CHAPTER 1
DEFINITION, FUNCTIONS, TYPES and THEORIES of MANAGEMENT
BASIC CONCEPTS AND THEORIES OF MANAGEMENT
Have you ever been in a group, school club or school organization? If yes, even in your previous
classes or school organizations whether that is from a small group or either school club, there is
always a leader who will manage the group. Did you ever thought what where the functions of
the leader in your group or organization? Actually there are different functions that are being
performed by every leader in your group or organization. All those functions will be carefully
discussed as we go along with the lesson. Let us start by defining the term “management”.
DEFINITIONS OF MANAGEMENT
● Management is a process of planning, decision making, organizing,
leading, motivating, and controlling the human resources, financial, physical, and information
resources of an organization to reach its goals efficiently and effectively. (iEduNote, n.d.)
● Management is a non-stop process of ensuring continuity and growth within an organization.
FUNCTIONS OF MANAGEMENT
a. Planning- Involves determining the organization’s goals or performance objectives, defining
strategic actions that must be done to accomplish them, and developing coordination and
integration activities.
b. Organizing-Demands assigning tasks, setting aside funds, and bringing harmonious relations
among the individual and workgroup or teams in the organization.
c. Staffing- Indicates filling in the different job positions in the organization’s structure; the
factors that influence this function include the size of the organization, types of jobs, number of
individuals to be recruited, and some internal or external pressures.
d. Leading/Directing- Entails influencing or motivating subordinates to do their best so that they
would be able to help the organization’s endeavor to attain their set goals.
e. Controlling-Involves evaluating and, if necessary, correcting the performance of the
individuals or workgroups or teams to ensure that they are all working toward the previously set
goals and plans of the organization.
Business environments are battlefields and business organizations are engaged in combat. Due to
rising competition, changes in the economic environment, the Labor Union movement, improved
productivity, and implementations of new Business Laws, the business organization should know
how to handle this type of conflict. In order to adapt to the changing times, we have to
understand the beginnings of present-day management practices.
TYPES OF MANAGEMENT
Web references and other books present different management types but what they have in
common are four common categories which are discussed below.
1. Autocratic
This management type is a one-way leadership where there is a single authority. Team members
are only there to follow orders.The employees are given rewards for a job well done but are
given punishment if they fail.This management style is beneficial in times of crisis that need
immediate attention. On the other hand, it causes the staff to fear. They need to be closely
supervised and a poor relationship would be evident among the team.
2. Persuasive
The manager has a strong and centralized controlling business decisions like the autocratic type
of management. What differs is that in a persuasive type, the manager convenes with his
colleagues before he decides. Employees are motivated not anymore by rewards and punishment
but by persuasive techniques.
3. Consultative
In a consultative style, leaders and workers have two-way communication. Team members share
their opinion in solving issues of the company. Consequently, the practice is costly, slow in
decision making and important changes are delayed.
4. Participative
There is a distribution of authority and power in participative management. The company’s
project is a shared responsibility and each member has self-direction.
THEORIES OF MANAGEMENT
A. Scientific Management Theory
This management theory makes use of the step-by-step, scientific methods for finding the single
best way for doing a job. Frederic W. Taylor, the Father of Scientific Management, is the
proponent of this theory. Taylor’s Scientific Management Principles are as follows:
1. Develop a science for each element of an individual’s work to replace the old rule of thumb
method.
2. Scientifically select then train, teach and develop the workers.
3. Heartily cooperate with the workers to ensure that all work is done following the principles of
the science that has been developed; and
4. Divide work and responsibility almost equally between management and workers.
B. Henri Fayol’s General Administrative Theory
This theory concentrates on the manager’s functions and what makes up good practice or
implementation. Henri Fayol is the contributor of this theory who believes that management is an
activity that all organizations must practice and view it as separate from all other organizational
activities such as marketing, finance, research and development, and others.
Principles of Fayol’s Management Theory
1. Work division or specialization- according to this principle, the whole work is divided into
small tasks. The specialization of the workforce according to the skills of a person, creating
specific personal and professional development within the labor force, and therefore increasing
productivity, leads to specialization which increases the efficiency of labor. By separating a
small part of work, the worker’s speed and accuracy in his/her performance increases. This
principle applies to both technical as well as managerial work.
2. Authority and Responsibility- This refers to the issue of commands followed by responsibility
for their consequences. Authority means the right of a superior to give enhanced order to his
subordinates; responsibility means an obligation for performance. This principle suggests that
there must be parity between authority and responsibility. They are co-existent and go together,
and are two sides of the same coin, and the authority must be commensurate with responsibility.
3. Discipline- Refers to obedience, proper conduct in relation to others, respect of authority etc.
It is essential for the smooth functioning of all organizations. This will also help shape the
culture inside the organization.
4. Unity of command- States that each subordinate should receive orders and be accountable to
one superior. If an employee receives orders from more than one superior, it is likely to create
confusion and conflict. Unity of Command also makes it easier to fix responsibility for mistakes.
5. Unity of Direction- All those working in the same line of activity must understand and pursue
the same objectives. All related activities should be put under one group, there should be one
plan of action for them, and they should be under the control of one manager.
6. Subordination of individual interest to general interest- The management must put aside
personal considerations and put company objectives first. Therefore the interests of goals of the
organization must prevail over the personal interests of individuals.
7. Remuneration/Pay – Workers must be paid sufficiently as this is a chief motivation of
employees and therefore greatly influence productivity. The quantum and methods of
remuneration payable should be fair, reasonable, and rewarding of effort. Remuneration is paid
to worker as
per their capacity and productivity. The main objective of an organization is to maximize net
profit and wealth of the company.
8. Centralization- The amount of power wielded with the central management depends on
company size. Centralization implies the concentration of decision-making authority at the top
management. Sharing of authority with lower levels is called decentralization.
9. Scalar chain of authority- Refers to the chain of superiors ranging from top management to the
lowest rank. The principle that there should be a clear line of authority from top to bottom
linking all mangers at all levels. It is considered a chain of command. However, there is a
concept called a “gang plank” in which a subordinate may contact a superior in case of an
emergency, defying the hierarchy of control. In this event, the immediate superiors must be
informed about the matter.
10.Maintenance of order- Social order ensures the fluid operation of a company through
authoritative procedure. Material order ensures safety and efficiency in the workplace. Orders
should be acceptable and under the rules of the company.
11.Equity/Fairness- employees must be treated kindly, and justice must be enacted to ensure a
just workplace. Managers should be fair and impartial when dealing with employees, giving
equal attention toward all employees.
12.Stability/security of tenure of workers- The period of service should not be too short and
employees should not be moved from positions frequently. An employee cannot render useful
service if he or she is removed before he/she becomes accustomed to the work assigned to
him/her.
13.Employee Initiative- Using the initiative of employees can add strength and new ideas to an
organization. Initiative on the part of employees is a source of strength for an organization
because it provides new and better ideas. Employees are likely to take greater interest in the
functions of the organization.
14.Promotion of team spirit or esprit de corps- Refers to the need of mangers
to ensure and develop morale in the workplace individually and as a group. Team spirit helps
develop an atmosphere of mutual trust and understanding. Team spirit helps finish the task on
time.
C. Weber’s Bureaucracy
Max Weber, A German Sociologist wrote in the early 1900s that ideal organizations specially the
large ones, must have authority structures and coordination with others based on what he referred
to as bureaucracy. According to Weber, bureaucracy is an organizational form distinguished by
the following components:
1. Division of labor
2. Hierarchical identification of job positions
3. Detailed rules and regulations
4. Impersonal connections with one another
D. Organizational Behavior (OB) Approach
This involves the study of the conduct, demeanor, or action of people at work. Research on
behavior helps managers carry out their functions- leading, team building, resolving conflict, and
others. Robert Owen, Mary Parker Follett, Hugo Munsterberg, and Chester Barnard were the
early supporters of the OB Approach. During the late 1700s, Owen noticed lamentable
conditions in workplaces and proposed ideal ways to improve the said conditions. Follett, in the
early 1900s, introduced the idea that individual or group behavior must be considered in
organization management. Likewise, in the early 1900s, Munsterberg proposed the
administration of psychological tests for the selection of would be employee in companies.
Barnard, in the 1930s, suggested that cooperation is required in organizations since it is, mainly,
a social system.
CHAPTER 2
FUNCTIONS, ROLES, and SKILLS of a MANAGER.
INTRODUCTION
A manager is one of the most important person who influences the productivity and success of
any business organization. Before we dig down deeper as to what are the roles and skills do
managers have let us define first what is a manager.
WHAT IS A MANAGER?
An individual engaged in management activities is called a manager. Managers supervise,
sustain, uphold, and assume responsibility for the work of others in his or her workgroup, team,
department, or the organization, in general. Therefore, it is safe to assume that organizational
success depends upon managers who practice optimal utilization of their human and material
resources, and who encourage high levels of performance, effectiveness, and efficiency among
the individuals under their care (Cabrera, Altarejos, and Riaz 2016, 9).
MANAGERIAL LEVELS
Organizations typically have three levels of management in which they are classified according
to their respective functions. These are top-level managers, middle-level managers, and frontline
or lower-level managers.
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Top-level Managers. Top-level managers are the general or strategic managers who
focus on long-term organizational concerns and emphasize the organization’s stability,
development, progress, and overall efficiency and effectiveness. They are also concerned
with the organization’s inter-relationships with their external environment. Chief
executive officers (CEOs), chief operating officers (COOS), presidents, and vice
presidents are examples of toplevel managers in big corporations; they have authority
over all other human resources of their organization. Traditionally, top-level executives
set the company’s general direction by designing strategies and by controlling various
resources.
At present, however, they, too, must act as organizational guides who must elaborate on
the wider purpose of their organizational existence, so that their subordinates could
identify and be committed to its success in the three levels of management in Figure 1.6
(Cabrera, Altarejos, and Riaz 2016, 9)
Middle-level Managers. Middle level managers are the tactical managers in charge of
the organization’s middle levels or departments. They formulate specific objectives and
activities based on the strategic or general goals and objectives developed by top-level
managers. Their traditional role is to act as go-betweens between higher and lower levels
of the organization; they announce and interpret top management priorities to human
resources in the middle hierarchical level of the company. It has been observed that
middle-level managers are more aware of the company’s problems compared to
managers in the higher level because of their closer contacts with customers, frontline
managers, and other subordinates. To be an ideal middle-level manager, one must be
creative so that they could provide sound ideas regarding operational skills as well as
problem-solving skills that will help keep the organization afloat.
Frontline or Lower-level Managers. Lower-level managers are also known as
operational managers and are responsible for supervising the organization’s day-to-day
activities; they are the bridges between management and nonmanagement employees.
Traditionally, they are controlled and instructed by top and middle-level managers to
follow their orders in support of the organization’s major strategy. Lately, however, their
role has been expanded in some large companies, as they are now encouraged to be more
creative and intuitive in the exercise of their functions, so that they, too, could contribute
to their company’s progress and the development of new projects (Cabrera, Altarejos, and
Riaz 2016, 9-10).
Managerial roles are classified into three types: interpersonal, informational, and
decision-making. Henry Mintzberg, a professor at McGill University, researched what real
managers do. See Table 1.3 for the managerial roles by Mintzberg (Cabrera, Altarejos, and
Riaz 2016, 10).
CATEGORIES OF MANAGERIAL ROLES ACCORDING TO MINTZBERG
INTERPERSONAL
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Figurehead - As head of a department or an organization, a manager is expected to carry
out ceremonial and/or symbolic duties. A manager represents the company both
internally and externally in all matters of formality (Mulder 2016).
Leader - In this role, the manager motivates his/her workers. Managers communicate
with them, guide and support them to develop a positive work environment.
Liaison - A manager serves as an intermediary and a linking pin between the high and
low levels. In addition, he develops and maintains an external network. As a networker,
he has external contacts and he brings the right parties together. This will ultimately
result in a positive contribution to the organization (Mulder 2016).
INFORMATIONAL
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Monitor - As a monitor, the manager gathers all internal and external information that is
relevant to the organization. He is also responsible for arranging, analyzing, and assessing
this information so that he can easily identify problems and opportunities and identify
changes.
Disseminator - As a disseminator, the manager transmits factual information to his
subordinates and to other people within the organization (Mulder 2016).Memorandums
and other important information are well disseminated from top-level up to the
managerial lower levels and vice versa.
Spokesperson - In this role, managers represent and speak for their organization, as he or
she communicates and transmit relevant information about their organization to external
parties.
DECISIONAL
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Entrepreneur - As an entrepreneur, the manager designs and initiates changes and
strategies to enhance productivity and generate more income.
Disturbance handler - In this role, the manager always responds to employees’ disputes,
operational breakdowns, and other issues whether internal or external and uses solutions
to resolve the problems.
Resource allocator - This role of the manager describes his control and the allocation of
organizational resources which will be put in use in all organization’s operations.
Negotiator - As a negotiator, the manager participates in negotiations with other
organizations and individuals and he represents the interests of the organization (Mulder
2016).
MANAGERIAL SKILLS
Managerial skills may be classified into three: conceptual skills, human skills, and
technical skills.
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Conceptual Skills. Conceptual skills enable managers to think of possible solutions to
complex problems. Through their ability to visualize abstract situations, they develop a
holistic view of their organization and its relation to the wider external environment
surrounding it. Top-level managers must have these conceptual skills to be successful in
their work.
Human Skills. Human skills enable managers in all levels to relate well with people.
Communicating, leading, inspiring, and motivating them to become easy with the help of
human skills. Dealing with people, both in the organization’s internal and external
environment, is inevitable, so managers must develop these human skills.
Technical Skills. Technical skills are also important for managers for them to perform
their tasks with proficiency with the use of their expertise. Lower-level managers find
these skills very important because they are the ones who manage the non-management
workers who employ varied techniques and tools to be able to yield good quality products
and services for their company (Cabrera, Altarejos, and Riaz 2016, 11).
CHAPTER 3
ENVIRONMENTAL FORCES, ENVIRONMENTAL SCANNING, AND BUSINESS
ENVIRONMENT
DISCUSSION
Environmental Forces and Environmental Scanning Business environment refers to the
factors or elements affecting a business organization. It may be divided into External and
Internal Business Environments.
The External Business Environment includes the factors and elements outside the
organization which may affect its performance, either positively or negatively while the Internal
Business Environment refers to the factors or elements within the organization which may also
affect its performance, either positively or negatively.
The environment in which a business operates is a major consideration in determining an
organizations’ design or structure. Considerations such as uncertainty, procurement, and
competition are linked with the external environment. A company’s strategy and approach to
operations must also be aligned with the limitations of its external environment as well as its
internal environment.
Components of the External Business Environment: General and Specific
Systematic monitoring of the major external forces influencing organizations is necessary to
improve the management of companies. Failure to consider a company’s general and specific
business environments may affect the strategies that management will make and use.
The general business environment includes the economic, sociocultural, politico-legal,
demographic, technological, and world and ecological situations. All these must be considered
as managers plan, organize, staff, lead, and control their respective organizations.
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Sociocultural situations include the customers’ changing values and preferences; customs
could also affect management practices in companies. For example, Filipino customers
are now conscious of the importance of avoiding fatty foods, so many food companies
now make sure that the products they offer are cholesterol-free or are low in cholesterol.
In doing so, they avoid losing their customers.
Politico-legal situations refer to national or local laws, international laws, and rules and
regulations that influence organizational management. For example, labor laws related to
preventing employers from firing their employees without due process require the former
to allow the latter to exercise their right to present their position during disciplinary
action before their employment can be terminated.
Demographic situations such as gender, age, education level, income, number of family
members, geographic origin, etc., may also influence some managerial decisions in
organizations. For example, decisions regarding the hiring of human resources may be
affected by an organization’s management policy that shows prejudice to the hiring of
married females who are in the child-bearing age because they would like to minimize
the payment of maternity leave benefits.
The technological situations of companies involve the use of varied types of electronic
gadgets and advanced technology such as computers, robotics, microprocessors, and
others that have revolutionized business management; e-commerce, teleconferencing, and
sophisticated information systems have rapidly changed the ways that business is
conducted in the 21st century.
World and ecological situations are related to the increasing number of global
competitors and markets, as well as the nature and conditions of the changing natural
environment. Products produced by companies, of course, must cater to the changing
needs of people in the global community, while, at the same time, considering their
impact on the natural environment. For example, car manufacturing managers must give
the go signal for the development of vehicles that are environmentally friendly instead of
only being focused on the product’s speed, fuel economy, and design.
Components of the Internal Business Environment
An organization’s internal business environment is composed of its resources, research
and development, production, procurement of supplies, and the products and the products and
services it offers The organization’s internal environment must also be subjected to internal
analyses. Internal strengths and weaknesses, opportunities, and threats (SWOT) with regards to
its resources (financial, physical, mechanical, technological, and human resources), research and
development endeavors, production of goods, procurement of supplies (materials, inputs, and
finance), and products and services must all be considered prior to organizational planning.
CHAPTER 4
FORMS and ECONOMIC ROLES of BUSINESS ORGANIZATIONS
FORMS OF BUSINESS ORGANIZATIONS
An organization is a social unit of people that is structured and managed to meet a need
or to pursue collective goals. A business organization may assume any of the following forms:
A. Sole proprietorship
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Also referred to as “single proprietorship”.
A business that is owned by only one individual for the practice of trade or profession.
Simple and least costly form of ownership among other forms of business. It is registered
through the Bureau of Trade Regulation and Consumer Protection (BTRCP) of the
Department of Trade and Industry (DTI).
Common to small business entities like beauty salon, computer shop, repair shop, and
grocery store.
B. Partnership
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Business that is owned by two or more persons pooling their resources together as
common fund. (The details of the arrangement between the partners are outlined in a
written document called Articles of Partnership).
Just like corporation, it is registered with the Securities and Exchange Commission
(SEC).
The partners are normally involved in the management and operation of the business.
Profits are divided among partners based on their agreed sharing. The owner is called
partner
The most common example of partnerships are professional partnerships, such as law and
accounting firms.
C. Corporation
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A business organized as a separate legal entity (artificial person) under the corporation
law with ownership divided into transferable shares of stocks. It is a business required to
have five to fifteen incorporators. Incorporators refer to those who originally formed the
corporation. The existence of the corporation is evidenced by Articles of Incorporation
and by-laws that are duly approved by Securities and Exchange Commission (SEC).
Section 2 of the Corporation Code of the Philippines defines corporation as “an
artificial being created by operation of law, having the right of succession and the
powers, attributes and properties expressly authorized by law or incident to its
existence.”
It has a legal personality that is separate and distinct from the owners. The owners are
called stockholders or shareholders. The voting rights of a shareholder is generally based
on the percentage of ownership.
Management of the business is delegated by the shareholders to the Board of Directors.
Example includes :
✓ General Motors Corporations - an icon for craftsmanship.
✓ Apple Corporations - one of the famous tech companies and Amazon Corporation as
the world’s leading ecommerce and innovation company.
D. Cooperative
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Duly registered association of persons with a common bond of interest, voluntarily
joining together to achieve their social, economic and cultural needs.
Usually requires at least fifteen members to function.
✓ Usually a board of directors and officers are elected to manage the business
operation.
✓ The owners are called members who contribute equitable to the capital of the
cooperative.
✓ The members are expected to patronize their products and services.
The word “cooperative” appears in the name of the entity.
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This form of business organization is regulated by the Cooperative Development
Authority (CDA).
Shall exist for a period not exceeding fifty (50) years from date of registration sooner
dissolved or unless said period is extended.
Types of cooperatives:
✓ credit cooperative,
✓ consumer cooperative
✓ multi-purpose cooperative
✓ electric cooperative
✓ water service cooperative
✓ fishermen cooperative
✓ health service cooperative
✓ cooperative bank
✓ marketing cooperative
ROLES OF BUSINESS ORGANIZATIONS IN RELATION TO THE ECONOMY
Business plays an important role in the economy of the country. The success of business
translates to the economic well-being of a company and offers improved quality of life of the
citizens of the country hence, as a whole affect directly to the world’s economy.
Here, we will delve the several aspects that relate the importance of business in today’s
economic environment and society
A. Provide Employment
• New employment opportunities provide chances for previously unemployed or underemployed
workers to increase take-home payand meet their financial obligations.
• Increased employee’s earnings lead to a higher rate of consumer spending, which benefits other
businesses who depend on consumer sales to stay open thus, contributes to a healthier economy
in the locality.
• Providing employment opportunities for all is the single most effective means of tackling
poverty and social exclusion, thus improve an individual’s standard of living.
• Employing people at each local business contributes to the economy of the country.
B. Drives the Economy through Investment
• Businesses encourage investment by keeping their profit margins large and their cost of doing
business low.
C. Production of Goods and Services
• Businesses are designed to serve a particular need that people have, and to provide trusted
goods and services related to that need.
• In the modern economy, most firms and employees have found that to be competitive with
other firms and employees they must become very good at producing quality goods and services
because, when consumer’s confidence or trust dips in business, it is not just sales that are
affected, this mistrust has a ripple effect which can result in a decline in a country’s general
economy.
• No matter how efficiently you make a product or how special the service is that you deliver, if
you lose consumer confidence as a result of your business decision, consumers won’t support
you by purchasing your goods and services, and then nobody benefits.
D. Increase Government’s Revenue
• Businesses help increase governments revenue through the payment of taxes hence, without
business, there would not be much tax which will on the other hand affect the government’s
revenue generation.
• The increased presence of companies in the region translates to increased tax revenue. Taxes
that are collected by the government will be used to fund government expenditures and
programs. It is also used for the salaries of public employees such as teachers, nurses, doctors,
agriculturist, policemen and many more.
• Additionally, business growth and increased sales contribute to better national income in the
form of higher tax revenue and higher government spending, which can directly translate to
better maintenance and offerings of local infrastructure and services that benefit the community.