jersey: Prentice Hall, Inc., 1998. Koontz, Harold and O’Donnel, Cyril. Essentials of Management. New Delhi: Tata-McGraw-Hill Publishing Co., Ltd., 1998. Labor Code of the Philippines.'President Decree 442. Lazzaro, Victor. Systems and Procedures. New Jersey: Prentice-Hall, Inc., 1993.' Selected Bibliography

319

Management for Filipinos by Inigo Jr.

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