Chapter VIII:

MANAGING THE
ENTERPRISES
INTRODUCTION
Enterprise is the act of creating, innovating and
setting up a business, taking financial risks
expecting profits. The enterprise in company form
offers a product, a product or service for scale or
hires to professionals or individuals, contributing to
a community’s overall economic development.
Principles of management apply to all kind of
organizations private or public; profit or not-for-
profit; service producing or good producing .
Managers’ work in all kinds of organization at all
levels. Regardless of the size or nature of an
organization, managers are among important assets.
OBJECTIVES
a. Define management and enterprises;
b. Discuss the role of management;
c. Classify the different theories of management
DISCUSSION PROPER
 All business organization has resources and goals.
Resources require proper allocation and efficient use.
Goals must be effectively achieved. These and many more
can have made possible through good management .
Without efficient and effective management, a business,
organization cannot survive. Such kind of management is
more needed in a very competitive market. It is the
survival of the fittest, and the fittest is one has the best
management.
 Peter Drucker, a world class management consultant,
said that the first function of a business enterprise is
economic performance. This is measured in terms of
profit. Such economics success means development
and growth for the enterprise without profit a
business organization cannot sustain its existence.
 Several topics are discussed in this chapter, such as
function management, characteristics of successful
management. Furthermore, the various theories of
management are explained.
Management defined
 JOSEPH MASSIE, author of Essential of Management,
defines management as a process by which cooperative
group directs actions towards common goals.
 From the economist point of view, management is one of
the factors of production , together with land, labor and
capital.
 Viewed by a sociologist, management is a class status
system which requires an elite of intelligence and Education.
 ROBERT HUGHES, author of Business, defines
management as the process of coordinating the resources of
the organization in order to achieved its primary goals.
Clearly, this is also the job of the Entrepreneur. Most
organization depend on four kinds of resources: material,
human, financial and Information.
Management is both Art and Science. It is an art because
management requires skills and techniques in dealing
with people in order to get things done or to achieve
organization goals. Such art is mostly not in textbooks. It
is simply an individual style f management in response
to particular situation. In the case of management as a
science, it uses an organized, clear and pertinent
knowledge. Management is systematic and uses
scientific methods of solving business problems.
PRODUCTION RESOURCES

 Material Resources
 Financial Resources
 Human Resources
 Informational Resources
THE ROLE OF MANAGEMENT
The role of business management should not only to
maximize profits for stockholders, but also to help the
jobless. Our country has a million jobless people. Such very
precious human resources constitute an enormous economic
waste if they are not used in the production of goods and
services. It is the social responsibility of management to
employ such resources for the good and economy and
society.
BASIC FUNCTION OF MANAGEMENT
1. Establish goals of the enterprise and develop plans to
attain goals
2. Organize people and other resources to achieve goals
3. Lead and motivate people towards the goals of the
enterprise
4. Maintain sufficient control system to ensure that the
enterprise is moving well towards its goal
MANAGEMENT BY OBJECTIVES (MBO)
 Management by objectives is based on team work and
team results, according to Peter Drucker. All members of
the organization focus their efforts towards the attainment
of common goal of the organization. Each subordinate
manager formulates his own objective of top management.
 The story of the three stone cutters shows the real manager
among them, they were asked what they were doing. One
stone cutter said “I am making a living” the other one
answered “I am doing the best stone-cutting in the entire
country”, the third stone cutter said with a proud voice “I
am building a cathedral”. The last one obviously, is the
true manager. He has a vision and considers himself part of
the team.
THEORIES OF MANAGEMENT
 Here are some theories which explain the factors that are
responsible for employee efficiency:
1. Scientific management of Taylor- In early 1800,Frederich
Taylor become interested in improving efficiency of workers
based on his bitter personal experiences as an employee of
manufacturing plants. Taylor claimed that the most people
work only to earn money. Because of his contribution to
management , Taylor become “Father of Scientific
Management”.
2. The Hawthorne studies of Elton de Mayo – Three
experiments were conducted in 1927-1932 by Elton Mayo at
the Hawthorne plant of Western Electric Company in
Chicago. The original objective of the experiment was to
determine the effect of environment on productivity. The first
experiment was to determine the effect of lighting on
productivity. The second experiment was to determine the
effectiveness of the piece rate-system. It was expected that
faster workers could pressure slower to produce more.
The Hawthorne studies proved that human factors are
important as pay rates as far as motivation is concern
subsequently other studies were conducted. They concluded
that employees who are happy and satisfied in their work can
be motivated to perform better. So, management should
provide , a favorable environment to maximize satisfaction of
workers or employees.
3. Theory X and Theory Y of McGregor- These were
explained in his book the Human Side of Enterprise. Theory
X assume that workers dislike work. So, managers should
force them to attain the goals of enterprise. The managers
make all the decisions while the workers just take the orders.
In the case of Theory Y, it assumes that work is an important
part of the lives, of people; that people are and therefore
committed to the goals of the enterprise if these provide them
personal rewards; and that enterprise do not, in general, fully
use their human resources.
4. Hierarchy of needs of Maslow- He assumed that people
seek to fulfill variety of needs. Based on their sequence of
importance, these need are:
a) Physical/ physiological- food, clothing and shelter
b) Safety- job security, health insurance and pension plan
c) Social- love, affection and belongings
d) Esteem- respect, recognition and honor
e) Self-realization- fulfillment
5. Theory of Herzberg- He interviewed 200 accountants
and engineers in Pittsburg City. The purpose of the interview
was to determine the factors that cause satisfaction and
dissatisfaction. The result was surprisingly unexpected. For
instance, low pay make an employee feel bad. But it is not
high pay that makes an employee feel good. Herzberg
discovered that factors most frequently, associated with
satisfaction are achievement , recognition, responsibility,
advancement and work together with work itself.
These factors are generally called motivation factors. Their
absence, however, does not necessarily result in
dissatisfaction of employees. Factors that cause
dissatisfaction, based on interviews are supervision, working
conditions, interpersonal relationship, pay job security and
company policies and administration.
CONTEMPORARY THEORY
 Theory Z, this is the best combination of the features of
Japanese enterprise and American firms. The feature of
Japanese corporation is:
 Lifetime employment
 Collective decision making
 Collective responsibility
 Slow promotion
 Holistic concern for employees
In the case of American firms, their features are:
 Short-term employment
 Individual decision making
 Individual responsibility
 Rapid promotion
 Explicit control mechanism
Theory Z integrates the features of both Japanese and
American firms which are believe to be most suitable for
American business, these are :
 Long time employment
 Collective decision making
 Individual responsibility
 Slow promotion
 Informal control
 Holistic concern for the employees
 Moderate specialized career paths

Professor William Ouchi of the University of California,

Los Angeles is the Author of Theory Z., in 1970’s, he studied
the characteristics of Japanese and American enterprises.
THE NEED FOR RISK MANAGEMENT
 Any business enterprise is faced with several risk
responsibilities. To sustain its business viability or
success, an enterprise should eliminate or minimize
business risk, such as fire, natural calamities, pilfering,
robbery, strikes, accident and so forth. The late Marlene
Dietrich’s legs and Elizabeth Taylor’s eyes have been
ensured at Lloyd’s of London . This organization
provides service for safety from the unknown and
unexpected.
 However, if risks cannot be avoided, at least this can be
reduced by the use of following:
1. Employees safety program
2. Proper safety environment
3. Burglar alarms, security guards and guard dogs
4. Fire alarms, sprinkler system and similar safety measure
5. Accurate accounting and financial controls
 Risk is part of the business. It can be both within the
control or beyond the control of the entrepreneur. To
eliminate of maximize such risks, the entrepreneur must
have a risk and insurance program
 The common types of non-criminal business risk are:
1. FIRE
2. NATURAL CALAMITIES
3. PERSONAL LIABILITIES
4. ECONOMIC PROBLEMS
5. BUSINESS INTERUPTIONS
6. LOSS OF KEY PERSONNEL
OTHER BUSINESS RISKS

 There are business risks which are criminal in nature,

such risks are personally planned or intended. These are:
1. BURGLARY
2. ROBBERY
3. SHOPLIFTING
4. EMPLOYEE THEF