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Introduction to Principles of Management and

What is a Business?
the activity of making, buying, or selling goods
or providing services in exchange for money
Criteria in Classifying Phases of economic
Development 1
Means of Livelihood
Hunting and Fishing Phase
Pastoral Phase
Handicraft Phase
Agricultural Phase
Industrial Phase
Second classification of Economic Development
Household Economy
Village Economy
National Economy
International Economy
Medium of Exchange
Barter Economy
Money Economy
Money and Credit Economy
Legal Forms of Business Ownership
Sole Proprietorship
The Entrepreneur and the Manager
Entrepreneurs play a key role in any economy.
These are the people who have the skills and
initiative necessary to take good new ideas to
market and make the right decisions to make
the idea profitable. The reward for the risks
taken is the potential economic profits the
entrepreneur could earn.
Are people who conceive opportunities to offer
new or improved goods or services, exhibit
initiative to pursue those opportunities, make
plans, and mobilize the resources necessary to
convert the concepts into reality.
Why Study Management?
It will increase your opportunities to be offered
a job as a manager
Technical skills
Human skills
Conceptual skills
The better you understand the work of your
own boss the more likely you will get along with
that person
Management is needed in all types of
It enables self understanding
Positive Values of a Filipino Entrepreneur
Pakikipagkapwa tao
Bahala na
Gaya Gaya
Utang na loob, hiya, awa, bayanihan
Social and Economic Contributions of
Entrepreneurship creates Employment
Entrepreneurship improves the quality of life
Entrepreneurship contributes to more
equitable distribution of income taxes and
therefore eases social unrest
Entrepreneurship utilizes and mobilizes
resources for greater national productivity
Entrepreneurship brings social benefits through
the government
What is Management?
It is a distinct process of planning, organizing,
staffing, directing, and controlling, performed
to determine and accomplish stated objectives
by the use of human beings and others sources
management refers to the processes, techniques in
coordinating activities of people, the direction of
actions toward common goals. Managers:
Make decisions
Organize and staff the positions
Control Activities
Lead the group toward its objective
Basic resources Ms of MANAGEMENT
Universally accepted functions of Management
Refers to the formulation of objectives,
programs, policies, procedures and
regulations in order to achieve the goals
of the business
Is the grouping together of people,
establishing relationship among them,
and defining the authority and
responsibility the personnel have
The delegation of responsibility and
Involves filling and keeping filled the
positions provided in the organization
This area involves leadership,
motivation, approaches and
It measures performance against goals
and plans
A process of measuring and correcting
the activities of subordinates to assure
conformity to plans
Manager Roles
Pertains to the relationship with others
and are related to the human skills
Describes the activities used to
maintain and develop an information
Performs ceremonial and symbolic
duties such as receiving visitors, signing
legal documents
Directs and motivates subordinates,
trains, counsels and communicates with
Maintains information links both inside and
outside the organization
Seeks and receives information, scan
reports and maintain personal contacts
Forwards information to other
organizations members; sends memos
and reports, make phone calls
Transmits information to outsiders
through speeches, reports and memos
Initiates improvement projects,
identifies new ideas, delegates
responsibilities to others
Disturbance Handler
Takes corrective action during crisis,
adapts to environmental crises
Resource Allocator
Distributes resources, schedules, sets
budgets and priorities
Represents departments during
negotiation contracts, sales and budget
Evolution of Management Theories
The Classical or Traditional School
The Human Relations School
The Management Science or Quantitative
Modern Management
The Classical or Traditional School
This theory of management is built on principles
These principles have been Suggested by
theories presented by: Mooney, Reiley, Urwick,
Gullick, Fayol, Emerson and Taylor
These principles were believed and prescribed
in aiding and setting up and managing an
The Classical Era can be subdivided into two
separate schools of thought
Looking at how to design specific jobs
The scientific management
Maximizing the productivity of
individual jobs
Looking at how the various jobs fit
Maximize the productivity of the overall
Max Weber
the old ways of organizing ,
which involved an emphasis on
providing jobs for relatives and
friends , were being replaced by
a more professional way of
organizing, which focused on
employees competence
Henry Ford (1920)
mass production of automobiles
Production line
Each worker did one job
Each job was highly specialized and
Henry Fayol ( 1841 1925)
14 principles of Management
Principles of Management by
Henri Fayol
DIVISION OF WORK: Work should be divided among
individuals and groups to ensure that effort and
attention are focused on special portions of the task.
Fayol presented work specialization as the best way to
use the human resources of the

AUTHORITY: The concepts of Authority and
responsibility are closely related. Authority was defined
by Fayol as the right to give orders and the power to
exact obedience. Responsibility involves being
accountable, and is therefore naturally associated with
authority. Whoever assumes authority also assumes

UNITY OF COMMAND: Workers should receive orders
from only one

UNITY OF DIRECTION: The entire organization
should be moving towards a common objective
in a common direction.
one person should not take priority over the
interests of the organization as a
REMUNERATION: Many variables, such as cost
of living, supply of qualified personnel, general
business conditions, and success of the
business, should be considered in determining a
workers rate of
CENTRALIZATION: Fayol defined centralization
as lowering the importance of the subordinate
role. Decentralization is increasing the
importance. The degree to which centralization
or decentralization should be adopted depends
on the specific organization in which the
manager is

SCALAR CHAIN: Managers in hierarchies are
part of a chain like authority scale. Each
manager, from the first line supervisor to the
president, possess certain amounts of authority.
The President possesses the most authority; the
first line supervisor the least. Lower level
managers should always keep upper level
managers informed of their work activities. The
existence of a scalar chain and adherence to it
are necessary if the organization is to be

ORDER: For the sake of efficiency and
coordination, all materials and people related
to a specific kind of work should be treated as
equally as
EQUITY: All employees should be treated as
equally as

Retaining productive employees should always
be a high priority of management. Recruitment
and Selection Costs, as well as increased
product-reject rates are usually associated with
hiring new workers.
SIMPLICITY: unnecessary elements should be
eliminated from all activities as well as from the
process and procedures established for carrying
SPAN OF CONTROL: The specific and limited
number of subordinates that a manager can
effectively handle and
ESPIRIT DE CORPS: Management should
encourage harmony and general good feelings
among employees.

By Frederick Taylor
Taylors 4 Principles
First. They develop a science for each element
of a man's work, which replaces the old rule-of-
thumb method.

Second. They scientifically select and then train,
teach, and develop the workman, whereas in
the past he chose his own work and trained
himself as best he could.

Third. They heartily cooperate with the men so
as to insure all of the work being done in
accordance with the principles of the science
which has been developed.

Fourth. There is an almost equal division of the
work and the responsibility between the
management and the workmen. The
management take over all work for which they
are better fitted than the workmen, while in the
past almost all of the work and the greater part
of the responsibility were thrown upon the
The Gilbreths and Motion Study
The Gilbreths made use of scientific insights to
develop a study method based upon the
analysis of work motions, consisting in part of
filming the details of a workers activities while
recording the time.
The films served two
main purposes. One was the visual record of
how work had been done, emphasising areas
for improvement. Secondly, the films also
served the purpose of training workers about
the best way to perform their work.
method allowed the Gilbreths to build on the
best elements of these work flows and to create
a standardized best practice
The Human Relations School
refers to the researchers of organizational
development who study the behaviour of
people in groups, in particular workplace groups
It originated in the 1930s' Hawthorne studies,
which examined the effects of social
relations, motivation andemployee
satisfaction on factory productivity
The movement viewed workers in terms of
their psychology and fit with companies, rather
than as interchangeable parts, and it resulted in
the creation of the discipline of human resource

Maslows Hierarchy of Needs
Safety and security
Self - Actualization
Mayo stressed the following:
Natural groups, in which social aspects take
precedence over functional organizational
Upwards communication, by which
communication is two way, from worker to
chief executive, as well as vice versa.
Cohesive and good leadership is needed to
communicate goals and to ensure effective and
coherent decision making
Contemporary theories
Systems Theory is an approach which perceives
an organization as a system
Contingency theory is a viewpoint that argues
in a condition that managerial action depends
on the particular parameter of the situation
Theory A, Z, and Y
An Emphasis on Planning:
The Calculating Era (1950 to 1970)
Systems Analysis
Is an approach used to analyze complex
problems that cannot be solved by intuition,
straightforward mathematics or simple
These was used to analyze the compositions,
routes, probable location, and speed of Nazi
General Electric used this to decide where to
deploy employees, where to locate plants, and
how to design warehouses
Subfields have emerged to Aid in Planning and
Decision Making:
Managerial science
Aids in mangerial planning by providing
sophisticated quantitative techniques
for decision making
Systems theory
Highlights managers unique
responsibilities and vantage points in
overseeing the entireb organization
Contingency Theory
Which suggests that there is an ideal fit
between organizational structures and
systems, technology, and the larger
Applies mathematics, statistics, and other
quantitative techniques to management
planning, decision making, and problem solving
2 subfields:
Operations research
Which emphasizes mathematical model
Operations management
Which uses quantitative techniques to
help managers make decisions that
organizations to produce goods and
Techniques in Operations Management
Break-even Analysis
Determines the sales volume and prices
required to earn a profit , decide which product
lines to keep and which to drop, set prices for
products and services
Projections that help managers plan ways of
meeting production targets, whether and when
to expand production facilities
Inventory modeling
Helps managers decide on the timing
and quantity for ordering supplies to
maintain an optimal inventory, how
much end-product inventory to keep on
Linear Programming
Suggests how to allocate scarce
resources among competing uses
Mathematical models that permit
testing the outcomes associated with
making different decisions
James D. Thompson, Daniel Katz and Robert L.
Is a subfield of management that aids in
planning and decision making by highlighting
managers unique responsibilities and vantage
points in overseeing the entire organization
This theory draws attention to the complexity
of managing organizations, and in particular, of
the need of managers to look beyond their
organizational boundaries
Closed Systems
Is a perspective on organizations that
looks at managing activities as though
the organization were a self contained
and self sufficient unit
Open Systems
Is a perspective that emphasizes an
organizations place in the larger
environment and its dependence on
access to inputs (raw materials, labor)
and a market (customers) for its
Occurs when two or more systems are
more successful working together than
they are working independently
Is a subfield of management theory that
suggests that there is a fit between
organizational structures and systems,
technology, and the larger environment
Bounded rationality
Recognizes that the management
decision making process is limited by a
lack of complete information and
limited cognitive ability when
processing information
Mechanistic structure
Is an organizational structure
characterized by a relatively high level
of standardization, specialization,
centralization, and functional
Organic Structure
An organic organization is a type of informal
organization originally described by British
theorists Tom Burns and George Stalker.
According to Burns and Stalker, an organic
organization is one that is very flexible and is
able to adapt well to changes. Its structure is
identified as having little job specialization, few
layers of management, decentralized decision-
making and not much direct supervision.
Key Concepts
Burns and Stalker wanted to determine the
relationship between an organization's
structure and management as they relate to
changes in the organization's environment.
They developed a continuum of organizational
structure where organic organizations are at
one end and mechanistic organizations are
at the other end.
Organic and mechanistic types of
organizations are defined by three general
factors: complexity, formalization and
centralization. You will find that an organic
organizational system has a low level of
complexity, meaning that it's a flatly structured
entity with few layers of management. Organic
organizations have very few rules and
procedures with vague member responsibilities
and duties, resulting in a low degree of
formalization. Finally, you will find that organic
organizations have low centralization, which
means that the members in the organization
share in organizational decision-making and
power. As you might expect, mechanistic
organizations demonstrate high complexity, a
high degree of formalization and are highly
A second aspect of the nature of these
organizations is their relationship to the
environment. Organic organizations are
designed to effectively deal with a rapidly
changing environment because they have
attributes that make them able to address
unforeseen problems, issues and
requirements. They are able to do so because
of their informal communication systems that
allow quick communication, a flat fluid
structure that can quickly adapt to changes,
and the ability to easily and continuously
change individual activities in the organization.
You will find that mechanistic organizations, on
the other hand, are best suited for stable and
predictable environments in which they can
leverage their standard procedures,
centralization and formalized structure.
Finally, you need to keep two things in mind.
First, any particular organization will fall within
the continuum between the ideal organic
organization and the ideal mechanistic
organization. An organization that fits perfectly
into the ideal type of organization on either
side of the continuum probably does not exist.
This means nearly all organizations will fall
somewhere between the two extremes.
Second, neither the mechanistic type
organization nor the organic type organization
is necessarily superior to the other. Each is the
best type of organization in particular
Let's say you are a member of a small Internet
start-up. Your company has twelve employees
consisting of ten software engineers and
computer programmers and two support
staffers. The company was started by three
friends who are software engineers that work
directly with their colleagues in the day-to-day
operations of the company. The three owners
make decisions by majority vote but only after
consulting with the other members of the
organization, whose input is encouraged.
There aren't many formal rules expect to
respect each other and the customers and not
break any laws. The company has an open-
door policy - anyone is free to consult with
anyone else regarding problems or concerns.
Your company is pretty far down on the
organic side of the continuum.

Strategic choice theory
Strategic choice is a systemic theory of
strategy. This theory is built on a notion of
interaction in which organizations adapt to
their environment in a self-regulating,
negative-feedback (cybernetic) manner so as
to achieve their goals. The dynamics, or
pattern of movement over time, are those of
movement to states of stable equilibrium.
Prediction is not seen as problematic. The
analysis is primarily at the macro level of
the organization in which cause and effect
are related to each other in a linear manner.
Micro-diversity receives little attention and
interaction is assumed to be uniform and

Dominant coalition
Dominant coalition is defined as the organizational
objectives and strategies, personal characteristics, and
internal relationships of that minimum group of
cooperating employees who oversee the organization
as a whole and control its basic policy making.

It is made up of the president/director and his
lieutenants as designated by the formal structure,
sometimes excluding some of them and including

Particular skills, interpersonal and cognitive orientation,
goals and values of the dominant coalition influence
organizational processes. Because the dominant
coalition occupies the top position of power in the
organizations social system, it have a larger overall
impact that others who occupy lesser power positions.