ESSENTIALS OF ORGANIZATION AND MANAGEMENT: SOME WELL KNOWN THEORIES OF HUMAN

1ST SEMESTER FINALS NOTES 2022 MOTIVATION

✓ Directing 1. Maslow’s Hierarchy of Needs

✓ Leadership 2. J. Herzberg’s Motivator/Hygiene Approach
✓ Controlling 3. McClelland Needs-based Motivation Model
4. Expectancy Theory of Victor Vroom
MODULE 5: DIRECTING 5. Harold Leavitt

I. WHAT IS DIRECTING MASLOW’S HIERARCHY OF NEEDS

• Directing is the process that people would relate to • Abraham Maslow's hierarchy of needs is one of the
managing best-known theories of motivation. Maslow's theory
• It is supervising, or leading workers to accomplish states that our actions are motivated by certain
the goals of the organization
• The final action of a manager in getting others to
affect all preparations toward completion
• Directing is the process of influencing people’s
behavior through motivation, communication, group
dynamics, leadership and discipline.

HOW TO EFFECTIVELY CARRY OUT THE MANAGERIAL

FUCTION OF DIRECTING

• Includes issuing orders that are clear, complete, and

within the capabilities of subordinates to physiological and psychological needs that
accomplish progress from basic to complex.
• Suggests an incessant training activity in which
Psychological Needs (lower order needs)
subordinates are given instructions to enable them
to carry out the particular assignment in the existing • the most basic of all human need for biological
situation. maintenance; food, water, and physical well-being
• Involves the motivation of workers to meet the
expectations of the manager Safety Needs (lower order needs)
• Consists of maintaining discipline and rewarding
• people also want to feel safe from harm; these have
those who perform well.
to do with the stability and consistency in a chaotic
HOW GOOD ARE THE RESULTS THAT YOU GET FROM world
YOUR SUBORDINATES
Social Belongingness or Love Needs (lower order needs)
1. Output or production
• once people have satisfied their psychological and
2. Quality and Workmanship
safety needs, they seek to satisfy their needs for
3. Cost and budget control
acceptance, affections, and the feeling of belonging
II. MOTIVATION
Esteem Needs (higher order needs)
• Motivation results from the existence of a persons
• people who value themselves have highly developed
needs and fulfillment of those needs
feelings of confidence, worth, strength, capability,
• A NEED is an unfulfilled physiological or
and adequacy
psychological desire of an individual
• lack of self-esteem produces feelings of inferiority,
• Physiological need include such basics as food, water
inadequacy, weakness, and helplessness
sleep, air, satisfactory temperature, protection from
• Two Types of Esteem Needs
the elements by clothing and shelter
1. Competence or mastery of a task
 2. Attention and recognition that comes from 6. Growth
others
Herzberg suggests that often work can and should be
Self-Actualization Needs (higher order needs) arranged in the following ways

• self-aware, concerned with personal growth, less • Job Enlargement

concerned with the opinions of others, and interested • Job Rotation
in fulfilling their potential. • Job Enlargement

MOTIVATOR/HYGIENE APPROACH NEEDS-BASED MOTIVATION MODEL

• Motivator-Hygiene Theory (sometimes known as • In the late 1940’s David McClelland identified three
Herzberg's Two Factor Theory) needs that are vital to his approach to motivation.
• Summary: employee satisfaction has two • These needs are found to varying degrees in all
dimensions: “hygiene” and motivation. Hygiene workers and managers, and this mix of motivational
issues, such as salary and supervision, decrease needs characterized a person’s or manager’s style
employees' dissatisfaction with the work and behavior, both in terms of being motivated and
environment. Motivators, such as recognition and in the management and motivation others.
achievement, make workers more productive, • Simple Explanation: every person has one of three
creative and committed. main driving motivators: the needs for achievement,
• Frederick Herzberg classified needs into two factors affiliation, or power. These motivators are not
1. Satisfaction and psychological growth was a inherent; we develop them through our culture and
factor of motivation factors life experiences.
2. Dissatisfaction was a result of hygiene factors • These Include:
o The need for achievement (n-ach)
Hygiene Factors
o The need for authority and power (n-pow)
are needed to ensure an employee does not become o The need for affiliation (n-affil)
dissatisfied. THE NEED FOR ACHIEVEMENT (n-ach)
They do not lead to higher levels of motivation, but
• The n-ach person is ‘achievement motivated’ and
without them there is dissatisfaction
therefore seeks achievement, attainment, of realistic
1. Working Conditions but challenging goals, and advancement in the job.
2. Quality Supervision • There is a strong need for feedback as to
3. Salary achievement and progress, and a need for a sense of
4. Status accomplishment.
5. Security
THE NEED FOR AUTHORITY AND POWER (n-pow)
6. Company
7. Job • The n- pow person is ‘authority motivated’. This
8. Company Policies and Administration driver produces a need to be influential, effective
9. Interpersonal Relations and to make an impact.
• There is a strong need to lead and for their ideas to
Motivation Factors
prevail. There is also motivation and need towards
Are needed in order to motivate an employee into higher increasing personal status and prestige.
performance.
THE NEED FOR AFFILIATION (n-affil)
These factors result from internal generators in employees
• The n-affil person is ‘affiliation motivated’, and has a
1. Achievement need for friendly relationships and is motivated
2. Recognition for Achievement towards interaction with other people.
3. Responsibility for Task • The affiliations driver produces motivation and need
4. Interest in the Job to be liked and held in popular regard. These people
5. Advancement to higher level tasks are team players.
 EXPECTANCY THEORY

• Formulated by Victor Vroom MEDIUM

• Deals with motivation and management.
• Vrooms theory assumes that behavior results from
conscious choices among alternatives whose
purpose it is to maximize pleasure and minimize
pain.
• Vroom realized that an employee’s performance is
based on individual’s factors such as personality,
skills, knowledge, experience and abilities.
• Explanation: the belief that an individual chooses
their behaviors based on what they believe leads to
the most beneficial outcome. This theory is
dependent on how much value a person places on
different motivations. This results in a decision they
expect to give them the highest return for their
efforts.
HAROLD LEAVITT
• Harold Levitt, an author and management expert who
advocated a more democratic approach to
organizational decision-making
• but who also concluded that people in large groups
work best through a chain of command.
• associated with the carrier of the message, which
may be personal communication though face-to-face
interaction, telephone call, or a letter.
• Channels of information
MESSAGE
• in personal communication is most critical because it
is influenced by culture and directness.
Communication to be successful usually must be
direct.
SPEAKER
• must be clear, effective, and culturally sensitive to the
individual’s needs. An adequate vocabulary and clear
expression are priorities for success.
LISTENER
• must devote full attention to the speaker. It is
imperative to provide the speaker with.
FEEDBACK

III. COMMUNICATION • is a reaction to the conversation as an indication of

attentiveness includes clarification of misunderstood
• Communication is the ability to communicate with all statements.
people with whom leader comes in regular contact;
INTERFERENCE
the ability to communicate continuously; the ability to
use language which those on the receiving end will • occurs when a listener fails to hear the message
be able to understand and respond to. because of external (noise) or internal (something
• Communication transfers information and enhances else on mind) interference.
understanding among individuals and groups.
CONTEXT
CHANNELS OF COMMUNICATION
• is related to the time, place, and situation in which the
• Informal communication channels – It grows out the
conversation occurs. The effectiveness of a
social interactions among people who work together.
communication may be related to the receptiveness
ELEMENTS OF COMMUNICATION of and lack of interference for the participant.

1. Medium COMMUNICATION TECHNIQUES

2. Message
• Effective Speaking
3. Speaker
• Effective Listening
4. Listener
• Feedback
5. Feedback
• Alert to Nonverbal Signals
6. Interference
7. Context EFFECTIVE SPEAKING
 • To ensure communicative clarity, formulate your
thoughts before speaking and be aware of the
verbal and nonverbal feedback from your listener.
• Avoid “ you” messages, as they can be insulting and
negative on the part of the listener. You can give
information about yourself and have a chance to
Visually Impaired
share personal information.
• Always give constructive feedback by giving
constructive criticism.
EFFECTIVE LISTENING
• An effective listener is as actively involved in the
conversation as the speaker. Since the speaker’s
nonverbal communication reveals more than the
actual words, the listener must be alert to posture,
gestures, facial expressions, eye movement, and the
tone and inflection of the speaker’s voice. The listener
always accepts criticism and listens carefully to the
individual’s point of view.
• You are also interacting with the speaker
FEEDBACK
• It is an important aspect in communication that can
reinforce some behavior and extinguish others.
Feedback can also be an important source of
information about you.
ALERT TO NONVERBAL SIGNALS
• Effective communication requires that one is alert to
the many nonverbal cues expressed by listeners.
These include posture, gestures, facial expression,
tone and inflection of words, personal dress, and
personal space. It reflects the individual’s personality
and culture.
BARRIERS TO COMMUNICATION
• Physical Barriers
• Psychological Barriers
• Cultural Barriers
• Attitudes and Behaviors
PHYSICAL BARRIERS
• can prevent effective communication. Deafness or
hearing loss, impaired vision, or speech disabilities
can affect the way messages are sent or received.
Hearing Loss
• People with hearing loss have difficulty receiving
spoken messages.
• To improve communication, it is essential for the
person with hearing loss to use hearing aids and be
sure that such aids are functioning properly.
• they may hear the words and receive and receive the
verbal part of the message, but be unable to receive
the critical nonverbal message.
• Be certain to announce your presence, touch as
appropriate and explain sounds or noises to the
person with visual impairment. Remember they can
still hear and you don’t have to shout to communicate
with the blind.
Aphasia or Speech Impairments
• may not only have difficulty with spoken words; they
may also have difficulty with written communication.
The person may know not be able to pronounce the
words or be unable to pronounce the words clearly.
PSYCHOLOGICAL BARRIERS
• Like attitudes, prejudices and personality can get in
the way of effective communication. Judging others
based on appearance, lifestyle or socioeconomic
status are psychological barriers to communication.
• The emotions or moods they have during that
situation of communication
CULTURAL BARRIERS
• Like values, beliefs, customs and attitudes shared by
a group of people
• Communication styles between cultures can
interfere with communication.
• In some cultures, direct eye contact is not acceptable,
people of some cultures stand very close when
communicating, and while others want to be at least
an arms distance.
ATTITUDES AND BEHAVIORS
• Communication may fail because of attitudes or
behaviors of both the sender and receiver.
• Sometimes communications can lead to defensive
responses such as avoidance, or be perceived as
criticism or an attempt to control the other person.
• Giving your opinion may tell the other person that you
are judging his or her values. Silences have meaning.
 Silence may mean acceptance, fear or the need for • This is power which comes from a system of informal
time to think. Changing the subject is sometimes personal obligations which has been built up
done when the topic becomes uncomfortable. between people.

IV. POWER AND INFLUENCE IN ORGANIZATION MODULE 6: LEADERSHIP

• POWER has been defined as the potential to I. LEADERSHIP

influence the actions of another person I the
direction desired by the influencer. • Is an interpersonal influence directed toward the
• Direct implication in the factor or able to perform the achievement of a goal or goals
effective directing functions o Interpersonal – means between persons. Thus,
• The capacity to influence, or power, that a person in a leader has more than one person (group) to
the organization has, is determined by many factors, lead
the formal authority of his position being only one o Influence – the power to affect others
of these. o Goals – is the end, one strives to attain;
• Is a dynamic relationship based on mutual influence
CLASSIFICATION OF POWERS and common purpose b/w leaders and
collaborators in which both are moved to higher level
1. Legitimate Power
of motivation and moral development as they affect
2. Expert Power
real, intended change
3. Referent Power
o Relationship – is the connection between people
4. Reward Power
o Mutual – means shared in common; mutual
5. Punishment Power
understanding; common mindset; common
6. Relationship Power
belief, values etc.
LEGITIMATE POWER ▪ Strong mutual – the don’t share the same
mindset
• This power comes by virtue of a person’s occupying
▪ Kahit na same goal there is no assurance
a position in an organization
that you will succeed if there is no mutual
EXPERT POWER or same mindset
o Collaborators – cooperate or work together
• This is capacity to influence which arises from expert
knowledge that the influencer has. II. FUNCTIONS OF LEADERSHIP

REFERENT POWER 1. To achieve results

2. To inspire and energize workers
• This is power that comes by virtue of some personal 3. Hard work
characteristics (charisma) of the person which
others identify with. TO ACHIEVE RESULTS

REWARD POWER • Measured in terms of what was intended and what

actually achieved
• This is power that comes by virtue of a person’s • You want to be done and to be attained
ability to give or withhold resources which are
valued by others. TO INSPIRE AND ENERGIZE WORKERS

PUNISHMENT POWER • Encourage workers to engage in productive and

• Closely related to Reward Power, this is power which
comes from the capacity to deprive a person of
something of value.
RELATIONSHIP POWER
effective activities and harness their talents,
capabilities and expertise accordingly
• You are there because you want to inspire, motivate,
and pump your subordinates to become more
productive. Activate the talent and potential of your
subordinate. Supporting and training and setting an
example
HARDWORK INFORMAL LEADER

• Leaders must have great stores of energy, • Secured by virtue of personality, charisma, expertise,
enthusiasm, dedication, zeal, and commitment in command of resources, and who is therefore the de
order to be able to energize and inspire people and facto leader in a particular situation
commit resources in pursuit of the desired results
IV. STYLE OF LEADER
• Hard work doesn’t just mean physical exertion but
the composition of hard work but rather on 1. Authoritarian Leadership (Autocratic)
psychological, or even mental setting 2. Participative Leadership (Democratic)
3. Laissez-Fair
III. TYPES OF LEADERS
AUTHORITARIAN LEADERSHIP (AUTOCRATIC)
1. Traditional Leader
2. Known Leader • Authoritarian leaders provide clear expectations for
3. Appointed Leader what needs to be done when it should be done and
4. Bureaucratic Leader how it should be done
5. Functional or Expert Leader • there is also a clear division between the leader and
6. Charismatic Leader the followers
7. Informal Leader • authoritarian leaders make decisions independently
with little or no input from the rest of the group
TRADITIONAL LEADER
• best the situations where there is little time for group
• Leader whose position is assured by birth and decision making or where the leader is the most
heredity knowledgeable member of the group
• Ex: monarchy
PARTICIPATIVE LEADERSHIP (DEMOCRATIC)
• However today, they are now only sumbolic
• The most effective style
KNOWN LEADER
• democratic leaders offer guidance to group
• Whose position is secured by the fact that everybody members but they also participate in the group and
understands his position allow input from other group members
• participative leaders encourage group members to
APPOINTED LEADER participate but retain the final say over the decision
making process group members feel engaged in the
• Position is legitimized by virtue of the fact that he or
process and are more motivated and creative
she has gone through selection and assessment
process LAISSEZ-FAIR

BUREAUCRATIC LEADER • laissez-fair leaders offer little or no guidance to

group members and leave decision making up to
• Leader whose position is legitimized by the rank held
group members
FUNCTIONAL OR EXPERT LEADER • make their way on how to do with a little bit of
interaction from the leader
• Leader whose position is secured by virtue of • advantage: empowered group members; they can do
expertise, command of technology or resources right things in their own way
CHARISMATIC LEADER • disadvantage: can be abused

• Leader whose position is secured by the sheer force V. LEADERSHIP THEORIES

of known or understood personality. 1. “Great Man” Theories
2. Trait Theories
3. Contingency Theories
4. Fiedler’s Contingency Model
 “GREAT MAN” THEORIES • Success depends upon a number of variables,
including the leadership style, qualities of the
• Theories that assume that the capacity for leadership
followers, and aspects of the situation
is inherent
• great leaders are born not made FIEDLER’S CONTINGENCY MODEL
• these theories often portray great leaders as heroic
• Fred E. Fiedler’s Contingency theory postulates that
mythic and destined to rise to leadership when
there is no best way for managers to leader
needed
• Situations will create different leadership style
• the term great man was used because at the time
requirements for a manager.
leadership was thought of primarily as a male
• The solution to a managerial situation is contingent
quality especially in terms of military leadership
on the factors that impinge on the situation
TRAIT THEORIES
ASPECTS OF THE CONTINGENCY MODEL THEORY
• Often identify a particular personality or behavioral
1. Relationship oriented manager vs. task oriented
characteristics shared by leaders
manager
CHARACTERISTICS OR TRAITS OF AN EFFECTIVE 2. Task oriented style vs. relationship orientation style
LEADER 3. Leader–Member relations, task structure, and
position power
1. Physical Traits
4. Task motivated style leader vs. relationship-
2. Social Characteristics
oriented leaders
3. Personality Traits
5. Situational theories
4. Task-related characteristics
6. Behavioral theories
Physical Traits 7. Theory X and Theory Y
8. Participative Theories
• Include being young to middle-aged, energetic, tall, 9. Management Theories
and handsome. 10. Relationship Theories
• Social background traits include being educated at
the “right” schools and being socially prominent or RELATIONSHIP ORIENTED MANAGER VS. TASK
upwardly mobile ORIENTED MANAGER

Social Characteristics Relationship Oriented Task Oriented Manager

Manager
• Include being charismatic, charming, tactful, popular, • they do better in all • tend to do better in
cooperative, and diplomatic other situations situations that have
good-leader-
Personality Traits
member
relationships,
• Self-confident, adaptable, assertive, and emotionally
structured tasks, and
stable
either weak or strong
Task-related Characteristics position power
TASK ORIENTED STYLE VS. RELATIONSHIP
• Driven to excel, accepting of responsibility, having ORIENTATION STYLE
initiative, and being results-oriented
Task Oriented Style Relationship Orientation
CONTINGENCY THEORIES Style
• Focus on particular variables related to the • preferably at the • excels in the middle
clearly defined ground
environment that might determine which particular
extremes of
style of leadership is best suited for the situation
“favorable” and
• Non leadership style is best in all situations.
“unfavorable”
environments
LEADER–MEMBER RELATIONS, TASK STRUCTURE, o Willingness and ability of a person to take
AND POSITION POWER responsibility for directing his or her own
behavior
• leader–member relations are the amount of loyalty,
dependability, and support that the leader receives BEHAVIORAL THEORIES
from employees
• based upon the belief that great leaders are made,
• positioning power measures the amount of power
not born
or authority the manger perceives the organization
• people can learn to become leaders through teaching
has given him or her for the purpose of directing,
and observation
rewarding, and punishing subordinates
THEORY X AND THEORY Y
TASK MOTIVATED STYLE LEADER VS. RELATIONSHIP-
ORIENTED LEADERS • Douglas McGregor described Theory X and Theory Y
in HIS BOOK, The Human Side of Enterprise.
Task-motivated style Relationship-oriented
leader leaders Theory X
• experiences pride • seeks to build
and satisfaction I the interpersonal • is the traditional view of direction and control by
task accomplishment relations and extend managers.
for the organization extra help for the • assumes that workers generally dislike work and
team development in must be coerced into performing well; and
the organization
• at their best when Theory Y
greater customer • is the view that individual and organizational goals
satisfaction is gained
can be integrated.
and a positive
• assumes that workers are predisposed to be creative
company image is
and cooperative, and should be encouraged rather
established
than threatened.

SITUATIONAL THEORIES
• leaders choose the best course of action based upon
situational variable
• different styles of leadership may be more
appropriate for certain types of decision-making
HERSEY-BLANCHARD SITUATIONAL LEADERSHIP
THEORY
• Based on the amount of direction (task behavior) and
amount of socio-emotional support (relationship
behavior) a leader must provide given the situation
and the “level of maturity” of the followers
• TASK BEHAVIOR
o Extent to which the leader engages in spelling
out the duties and responsibilities to a individual
or group
• RELATIONSHIP BEHAVIOR
o Leader engages in two-way or multi-way
communications. This includes listening,
facilitating, and supportive behaviors
• MATURITY
PARTICIPATIVE THEORIES
• Participative leadership theories suggest that the
ideal leadership style is one that takes the input of
others into account.
• The Vroom, Yetton, Jago leader-participation model
o relates leadership behavior and participation to
decision making. The model provides a set of
sequential rules to determine the form and
amount of participative decision making in
different situations.
MANAGEMENT THEORIES
• also known as “Transactional theories”
• focus on the role of supervision, organization, and
group performance.
RELATIONSHIP THEORIES
• also known as ‘’Transformational theories”
• focus upon the connections formed between leaders
and followers
VI. HOW WILL YOU MANAGE
Consider the following skills and abilities which are • Clarity, intelligence, and confidence
commonly needed in managerial and leadership situations.:
ABILITY TO RUN A MEETING
• Oral communication
• The ability to run an orderly meeting is a skill that is
• Written communication
highly prized but often underestimated.
• Delegation
• Organization MODULE 7: CONTROLLING
• Public Speaking
• Ability to run a meeting I. CONTROLLING DEFINED

ORAL COMMUNICATION • Managerial activity for ensuring the achievement of

• The ability to communicate with a variety of types
of people, including board members, volunteers, staff
members, donors, government authorities and other
people in the community.
• The manager must understand what information
each person or group needs, how they will receive
the information, and how to present the information
in the away it will be most clearly understood.
• You must be able to communicate effectively and
efficiently to every people
• You must know their background
WRITTEN COMMUNICATION
• Managers must be able to clearly articulate, in a
minimum of words, an organizational mission, vision,
objectives of an organization.
DELEGATION
• With the number of activities of a manager, the
ability to assign tasks to other, give them clear
instruction and follow through in a way that creates
the most possibility for success is a valuable skill for
managers.
• Effectively assign the tasks to others
ORGANIZATION
an organization’s objective
• Control is checking to determine whether plans are
being observed and suitable progress toward the
objectives is being made, and acting, if necessary to
correct deviations
II. THE CONTROL PROCESS
1. Establishing standards against which performance
can be measured
2. Comparing actual performance against standards
3. Correcting deviations or straightening up what is
crooked
ESTABLISHING STANDARDS
• These standards are closely tied up with the
objectives which the manager formulates during the
planning stage
• These standards which are often expressed in terms
of money, time, quotas, etc. say how things ought to
be
COMPARING ACTUAL PERFORMANCE AGAINST
STANDARDS
• Necessitates the collection of accurate data relating
to actual performance
• Helps the manager see how things really are

• The ability to organize, not only one’s own CORRECTING DEVIATIONS

workspace, but a list of tasks and duties, is prized
• After the causes of the deviations have been
management ability.
identified, appropriate corrective action should be
• You know how to formulate, strategize, or allocate
taken so that performance takes place according to
resources to certain people, etc.
plans
PUBLIC SPEAKING
III. TYPES OF CONTROL
• Whether it is a news conference, a public
1. Preliminary Control
announcement, a report to the board or a defense of
2. Concurrent Control
a grant application, a manager needs to be able to
3. Post-Action Control
stand in front of various groups of people and speak
with clarity, intelligence and confidence.
 PRELIMINARY CONTROL
• Control which identifies major problems before they
occur
CONCURRENT CONTROL
• Form of control that endeavors to monitor the
operation in progress
• Under this type, work may no proceed to the next
step unless it passes a screening test
POST-ACTION CONTROL
• Carried out after the event
• This is the poorest form of control because it is
wasteful of resources
IV. CONTROL TECHNIQUES
1. Traditional Control Techniques
o Budgetary Control
o Break-even point analysis
2. Specialized Control Techniques
o Gantt Chart Technique
o Network Analysis
o Milestone Scheduling
TRADITIONAL CONTROL TECHNIQUES
BUDGETARY CONTROL
• Budget is a financial statement prepared and
approved prior to a defined period of time, of the
policy to be pursued during the specified period for
the purpose of achieving a predetermined objective
BREAK-EVEN POINT ANALYSIS
• Break-even point is the point when total income is
equal to the total cost, that is, the level of activity
when profit or loss is made by the business
organization
SPECIALIZED CONTROL TECHNIQUES
GANTT CHART TECHNIQUE
• This is a way of presenting control information to
management developed by Henry L. Gantt
• Data relating to costs, sales or production are plotted
by time period as a series of bars, the length of the
bar depends upon the value of the data presented
NETWORK ANALYSIS
• Technique for controlling a complex project which
requires analysis into its various activities and
events
• These events are recorded on a network analysis
chart
• Network analysis techniques are similar and include
Critical Path Method (CPM) and Program Evaluation
and Review Technique (PERT)
• A more recent development in control program is the
Graphic Evaluation And Review Technique (GERT).
Unlike its predecessors, GERT gives a statistical read-
out of the optional paths to pursue that the other
processes do not
MILESTONE SCHEDULING
• Schedule and control procedure developed by the
National Aeronautics and Space Administration
(NASA)
• Allows the manager to see a program in its simpler
parts, thereby providing more effective control than
sophisticated techniques
V. CONTROLLING OVERALL PERFORMANCE
1. Income Statement
2. Return on Investment (ROI)
3. Key Area Control
4. Audits
INCOME STATEMENT
• Statement compiled at the end of an accounting
period for the purpose of calculating the net profit or
loss from business operation
• Done by deducting administrative expenses,
financial, selling and distribution overheads from
the gross profit, derived from the trading account,
adding any income from investments and subtracting
financial charges such as bank interest
RETURN ON INVESTMENT (ROI)
• The ROI is a key ratio as it indicates the results
obtained by a business organization
𝑃𝑟𝑜𝑓𝑖𝑡 (𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥 ) 𝑥 100%
𝑅𝑂𝐼 =
𝑇𝑜𝑡𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡
 KEY AREA CONTROL VI. CONTROL STRATEGIES

• This is a control technique by which an organization 1. Market Control

rates its performance in a number of critical areas
AUDITS
• an official inspection of an individual's or
organization's accounts, typically by an independent
body.
• Three Types:
1. Internal Audits
2. External Audits
3. Management Audits
INTERNAL AUDITS
• This type of audit is conducted by internal auditors
who are employees of the organization and are
responsible for performing impartial monitoring
activities.
• They examine and evaluate the financial aspects of
the organization’s operations and recommend
corrective action where it is needed
EXTERNAL AUDITS
2. Bureaucratic Control
3. Clan Control
MARKET CONTROL
• A managerial approach that relies on market
mechanisms to regulate prices for certain clearly
specified goods and reasonable level of competition
in the goods or service area and it must be possible
to specify requirements clearly.
BUREAUCRATIC CONTROL
• Relies on regulations through rules, policies,
supervision, budgets, schedules, reward systems and
other administrative mechanisms.
CLAN CONTROL
• Relies on values, beliefs, traditions, corporate culture,
shared norms, and informal relationships to regulate
employee behaviors and facilitate the reaching of
organizational goals.

• Conducted by external auditors who are not

employees of the company
• Their tasks is to inspect financial accounts and
business records at the end of the financial year to
ensure that they present an accurate and fair picture
of profits, losses, assets and liabilities.
• External auditing, in spite of it being essentially a
verification of the financial statements, tends to
exercise some degree of control over the
organizations personnel.

MANAGEMENT AUDITS

• A management audit is a periodic assessment of the

managerial performance conducted by an internal or
external auditors.
• Its primary aim is to determine whether positive
results are being obtained from the managerial team
or not.
• This type of audit is essential in large companies to
ensure that managerial performance is in line with
current needs rather than outdated historical
circumstances.