Principles of Management Module 1 1

Republic of the Philippines
City of Taguig
Taguig City University
Gen. Santos Avenue, Central Bicutan, Taguig City
PRINCIPLES OF MANAGEMENT
CHAPTER I
Business in General
Business is the evolutionary growth of various activities developing from a simple and
complex system.
Relationship between Business and the economy
The role of business is to provide goods and services which consumers need. The
business firms produce 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.
Economic is the study of how society produces and distributes its desired goods and
services. It deals with how society uses its resources to produce goods and services.
These economic resources to produce are called factors of production. They are land,
labor, capital and entrepreneur.
Profit is the difference between the income an entrepreneur receives from the sale of
his goods and services and the expenses he incurs to produce them.
Why people engage in business
Human behavior, including consumer behavior, involve a complicated 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 Approval and etc.
Kinds of Business
1. Industry
2. Commerce
3. Services
This classification based on the nature of principal activity performed by the business
enterprise.
1. Industries involve the conversion of raw materials into finished products or

goods and the application of labor upon raw materials so that greater
usefulness becomes possible after the process in the industrial group can be
divided into extractive industries: farming, fishing and mining. The
manufacturing industries use materials and supplies turned out by the extractive
industries and change these raw materials into various articles of materials for
further production of goods and new products.
2. Commerce involves the process of buying and selling where good as moved
from the point of production to the point of consumption.
3. Service Enterprises are primarily concerned with satisfaction of the needs and
wants of the consumer.
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Kinds of Economic System
1. Capitalism is a system in which the means of production are owned and

operated by private individuals.
2. Socialism means the ownership of production and capital by the government
and the regulation by society; as a whole of the process of production and
distribution, and of the giving of essential services.
3. Communism stands for the collective ownership by the government of
consumption goods and production goods.
Legal forms of Business Ownership
1. Sole Proprietorship
2. Partnership
3. Corporation
Positive Values of a Filipino Entrepreneur
1. Pakikipagkapwa tao
2. Bahala na
3. Pakiki-pagsapalaran
4. Gaya-gaya
5. Utang na loob, hiya, awa, bayanihan
6. Kasipagan
7. Pagtitipid
8. Pagtitiis
9. Pagtitimpi
10. Katapatan
CHAPTER II
Nature and Concept of Management
Definition of Management
Management is defined in so many ways depending upon the viewpoints, beliefs, and
interpretations of the manager.
“The force that runs an enterprise and is responsible for its success and failure.”
“Management is the performance of conceiving and achieving desired results by means
of group effort consisting of utilizing human talents and resources.”
“Getting things done through people”
Management is a distinct process of planning, organizing, staffing, directing and
controlling performed to determine and accomplish stated objectives by the use of
human being and other business resources.
6 Basic Resources / 6 M’s
1. Men
2. Money
3. Materials
4. Machine
5. Methods
6. Market
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Planning refers to the formulation of objectives, programs, policies, procedures, rules

and regulation in order to achieve the goals of the business.
Organizing is the grouping together of people, establishing relationship among them,
and defining the authority and responsibility that the personnel have in the use of the
company’s material resources to attain predetermined goals and objectives.
Staffing involves filling and keeping filled position provided in the organizing structure.
Directing has to do with the predominantly interpersonal aspect of managing.
Controlling is the process of measuring and correcting the activities of subordinates
and the company itself to assure conformity to plans.
Management as a Science and as an Art
Management is both art and science. It is an art because it results in the
accomplishment of objectives through the use of human efforts. Management is a
science because it is a systematic body of knowledge. It gathers and analyse facts and
formulates general laws or principles from these facts.
Principles of Management by Henri Fayol
1. Division of work
2. Authority and Responsibility
3. Unity if Command
4. Subordination of Individual Interest to General Interest
5. Remuneration
6. Centralization
7. Scalar Chain
8. Stability of Tenure
9. Esprit de Corps
10. Span of Control
11. Simplicity
12. Unity of Direction
13. Order
14. Equity
CHAPTER III
Planning is a logical and systematic approach of formulating the objectives, programs,
policies, procedures, budgets, rules and regulations and other types of plan.
Objectives are something that you ae trying to do or achieve.
Program it is actual course of action designed to carry out the established objective.
Policies these are basic guidelines for action.
Procedures are series of related steps expresses in chronological order for a specific
purpose.
Rules require specific and definite actions for a given situation.
Budget a plan stated in financial terms is called a budget.
Philosophy the values and beliefs an organization holds as the guiding light is the
company’s philosophy.
Strategy it is the method of shaping a company’s future and involves determining the
long run direction of the organization.
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The Nature of Planning

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

2. Planning as the first basic function
3. Planning as a function of all managers
4. Planning for efficient organization
Major Types of Plans

A number of different types of management plans exist. For this purpose, certain types
of plans been selected.
1. General
2. Departmental
3. Group
4. Section
5. Individual
Basic Steps in Business Planning
1. Define the business idea

2. Establish goals and objectives
3. Evaluate the ideas, goals and objectives
4. Forecast cash needs
5. Identify source of funds
6. Write a business plan.
Other Types of Plans
1. Standing Plans
2. Single-use Plans
3. Long-range Plans
4. Intermediate Plans
5. Short-range Plans
6. Marketing Plans
7. Production Plans
8. Financial Plans
9. Man Power Plans
10. Strategic Plans
11. Tactical Plans
12. Planning Horizon: Short range versus long range
13. Functional Plans
14. Operational versus Strategic Plans.
Decision making Process
1. Set objectives
2. Identify constraints
3. Identify alternatives
4. Gather appropriate information
5. Evaluate alternatives
6. Choose the most acceptable alternatives
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Why Managers Fail in Planning
1. Lack of real commitment in planning

2. Interchanging planning studies with plans
3. Failure to develop and implement sound strategies
4. Lack of meaningful objectives and goals
5. Tendency to underestimate the importance of planning premises
6. Failure to see the scope of plans
7. Failure to see planning as rational process
8. Too much reliance on experience
9. Failure to use the principle of limiting factor
10. Lack of top management support
11. Lack of clear delegation
12. Lack of adequate control and techniques and information
CHAPTER IV
Organizing is the process of grouping together of men and establishing relationship
among them, defining the authority and responsibility of personnel by using resources to
attain predetermined goals and objectives.
What is Organization?
The term “organization” has several definitions. One (Webster’s) is the “executive
structure of business.” This definition indicates that organization is the framework or
backbone by which the work of a business, managerial or otherwise, is performed, that
it provides the required channels, points of origin, and flow of management direction
and control.
Types of Organization Structure
1. Line organization
This is the simplest form of structure and refers to a direct straight-line
responsibility and control from the top management to the middle management and to
the lower level.
Plant Manager
Foreman Foreman
2. Line and Staff Organization

This utilizes the assistance of experts or specialist. Business leaders have
recognized- as their companies expand from simple to complex organization- that a
small number of managers could not personally assume direct responsibility for all
functions such as research, planning, distribution, public relations, industrial relations
and many other activities of business.
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Plant Manager
Marketing Personnel Production Engineering Finance Manager

Manager Manager Manager Manager
Marketing
Advertising Sales
Research
Quality Control Purchasing Plant Supervisor Maintenance
3. Functional Organization
It utilizes the pure services of experts or specialists. The development of staff
departments and position led quite naturally to attempt complete reorganization on a
functional basis.
4. Committees
Committee is another common organizational form used in situations where
group participation and decision are required. Two types of thinking seem to be
common when it comes to the use of the committee form of organization.
Committees maybe classified as:
1. Ad Hoc Committee
2. Standing Committee
Organizational Chart
An organization chart is a diagram or drawing showing the important aspects
of an organizational structure. It shows the relationship among 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 their respective relationship, the
channels of supervision and the relative authority of each employee who is charge of
each function.
Types of Organizational Chart

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1. Master Chart or Chart of Authority

The master chart allows the entire organizational structure. It is a master
plan of the principal departments with lines of authority and the mutual relationship of all
departments or major components.
2. Functional Chart
The functional chart shows at a glance the function and activities of the
positions and or departments. It shows the major responsibilities of departments or
positions.
3. Personnel Chart
The personnel chart shows the departments in the same relative manner as
the functional chart. But instead of listing the functions, the titles of the names of
persons are indicated, The chart also shows the class titles of all positons in the
department together with their location in the organization.
Departmentation result from the grouping of work, the desire to obtain organization
units of manageable size, and utilize managerial ability. An organization structure and
design shaped significantly by the departmentation followed.
Delegation is the process of entrusting and transferring responsibility and authority by
the top management to the lowest level.
The Elements of Delegation

1. Responsibility this is the work or duty assigned to a particular position.
Responsibility involves mental and physical activities which must be performed to carry
out a task or duty.
2. Authority it refers to the power or the right to be obeyed. It is also the sum of power
and rights entrusted to make possible the performance of the work delegated. Authority
includes such right and powers with regard to receipt and disbursement of money, and
hiring and dismissing of employee.
3. Accountability the answerability of the obligation to perform the delegated
responsibility and to exercise the authority for the proper performance 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.
Centralized and decentralized Organizations

Centralized control few because men at the top believe they are indispensable.
In a centralized management organization, major decisions are made by a few top
executives, subordinates exercise little (if any) initiate in decision making.
Decentralized control by many because men at the top believe that participation will
increase efficiency and effectiveness.
A decentralized management organization represents a systematic effort to delegate to

lower levels all authority, except that which can only be exercised at the highest level.
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In a centralized organization, authority rests only in a few hands and most of the
decisions are made by these few. On the other hands n a decentralized organization
authority is dispersed throughout and decision making is distributed throughout the
organization.
Chapter V
Staffing is the process of recruiting, selecting and training of men. It means putting the
right men on the right jobs.
Recruitment is the process of encouraging, inducing, or influencing applicants to apply

for a certain vacant position.
Steps in Recruitment
Step One-Studying the Different Jobs in the Company and Writing Job
Descriptions and Specification (Job Analysis)
Job Description defines the duties and responsibilities of a particular position.
Job Specification gives 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 qualification, and other
requirements.
Step Two-Requisition of New Employee

To inform the personnel department, the line supervisor or the department head
concerned should be accomplish a formal requisition form, indicating the position to be
filled, the date when the new employee will be needed, his pay rate, the required
qualification of the employee, the job description, approval by responsibilities official of
the company, and other pertinent data.
Step Three- Actual Recruitment of Applicants

Recruitment is the process by which prospective applicants are induced to apply
in the company in order that their qualification for present and anticipated vacancies can
be evaluated through sound screening and selection procedures.
Sources of Labor/Applicants
A) Internal
B) External
Selection is the process of getting the most qualified applicant from among different job
seekers.
Steps in Selection
Step One- Reception of Applicants
Step Two- Preliminary interview
Step Three-Application Form
Step Four- Employment Test
Step Five- Final Selection by Immediate Supervisor or Development Head

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Step Six-Physical and Medical Examination
Step Seven-Hiring
Step Eight-Orientation/Induction/Indoctrination
Training according to the Labor Code of the Philippines, is the systematic development
of the attitude/knowledge/behaviour patterns for the adequate performance of a given
job or task.
Common Types of Training

1. On-the-Job Training and Job Rotation
2.
3. Apprenticeship
4. Classroom Training
5. Programming Instruction
6. Management Development Program
Understudy Assignment
Coaching
Experience
Job Rotation
Special Projects and Committee Assignments
Lectures
Case Studies
Role Playing
In - Basket Technique
Business Management Games
University and Professional Association Seminars
Human Asset Accounting

Human asset (for human resources) accounting attempts to place a value on an
organization human asset. It evaluates costs incurred by organizations in recruiting,
hiring, training and developing their human assets.
Several methods have been suggested for finding the financial value of an
organization's human resources.
1. Start up costs- Derive the original cost hiring and training personnel as well as the
costs of developing working relationships.
2. Replacement costs- Estimate the costs of replacing current employees with others
of equivalent talents and experience.
Movements of Personnel
Transfer the term "transfer" refers to the shifting of an employee from one
position to other without increasing his duties, responsibilities, or pay.
Promotion the term "promotion" refers to the shifting of an employee to a new

position to which both his status and responsibilities are increased.
Separation from the employment of the company may either be temporary or

permanent, voluntary or involuntary.
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1. Lay-off is temporary and involuntary, usually traceable to a negative business

condition.
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.
3. Resignation is the voluntary and permanent separation of an employee due to low
morale, low salary, etc.
4. Retirement can either be voluntary or involuntary. It is voluntary if an employee
retires upon reaching the number of years of services upon reaching the retirement age
of 65.
Chapter VI
Directing is the fourth universal function of management and it refers to the process of
motivation, communication and leadership.
Motivation comes the Latin word "movere" which means to move.
Three Common Characteristics of Motivation

1. Motivation is concerned what activates human behaviour.
2.Motivation is concerned with what directs this behaviour toward a particular goal.
3. Motivation is concerned with how this behaviour is sustained.
Theories of Motivation
1. Traditional Theory
2. The Hierarchy of Needs
3. Achievement-Power-Affiliation Theory
4. Motivation- Maintenance Theory
5. McGregor's Theory X and Y
6. Achievement Theory
7. Barnard-Simon's Theory of Equilibrium
8. Vroom's Preference- Expectancy Theory
9. Reinforcement Theory
10. Maturity Theory
Communication the act or process of using words, sounds, signs, or behaviours to

express or exchange information or to express your ideas, thoughts, feelings, etc., to
someone else.
Communication is a process which aims to transfer and implement the meaning of

symbols from one person, group or organization to another its ultimate goal is the
sharing of meaning.
PATHWAYS
The sender is the communicator who
S M E D A R
can be any person, group or SYMBOLS E C E
E E N
organization. The sender encodes N S C C C C
E
the message into appropriate D S O O E
I
E A D FEEDBACK D P
V
R G E E T E
E R
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symbols for transmission. The

receiver likewise, can be individual,
group or organization. He/she
decodes the symbols to understand Fig.3.1 Main elements of the communication process.
the message.
The message is communicated through symbols that are sent through a medium such
as a memo or a phone call. The symbols can take various forms such as verbal and
non-verbal, oral and written, textual and visual.
The elements to consider in non-verbal communication include general appearance:

KINESICS-facial and body movement.
PROXEMICS-gaze, physical orientation, social distance.
PARA LANGUAGE - voce, pitch, range and tone.
The pathways take various layers

Sender: Symbol: Receiver
from vice president to the section President Words R&F
head. The feedback if any may Employee
also go through various layers
from the section head back to the Pathway: Medium:
feelings to the others and receiving
them from others.
Fig.3.2 Communication loop from top management to rank and file
Leading
Organizing
In the business world,
communication is needed to establish and Planning Staffing
Controlling
disseminate goals for an organization,
develop PLANS for their achievement,
ORGANIZE resources in the most efficient
and effective manner, RECRUIT and
SELECT members who will compose the
COMMUNICATION
organization, DIRECT and MOTIVATE
people, and CONTROL performance of
each member by setting standards,
Internal Environment
correcting variations from standards and
plans and reaching out to the external
world. External Environment
Fig.3.3 Communication in the management process:
TYPES OF COMMUNICATION:
1. Number of People Involved
A. Intrapersonal communication- this occurs when the sender and the receiver of
the message is one and the same person, as in someone talking to himself.
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B. Interpersonal communication- this requires two people interacting with each

other.
C. Group communication- the process involves several people.
D. Mass communication- takes place with an indefinite number of people which
some would term as a faceless audience. The use of television, radio,
newspapers, magazines and billboards falls under this category.
2. Levels of source and receiver.

a. Downward communication - the message flows from higher to lower authority.
This is best exemplified in a work setting where the leadership is autocratic
management approach. Task oriented.
b. Upward communication - people oriented/ participative management
approach, where the group below feels free to initiate and suggest new programs
and projects which are welcomed by management.
c. Horizontal communication- across rather than along the formal chain of
command. Individuals communicate with others who are on the same level. The
middle managers group together to discuss common problems. Its main
motivation is task - oriented.
d. Circular communication- starts at any point or level; moves on to another point
or level, moves back and forth in either formal or informal progression.
e. Cross-Channel/ Diagonal communication-information flows takes in inter-unit
exchanges or in co-orientation activities. Again communication flows across the
chain of command.
WAYS OF COMMUNICATING IN ORGANIZATIONS.

The manners by which individuals communicate in the work setting depends on the type
of channels. Table 3.1
FORMAL CHANNELS INFORMAL CHANNELS
For top management

Memoranda hosted meals
Policy Issuances/statements use of key informants
Meeting/conferences like secretaries, aids, runners.
Reports/meetings/conferences liaisons, cliques, bridges
For rank and file

Meetings/(unions, associations) small talk, grapevine
Letters.
Factors that affect the quality of communication;

Goal clarity non-verbal
Sender medium
Receiver pathways
Shared experience information overload
Symbol
Barriers to Communication
1. Distance
2. Distortion
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3. Semantics
4. Lack of Levelling
5. Lack of Trust
6. Inaccessibility
7. Lack of Clear Rsponsibilities
8. Personal Incompatibility
9. Refusal to listen
10. Failure to use proper media
11. Communication Gap
12. Lack of Direction
Leadership
THEORIES OF LEADERSHIP:
1. Trait or Great man theory - leadership ability is innate, determined by certain

individual personality traits, social traits, and significant physical characteristics.
The following were partly confirmed hypotheses of the study;
a. there is a positive relationship between leadership and abilities, personality
characteristics and academic performance.
b. gender is not a determinant of leadership
c. type of organization does not influence leadership
d. males excel in mental abilities; females are superior in academic performance
and selected personality traits.
e. student leaders are achievers. The transformational leadership model is a
natural evolution of the trait theory. A leader must possess the charisma to
effective leadership.
2. Environmental theory - states that leadership traits are in born, environmental

concept posits that leadership skills are acquired. Gives plenty of opportunities to
recognize and develop students' talents. A person is trained and developed as a leader
through seminars, travel, actual immersion in leadership roles like being assigned or
elected head of an organization. Leaders are made, not born.
3. Behavioral theory - approach postulates that leaders adopt a particular leadership

style which exerts tremendous impact over individual and group behavior. Four types of
leader emerge as Sharma describes:
a. Dictatorial leader- with absolute authority and utilizes threats and
punishments to induce compliance.
c. Democratic or participative leader- involves subordinates in considering
organizational matters giving them guidance in their work problems and goal
achievement.
d. Laissez-faire or free rein leader- one who offers information to the members
but shows little involvement and participation in group activities.
4. Situational or contingency theory - the situation calls for the emergence of a

leader. During an accident or during war time, a leader emerges to handle the critical
situation. Philippine President Corazon C. Aquino is a very apt example of a political
leader who was "pushed to save the situation".
5. The theory of Shared Leadership - responsibility for the success of the group rests
upon all the members, not only upon the designated leader. Leadership functions can
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be performed by any member of a group, as well as by the designated leader for the
group to achieve its goal.
Chapter VII
Controlling is the process of measuring and correcting activities (plans, organization,

personnel, etc.)
Budget Costs: The Basis for Cost Control
Types of Cost Components
Direct Labor: Wages and salaries of workers who are engaged 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 tangible part of finished goods and
services.
Production overhead-variable: Training new employees, safety training, supervision

and clerical overtime, premium, shift premium, payroll taxes, vacation, holiday,
requirement funds, group insurance, supplies, travel, repairs and maintenance.
Production overhead-fixed: Travel, research and development, fuel (coal, gas, or oil),
electricity, water, repairs and maintenance, rent depreciation, real estate taxes, and
insurance.
The Control Process

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 action are followed through.
Quality the performance for each group/department can be controlled based on the
quality of its output.
Quantity this can be used as the control tool by finding out the amount or number of the
output of the group/department.
Time this can be employed by formulating a timetable for achieving certain goals at
certain dates.
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.
Control Methods and Systems

There are two types of control methods, Behavior Control and Output Control.
Behaviour (or personal) control is based on direct, personal surveillance. Output (or
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impersonal) control is based on the measurement of output. Direct Observation, Written

Reports, Audits and Time Related Charts and Techniques.
Management by Objectives is an effective means for setting objectives.
Quality Control deals with setting up of quality standards in advance in such areas, as
physical

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Republic of the Philippines

Relationship between Business and the economy

Why people engage in business

Human behavior, including consumer behavior, involve a complicated process of

1. Industries involve the conversion of raw materials into finished products or

Kinds of Economic System

1. Capitalism is a system in which the means of production are owned and

Legal forms of Business Ownership

Positive Values of a Filipino Entrepreneur

Planning refers to the formulation of objectives, programs, policies, procedures, rules

The Nature of Planning

1. Contribution to purpose and objectives

Major Types of Plans

Basic Steps in Business Planning

1. Define the business idea

Other Types of Plans

Decision making Process

Why Managers Fail in Planning

1. Lack of real commitment in planning

2. Line and Staff Organization

Marketing Personnel Production Engineering Finance Manager

Quality Control Purchasing Plant Supervisor Maintenance

As defined by George Terry:

Types of Organizational Chart

1. Master Chart or Chart of Authority

The Elements of Delegation

Centralized and decentralized Organizations

A decentralized management organization represents a systematic effort to delegate to

Recruitment is the process of encouraging, inducing, or influencing applicants to apply

Job Description defines the duties and responsibilities of a particular position.

Step Two-Requisition of New Employee

Step Three- Actual Recruitment of Applicants

Step One- Reception of Applicants

Step Two- Preliminary interview

Step Three-Application Form

Step Four- Employment Test

Step Five- Final Selection by Immediate Supervisor or Development Head

Step Six-Physical and Medical Examination

Common Types of Training

Human Asset Accounting

Promotion the term "promotion" refers to the shifting of an employee to a new

Separation from the employment of the company may either be temporary or

1. Lay-off is temporary and involuntary, usually traceable to a negative business

Motivation comes the Latin word "movere" which means to move.

Three Common Characteristics of Motivation

Communication the act or process of using words, sounds, signs, or behaviours to

Communication is a process which aims to transfer and implement the meaning of

symbols for transmission. The

The elements to consider in non-verbal communication include general appearance:

The pathways take various layers

Fig.3.3 Communication in the management process:

B. Interpersonal communication- this requires two people interacting with each

2. Levels of source and receiver.

WAYS OF COMMUNICATING IN ORGANIZATIONS.

FORMAL CHANNELS INFORMAL CHANNELS

For top management

For rank and file

Factors that affect the quality of communication;

1. Trait or Great man theory - leadership ability is innate, determined by certain

2. Environmental theory - states that leadership traits are in born, environmental

3. Behavioral theory - approach postulates that leaders adopt a particular leadership

4. Situational or contingency theory - the situation calls for the emergence of a