Business Arts • Two Types:

Kinds and Forms of Business Organizations a. General Partnership – All members has the
Note! There might be some false information due to the fact that some of the videos provided by the subject teachers responsibility in case of loss.
were not completely understandable. b. Limited Partnership
• One of the decisions a business owner should carefully o Not all members are responsible in case of loss
assess is the way his or her business is formed and o Limited liability of the partners
structured. • Advantages
• In selecting the business organization, the owner o Easy to set-up
should consider: These will determine the type of business o More resources
organization that a company will be shaped into. o Shared control
1. Size and nature of the business o Tax advantages
2. Level of Control • Disadvantages
3. Expected profit o Unlimited Liability – Liable for any of the
4. Tax implications partners’ debts or decisions
5. Vulnerability to lawsuits o Difficult to raise capital
Business Entity – An organization that uses economic o Responsible for partners’ decisions
resources to provide goods or services to customers in • Examples: Legal practices, CPA services, doctor
exchange for money or other goods and services. offices, small shops
Major Types of Businesses: 3. Corporation
1. Service Business
• A private corporation may have a minimum of five
• Provides intangible resources (Products with no members with at least one member which is a natural
physical form) born Filipino and a citizen of the country.
• Offers professional skills, expertise, advice, and • A separate legal entity
other similar products
• Types:
• Examples: Salons, repair shops, schools, banks, a. Stock Corporation
accounting firms, and law firms o The ownership is in the form of stocks
2. Merchandising Business o Has capital stocks divided into shares or proportions
• Buys products at a wholesale price and sells the same of the total capital
at retail price b. Non-Stock Corporation – Doesn’t issue shares of a
• Known as “Buy-and-Sell” businesses stock because it is organized to carry out
• Makes profit by selling the products at higher than purposes other than obtaining profits for the
purchase investors
• Sells a product without changing its form • Advantages
• Examples: Grocery stores, convenience store, o Easy to raise capital through stockholders
distributors, and other resellers o No personal liability
3. Manufacturing Business – Unlike a merchandising o Transfer ownership
business, a manufacturing business buys products with o Unlimited life
the intention of using them as materials in making a • Disadvantages
new product. o Harder to set up
4. Hybrid Business o Higher taxes
• Companies that may be classified in more than one type • Examples: Pepsi Co., Microsoft, eBay, IKEA, FedEx
of business 4. Cooperatives
• Example: Restaurant • Owned by group of individuals and is operated from
Type of Business Function their mutual benefit
Manufacturing Combines ingredients in making a • Members – Persons making up the group
fine meal Small and Medium Scales Enterprises (SMEs)
Merchandising Sells a cold bottle of wine
• Plays a major role in most economies, particularly in
Service Fills customer needs
developing countries
Forms of Business Organizations:
1. Sole Proprietorship • Account for the majority of business worldwide and are
important contributors to job creation and global
• One person starts a business
economic development
• Simplest and easiest business to organize
• Formal SMEs
• Usually controlled and owned by an o Contribute up to 45% of total employment and 33%
individual/entrepreneur of national income (GDP) in emerging economies
• Owner is the sole responsible of all the liabilities § These numbers are significantly higher when informal
of the business SMEs are included.
• Advantages • According to estimates, 600 million jobs will be
o Easy to set-up needed in the next 15 years or by 2030 to absorb the
o Controlled by owner growing global workforce. (Mainly in Asia and Sub-
o Tax incentives Saharan Africa)
• Disadvantages o Makes SME development a high priority for many
o Unlimited Liability – If your business is unable governments around the world
to meet financial obligations, a creditor, like • In emerging markets, most formal jobs are with or
the bank, can come after your personal assets such generated by SMEs
as your house or car. o Creates 4 out of 5 new positions
o Difficult to raise capital – Primary way to o Creates 7 out of 10 jobs
finance business is through bank loans or personal • Access to finance
investments o A key constraint to SME growth
o Limited Life – Lasts as long as the owner’s life o Without it, many SMEs languish and stagnate
• Examples: Private tutor, farms, local barber shop, o 2nd most cited obstacle facing SMEs to grow
auto-repair shop, youtuber
their businesses in emerging markets and
2. Partnership
developing countries
• A business owned by two or more persons who contribute
resources into the entity. • Less likely to be able to secure bank loans than large
firms
• The partners divide the profits of the business among
themselves. • Rely on internal or personal fund to launch and
o They have mutual agreement on how the decisions initially run their enterprises
will be made, on how future partners will be • 50% of formal SMEs don’t have access to formal credit
admitted, and how arguments will be resolved. • Financing Gap
o An individual person with benefits has some o Even larger when micro and informal enterprises
responsibilities, obligations, and some certain are taken into account
rights. o Varies between regions
 o Particularly wide in Africa and Asia
• Current Credit Gap:
a. Formal SMEs - $1.2 trillion USD
b. Formal and Informal SMEs - $2.6 trillion USD
• Approximately 70% of all MSMEs (Micro, Small and
Medium Enterprises) in emerging markets lack access to
credit.
• The World Bank Group Study suggests that between 365-
445 million MSMEs in emerging markets:
o 25-30 million are formal SMEs
o 55-70 million are formal micro enterprises
o 285-345 million are informal enterprises
• Moving informal SMEs into a formal sector can have
considerable advantages for the…
a. SME – Better access to credit and government
services
b. Overall Economy – Higher tax revenues and better
regulations
c. Also, providing SMEs access to finance and finding
solutions to unlock sources of capital which is
crucial to enable this potentially dynamic sector
to grown and provide the needed jobs.
• Very important in the economy of the country because
they maintain revenues, assets, or number of employees
below a certain threshold.
• Its definition may vary depending on the country
• Certain size criteria must be met, occasionally, the
industry in which the company operate in is taken into
an account as well.
• Play an important role in the economy, employing vast
numbers of people, and helping to shape innovation
• Represent 90% of businesses and more than 50% of
employees worldwide
• Formal SMEs – Contribute up to 40% of national income
(GDP) in emerging economies
• SMEs can be classified based on the number of
employees or the total assets – According to the
definition of Bureau of Small and Medium Business
Development (BSMBD) and Department of Trade and
Industry (DTI)
• In the Philippines
o SMEs – Defined as any enterprise with 10 to 199
employees and/or assets valued from Php3 million
to Php100 million
o Definition of Small Enterprises – According to the
size of assets, size of quality, and number of
employees
o Definition of Small Business – Any enterprise or
business activity engaged in the major sectors of
the economy whether a single proprietorship,
cooperative, partnership, or corporation whose
total assets are ranging from more than
Php3,000,001 to Php15,000,000
o Small Enterprise – Has a total number of employees
of 10 to 99 workers
o Examples of Small Enterprises – Bakeshops and
Convenience Stores
o Medium Scale Enterprises – Has total assets of
Php15,000,001 to Php60,000,000 and employs 100 to
199 workers
o Examples of Medium Scale Enterprises – Food
manufacturing corporation and a furniture company
Advantages of Having SMEs:
1. Closer to the customers – Has direct dealing with
their customers that will enable them to meet their
needs more accurately and to offer a more
individualized service
2. More flexible – Due to their size and simpler
structure, SMEs have a greater capacity to adapt to
changes
3. Able to better detect and take advantage of small
niches – Will have a greater capability to detect and
satisfy very specific needs of its customers
4. Can make decisions faster – Decision-making will
normally fall on a person or a small group
5. Easier to link the staff to the company – Greater
proximity to management and a more global vision of
the business will make it easier to emotionally
connect the worker with the company’s objectives
6. Everyone knows each other
• Within a small and medium-sized company, it is easier
to form bonds and know the qualities of others
• This can be used to increase performance and improve
teamwork.
7. Communication will be easier – Will enable new ideas
to flow and problems to be solved as a team
Disadvantages of Having SMEs:
1. Have more difficulties to find funding
• Do not have the financial power that large companies
have
• Usually need external financing, which will also be
more limited in worse condition
2. May be difficult to reach a large number of customers
and earn their trust – The financial power of large
companies allows them to make themselves known through
mass media by advertising
3. Costs are higher – Will have enormous impediments to
benefit from the economy of scale which will cause
costs to be higher in certain types of business
4. Not easy to endure prolonged periods of crisis – The
lack of financial capability can cause more problems
for an SME, if it is forced to endure long periods of
crisis.
5. Low bargaining power with suppliers and customers – It
is much more difficult to achieve beneficial
conditions and are often force to give in or they
would like to.
6. Access to less skilled personnel – Given the greater
limitations that an SME usually offers to develop a
career (there will be fewer possibilities of
advancement), it will be more difficult to attract
talented and well-prepared workers.
Importance and Contribution of Entrepreneurship to
Economic Development and Competencies of an Effective
Entrepreneur
Sources: Aduana (2017)
Entrepreneurship – A process of actions of an entrepreneur
who is always in search of something new to explore new
ideas into gainful opportunities by accepting the risks
and uncertainties of the enterprise.
Entrepreneur
• Originate from the French word “entreprende” which
means “to undertake”
• A unique individual who has the innate ability and
extraordinary dedication to establish and manage
business, acknowledging all the risks, and reaping its
rewards.
Salient Features of Entrepreneurship:
Providing
Values to
Opening
Customers and
Wealth-
creatin Managing
Venture Self-owned
Business
Entrepreneurship
Art of Risk-
Correct taking
Practices Venture
1. Entrepreneurship is an Art of Correct Practices
• Considered an art and not science because it is not
ruled by fixed and absolute rules, whereas, science is
• There is a constant change which denotes movement and
innovation
• Not stagnant or static
• Continuously grows, develops, improves, and expands –
change does not stop
• As an art, it is dynamic – By the moment the economic
activity changes, the political, social, and
entrepreneurial activities will eventually change.
• As an art, it has something to do with creativity –
There is a continuous change or evolution that
contributes towards the enhancement of the enterprise
• Related to the correct practices or ways of carrying
out entrepreneurial activities
2. Entrepreneurship is a Wealth-Creating Venture
• This may sound simple, but this has been the most
misconstrued because of the world “wealth.” – We often
hear the old maxims, “Health is wealth.” or “Knowledge
is wealth.”
• In most instances, ordinary small business people
equate wealth with the term “profit.” – In the
parlance of accounting, profit represents the excess
income or revenue from the cost and expenses.
• Operating within the concept of wealth creation rather
than profit generation
• Concept of Profit – More applicable in the area of
accounting as a way of measuring the operating
performance of a business
• Random House Webster’s Dictionary’s Definition of
“Wealth” – The abundance of money, property, or
possession
• Conceptual Definition of Wealth – In its strict sense,
does not even refer to business profit; because as the
field of entrepreneurship continues to develop, it has
already included other contexts.
• Concept of Entrepreneurship – Limited only to the
business paradigm in this book
• Opening a business with the working philosophy that it
will provide an income is common among ordinary
business people. – Should not be the approach and way
of an entrepreneur
• An entrepreneur has a different perception and outlook
from an ordinary business person.
o Entrepreneur – He/she/they looks at his/her/their
business as a wealth-creating venture.
o Ordinary Business Person – Regards his/her/their
small business basically as a source of income
• Some Literature’s Definition of Entrepreneurship – The
process of starting a business
o Hides the real meaning of entrepreneurship
o As explained, the mere opening of a business is
definitely not entrepreneurship, and neither does
it mean wealth creation.
• A business has to generate wealth for the owner in a
creative way; otherwise, it is not an entrepreneurial
endeavor, but is merely an ordinary small business.
3. Entrepreneurship Provides Valuable Goods and Services
• Owner of the Business – In most instances, they are
engaged in the sale of goods and services.
• Mere act of selling goods or providing services – Does
not make a person perform or act within the concept of
entrepreneurship
o Anybody can sell goods to the travelers; however,
he/she/they cannot be considered as an
entrepreneur, rather, he/she/they is just an
ordinary businessperson.
• Entrepreneurship creates economic wealth by providing
goods and services to the consumers.
o These goods must have a value in order to create
wealth.
• Valuable Goods and Services – Highly satisfy the
target buyers in terms of quality and price
• The entrepreneur convinces the consumers that they
gain more benefits than what they pay for the goods
and services.
• The entrepreneur defines value from the perspective of
the buyers and not only from his/her/their own because
what is valuable to the entrepreneur may not be of any
value to the consumers.
• Businesses that offer goods and services that are
valuable from the buyer’s perspective are operating
with the concept of entrepreneurship.
o The business will definitely be a wealth-creating
venture.
• When consumers are satisfied with the products and
services offered by an entrepreneur, they tend to
patronize the business and even endorse it to others.
4. Entrepreneurship Entails Opening and Managing the
Self-owned Enterprise
• Self-owned Business
o When the person managing its daily activities is
also its owner
o A straightforward requirement of entrepreneurship
• Businesses that are being managed by others for the
benefit of the owners do not fall within the sphere of
entrepreneurship. – Such businesses are operating
under the concept of intrapreneurship.
o Intrapreneurship – Refers to a system that allows an
employee to act like an entrepreneur within the
company or other organization
• Issue in a Self-owned Business – Plainly about
ownership, neither about the amount of invested
capital nor about the nature of the business
enterprise
• Businesses Falling Under the Concept of
Entrepreneurial Endeavour: Provided that the business is
managed by the owner himself/herself/theirselves
a. Small Bakery
b. Restaurant in the Neighbourhood
c. A Multimillion Construction Company Operating
throughout the Philippines
• Entrepreneurship is not about the size of the business
but, rather, it’s about sole ownership.
o In other words, entrepreneurship includes small,
medium, and multimillion businesses that are managed
by their respective owners.
5. Entrepreneurship is a Risk-Taking Venture
• Basic Concept of Risk in Entrepreneurship – Can be
expressed in this statement: “Risk is inherent in an
entrepreneurial venture.”
o In other words, once an entrepreneurial venture is
born because of new ideas and opportunities, risk
comes simultaneously with the venture.
• Risk cannot be detached from any entrepreneurial
venture and the only way to remove it is to close the
venture.
o However, closing the business means giving up becoming
a successful entrepreneur.
• Business Risk – The risk in entrepreneurship
• Approach of Handling Business Risks – Differentiates
an entrepreneur from an ordinary businessperson
• Ordinary Businessperson – Usually, they do not
understand the nature of business risk which in one
way lead to the failure of his/her/their business
o He/she/they shuns or avoids it which indicate that
he/she only favors operating under favourable
condition.
Importance of Entrepreneurship in the Economy of the
Country
• It is important to have a background understanding of
the effects of entrepreneurship on the lives of
individual Filipinos, the local community, and the
Philippine economy.
• Contributions of Entrepreneurship to the Philippine
Economy:
1. Encourages competitiveness and thereby challenges
entrepreneurs to keep improving their products and
services
2. Helps find an entrepreneurial niche in the world
market
3. Helps hasten the economic recovery process of the
Philippines during financial turmoil or crackdown
4. Facilitates the smooth flow of money in the local
market
5. Assists the national government in its desire to have
favourable economic ratings in the world market
Entrepreneurial Character Traits:
• Basically, there is no specific formula as to what
exactly should be the character and competency of a
person in order to become a successful entrepreneur.
• Several studies reveal that there are character traits
and competencies which are common among successful
entrepreneurs.
o Acquiring or developing them will equip you in your
entrepreneurial journey.
o As you study and learn them, you must conduct an
unsupervised self-assessment based on them.
1. Opportunity Seeker
§ A person who dreams of becoming a successful
entrepreneur must be a seeker of business
opportunities.
§ He/she/they must possess the ability to identify with
great ease the most appropriate entrepreneurial
opportunities.
§ The entrepreneur usually identifies a business
opportunity and then thoroughly evaluates its
viability.
§ An entrepreneur who sees and acts on new business
opportunities and seizes the unusual opportunities to
obtain financing, equipment, land, work, space, or
assistance.
2. Committed
§ A highly committed entrepreneur displays full
commitment to the work or endeavor that he/she/they
are undertaking.
§ He/she/they accept full responsibility for what has
been promised to the customers, establishes proper
coordination with and among workers so that goods and
services are delivered as promised, and seek to
prioritize the satisfaction and interest of customers.
3. Persistent
§ Trials, sacrifices, and failures challenge the
entrepreneur to be persistent.
§ He/she/they learn to take repeated or different
actions in order to overcome obstacles, make personal
sacrifices, or exert extraordinary effort to complete
the required task and stick to his/her/their own
judgement in times of opposition and failure.
4. Risk-Taker
§ Successful entrepreneurs are risk-takers.
§ There is a risk in entrepreneurship because of
uncertainty.
- No one can predict what will happen tomorrow.
§ Risk is inseparable from entrepreneurship.
§ Someone who is not scared to take any risks in
business.
§ Entrepreneur
- Weighs the pros and cons of a particular business
opportunity before taking the risk
- A risk taker that still takes all the
precautionary measures before engaging in a
particular business endeavour.
- A successful entrepreneur evaluates thoroughly all
the available course of action before making the
final decision.
§ Owner of an Ordinary Small Business – Takes the risk
in all instances without considering consequences
5. Efficient and Quality-Oriented
§ A successful entrepreneur highly values efficiency and
the concept of quality in all business undertakings.
§ He/she/they always perform the required tasks in
accordance with the existing standards of excellence
or continuously improves his/her/their past
performance and strives to do things better and faster
with minimal cost.
Theories of Management
a. Classical Management Theory
b. Behavioral Management Theory
c. Modern Management Theory
Management Theories – Vary according to management views,
assumptions, ideas, and practices that gradually evolve
during specific time periods, at around 1800s to modern
times
Classical Management
• Historical Context
o Came about as a reaction to the Industrial Revolution
§ Late 1700s to late 1800s
§ Industry = Work
§ Revolution = Rapid Change
§ Big changes in the way people work
§ The rapid explosion of big factories
§ People were moving from farms to factories, from
small shops to large companies.
§ Primary Sparks (Main Sparks or Ingredients of the
Revolution): Came together to spark the revolution
1. Power
- Specifically, steam power and hydropower were one
of the main sparks or ingredients of the
revolution
- Machines
« Used in new large factories were run on power, not by
hand
« Sped up work dramatically and helped factories grow
very quickly
2. Machinery Innovations
- Inside of the factories
- Cotton Gin – Invented by Eli Whitney in 1873
« “Gin” – Short for engine
« A little apparatus that separated the seed from the
cotton much more quickly than could be done by hand.
- Inventions and innovations like the cotton gin and
other machines sped up work even further.
3. Transportation
- Blooming at the time
- Another key ingredient of the revolution
- Railroads – Connected most cities in the US by the
mid-1800s
- Steamboats – Started to catch on around 1800 as
well
- Roads – Were improving in general
§ This rapidly changing context created a great
need.
§ Emerging issues that people needed to grapple
with: Prompted a lot of new questions
1. Large Groups Working Together
2. People Working Alongside Machinery
3. Increasing Pace of Industry
4. Companies were Looking for Answers (More effective
ways to handle their new challenges)
§ Questions prompted by the issues:
1. How are we going to organize all of this?
2. How are we going to maximize productivity?
3. How are we going to manage all of these people?
§ Max Weber, Frederick Taylor, and Henri Fayol –
« Three people that answered the questions pretty
effectively at the time
« The founding fathers of the Classical Management
Theory
« Max Weber’s Approach – Took a big picture, “The
Bureaucratic Approach”
« Frederick Tahylor’s Approach – Took a micro level
approach looking at the specific tasks
« Henri Fayol’s Approach – Took a mid-level approach
looking at the management side of things
Three Primary Theories that Generally make up Classical
Management Theory:
1. Bureaucracy
2. Scientific Management
3. Administrative Science or Classical Management
Max Weber “Bureaucracy” or “Bureaucratic Organization”
• A big picture type of thinker compared to the other
two and that big picture term is bureaucracy.
• Most known for the term “Bureaucracy,” which to him
means that the organizations should look like the
government and the legal system.
o The ideal structure
o Characterized by the division of labor, clear
authority, hierarchy, formal selection procedures,
detailed rules and regulations, and impersonal
relationships
o He wanted a legal-rational approach to organizing that
meant that he didn’t want to follow the traditional,
family-type system or family-based leadership where
the head of the family was in charge or perhaps a
charismatic type of leader.
o He thought these were not the right way to run large
organizations, and he wanted a legal-rational approach
where he saw each person’s authority and should be
tied to his or her official position in the
organizational hierarchy.
o In other words, if you’re in a job, your
responsibilities are tied to that position and if you
live that job you don’t keep all that influence and
power, whoever the new person is is responsible.
o This was his way of balancing power and keeping things
rational and organize.
o He wanted clear rules that governed performance and
standardized guidelines for hiring and firing.
o He was really concerned about issues of favoritism or
what he called “particularism” and he wanted to hire
the best of people to work in organizations and
organize them in a logical, sensible way.
Frederick Taylor “Scientific Management”
• Father of Principles of Scientific Management
• Also entered the discussion of bureaucracy, and unlike
Max Weber who was very big picture, he is much more
micro in his focus.
• Used the term “Scientific Management” for his approach
o Proper way of recruiting/selecting employees
o To him, this meant applying science to work
o Specifically, he thought that the customized approach
was very inefficient
o He saw a lot of factories and people basically all
doing things their own way; however they wanted to do
their particular job in the organization, they could,
and he thought this was not efficient and that this
was not the best way to do jobs
o So, he said lets do time and motion studies to study
how much time every single little task should take and
 how many motions every single little task would take,
and we can speed things up and come up with the one
right way.
o Each task was broken down into very small steps and
standardized to the one right way.
o And so, he would go on to an organization, look at all
the inefficiencies, and figure out the one right way
to do every single job, and his results were actually
pretty impressive.
o For example, when he went into a bricklaying
organization, they were laying bricks down and they
were bending over to pick them up and he thought it
was all very inefficient.
§ So he came up with a system where the bricks were
all right at hand level and they were upon a shelf
and people didn’t have to bend over to pick them
up.
§ He made some changes to their time and the way
they used their motions and he sped them up about
300%.
§ So now one bricklayer could put down as many
bricks as it took 3 to do in the past.
• His work was pretty dramatic and successful in some
ways
Henri Fayol “Administrative Science” or “Classical
Management
• Took a mid-level approach
• He was looking at the management side of things
• “How should we manage people?” – The big question that
he wondered about
• He put forward a theory of management called
“Administrative Science” or sometimes, just called,
“Classical Management”
• Believed that managers needed to be trained in a much
more systematic approach
• He didn’t really see any good theories out there for
how we should train managers, and so he wanted to
contribute to that discussion.
o He wrote, “It is a case of setting it going, starting
general discussion – that is what I am trying to do by
publishing this survey, and I hope a [management]
theory will emanate from it.”
• General and Industrial Management
o So, he wrote a book that then became popular in the
late 1940s.
o In a section of that book, he talked about the
management activities that managers should be pretty
competent at.
1. Planning – Should look ahead and chart a course
for the organization
2. Organization – A key management activity that they
needed to select and arrange people in an orderly
and efficient fashion.
3. Command – To be in command, to oversee, to lead,
and to drive the process but to stay out of the
details that was up for the regular workers
4. Coordinate – Should be good at coordination and
needed to harmonize and facilitate the general
activities of different departments and groups in
the overall organization
5. Control – Needed to ensure compliance on
everything, from accounting, finance, the
technical side, quality control, and other areas
• 14 Principles of Management/Administrative Principles:
1. Division of Work
2. Authority
3. Discipline
4. Unity of Command
5. Unity of Directions
6. Subordination of Individual Interest
7. Remuneration
8. Centralization
9. Scalar Chain
10. Order
11. Equity
12. Stability of Tenure and Personnel
13. Initiative
14. Espirit de Corps – “Harmony”
o Building a harmonious relationship
Commonalities and Overlap of the Founding Fathers of the
Classical Management Theory’s Approach:
• There are some common elements that they really all
wrote about in one way or another that bring them
together,
1. All wanted a clear hierarchy in an organization, that
chain of command.
2. All wanted some form of division of labor.
3. All wanted a standardize approach to work.
4. All wanted the centralization of authority, largely in
the manager’s hands.
5. Wanted the separation of personal and work life or
personal life from organizational.
6. All really wanted to select the best employees based
upon qualifications and performance – They wanted the
best people in the right jobs which was one of the
reasons they wanted to separate personal life from
organizational, so people didn’t pay favorites.
7. Wanted people paid fairly, at least in theory
o Frederick Taylor and Henri Fayol talked specifically
about paying good employees, your best people, more so
you can attract and keep your best and most talented
people.
o Henri Fayol even talked about profit-sharing, which
was pretty innovative at the time
o Said to be “at least in theory” because not a lot of
organizations necessarily took this advice, but these
researchers did right about that
Classical Management Theory
• Max Weber, Frederick Taylor, and Henri Fayol all come
together to form this approach
• An approach that has really become the great
grandparent of organizational studies.
• Almost everything that comes after the classical
management era is a reaction against it.
• So, if you see human resources, human relations,
systems theory, or team approach – These are all
responses to or a reaction against classical
management and it’s difficult to imagine in an
organization that’s not influenced by this approach in
one way or another, even today.
• Relevance Today
o Absolutely relevant, even today, as we see in a lot of
places, especially in manufacturing
o We can see it in warehouses and delivery services like
Amazon.
o We can see it certainly in food service like fast
foods and same thing with farming and food production,
it has really gone to look almost like a manufacturing
process
o In a lot of ways, not only is it still relevant, it’s
still more common than ever
• A classical management approach to organizations is
just one way to do things
• Some of the new knowledge-based, expertise-based, and
information-based companies don’t necessarily take
this approach.
o So, Google, Facebook, and other kinds of companies
like that are not generally manufacturing tangible
goods, and so, they do not take this classical
management approach as much.
o Although, they are still very aware of it, and just
like the systems theory, human relations, and human
resources, they are in many ways reacting against the
classical management way of doing things
• Many new theories and approaches are a reaction
against classical management theory
• Absolutely still relevant in many of our workplaces,
and when it’s not directly touching us, we are
certainly indirectly influence about it.
Behavioral Management
• Ushered in the “human relations” view to management
approximately during 1930 to 1950
• When companies ignore employees’ own personal
development, it leads to negative attitudes, high
turnover, high absenteeism, and poor job commitment.
• When companies focus only on the production profits of
their business, they ignore the human behavioral
issues of people.
• Human Relations Movement
o A significant part of organizational behavior
o Focuses instead on the person as an individual and
analyzes what motivates and cultivates their
achievement in a work setting
o Employees’ attitudes toward work became important to a • Have found that by adopting this theory, employees are
successful company more motivated, productive, and committed to their
o Early 1900s jobs
§ Its framework was being built Modern Management Theories
§ Companies realized that a monetary incentive was • Came in approximately during 1950 to 1980
not the only factor to increasing production • Involves several techniques and views
o Elton Mayo
• Michael Porter
§ An organizational psychologist o Father of Competitive Strategy – Techniques for
§ The Father of the Human Relations Movement analyzing industries and competitors
§ The first to realize that worker output and Functions of Management
satisfaction were linked to social factors such as Sources: Drucker (1990), Schermerhorn (2011), Dyck and Neubert (2012), Quero
the way employees were treated on the job (2020)
§ Forerunner of the behavioral movement in • Helps in achieving the goals of the organization
management Management
§ Studied the Hawthorne Studies • In an organization, it is very important because it
• 1927 Hawthorne Experiment gives direction to the organization
o Focuses on the social nature of work groups • The organizational process that includes strategic
o Further proved the relationship between the planning, setting objectives, managing resources,
understanding the worker’s psychology and output deploying the human and financial assets needed to
o In this experiment, psychologists developed a theory achieve objectives, and measuring results.
that additional lighting would have a positive effect • Can be applied in many activities, particularly in the
on worker factory output. conduct of jobs and responsibilities
§ They increased the lighting and they were correct • Business establishments, government agencies, private
as production soared. organizations, resources, and equipment conduct the
o In addition, the scientists lowered the lighting to a various activities that need to be coordinated to
dismal amount assuming that production would fall. ensure a smooth and successful flow of activities.
§ Surprisingly, production increased even more and • Usually defined as a process involving planning,
this led to the discovery that the factory workers organizing, leading, and controlling resources to
were overperforming because they knew they were achieve specific objectives.
being watched as part of the study. o Therefore, it is a process that uses resources and
- This result became known as The Hawthorne Effect – The aims to achieve specific objectives
attention from the study made them feel important and
• As a process, management involves four functions (4
resulted in better output.
Major functions that a manager should do):
« This solidified the acceptance of the Human
Relations Movement.
Douglas Mcgregor Planning
(Starting
• Developer of the Theory X and Theory Y Phase)
o Inspired in today’s management practices such as
participative decision making
o Theory X – Authoritative Management Moving on
o Theory Y – Liberal Management to the next Organizing
cycle of
Abraham Maslow POLC
• Father of the Theory on Hierarchy of Human Needs –
Focus is on understanding and satisfying the
employees’ needs in order to motivate productivity
Messy Chocolates
• Has been in operation for over 10 years
• They manufacture giant milk and dark milk chocolate
Controlling Leading
bars nationwide
• Their factory consists of 200 workers who produce the
bars in three different ships
1. Planning
• The company pays a solid rate of $15 an hour o Defined as the process of identifying the
• The company leaders had noticed that although their objectives of a task, an assignment, or a cause
employees are well paid the overall production is on a (e.g., advocacy) and the corresponding activities
yearly decline to achieve those objectives
• The Human Resource Department has suggested that the o Work Plan – A visual planning tool in a form of a
company adopt a human relations philosophy with their summary table that usually contains the following
employees information:
o They have completed an internal audit and will adopt a. The objectives
three key elements of the theory (Human Relations b. The corresponding activities to accomplish the given
Movement): objectives
1. Key Work Groups/Teams c. The persons responsible for doing the identified
§ Teams are important aspect of the Human Relations activities
Movement d. The time frame to accomplish each of the activities
§ The teams are Workers placed together and the e. The resources needed/required
overall socialization of the individuals provides § Example from the Table 1.1 of the Organization and
motivation and productivity Management textbook for Team Building in Company Z:
2. Excellent Upward Communication Objectives Activities Persons Time Resources
§ A necessity of the movement as it allows the employees Responsible Frame Required
to offer feedback and communication to upper Conduct a 1. Announce Head of the 15 Memo to
team building to all Human Resource January employees
management
for employees personnel Dept.(Donna) 2016 to
§ This allows the employees to feel that they can be of Company Z via announce
vocal and viable to the company’s decision-making to be held in intranet the team
process. White Sand, the team building
3. Superior Leadership Batangas on building date and
§ Revolves around providing good leadership through 15-16 May event place
2016. 1. Prepare Human Resource January Team
excellent communication and decision making
program of Dept.(Elsie) – building
§ Employees will feel motivated by having leaders who activities and Marketing February program
can offer mentorship and direction for the Dept.(Charlie) 2016 duly
Companies two-day approved
• Should focus on the human behavior side of employee team by the
dynamics to ensure a successful workplace building company
president
 o Defined as a process which encompasses –
1. Confirm the Human January – List of persons who influencing other people to perform the way you
list of persons Resource March confirmed to attend wish them to, directing other people to achieve
per department Dept. 2016 the two-day team the desired objectives, coordinating the proper
who will attend (Elsie) building
implementation of activities, communicating
the team building
1. Make Admin On or Budget for White Sand
effectively across various groups, and motivating
reservations in Dept. before 30 (room, facilities, individuals to perform their best.
White Sand, (Benjie) March food, entrance fee) o Leadership – Having a good working relationship
Batangas 2016 between the leader and his/her subordinates
1. Arrange for Admin On or Vehicles to be used; o Leader – Must be a role model who can relate well
transport Dept. before 30 budget for vehicles with his/her team to help them realize their
facilities (Roy) March potentials and maximize them for the
2016
accomplishment of the team’s goal
1. Confirm the Human January – List of persons who
list of persons Resource March confirmed to attend o The use of influence to motivate employees to
per department Dept. 2016 the two-day team achieve organizational goals
who will attend (Elsie) building o Also means creating a shared culture and values
the team building and goals to employees
1. Make Admin On or Budget for White Sand 4. Controlling
reservations in Dept. before 30 (room, facilities, o Defined as monitoring and evaluating activities
White Sand, (Benjie) March food, entrance fee) undertaken in relation to the stated objectives
Batangas 2016
o Includes identifying the gap (variance) between
1. Arrange for Admin On or Vehicles to be used;
transport Dept. before 30 budget for vehicles what was planned and what was accomplished in
facilities (Roy) March (gasoline, drivers, terms of quantity and quality or work, determining
2016 toll fees); map going the main cause of problems encountered during
to White San, implementation, finding ways to correct those
Batangas problems, preventing those problems from
1. Arrange food, Human March – Budget for food, recurring, and seeking new ways to improve how
snacks, and Resource April first-aid, and safety things will be done in the future
first-aid kits Dept. 2016 kits for the trip
for the trip (Rose,
o Monitoring employees’ activities, determining
Emmy, whether the organization is on target toward its
Dan) goal, and making corrections as necessary
o Identifying goals for future organizational • Economy’s Definition of Management – Consider as a
performance and deciding on the tasks and use of resource like land, labor, or capital
resources • Harold Koontz (1909-1984)
2. Organizing o An American organizational theorist and professor of
o After defining your objectives and laying out the business management
activities to arrive at those objectives, the next o Definition of Management – The art of getting things
step is to organize. done through others and with formally organized groups
o Defined as the gathering of resources required to o For him, the organizational goal is not achieved by
carry out the activities and allocating the the manager alone
effective and efficient use of those resources • Frederick Winslow Taylor (1856-1915)
o According to the management consultant and author o One of the first management consultants
Peter F. Drucker… o Definition of Management – The art of knowing what you
§ Effectiveness – Doing the right things want to do and then seeing that they do it in the best
- You are effective when you have achieved your goal and the cheapest way
and have produced intended results. o He is concerned by the quality of the job that is
- The degree to which the organization achieves a being done by the organization
stated goal, or succeeds in accomplishing what it • Mary Parker Follet (1868-1933)
tries to do o A management scholar in the early 20th century
- Measured by the quality of output (goods, o Definition of Management – The art of getting things
services, products, or attainment of goals) done through people
§ Efficiency – Doing things right o Like Koontz, she believed that an organizational goal
- You are efficient when you have accomplished your should be achieved by the members of the organization.
goal and minimized the cost of waste or used the
• Peter Drucker (1909-2005)
least amount of resources.
o A management theorist
- Refers to the amount of resources used to achieve
o Definition of Management – A multipurpose organ that
an organizational goal
manage a business, manages managers, and manages
- Measured by the amount of inputs or resources
workers and work
o Example of why effectiveness and efficiency must
o For him, the job of the managers is to give direction
be aimed by the manager in organizing resources:
to their organizations and provide leadership.
TV network A scout aspiring talents by visiting
o Duties of Managers: These activities apply not only to top
different places around the country for the executives, but also to the manager of a restaurant
audition and be selected to attend the final 1. Getting things done through people and other resources
audition in Manila for the upcoming Talent Search 2. Providing leadership and direction
Show. On the other hand, Company D announces via
• Combined Definitions of Management – The attainment of
social media about their new TV program on
organizational goals in an effective and efficient
searching for aspiring talents, lets interested
manner through planning, organizing, leading, and
applicants undergo online interview and audition,
controlling organizational resources.
then select the top applicants to have the final
Management is Using Proper Resources
audition in their TV station in Manila.
§ This shows that both companies get qualified talents • Resources
for their shows o In management, it pertains to people, time, money,
- Company A – Only effective in selecting aspiring materials, machines, equipment, land, building,
talents technology, information and communication systems, and
- Company D – Both effective and efficient in other forms of material and non-material things
selecting aspiring talents o Essential to achieve specified objectives
§ It is clear that Company D had a better strategy in • Proper Resources – Without these, you will not be able
organizing their resources. to manage effectively
o This function will determine how the manager will o For instance, a five-star hotel must have competent
distribute resources and organize his employees and well-trained staff, complete facilities, and
according to the said plan reliable information and communication systems, among
3. Leading other things, to provide satisfying customer related
o Among the four management functions, this is the services.
most broadly defined. Management Aims to Achieve Objectives
• Management – Will not achieve its purpose without
having a clear set of objectives
• It is very important to set guides through setting
management objectives considering five important
guides.
1. Specific – The objectives should be in a form of
sufficient detail such as in terms of quantity or
quality.
2. Measurable – The objectives can be assessed and
verified through objective performance indicators.
3. Attainable – The objectives can be achieved by finding
your own ways or strategies.
4. Realistic – The objectives can be accomplished given
the current and planned level of resources that you
have.
5. Time-bound
o Also known and abbreviated as SMART
o The objectives can be accomplished within a
definite time period.
Management Skills: For managing a department or an organization
1. Conceptual Skills
• Ability to think strategically and to identify,
evaluate, and solve complex problems
• The cognitive ability to see the organization as a
whole system and the relationships among its parts
2. Human Skills – Ability to work with and through other
people and to work effectively
3. Technical Skills – The understanding of and
proficiency in the performance of specific tasks
Operating a Manufacturing business
• A good management system is very important because it
will tell the success of the business itself
o Just like when the company is about to introduce a new
product
§ Manager and the rest of the team – Must create a
better strategy on how to produce the product, up
to the part of introducing it in the market.
o Therefore, proper planning, organizing, leading, and
controlling must be done by the company to become
successful in producing and introducing a new product
in the market.
Functions, Roles, and Skills of a Manager
Manager
• Performs the main managerial functions in the
organization and assume different roles in the
performance of their duties
• The head of an organization
• He/she might be the head of the unit, division, a
department, or even the whole organization
• The one who is mainly responsible and accountable for
accomplishing the specific goal or objectives of a
particular group (such as unit, division, or
department) or several groups.
• In any type of organization, whether private,
governmental, or non-governmental, there are always
persons who are designated as managers.
• The one who is mainly responsible and accountable for
accomplishing the specific goal or objectives of a
particular group (such as unit, division, or
department).
• The leader of a group or groups in the organization
where he/she/they belong.
Functions of a Manager
• Managerial Functions – Pertain to the specific tasks
and responsibilities assigned to managers
• Manager - Must lead, direct, supervise, monitor,
evaluate, and control the performance and output of
his/her/their group
• May vary depending on the level of managerial position
• Levels of Managerial Position:
1. First-level Supervisor
o States that managers manage the work of members
who are directly involved in the production of
products and delivery of services of the
organization
o Manage the work of members who are directly
involved in the production of products and
delivery services of the organization
o Supervises their section of the organization
2. Middle Managers
o States that managers manage the work of the
supervisors or other members of the organization
o They are the division heads or department heads,
depending on the size and nature of the
organization
o Manage the works of the supervisors or other
members of the organization
o Supervise the supervisors (first-level supervisor)
3. Top Managers
o States that managers manage the middle managers
o They have larger responsibilities and
accountabilities.
o They are positioned as the organization’s chief
executive officer (CEO), chief financial officer
(CFO), or board of directors.
o Hold a high position in the company or
organization
o Manage the middle managers
o Positions as the organization’s president (CEO),
Vice President (chief financial officer)
Roles of a Manager:
1. Interpersonal Roles
• A manager, as a figurehead, is a role model for the
members of the organization.
• As the head of the team or department, he/she provides
direction to the activities and outputs of his/her
subordinates.
• He/she also coordinates the activities of his/her
members with the activities of other groups within the
organization.
• He/She acts as a leader that gives directions, a
liaison who coordinates activities to the other
members of the organization.
• The way the manager deals with his/her team or with
the members of the organization
2. Informational Roles
• The manager may act as a leader who gives instructions
• A manager acts as a monitor who is responsible for
gathering information and tracking the happenings in
the organization.
• The manager acts as a…
a. Monitor
o Responsible for gathering relevant information and
tracking what is happening inside and outside the
organization
o Responsible in gathering data and information and
checking on the happenings within the organization
b. Disseminator
o Shares with the members’ relevant information that
he/she/they gather for the improvement of the
organization
o Shares relevant information either with the team,
department, or the whole organization
c. Spokesperson
o Acts as the official communicator for the organization
o Spokesperson of the group, department, or the whole
organization who acts as the official communicator for
the organization.
§ He/she is the representative
3. Decisional Roles
• The manager acts as a/an…
a. Entrepreneur – Cares to develop new opportunities
for the success of the business
b. Disturbance Handler – Resolves conflicts among
members
c. Resource Allocator – Allocates funds and
distributes resources for effective use
d. Negotiator – Makes effective agreements with
various parties
• A task related to decision making
Skills of a Manager
• A manager must have the skill in order to operate a
business.
• Skill – Pertaining the ability to perform a specific
task to achieve the desired results
• Three Most Significant Skills of a Manager:
1. Technical Skills
o Pertains to abilities or expertise to do the job
required
o Example: A production supervisor has to know how
to operate a machine so that he/she/they can guide
his/her/their subordinates in using the machine
when producing goods.
2. Human Skills
 o Pertains to the ability to have a good working
relationship with other people
o Essential in handling and addressing individual
differences and challenging tasks required among
members
o Pertains to interpersonal skills or the ability to
work well with other people
o The ability to have a good working relationship
with the team or the rest of the organization
o How the manager deals with the subordinates and
the rest of the organization
3. Conceptual Skills
o Pertains to the ability to think critically and
analytically
o Characterized with the ability to see the big
picture of thins, to understand their
interrelationships, and to analyse the causes and
implications of actions or situations
o Skills about thinking of different concepts or
better strategies, as well as, decision making
o Solving issues or problems, coming up with better
strategies in improving the operation and
performance of the organization or the company
o The manager is the head of the planning team