CHAPTER 4: Organizing

LESSON 1: Nature of Organization

Organizing Function
• is a process of identifying people, assigning them for a specific task, coordinating horizontally and vertically with
one another, and establishing authority to achieve goals and objectives.
• The key role of organizing function is to create a harmonious working environment.
• Without the organizing function, all goals and objectives set for the organization will go to waste.
Division Of Labor
• involves assigning of different tasks, mostly according to specialization, to different people in an organization
(Benjamin and Del Castillo 2016).
Specialization
• Is the process in which different individuals and units perform different tasks.
Integration
• is another process in the organization’s internal environment which involves the collaboration and coordination of
its different work units or work divisions.
Coordination
• refers to the procedures that connect the work activities of the different work divisions/units of the firm to achieve
its overall goal.

LESSON 2: Types of Organization Structure

ORGANIZATION STRUCTURE
• Is a system made up of tasks to be accomplished, work movements from one work level to other work levels in
the system, reporting relationships, and communication passageways that unite the work of different individual
persons and groups.

Types of Organizational Structures

1. Vertical Organization Structure
 is centralized and the decision-making flows from top to bottom.
 Clears out issues related to authority rights, responsibilities, and reporting relationship.
*Authority rights refer to the legitimate rights of individuals, appointed in positions like president, vice
president, manager, and the like, to give order to their subordinates, who in turn, report to them that they
have done.

2. Horizontal Organization Structure

• Refers to a selection of independent, usually single-function organization that work together to produce a product
or service.
• Refers to the departmentalization of an organization into smaller work units as tasks become increasingly varied
and numerous.
• This type of organizational structure is decentralized, and decision-making could be made at various levels
because rank-and-file employees are also empowered by having the authority to make decisions for business
operations.
• This creates collaboration and coordination among employees, regardless of position.

3. Network Structure
• is a collection of independent, usually function organizations/companies that work together to produce a product
or services.
• Often their communication is electronic means where sharing of information is speedy.
Departmentalization
• refers to grouping of jobs based on functions, divisions, or multiple tasks which reflect the coordination and
control of activities.

Types of Department:
Line Departments- deal directly with the firm’s primary goods and services; responsible for
manufacturing, selling, and providing services to clients.
Staff Departments- support the activities of the line departments by doing research, attending to legal
matters, performing public relations duties, etc.

Functional Design/Approach- it is also called the bureaucratic design structure. The organization is grouped or
divided according to functions. Employees are grouped together according to common tasks, skills, or activities.

Functional design Organizational structure

ADVANTAGES DISADVANTAGES

Easy communication between and among members Different functional groups work according to roles,
which allows fast decision-making making them susceptible for one-sided view
Members working with same function enables people to Employees have a little autonomy. Thus, they have a
work and learn with one another little knowledge about other functions

b. Divisional Design/ Approach- where departments are formed based on management of their products, customers, or
geographical areas covered. An organization is usually formed and divided based on product variety or customer
diversity.

Divisional Design (Geographical Location) Organizational Structure

ADVANTAGES DISADVANTAGES

• It works well with organizations or businesses There is a tendency of function duplication,

with many product lines and large scope as to which can cause inefficiency.
geographical territory
• Failure of one division does not impact the • Complicated for accounting and tax
operations of other divisions which gives purposes.
business flexibility

c. Matrix Design/Approach- is a hybrid form of departmentalization where in managers and staff personnel report to the
superiors, the functional manager, and the divisional manager.
Hybrid Design Organizational Structure
 ADVANTAGES DISADVANTAGES

• It is more flexible and dynamic • Chain of command becomes complex.

because information and task are
disseminated across departments.
• This type of structure gives • Creates conflict between and among
employees knowledge and skills of members, and confusion as to the
different tasks of each department. accountability of members.

Organizational Chart
• Is a diagram presenting the organization’s official positions, formal lines of authority, and organizational
structure.
• In many instances, this chart includes the name and the position of the staff or personnel.

Elements in creating an organizational chart:

a. Level of management hierarchy the organizational chart should present a detailed view of ranks, positions, and
name of personnel who are assigned to the given position.
b. Chain of command – the downward and upward vertical lines give a graphic illustration of the stages of authority
whereby each level of management reports (Valencia, et al. 2009).
c. Division and departmentalization – the organizational chart should present the overall distribution of functions,
tasks, and manner of division of work within an organization.

Differences Between Organizational Structure and Organizational Chart.

ORG. STRUCTURE ORG. CHART

1. It is designed to convey the functions in a business.
2. It defines the tasks, purposes, and accountabilities of
each business function and role.
3. It changes infrequently and does not when a member
resigns/leaves the organization.
1. It is designed as visual representation of the
organizational structure.
2. It shows the name of personnel, his/her job title, and
may also include his/her function.
3. It needs to be changed when a member leaves the
organization.
 Lesson 3. Organization Theories and Application
Organization Theories
 are considered as knowledge systems which study and explain the organizational structure, function and
operation, and organizational group and individual behavior (Zhu 1999).
Three (3) Perspectives
Classical Organization Theory
 is the main organizational theory used by managers in the early 1900s.
 This organizational theory focuses on work efficiency, particularly on job performance of the employees or
workers.
Three (3) known approaches under this theory namely:
1. Scientific Management Approach focuses on ways to manage work efficiently. The main contributor of this approach
is Frederick W. Taylor, who is known as the “Father of Scientific Management”. He stressed that job efficiency could
be achieved through technical skills and professional skills development of employees.
Four (4) Management Principles:
1. Managers should study how the employees perform their jobs/tasks. They should gather information on the knowledge
and skills that workers possess to know their job-related needs.
2. Create new rules and methods of performing tasks.
3. Match the tasks and the workers who possess the skills and abilities needed for the tasks. As managers, you need to
train them perform the task according to the established rules.
4. Establish a fair and acceptable level of performance. Then, provide a reward system for performances above the
acceptable level.

Henry Gantt developed a method for scheduling work over a period of time which is presented through a visual graphic
known as Gantt Chart. This chart is still widely used up to date.

2. Administrative Management Approach focuses on managing the organization as a whole. Henri Fayol, who is
known as the “Pioneer of the Principles and Functions of Management”, distinguished operating and managerial
activities and developed the major functions of management: planning, coordinating, organizing, controlling and
commanding.
14 management principles according to Fayol
1. Division of Work – employees work well when they are tasked according to specialization.
2. Authority – refers to the right to issue command and goes hand-in-hand with responsibility. Employees work best
when they are given the authority in line with their function.
3. Discipline – there should be an established rules and regulation, and employees must abide to these.
4. Unity of Command – it is essential that workers in an organization must have only one boss and no conflicting lines of
command.
5. Unity of Direction – workers in same department must have same goals in a single plan.
6. Subordination of Individual Interest –
top-level managers should set goals which best interests the organization, and not their self-interest.
7. Remuneration – monetary reward is an important motivator for employees to do their tasks.
8. Centralization – employees need to obey commands which depends on the central authority.
9. Line of Authority – a hierarchy is necessary for unity of direction.
10. Order – material order and social order must be maintained in an organization.
11. Equity – managers need to treat their employees well and fairly.
12. Stability of Tenure of Personnel – employees work better when they are assured of job security and career
development.
13. Initiative – employees must be encouraged to have the initiative to do tasks.
14. Esprit de Corps – “group spirit” in French, Fayol suggested that the management must uplift the morale of his
employees by encouraging coordination, keenness, and unity without disturbing harmonious relationships.

3. Bureaucratic Management Approach is proposed by Max Weber, a German sociologist, and Chester Barnard.
• This approach focuses on the development of rules and SOPs to ensure that employees are treated fairly. The two
main contributors did not encourage red tape and inefficiency.
In addition to this, Weber advocated five (5) principles in the bureaucracy system to ensure efficiency and effectiveness:
1. The formal authority of a manager is derived from the position he/she holds in an organization.
2. People should occupy positions because of their performance, and not because of personal contacts and social class.
3. The extent of each position’s formal authority and relationship to other positions in an organization should be specified
clearly.
4. When positions are arranged according to hierarchy, authority can be easily implemented.
5. Managers must create a well-defined rule, codes of conduct, and standard operating procedures (SOPs) so that they can
control behavior within the organization.

Rules are formal written instructions which give specific instructions to be taken under various situations to achieve the
organizational goals.
Codes Of Conduct are norms which prescribe how employees should act in a particular situation. Republic Act No.
6713 is the code of conduct for all public officials and employees.
Standard operating procedures, known as SOPs, are formal instructions set by the organization about how an employee
should perform a certain task.
BEHAVIORAL ORGANIZATION THEORY
• which is more focused on understanding the human behavior. It gave emphasis on human skills rather than
technical skills. One of the many contributors of this theory is Mary Parker Follet, a social worker and
philosopher. Tagged as the “Mother of Management Thought”, she suggested that management should be more
democratic and let employees participate and exercise their initiative in their work because they are
knowledgeable about their jobs. Workers should be allowed to take part in the work development process
(Valencia, et al. 2009).
FOUR (4) PRINCIPLES develop by Follet :
(1) knowledge and expertise are essential for managers to identify the right person for the position;
(2) managers need to be cross-functioning to communicate directly with each other and to make decisions fast;
(3) self-managed teams and empowerment which means that managers should act as facilitators and motivate their
workers since the latter have more relevant work knowledge; and
(4) integration should be a part of the managerial process so that conflicts which could arise can be easily resolved.

ELTON MAYO,
• an Australian psychologist who believed that workers must be well-treated and their needs must be satisfied to
increase their work performance. His Hawthorne Works/Studies (1924-1932) presents the importance of
understanding the behavior, thoughts, and emotions of workers and managers which strongly contributes to their
overall performance. It also suggests that the attitude of the managers toward the workers (and vice versa) greatly
affects the work performance level. This is known as the Hawthorne Effect.
Abraham Maslow and Douglas McGregor are two other theorists who proposed a behavioral management theory which
suggests that better human relations could increase productivity. This is known as the Human Relations Approach.

Abraham Maslow believed that the great motivators of a human being are as follows:
• physiological needs (food and water); safety and security; sense of belongingness; self-esteem; and
• self-actualization. This is known as the Maslow’s Hierarchy of Needs. He believed that when these are attained,
employees or workers would be satisfied resulting to an increase in productivity.
Douglas McGregor developed Theory X and Y. Theory X is a set which gives assumption on the pessimistic work
attitudes and behaviors thus managers need to construct a plan to eliminate these bad behaviors to perform at high levels.
Theory Y is a set which shows optimistic views on workers and considering them highly capable to perform their tasks.

MODERN OR CONTEMPORARY ORGANIZATION THEORY.

• This theory is based on the concept that an organization is a system which adapts to the changes in its
environment.

1. The systems viewpoint regards organization as a system which is composed of four parts which operates together to
achieve a common purpose.
2. The sociotechnical viewpoint shows that workers and technology must be integrated to maximize organizational
performance. It also states that organizations without technology could result to low performance and organizations
without manpower to operate technological equipment could also result to immobilization. In other words, it suggests
balance for effective working in an organization.
3. Lastly, contingency or situational viewpoint is focused on determining the best possible approach or strategy in each
situation. We must take note that no best management approach is applicable for all situations. The method or strategy
greatly depends on factors or variables which could affect the situation.

Quality Management
• this concept is essential in an organization because of its commitment to excellence. It is primarily concerned with
quality control, quality assurance and total quality management.
Quality control refers to the strategy of minimizing errors in each stage of production while
Quality assurance is ensuring that workers will strive for “zero defects” in the production process.
Total Quality Management, a very comprehensive management concept, is advocated for organizations to continuously
seek improvement. It suggests that continuous improvement (kaizen in Japanese) should be the organization’s top priority.

Aside from this, teamwork and trust are necessary to achieve the organizational goals. Workers must be trained together
to build unity among them. Feedback from clients and employees is also necessary as it seeks to find what needs to be
improved in the organization. Lastly, the organizations must establish acceptable standards to eliminate any organizational
problem.

LESSON 4: Delegation
Delegation
• Refers to assigning a new or additional task to a subordinate.
• It may also refer to getting work done through others by giving them the right to make decision and act.
Elements of delegation includes:
• Authority or the right to set officially or legally.
 • Responsibility or the state of being answerable legally/morally for the discharge of a duty.
• and accountability is to be liable to be called to explain.
Steps in delegation includes:
1. Defining the goal clearly
2. Selecting the person who will be given the task.
3. Assigning the responsibility
4. Asking the person assigned about his or her planned approaches to accomplish the task objectives.
5. Granting the assigned person, the authority to act.
6. Giving the assigned person enough time and resources to do the task, while at the same time emphasizing his or
her accountability.
7. Checking the task accomplishment progress
8. Making sure that the task objective has been achieved.

Kanban Board
This board is used to implement the Kanban method for a specific project. Kanban is a Japanese word which means
“signboard” or “billboard”. David J. Anderson later used this term to name his own method for delegating a team’s
workload and deliverables without overloading his members.

Advantages and Disadvantage of Delegation

Advantages Disadvantages
1. It prevents work overloading among organization managers 1. It may cause laziness among managers.
2. It provide opportunities for the employee or subordinates assigned 2. It may encourage too much dependence
to do the task to fully utilize their talents on the jobs on others.

3. It leads to empowerment of the employees or 3. It may cause lack of control over priority management
subordinates assigned to the task, as it allows them problems
freedom to contribute ideas and to perform their job in the
best possible way.
4. It increases job satisfaction among the assigned 5. It may cause low self-confidence among managers.
employees or subordinates, that may lead to better job
performance.

LESSON 5: Formal and Informal organizations

Formal Organizations
• are characterized by hierarchical and reporting relationships among groups or members.
• Refer to organizations formed by the company owner or manager to help the firm accomplish its goals;
• Made up of formal groups (work groups/project teams/committee) similarly formed by company authorities to
support their activities and achieve their objectives.
Informal Organizations
• refer to organizations that exist because of friendship or common interest;
• Made up of informal groups which exist for the members’ need for affiliation.

Functions Formal Organization

1. Accomplish goals that require cooperation or collaboration among formal groups in the organization;

2. Produce or bring about new and creative ideas and solutions to company problems;

3. Coordinate interdepartmental activities

4. Implement company rules/ regulations and policies; and

5. Orient/train new employees.

Functions of Informal Organization

1. Satisfy the members’ need for affiliation

2. Give the individual members a chance to develop their self-esteem

3. Give individual members an opportunity to share their ideas;

4. Lessen individual members’ insecurities; and

5, Provide a mechanism to solve members’ personal and interpersonal problems

ADVANTAGES OF FORMAL AND INFORMAL

FORMAL INFORMAL
1. Working systematically 1. Fast communication due to the absence of standard operating procedures
and protocols
2. Established on and for the 2. Gives importance to the psychological and social needs of employees
organization’s objectives
3. No duplication or overlapping of 3. Top managers can solicit feedback directly from the employees on new
work policies and plans
4. Efficient coordination among
departments
5. Implementation of chain of
command and professional
relationship
 CHAPTER 5
Staffing
LESSON 1: Definition and Nature of Staffing

Staffing -(Dyck and Neubert, 2012)

 is the Human Resource function of identifying, attracting, hiring, and retaining people with the necessary
qualifications to fill the responsibilities of current and future jobs in the organization.
 Refers to filling in all organizational job positions.
 The number of managerial personnel or non-managerial human resources needed by an organization depends
upon the size and complexity of its operations, its plans for branching out or increasing products, and turnover
rates of both types of human resources, among others.
 Besides considering their number, the qualifications for the individual positions must be identified, so that the
best-suited individuals for the job positions may be selected for hiring.
Staffing Steps include:
1. The identifying of job vacancies, job requirements, as well as work force requirements;
2. Checking internal environment of the organization for human resources;
3. External recruiting
4. Selecting those with essential qualifications for the job opening;
5. Placing the selected applicant;
6. Promoting;
7. Evaluating performance;
8. Planning of employee’s career;
9. Training of human resources; and
10. Compensating human resources.
Systems approach to staffing is the step-by-step way of filling job positions in organizations, considering variables such
as numbers and kinds of human resources needed, open managerial and nonmanagerial positions, potential successors to
open job positions, etc.
Lesson 2: RECRUITMENT
 A set of activities designed to attract qualified applicants for job position vacancies in an organization.
 Recruitment is either be external or internal.
External Recruitment
• Refers to recruitment from outside sources.
• Unsolicited applications and referrals from employment agencies and schools are examples of outside sources.
Internal Recruitment
• Refers to recruitment done within the organization.
• Filling job vacancies can be done through promotions or transfer of employees who are already part of the
organization.
Methods of External and Internal Recruitment
External recruitment methods include:
• ADVERTISEMENTS- through websites, newspapers, trade journals, radio, television, billboards, posters, e-
mails, etc.
• UNSOLICITED APPLICATIONS-received by employers from individuals who may or may not be qualified for
the job openings.
• INTERNET RECRUITING- independent job boards on the Web commonly used by job seekers and recruiters to
gather and disseminate job opening information.
• EMPLOYEE REFERRALS-are recommendations from the organization’s present employees who usually refer
friends and relatives who they think are qualified for the job.
• EXECUTIVE SEARCH FIRMS- also known as “Head Hunters” help the employers find the right person for a
job. Such firms seek out candidates with qualifications that match the recruitments of the job opening that their
client company hopes to fill.
• EDUCATIONAL INSTITUTIONS-good sources of applicants or new graduates who have formal training but
with very little work experience. For technical and managerial positions, schools may refer some of their alumni
who may have the necessary qualifications needed for the said job positions.
• PROFESSIONAL ASSOCIATIONS- may offer placement services to their members who seek employment.
• Employers may make use of the listings that they publish in their journals regarding members who are available
for possible recruitment or hiring.
• LABOR UNIONS- possible sources of applicants for blue collar and professional jobs.
• PUBLIC AND PRIVATE EMPLOYMENT AGENCIES- may also be good sources of applicants for different
types of job vacancies for they usually offer free services while private charge fees from both the job applicant
and the employers soliciting referrals from them.

In Internal recruitment, most managers prefer to follow a policy of filling job openings through promotions and
transfer to lessen the chances of losing the organization’s top performers. Recruitment may be done using the
 company’s bulletin boards, company intranet, company newsletters, and recommendations from department or
unit heads.
EXTERNAL RECRUITMENT ADVANTAGES
• Qualitative human resources. External recruitment creates a pool of eligible candidates and best-qualified ones
can be chosen easily as the management team has greater choice of selection. This ensures the quality of human
resources in the organization.
• Rejuvenates organization. When employees are recruited externally, there is inflow of new ideas, skills and
enthusiasm in organization. This rejuvenates organization and its system.
• Better adaptation to the changing environment. Technologies are changing rapidly in this generation and
enrolment of new ideas, knowledge and skills help in adaptation to the changes easily.
EXTERNAL RECRUITMENT DISADVANTAGES
• Recruitment Demoralize employee.
Hardworking employees expect upgrade of their position. But when new employees from outside are hired, the existing
employees feel demoralized. This may lead the existing employees to resign from the job as well.
• High cost. External recruitment is a long process, and it includes various steps like job announcement, orientation,
training, etc. This is time consuming as well as money consuming.
• Adaptability problems. New employees take time to get used to the culture and environment of the organization.
They also take time to get comfortable with their colleagues which hamper their performance.
• Chances of wrong selection. There are chances that the management team selects a wrong employee. If wrong
employees are selected, then effectiveness of organization is decreased.
• Promotes nepotism. Nepotism is the practice where people with some kind of authority favor their relatives and
friends by offering jobs. While recruiting employees from outside, chances of nepotism is high.
INTERNAL RECRUITMENT ADVANTAGES
• Encourages hard work and develops employees. When employees are recruited from within the organization, it
sets a mentality in employees’ minds that sincere employees are promoted. Promotion means increased payment
and fame. So they become encouraged to put more efforts and make quality outputs. This results in development
of employee.
• Accurate selection. When employees are recruited from inside, there is almost zero chances of selecting a wrong
person because company does not only have its employees’ record but also knows them personally which is not
possible in external recruitment.
• Economic in nature. External recruitment involves various processes like job announcement, interview, etc which
is both time and money consuming. In contrast, internal recruitment saves time as well money.
• Strengthens employer-employee relationship. When employees are promoted or transferred to better branch,
employees feel valued by the company and in return employees also become loyal and faithful to its company.
This strengthens employer- employee relationship and makes a company stronger.
• Adaptability. When new employees are hired, they require training and orientation. But when employees are
recruited from inside the company, they take less time to adapt to new work because they are already familiar to
environment, employees and culture of the company.
INTERNAL RECRUITMENT DISADVANTAGES
• Promotes unemployment. There are people outside the office as well who are capable or has potential to complete
the concerned task. So when companies keep recruiting employees from inside, external talents are deprived of
working platform.
• Promotes favoritism. Favoritism is an unfair practice where people or groups are treated in bias. Simply,
favoritism is the act of showing personal preference towards a person or a group.
• Limited choice. Internal recruitment limits the choice of company. Candidates inside the company may not be as
skilled as the post demands them to be.

LESSON 3: SELECTION
 the process of choosing individuals who have the required qualifications to fill present and expected job openings.
SELECTION PROCESS includes the ff. steps
1. Establishing the selection criteria-
2. Requesting applicants to complete the application form-
3. Screening by listing applicants who seem to meet the criteria-
4. Screening interview to identify more promising applicants-
5. Interview by the supervisor/manager or panel interviews-
6. Verifying information provided by the applicant-
7. Requesting the applicant to undergo psychological and physical examination-
8. Informing the applicant that he or she has been chosen for the position applied for.
INTERVIEW-the determining of an applicant’s qualifications to gauge his or her ability to do the job.
Types of Job Interview
 Structured interview- the interviewer asks the applicant to answer a set of prepared questions- situational, job
knowledge, job simulation, and worker requirement questions.
 Unstructured interview- the interviewer has no interview guide and may ask questions freely.
 One-on-one interview- one interviewer is assigned to interview the applicant.
 Panel Interview-several interviewers or a panel interviewer may conduct the interview of applicants; three to five
interviewer take turns in asking questions.
Types of Employment Tests
 Intelligence Tests- designed to measure the applicant’s mental capacity tests; his or her cognitive capacity, speed
of thinking, and ability to see relationship in problematic situations.
 Proficiency and Aptitude tests- tests his or her present skills and potential for learning other skills.
 Personality tests- designed to reveal the applicant’s personal characteristics and ability to relate with others.
 Vocational tests- tests that show the occupation best suited to an applicant.

LESSON 4: Training and Development

Training-refers to learning given by organizations to its employees that concentrates on short-term job performance and
acquisition or improvement of job related skills.
Development-refers to learning given by organizations to its employees that is geared toward the individual’s acquisition
and expansion of his or her skills in preparation for future job appointments and other responsibilities.
Procedures:
1. Conducting a Training needs assessment- a systematic evaluation done to ascertain if there really is a need for
employee training.
• Organization analysis include the analysis of effects of downsizing, branching out, conflicts with rival
companies, and others that may require training or retraining of employees.
• Task analysis involves a checking of job requirements to find out if all these are being done to meet company
goals.
• Person analysis determines who among the employees need training or retraining. This is to avoid spending for
the training of employees who no longer need it.
2. Designing the training Program
• Involves stating the instructional objectives that described the knowledge, skills, and attitudes that to be acquired
or enhanced to be able to perform well.
• These are performance-centered objectives that must be aligned with the firm’s objectives.
• Considered the trainee’s readiness and motivation.
• Different learning principles influence the training design’s effectiveness.
Different Learning Principles:
• Modeling- the use of personal behavior to demonstrate the desired behavior or method to be learned.
• Feedback and reinforcement- learning by getting comments or feedback from the trainees themselves, from
trainers, or fellow trainees, which can help the individual realize what they are doing right or what they are doing
wrong; reinforcement is accomplished through verbal encouragement or by giving rewards such as prizes, awards
and others.
• Massed vs. distributed learning- learning by giving training through either few, long hours of training (massed)
or series of short hours of training (distributed).
 • Goal-Setting- learning through the explanation of training goals and objectives by trainers to the trainees.
• Individual differences- training programs that consider and accommodate the individual differences of the
trainees to facilitate each person’s style and rate of learning.
• Active Practice and repetition- learning through the giving of frequent opportunities to trainees to their jobs
tasks properly.
3. Implementing the training program
• Includes On-the-Job training, apprenticeship training, classroom instruction, audio-visual method, simulation
method, and e-learning.
4. evaluating the training

Training program evaluation- involves assessing the positive or negative effects of the training program after employees
have completed.
Employee Development- is a part of an organization’s career management program and its goal is to match the
individual’s development needs with the need of the organization.

Lesson 5: Compensation/Wages and Performance Evaluation

Compensation/Wages- all forms of pay given by employers to their employees for the performance of their jobs.
Types of Compensation
 Direct compensation- includes worker’s salary, incentive pays, bonuses, and commissions.
 Indirect compensation- Includes benefits given by employer other than financial remunerations; for example:
travel.
 Nonfinancial compensation- includes recognition programs, being assigned to do rewarding jobs, or enjoying
management support, ideal work environment, and convenient work hours.
Compensation: A motivational factor for Employee
• Pay equity- Equity theory is a motivation theory focusing on employee's response to the pay that they receive and
the feeling that they receive less or more than they deserve.
• Expectancy Theory- predicts that employees are motivated to work well because of the attractiveness of the
rewards or benefits that they may possibly receive from job assignment.
Bases for compensation
• Piecework basis- when pay is computed according to the number of units produced.
• Hourly basis- when pay is computed according to the number of hours rendered.
• Daily basis- when pay is computed according to the number of workdays rendered.
• Weekly basis- when pay is computed according to the number of work weeks rendered.
• Monthly basis- when pay is computed according to the number of work months rendered.
Performance Evaluation- a process undertaken by the organization, usually done once a year, designed to measure
employee’s work performance.
Purpose of Performance Evaluation-
• Administrative Purpose- these are fulfilled through appraisal/ evaluation programs that provide information that
may be used as basis for compensation decisions, promotions, transfer, and termination.
• Developmental Purposes- are fulfilled through appraisal evaluation programs that provide information about
employee’s performance and their strengths and weaknesses that may be used as basis for identifying their
training and development needs.
Performance Appraisal Method
• Trait Methods- designed to find out if the employee possesses important work characteristics such as
conscientiousness, creativity, emotional stability, and others.
• Graphic rating scales- where each characteristics to be evaluated is represented by a scale on which the
evaluator or rater indicates the degree to which an employee possesses that characteristics.
• Forced-choice method- requires the rater to choose from two statements purposely design to distinguish between
positive or negative performance.
• Behaviorally anchored rating scale (BARS) – includes five to ten vertical scales, one for each important
strategy for doing the job and numbered according to its importance
• Behavior Observation Scale (BOS)- measures the frequency of observed behavior.

Lesson 6: Employee Relations

Employee relations- the connection created among employees/workers as they do their assigned tasks for the
organization to which they belong.
Social Support- is the total perceived assistance or benefits that may result from effective social employee relationships.
3 types of Employee
• Engaged- employees work with passion and feel a deep connection with their company. They drive innovation
and move the organization forward.
 • Not engaged- employees who are essentially checked out. They put time but not energy or passion into their
work.
• Actively disengaged- employees who are not only unhappy at work, but also act out their unhappiness. They
undermine what they engaged coworkers accomplish.
Barriers to good employee relation
• Anti-social personality; refusal to share more about oneself to co-employees; being a loner
• Lack of trust in others
• Selfish attitude; to many self-serving motives
• Lack of good self-esteem
• Not a team player
• Being conceited
• Cultural/subcultural differences
• Lack of cooperation
• Communication problems; refusal to listen to what others seek to communicate
• Lack of concern for other’s welfare
Ways to overcome barriers to good employee relations:
• Develop a healthy personality to overcome negative attitudes and behavior
• Find time to socialize with coworkers
• Overcome tendencies of being too dependent on electronic gadgets.
• Develop good communication skills and be open to other’s opinions.
• Minimize cultural/subcultural tension

LESSON 7: Employee Movements

Employee movements- series of actions initiated by employee groups toward an end or specific goal.
Unionism- the principle of combination for unity of purpose and action.
Labor union is a formal union of employees/workers that deals with employers, representing workers in the pursuit of
justice and fairness and in their fight for their collective or common interests.
Reasons why workers unionize;
a. Financial needs- complaints regarding wages or salaries and benefits given to them by the management are the
usual reasons why employees join labor unions.
b. Unfair management practices- perception of employees regarding unfair or biased managerial actions are also
reasons why they join movements.
c. Social and leadership concerns- some join unions for the satisfaction of their need for affiliation.

Contract negotiations or collective bargaining agreement (CBA) process involves the ff. procedures:
a. Prepare for negotiations-
b. Develop strategies
c. Conduct negotiations
d. Formalize agreement
Grievance Procedure- a formal procedure that authorizes the union to represent its members in processing a grievance or
complaint. Such grievance must be expressed must be expressed orally or in writing to the employee’s immediate
supervisor and the union steward.
Lesson 8: Rewards System
Reward- gift, prize or recompense for merit, service or achievement, which may have a motivating effect on the
employee.
Different Types of rewards
Monetary Rewards- rewards which pertain to money, finance, or currency.
• Pay/salary- financial remuneration given in exchange for work performance that will help the organization attain
its goals;
• Benefits- indirect forms of compensation given to employees/ workers for the purpose of improving the quality of
their work and personal lives; health care benefits, retirement benefits, etc.
• Incentives- rewards that are based upon a pay-for-performance philosophy; it establishes a baseline performance
level that employees or groups of employees must reach to be given such reward or payment; examples: bonuses,
sales incentives, etc.
• Executive pay- a compensation package for executives of organizations which consists of five components: basic
salary, bonuses, benefits, etc.
• Stock options- plans that grant employees the right to buy specific number of shares of the organizations’ stock at
a guaranteed price during a selected period.
• Nonmonetary rewards- rewards which do not pertain to money, finance, or currency; refer to intrinsic rewards
that are self-granted and which have a positively psychological effect on the employee who receives them.
 • a. Award- nonmonetary reward that may be given to individual employees or groups/teams for meritorious
service or outstanding performance; trophies, medals, or certificates of recognition may be given instead of cash
or extrinsic rewards.
• b. praise- a form of nonmonetary, intrinsic reward given by superiors to their subordinates when they express
oral or verbal appreciation for excellent job performance.
Rewards system can influence six factors or areas that impact organization effectiveness:
• Attention and retention
• Motivation of performance
• Skills and knowledge
• Culture
• Reinforce and define structure; and
• cost
 CHAPTER 6:
Leading
Lesson 1: Definition and Nature of Leading

 Leading- a management function that involves inspiring and influencing people in the organization to achieve a
common goal.
 Managing- the process of working with and through others to achieve organizational objectives efficiently and
ethically amid constant change. It also deals with POSDCON.
 Personality- pertains to the unique combination of physical and mental characteristics that affect how individuals
react to situations and interact with others, and if unhealthy or not fully functioning could cause conflict/s
problems among individuals.

Big Five Personality Characteristics

1. Extraversion- the degree to which someone is sociable, talkative, and assertive.
2. Agreeableness- the degree to which someone is good natured, cooperative and trusting.
3. Conscientiousness- the degree to which someone is responsible, dependable, persistent, and achievement-
oriented.
4. Emotional Stability- the degree to which someone is calm, enthusiastic, and secure (positive), or tense, nervous,
depressed, and insecure (negative).
5. Openness to experience- the degree to which someone is imaginative, artistically sensitive, and intellectual.
The big model provides more than just a personality framework. Research has shown that important relationships exist
between these personality dimensions and job performance.
 Emotional Intelligence (EI) pertains to the ability to manage one’s self and interact with others in a positive way.

Lesson 2: Motivation

Motivation refers to psychological processes that arouse and direct goal directed behavior.
Theory- a body of fundamental principles verifiable by experiment or observation.

Theories of motivation
1. Maslow’s Hierarchy of Needs Theory- refers to Maslow’s hierarchy of Five human needs by Abraham
Maslow in 1943.
a) Physiological Needs refer to the human need for food , water, shelter and other physical necessities.
b) Safety needs- refer to human needs for security and protection from physical harm.
c) Social needs- pertain to human desire to be loved and to love, as well as the need of affection and belongingness.
d) Esteem needs- include the human need for self-respect, self-fulfillment, and becomes the best according to one’s
capability.
e) Self-actualization needs- are the final needs in Maslow’s hierarchy.

2. McGregor’s Theory X and Theory Y- refers to the theory that was proposed by Douglas McGregor.
Theory X- negative view of workers; Theory Y- Positive view of workers.
3. Herzberg’s Two Factor Theory –proposed by Frederick Herzberg. Also known as Motivation-Hygiene
Theory. States that INTRINSIC FACTORS (achievement, recognition, growth, and responsibility) are
associated with job satisfaction, while EXTRINSIC FACTORS (company policy, salary, security, and
supervision) are associated with job dissatisfaction. Intrinsic factors are the motivators while the
Extrinsic factors are called hygiene factors.
4. McClelland’s Three Needs Theory- was proposed by David McClelland. States that individuals have
three needs that serve as motivators at work.
1. The need for achievement (nAch)
2. The need for power (nPow)
3. The need for affiliation (nAff)

5. Alderfer’s ERG Theory- was developed by Clayton Alderfer in the 1960s. For Alderfer, a set of core
needs explains behavior.
E stands for existence needs
R refers to relatedness needs
G pertains to growth needs
The needs or desire for physiological and materialistic well- being, to have meaningful relationships with
others, and to grow as a human being are like the needs presented in Maslow’s theory.

Modern Theories of Motivation are process theories that focus on the notion that motivation is a function of
employees’ perception, thoughts, and beliefs.
 Goal Setting Theory- a theory stating that specific goals motivate performance and that more difficult goals,
when accepted by employees, result in greater motivation to perform well, as compared to easy goals.
Reinforcement Theory- a theory which states that behavior is a function of its consequences.
Job Design Theory- a theory which states that employees are motivated to work well by combining tasks to form
complete jobs.
• Job enlargement- the horizontal expansion of a job by increasing job scope.
• Job enrichment- the increasing of job depth by empowering employees to assume some tasks usually done
by the managers
• Job Characteristics model- where employees are motivated to perform well because the task assigned to
them have the five core job dimensions that serve as motivators.
Equity Theory- a theory developed by J. Stacey Adams which states that employees assess job outcomes in relation
to what they put into it and then compare these with their co-workers.
Expectancy Theory- states that an individual tends to act in a certain way, based on expectation that the act will be
followed by an outcome which may be attractive or unattractive to him or her.

FIVE CORE JOB DIMENSIONS

Skill Variety- the degree by which a job requires different activities, so employees may be able to use their different
skills.
Task Identity- the degree by which a job requires completion of an identifiable piece of work.
Task significance- the degree by which a job has a significant impact on the lies or work of others.
Autonomy- the degree by which a job provides enough freedom and discretion to employee.
Feedback- the degree by which performing job requirements results in the employee’s receipt of information about
his or her performance effectiveness.

Lesson 3: Leadership Styles and Theories

Leadership- the process of inspiring and influencing a group of people to achieve a common goal.

EARLY LEADERSHIP THEORIES- Kreitner and Kinicki (2013)

Trait Theory- based on leader traits or personal characteristics that differentiate leaders from followers. It evolved
from the earlier Great Man Theory, which based on the assumption that leaders were born with some innate ability
to lead.
Behavioral Theory- a theory that focuses on the behavior, conduct, demeanor, or deportment of a leader instead of
his or her personality traits. Leaders are made and not born.

Contemporary Theories of Leadership

Fiedler Model- it is situational leadership theory proposed by Fred Fiedler. This theory assumes that a leader’s
effectiveness is contingent or dependent on the extent to which a leader’s style is fitted to actual situations in the
organization’s internal and external environment.
Hersey-Blanchard Model- proposed by Paul Hersey and Ken Blanchard. The theory focused on subordinate’s
readiness or extent to which the sad subordinates have the ability and willingness to accomplish a specific work
assignment.
Four Stages of subordinate readiness
R1 Where the subordinates are both unable and unwilling to accomplish the task
R2 Where the subordinates are unable but willing to do the task
R3 Where the subordinates are able but unwilling to do the assigned task
R4 Where the subordinates are both able and willing to do what the leader wants to complete the task
Path- Goal Theory- developed by Robert House which states that the leader’s task is to lead his other followers or
subordinates in achieving their goals by providing them direction needed in order to ensure compatibility of these
said goals.

Four Leadership Behaviors by House

1. Directive leadership- where the leader gives specific guidelines to followers so that task accomplishment would
be easier.
2. Supportive leadership- where the leader shows concern and friendliness to subordinates;
3. Participative leadership- where leader asks suggestions from followers before decision making; and
4. 4. Achievement-oriented leadership- Where the leader sets the goals that subordinates must try to achieve.

Situational control- is a leadership control/style dependent on the specific circumstances in which the leadership
occurs; an effective leadership style in one situation may not be effective in another situation.

MODERN LEADERSHIP VIEWS

1. Transactional Leadership Model- theoretical model which states that leaders guide their subordinates toward the
achievement of their organization’s goals using social exchange or transactions and by offering rewards in exchange
for their productivity.
2. Transformational Leadership Model- a view that developed from transactional leadership. It states that leaders
inspire or transform followers to achieve extraordinary outcomes. Through their leadership, they can excite and inspire
followers to exert extra effort to achieve group goals. It is strongly correlated with lower turnover rates and higher
levels of productivity, employee satisfaction, creativity, goal attainment, and follower well-being.
3. Charismatic Leadership Theory- states that leaders who have a charismatic personality can influence their
subordinates to follow them.
4. Visionary Leadership Theory- which states that leaders can make their subordinates follow because of their ability
to create and articulate a realistic, credible, and attractive vision that may improve present conditions or circumstances.
5. Team Leadership Theory- theory that emerged because leadership is increasingly taking place within a team
context and that more companies are now utilizing work teams led or guided by leaders.
6. Servant Leadership Theory- proposed by Robert Greenleaf in 1970 stating that servant-leaders must focused on
increased service to others rather than to one’s self.
“Effective leadership is not about making speeches or being liked; leadership is defined by results not attributes”- Peter
Drucker.

Lesson 4: Communication
Communication process starts with the sender who has an idea or a message, which is then transmitted through a
selected channel to the receiver, who in turn has to be ready for the reception of the message, so that it could be
decoded into thoughts. Accurate communication occurs when the when the sender and the receiver understand one
another.

Communication- the exchange of information and understanding.

Types of Communication
Verbal- through the use of oral and written words.
Non-verbal- through body movements, gestures, facial expressions, eye contact, and by touching.
Classification:
Formal- if communication takes place within prescribed, routine organizational work arrangements. Example is
when the manager gives an assignment to a subordinate.
Informal- if communication is not defined by an organization’s hierarchical structure. Example is when
employees talk to their friends in the office about a weekend party.
Direction and Flow of Communication
Vertical communication- involves communication flow between people belonging to different organizational
levels.
Upward Communication- the flow of information from an employee who belongs to lower hierarchical level to
the boss/manager who belong to a higher hierarchical level.
Downward Communication- The flow of information from the manager, who belongs to higher hierarchical
level, to the subordinates/employees, who belong to lower hierarchical levels.
Horizontal/lateral Communication- takes place among employees belonging to the same hierarchical level.
Diagonal Communication-communicating with someone who belong to different department and different
hierarchical levels.

Communication Networks in Organizations

• Are varied patterns of combined horizontal and vertical flows of organizational communication.

Types of Communication Networks

Chain network- where communication flows according to the usual formal chain of command, downward and
upward.
Wheel network- where communication flows between a leader and other members of their group/team.
All-channel network- where communication flows freely among all members of a team.
*Grapevine is an informal communication network in an organization. Example is gossip/rumor which could quickly
disseminate information.
*Computer networks-Examples are e-mail, blogging, teleconference, and the like.

Barriers to Communication
Filtering- the shaping of information communicated in order to make it look good or advantageous to the receiver.
Emotions- the interpretation of communication which may be influenced by extreme emotions felt by the receiver.
Defensiveness- the act of self-protection when people are threatened by something or someone.
Information overload- another barrier to good communication since there are too many pieces of information
received by an individual may have a negative effect on a person’s processing capacity.
Language-could also hamper good communications because words used may have different meanings to different
people belonging to different age, educational background, or cultural group.
National culture- just like language, the prevailing national culture may also cause problems in communication
among members of an organization, especially if it is multinational company.
Defensiveness- the act of self-protection when people are threatened by something or someone.

Overcoming Communication Barriers through:

1. Using feedback- this is usually done by asking questions about a memo sent to subordinates or by asking them to
give their comments or suggestions.
2. Using simple language-this is done by avoiding uncommon terms and flowery words that may just cause
misinterpretations. Language use must fit the level of understanding of the intended recipients of the
communication.
3. Active listening- this means listening well in order to grasp the full meaning of the communication. Hearing
without giving full attention to what others seek to communicate usually results in misinterpretation and
communication distortions.
4. Controlling emotions- this is another method of overcoming misinterpretation. When a receiver is affected by
extreme anger, his interpretation of a message received may not be accurate.
5. Observing body language- this also influences communication is interpreted. Actions of the receiver, like
throwing away a letter delivered to him, betrays the negative feelings regarding its message, even he says yes or
okay to what is requested. Nonverbal cues must always be watched because, as the saying goes, actions speak
louder than words.

Lesson 5: Management of Change and Diversity in Organizations

Management of change and organizational diversity are two related activities/functions of management because trying
to bring change in organizations is dependent on the kind and the behavior of the people within them.
Organizational change- any alteration of people, structure, or technology in organizations brought by external or
internal forces which they encounter.
Organizational diversity- the host of individual differences that make people in organizations different from and
similar to each other.

Types of Change
Changes in People- People’s attitudes, values, wants and needs, expectations, perceptions, and behaviors change as
time goes by, but changing them for the better is not easy to do.
Changes in Structure- Due to changing conditions/situations and changing strategies used, organizational structures
may also change according to work specialization, departmentalization, change in command, span of control,
centralization, formalization, and job redesign. Managers are advised to alter one or more structural components,
depending on the needs of their organization
Changes in Technology- refers to changes in work processes and methods used, introduction of new equipment and
work tools, automation, or computerization. Competitive factors or innovations in industries require administrators of
companies to consider such technological changes.

Managing Resistance to change

• Education- employee must be educated regarding the reasons for and the relevance of change.
• Participation- allow organization members to participate in decision making related to bringing change in their
company.
• Facilitation and support- facilitate and provide new skills training and counselling for employees to minimize
their fear of change.
• Manipulation of Information- withhold damaging information about change to make it acceptable to
organization members.
• Selection of people- select people who are open to change to help disseminate the beneficial effects of change,
resistance to change is lessened.
• Coercion- the use of direct threats or force to make people accept change; however, this method is perceived as a
form of bullying, so it is used only when extremely necessary.

New issues in Change Management

Understanding Situational Factors
• Waiting for the appropriate time and situation is suggested when bringing change in organization. Example, the
induction of new administrators/leaders is a good time to introduce changes in the organization’s strategies,
policies, and core values.
• Another example is when a crisis situation has just occurred. A big financial crisis in the organization could
trigger a clamor of change. In this situation, there would be less resistance to the acceptance of new investment,
marketing, and human resource policies.
• Making Changes in Organizational Culture
• set the tone through management behavior-top managers, particularly, need to be positive role models.
• Create new stories, symbols, and rituals to replace those currently in use.
• Select and promote employees who adapt the new values.
• Redesign socialization processes to align with the new values.
• Change the rewards system to encourage acceptance of new values.
• Replace unwritten norms with clearly specified expectations.
• Shake up current subcultures through job transfers, job rotation, and/or termination.
• Work to get consensus through employee participation and create a climate with a high level of trust.
• Managing Workplace Diversity
• -workforce diversity in an organization is inevitable. Since workgroup diversity is associated with positive and
negative outcomes, managers must try to reduce the potential negative effects of diversity through a. encouraging
employees to accept the organization’s culture or its dominant values and b. encouraging employees to accept
differences in the workplace.
• These, in turn, may be accomplished by training in order to improve the inherent negative relationship regarding a
workgroup’s diversity or between its deep level values and the organization’s culture and dominant values.
• Training can be used to help employees understand demography differences.
• Other way to handle workplace diversity is by creating support groups that can help employees ease the tensions
of working in diverse groups and reducing unconscious stereotyping related to associating low performance to
women, the disabled, or some ethnic group members.

Lesson 6: Filipino and Foreign Cultures in Organizations

Culture- a set of beliefs and values about how a community should act and do things.
Organizational culture- a set of shared values and norms/standards for behavior and expectations that influence
the interaction of organization members in order to achieve their set mission, vision, goals, and objectives.
Shared Values and Beliefs of Filipinos
Three primary Filipino values:
1. Social Acceptance- this value focuses on the desire of Filipinos to be accepted and treated well by
others-his/her family, relatives, friends, and the members of communities/organizations where he/she belongs-in
accordance with his/her status, for what he/she is, and for what he/she has accomplished.
2. Economic security- this value emphasizes that one must have financial stability and that he/she must be able to
stand on his/her own two feet, without incurring debt in order to meet his/her basic material needs.
3. Social Mobility- this value is concerned with his/her desire to move up the social ladder, to another higher
economic level, to a higher job position, to a position of respect in his/her family or in the community where
he/she lives or in the organizations where he/she belongs
*Manana Habit pertains to the belief that it is alright to postpone work or finish tasks to another day.
*Ningas Cogon- refers to the initial show of enthusiasm over a project during its beginning and the waning of
this interest.
*Filipino time- pertains to the common Filipino practice wherein arriving 15-30 minutes late to work or meeting
is considered acceptable.

Influence of Foreign Culture on organizational management.

Cultural Dimensions
Gender Egalitarianism- refers to the amount of effort which must be put into minimizing gender discrimination
and role inequalities.
It is highest in Hungary, Poland, Slovenia, Denmark, and Sweden, Lowest in South Korea, Egypt, Morocco,
India, and China
Assertiveness- refers to how confrontational and dominant individuals should be in social relationships.
It is highest in Germany, Austria, Greece, US, and Spain, and lowest in Sweden, New Zealand, Switzerland,
Japan, and Kuwait
Performance Orientation- refers to how much individuals should be awarded for improvement and excellence.
It is highest in Singapore, Hongkong, New Zealand, Taiwan, US, and lowest in Russia, Argentina, Greece,
Venezuela, and Italy.
Human Orientation- refers to how much society should encourage and reward people for being kind, fair,
friendly, and generous. It is highest in the Philippines, Ireland, Malaysia, Egypt, Indonesia, and lowest in
Germany, Spain, France, Singapore, and Brazil.
Cultural Relativism- it is important to interpret the actions of the members of other groups in terms of their
particular cultures.
Ethnocentrism- it is important to understand that people developed culture through adaptation to their
surroundings.
 Chapter 7
Controlling

Lesson 1. Definition and Nature of Management Control

Controlling- a management function involves ensuring the work performance of the organization’s members are
aligned with the organization’s values and standards through monitoring, comparing and correcting their actions.
*Standard- any established measure of extent quantity, quality, or value.

Management Control Importance

Management control makes sure that the firm’s operating cash flow is sufficient, efficient, and, if possible
profitable when invested.

The Control Process

Control techniques used for controlling financial resources, office management, quality assurance, and others are
essentially the same.
 Establishing standards means setting criteria for performance. Managers must identify priority activities
that have to be controlled, followed by determining how these activities must be properly sequenced.
 Measuring and reporting actual performance and comparing it with set standard is essentially the
monitoring of performance. Managers are able to control facts and figures called data, and information,
which have been given meaning and considered to have value.
 Taking action involves the correction of deviations from set standards.

Lesson 2: The Link between Planning and Controlling

Control is integrated planning. Planning involves a thorough process which is essential to the creation and
refinement of a blueprint or its integration with other plans that may combine forecasting of developments in
preparation for future scenarios.

Double entry accounting- accounting strategy of some firms which requires the preparation of two different
accounting reports, one for internal use and another for external use.
Dual entry- the process of journalizing with debit and credit entries.
Liquidity- the organization’s ability to meet short-term obligations.
The Balance Sheet is a financial statement which is defined by most accounting bools as the “snapshot” of any
entity’s financial condition because it presents the financial balances of a particular period. It is also called as
Statement of Financial Position or Statement of Condition.
Income Statement is also known as the profit and loss statement, revenue and expenses statement, statement of
financial performance, or earning statement.
Cash Flow Statement summarizes the inflow and outflow of cash during a given of time. Inflow activities are
those that result in providing the firm with sources of funds, while outflows result in cash leaving the firm due to
disbursements or expenses that utilize cash.

Organizational Performance Control

 Organizational Productivity is the amount of goods or services produced (output) divided by inputs
needed to produce the said output. Produce biggest amount of output using the least input.
 Organizational Effectiveness is a measure of the organizational goals suitability to organizational needs
and how well these said goals are being attained.
 Ranking in industry is a way commonly used by managers to measure organizational performance.
Other Performance Controls in Organizations
• Computer based control systems are common in many companies today
• Bureaucratic control makes use of strict rules, regulations, policies, procedures, and orders from formal authority.
Negative performance evaluation is given to human resources who do not comply with the said control measures.
• Clan control is based on compliance with norms, values, expected behavior related to the firm’s organizational
culture, and other cultural variables of the country where the company is located. Positive performance evaluation
ratings are given to employees or teams who quickly adapt to possible changes of norms and values in the firm’s
internal and external environment.

LESSON 3: Control Methods and Systems

Control Methods- techniques used for measuring an organization’s financial stability, efficiency, effectiveness,
production, output, and organization member’s attitudes and morale.

Methods of Control
 1. Quantitative Methods- methods which make use of data and different tools expressed in members for
monitoring and controlling production output.
• Chart- used as control tools normally contrast time and performance. The visual impact of a chart often provides
the quickest method of relating data. A difference in numbers is much more noticeable when displayed
graphically.
• Budgets- remains the best known control device. An organization’s budget is an expression in financial terms of a
plan for meeting the organization’s goals for a specific period. A budget is an instrument of planning,
management and control.
• Budgets are used to establish facts that must be taken into account during planning and to prepare a description
and financial information to be used by the chain of command to request for and manage funds.
• Audits-Internal auditing involves the independence review and evaluation of the organization’s nontactical
operations, such as accounting and finances.
• Audit measures and evaluates the effectiveness of management controls.
• Audit services provides an independent audit of programs, activities, systems, and procedures.

2. Nonquantitative Methods –refer to the overall control of performance instead of only those of specific
organizational processes.
• These methods use tools such as inspections, reports, direct supervision, and on-the-spot checking and
performance evaluation or counseling to accomplish goals
Other Control Methods
• Feedforward control prevents problems because managerial action is taken before the actual problem occurs.
• Concurrent control takes place while work activity is happening. Example of this type of control is direct
supervision or management by walking around.
• Feedback control is control that takes place after the occurrence of the activity. It is disadvantageous because by
the time the manager receives the information, the problem had already occurred.
• Employee Discipline- is a control challenge for managers. Concerns regarding this include workplace privacy,
employee theft, and workplace violence, among others
• Project management control- ensures that the task of getting a project’s activities done on time, within the budget,
and according to specifications, is successfully carried out

Lesson 4: Application of Management Control in Accounting and Marketing Concepts and Techniques
Marketing control- (Accounting and Finance) control that makes use of balance sheets, income statements, cash flow
statements to analyze and examine financial statement to determine the company’s financial soundness and viability,
as well as financial ratios to determine the organization’s stability.
Marketing Control (Marketing)- is the control that makes use of projected sales or forecasts, statistical models,
econometric modeling, surveys, historical demand data, and actual consumption of their products.
• Sales is considered to be the “lifeblood of the business”.

Accounting/Financial Control Ratios

• Liquidity Ratio- tests the organization’s ability to meet short term obligations; it may also refer to acid tests done
when inventories turn over slowly or are difficult to sell.
Current ratio=current assets/current liabilities
 Leverage ratio- determines if the organization is technically insolvent, meaning that the organization’s financing
is mainly coming from borrowed money or from the owners’ investments.
Debt-to-assets ratio= total debt/total assets
 Activity ratio- determine if the organization is carrying more inventory than what it needs; the higher the ratio,
the more efficiently inventory assets are being used.
Inventory turnover=cost of good sold/average inventory
 Profitability ratio- determines he profits that are being generated;
Net profit after taxes/total sales
Or it measures the efficiency of assets to generate profits.
Return on investment=net profit after taxes/total assets
*Asset Management is the ability to use resources efficiently and operate at minimum cost.
Inventory turnover=sales /average inventory

Benchmarking- is an approach or process of measuring a company’s own services and practice against those of
recognized leaders in the industry in order to identify areas of improvement.
Budgeting- is the responsibility and activity of the management which requires extensive planning throughout the
organization’s entire units and departments.
• the budget may be presented on aggregated values for the entire year,
• But there is often monthly budget that puts into detail the expectations to be met.
Deviations on the budget may be adjusted as the need for them arises and is subject to the approval of the higher
authority. Budget preparation may either utilize Historical budgeting which uses the past data or actual figures of
previous periods based on actual experiences of the firm. Zero based budgeting which is created by starting from
nothing and relying on the expertise, anticipations, and experiences of each head.