LM INST 3 (Entrepreneurial Management)
(PPT 1)
ENTREPRENEURSHIP: EVOLUTIONARY
DEVELOPMENT
➢ Who are Entrepreneurs?
They are individuals who recognize opportunities
where others see chaos, contradiction, and confusion
(Kuratko, 2019).
➢ Entrepreneurs vs. Small-Business Owners
a. Small-business owner – owns and operate small
businesses that are dominant in their fields and
usually do not engage in new or innovative ways.
They prefer more stable and less aggressive
approach. They can be viewed as managers of their
small-businesses.
b. Entrepreneurs – they have the principal objectives
of innovation, profitability, and growth. They
practiced innovative strategy and sustainable
growth. Thus, entrepreneurial mind-set is
developed.
➢ Entrepreneurial Mind-set
It represents the awareness and determination to see
the world in a new light or innovative perspective. It is
exhibited inside or outside an organization to bring forth
creative ideas.
➢ Evolution of Entrepreneurship
• Entrepreneur – derived from the French
entreprendre, meaning to undertake.
• Entrepreneur undertakes to organize, manage, and
assume risks of a business.
• Now, an innovator or developer who recognizes and
seizes opportunities by converting those to
workable ideas and realizing rewards in the future
• 18th century France – recognition of entrepreneurs
when economist Richard Cantillon associated risk
bearing activity in the economy with the
entrepreneur.
• 18th century England – industrial revolution is
evolving with entrepreneur playing an important
role in risk taking and transformation of resources.
• Until the 1950’s – definition were given by
economists: Richard Cantillon (1725), French
economist Jean Baptiste Say (1803), 20th Century
economist Joseph Schumpeter (1934)
• Robert C. Ronstadt put together summary
description from evolution entrepreneurship and
examining various definitions.
Entrepreneurship is the dynamic process of
creating incremental wealth. This wealth is created
by individuals who assume the major risks in terms
of equity, time, and/or career commitment of
providing value for some product or service. The
product or service itself may or may not be new or
unique but value must somehow be infused by the
entrepreneur by securing and allocating the
necessary skills and resources.
➢ Entrepreneurship Defined:
Entrepreneurship is the dynamic process of
vision, change, and creation. It requires an
application of energy and passion toward the
creation and implementation of innovative ideas
and creative solutions. Essential ingredients include
the willingness to take calculated risks in terms of
time, equity, or career; the ability to formulate an
effective venture team; the creative skill to marshal
needed resources; the fundamental skill of building
a solid business plan; and, finally, the vision to
recognize opportunity where others see chaos,
contradiction, and confusion.
(PPT 2)
APPROACHES TO ENTREPRENEURSHIP
➢ Schools-of-Thought Approaches to
Entrepreneurship
• Two Major Schools of Entrepreneurial Thought
1. The Macro View
The macro view of entrepreneurship presents a
diverse set of factors that influence the success or
failure of contemporary entrepreneurial ventures.
The macro view point includes:
a. Environmental School of Thought
The environmental school of thought is
concerned with external factors (positive or
negative forces) that influence the lifestyle of a
potential entrepreneur.
b. Financial/Capital School of Thought
The financial/capital school of thought is based
on the process of seeking capital. It focuses on the
acquisition of seed and growth capital.
c. Displacement School of Thought
The negative side of group phenomena in which
someone feels "out of place" or is literally
"displaced" from the group. It asserts that the group
prevents a person from advancing or eliminates
critical factors that are required for that person to
advance. As a result of such actions, the dissatisfied
individual will be compelled to pursue an
entrepreneurial endeavor out of his or her own
desire to succeed. Individuals will not engage in a
venture unless they are prevented or displaced from
doing other things.
Under the displacement school of thought,
cultural awareness, knowledge of political and
public policy, and economic indoctrination will aid
and improve entrepreneurial understanding. The
stronger the entrepreneurial understanding, the
broader the educational base in economics and
political science. This school of thought is
LM INST 3 (Entrepreneurial Management)
exemplified by three major types of displacement:
political, cultural, and economic.
2. The Micro View
The micro view of entrepreneurship
investigates entrepreneurship-specific factors that
are part of the internal locus of control.
In this viewpoint, the potential entrepreneur has
the ability, or control, to direct or adjust the
outcome of each major influence.
The micro view point includes:
a. Entrepreneurial Trait School of Thought
This approach is based on the study of
successful people who exhibit similar
characteristics that, if copied, would increase the
followers' chances of success. Successful
entrepreneurs, for example, typically exhibit four
factors: achievement, creativity, determination, and
technical knowledge.
b. Venture Opportunity School of Thought
It focuses on the opportunities associated with
venture development. This school's main areas of
interest are the search for new ideas, the
development of concepts, and the implementation
of business opportunities.
c. Strategic Formulation School of Thought
It emphasizes the importance of planning in
successful venture development.
Unique elements of strategic formulation:
i. Unique markets. The strategy is mountain
versus mountain gap strategies, which
refers to identifying major market segments
as well as in-between markets that arise
from larger markets.
ii. Unique people. The strategy is great chef
strategies, which refers to the skills or
special talents of one or more individuals
around whom the venture is built.
iii. Unique products. The strategy is better
widget strategies, which refers to
innovation that encompass new or existing
markets.
iv. Unique resources. The strategy is water
well strategies, which refers to the ability to
gather or harness special resources like
land, labor, capital, and raw materials over
the long term.
(PPT 3)
BUSINESS SYSTEM
➢ What is Business?
Is any activity involved in the production and
distribution of goods and services, aimed to meet
the economic needs of consumers with an objective
of eventually earning profit.
➢ Relationship Between Business and Economy
• The role of business is to produce goods and
services which consumers need.
• The business firm produces goods and services
from the factors of productions provided by the
society. Consequently, to produce goods and
services, the business firm has to purchase
materials, components, or semi-finished goods
from other producers.
➢ Elements of a Business System
Economy is the study of how society produces
and distributes its desired goods and services. It
deals with how society uses its resources to produce
goods or services. These economic resources to
produce are called Factors of Production.
a. Land – All natural resources and the land itself.
b. Labor – Physical and mental inputs of the
people who produce the goods and services.
c. Capital – Money needed to start the business
operation.
d. Entrepreneur – Buys and organize these
factors to provide goods and services.
In return, he profits if his products are in
demand and inherent in all business ventures.
➢ What is Profit?
It is the difference between the income an
entrepreneur receives from the sale of his goods and
services and the expenses he incurs to produce
them. Formula “Income – Expenses”
Profit is important in business. It is the prime
motivator. Entrepreneurs produce goods and
services that consumers are willing to buy.
➢ Why People Engage in Business?
✓ Power
✓ Profit
✓ Service to Community
✓ Prestige
✓ Livelihood
✓ Social Approval
• Abraham W. Maslow Hierarchy of Needs
1. Physiological – essential for survival (food,
shelter, clothing, sex, air, water)
2. Safety Need – desire for security, stability, or
protection against danger
3. Social Need – need for group belongingness,
affection, love and friendship
4. Self-Esteem Need – self-recognition or group
satisfaction
5. Self-Fulfillment or Self- Actualization –
realization of personal goal or ambition
LM INST 3 (Entrepreneurial Management)
➢ Kinds of Business
Classifications are based on the nature of
principal activity performed by the business
enterprise.
1. Industries
Involve the conversion of raw materials
into finished products or goods and the
application of labor upon raw materials so that
greater usefulness becomes possible. (e.g.,
farming, fishing, and mining). Manufacturing
Industries use materials and supplies turned
out by extractive industries and change these
raw materials into various article of materials
for further production of goods and new
products. (e.g., Nokia, Honda, Sony, Shell, etc.)
2. Commerce
Involve the process of buying and selling
where the goods are moved from the point of
production to the point of consumption. It
involves purchasing and the actual investment
of capital in the merchandise handled with the
intention of reselling a profit. (e.g., SM,
Rustan’s , Robinsons, etc.)
3. Service Enterprise
Primarily concerned with the satisfaction of
the need and wants of the consumers. Divided
into:
a. Public and Community Service (Meralco,
Transport Services, etc.)
b. Professional or Trade Service (Law
offices, CPAs, Repair Shops, etc.)
➢ Kinds of Economic System
1. Capitalism
A system in which the means of production
are owned and operated by private individuals.
It is a system of economic organization wherein
privately-owned capital, and property rights are
privately invested with the ultimate aim of
personal gain.
2. Socialism
The ownership of production and capital by
the government and regulation by the society,
as a whole, of the process of production and
distribution, and of the giving of essential
service.
3. Communism
Stands for the collective ownership by the
government of consumption goods and
production goods. The state owns and controls
all means of production.
These terms have been defined in different
ways. Very few countries have a pure capitalist
or a pure communist system.
➢ Phases of Economic Development
Criteria in Classifying Phases of Economic
Development
A. Means of Livelihood
1. Hunting and Fishing Phase – Ancestors
obtained food by hunting and fishing.
2. Pastoral Phase – Presence of large numbers of
livestock.
3. Handicraft Phase – Items or objects were
made by skilled and trained manual laborers
(sculptures, jewelry, furniture).
4. Agricultural Phase – Concept of land
ownership. Began to work as a farmer or a
fisherman.
5. Industrial Phase – Presence of manufacturing
companies. Machineries were used.
B. Extent of Economic Activity
1. Household Economy – The needs of the family
were satisfied first through the contribution of
the family members.
2. Village Economy – Economic and social
relations spread among various families.
3. National Economy – Grouping of villages into
bigger and broader social units.
4. International Economy – Country expands its
economic relationship through international
trade.
C. Medium of Exchange
1. Barter Economy – Done during primitive era,
exchange was done which was the direst
exchange of goods for goods, services for
services, goods for services, or services for
goods.
2. Money Economy – There came to circulate in
the market certain objects, such as bars of
metals, buttons, tools, and utensils which were
stable in value, durable, and generally, accepted
by the public. Money was used as the “Medium
of Exchange”
3. Money and Credit Economy – Dues to
increase in volume and frequency, it became
imperative to allow others to purchase one’s
goods or engage one’s service with payments to
be paid at some future date.
Credit is the power to obtain economic goods
and services in exchange for the promise to pay the
agreed equivalent at some future date.
LM INST 3 (Entrepreneurial Management)
➢ Legal Forms of Business Ownership
1. Sole Proprietorship
A form of business ownership organized
and managed by only one person. Capital
comes from the collective contribution of
member of the family or among friends. It
should be registered in the name of only one
person.
2. Partnership
A business organization where two or more
persons contribute money, property, or talent to
carry on a business. Agreement is required to be
in writing, if capital partnership is P3,000.00 or
more. Maybe limited or general partnership.
3. Corporation
Is an artificial being created by the
operation of law, having the rights of
succession and the powers, attributes, and
properties expressly authorized by law.
➢ Other Specialized Business Forms
1. Cooperative
Owned by members to provide goods and
services that they all need, and managed in their
interest.
2. Franchise
Is a written contract granting permission to
operate a business to sell products and services
in a set way. The company that owns the
product or service or grants the rights to another
business is known as the Franchiser, while the
company that purchasing the rights is the
Franchisee.
➢ The Entrepreneur and the Manager
Entrepreneurs
• Almost business firms are managed and owned
by them.
• They start the business, risking time and capital,
they make all management decisions.
• Way of life is combination of creativity,
challenge, hard work, and satisfaction.
• Must conceives and idea out of his own
visualization then turn the idea to reality.
• Puts in long and unremitting hours of work and
takes financial risks. Requiring a lot of energy
and self-discipline.
When the business becomes more complex…
Managers
• Professional experts in finance, marketing,
personnel production, pr data processing.
• Usually employees in the business enterprise.
• Main role is to maximize the use of resources,
to make decisions, to generate profits, and to
sustain the growth of the business.
**Successful entrepreneur attains a position of prestige
in the community because of his many contributions to
society especially in terms of general jobs to many
people and providing needed goods and services.
➢ Social and Economic Contributions of
Entrepreneurship
1. Entrepreneurship Creates Employment
• Need to hire or employ at least one or two other
people in order to get things done.
2. Entrepreneurship Improves the Quality of
Life
• Entrepreneurial ventures contribute
significantly to the continuous improvement of
living standards, making life easier and
comfortable.
3. Entrepreneurships Contributes to More
Equitable Distribution of Income Taxes
• When income is more evenly distributed,
entrepreneurship also grows. People will have
more money with which to buy the products and
services they need.
4. Entrepreneurships Utilizes and Mobilizes
Resources for Greater National Productivity
• The PH will develop faster economically if
none of its resources were left idle or unused.
5. Entrepreneurships Brings Social Benefits
Through the Government
• With the revenues the government collects from
taxes, duties, and licenses paid by the
entrepreneurs, the government allocates for
communities – for infrastructures facilities.
➢ Business Registration
Purposes:
✓ To establish the legal personality of the
business
✓ To obtain a Permit to Operate (PTO)
✓ To comply with the requirements of special
regulatory or promotional programs of
government
• Two Government Agencies
1. Securities and Exchange Commission (SEC)
– Registering partnerships and corporations
2. Bureau of Trade Regulation and Consumer
Protection (BTRCP) – Single Proprietorship
• Normal Sequence
1. SEC and BTRCP
2. BIR
3. Local Government Unit
4. SSS
LM INST 3 (Entrepreneurial Management)
*Department of Trade and Indsutry (R.A. 3883) –
No two businesses would have the same or
similar names.
➢ Positive Values of a Filipino Entrepreneur
1. Pakikipagkapwa Tao (Human Relations) –
does not cheat to customer by overpricing, etc
2. Bahala Na (Let Fate Decide the Outcome) –
pursie plans and projects even seems unsure
3. Pakikipagsapalaran (Adventure) – do not
surrender before uncertainty or challenge
4. Gaya-gaya (Imitations) – more creative and
innovative
5. Utang na Loob, Hiya, Awa, Bayanihan (Debt
of Gratitude, Loss of Face, Compassion,
Cooperative Spirit) – willing to assist us
simple from goodwill
6. Kasipagan (Industriousness) – dealing with
Juan Tamad
7. Pagtitipid (Thrift) – frugality, being wise
spenders and savers
8. Paftitiis or Mapagtiis (Enduring) – not easily
to give up
9. Pagtitimpi (Self-Control) – capacity to bear
emotional and physical stress
10. Katapatan (Sicerity) or Kalinisan ng Loob
(Purity of Heart) – honest in our dealings with
others.
➢ International Business Environment
Range from exporting goods to other nations to
establishing manufacturing operation to other
nations.
Training of goods and services across national
boundaries result from the principle of competitive
advantage. Factors determining a country’s
competitive advantage include the presence of
natural resources, adequate quality and quantity of
labor and capital, available technology, and the cost
pf these resources.
➢ What is Exporting and Importing?
Exporting refers to the selling of an
organization’s goods in other country.
Importing is the purchasing of goods and
services from a foreign country.
The organization may establish its own internal
structure. This may require special expects in
international accounting, finance, marketing, and
law/
➢ Reasons for Exporting and Importing
Exporting:
1. If the production process requires high volume
to reduce cost per unit, the home market may be
too small to absorb the output. Output may be
sold overseas.
2. The demand for the firm’s product maybe
seasonal or irregular. By expanding the firm’s
market to other countries, production cost may
be lowered by more effective production
scheduling.
3. Product Life Cycle – Creating new markets,
where it re-enters the growth stage.
4. Selling its established goods in new overseas
markets, organization is also able to increase
profits.
Importing:
1. The goods may be needed but not available in
the importing country (crude oil)
2. Many foreign-made country products have
prestige value and are demanded by the home
market (French perfume, sports car)
3. Some foreign goods are less expensive due to
lower production cost.
➢ Multinational Corporation (MNC)
Measure used to determine if a business is
multinational include percentage total sales by
majority-owned foreign affiliates, percentage of
earnings due to foreign operations, and percentage
of new capital investment destined for overseas
facilities.
MNC is defined as any business that maintains
a production, assembly, sales, or, services presence
in two or more countries.
Chapter 2: NATURE AND CONCEPT OF
MANAGEMENT
MANAGEMENT
- “The force that runs an enterprise and responsible for its
success and failure.”
- “Management is the performance of conceiving and
achieving desired results by means of group effort
consisting of utilizing human talents and resources.”
- “Getting things done through people.”
- “Satisfying the economic and social needs by being
productive for the human being, for the economy, and for
society.”
- It is the distinct process of planning, organizing, staffing,
directing, and controlling (POSDICON), performed to
determine and accomplish stated objectives by the use of
human being and other business resources.
o Basic Resources (6Ms)
a. Men
b. Money
c. Materials
d. Machines
e. Methods
f. Market
o Fundamental Functions the Process of
Management
a. Planning
b. Organizing
LM INST 3 (Entrepreneurial Management)
c. Staffing
d. Directing
e. Controlling
o Stated Objectives End-Results
a. Social Responsibility
b. Profit
• UNIVERSALLY ACCEPTED FUNCTIONS OF
MANAGEMENT
a. PLANNING
- Formulation of objectives, programs, policies,
procedures, rules and regulations, in order to achieve the
goals of the business.
- Related to decision-making.
- Involves selecting the best course of action that a
business or other enterprises and every department will
follow.
- Ranging from the company purpose and objective to the
most detailed individual action plan.
- Involves forecasting, that is, making decisions in
advance.
- Used to further accomplish the objectives today and its
relationship in the future.
- Thinking before doing.
b. ORGANIZING
- The grouping together of people, establishing
relationship among them, and defining the authority and
responsibility that the personnel have in the use of the
company’s material resources to attain predetermined
goals and objectives.
- Involves establishing an intentional structure of roles for
men to fill in an enterprise. Intentional that it makes sure
that all the tasks necessary to accomplish goals are
assigned to men who can do them best.
c. STAFFING
- Involves filling and keeping filled the positions provided
in the organization structure. Includes recruiting and
selecting candidates for position, compensation, and
training.
d. DIRECTING
- Involves motivation, leadership styles, and approaches,
and communication. Leadership implies followership,
and people tend to follow the man on who they see a
means of satisfying their own needs, wishes, and desires.
e. CONTROLLING
- The process of measuring and correcting the activities of
subordinates and the company itself to assure conformity
to plans.
- It measures performance against goals, and plans where
negative deviations exist, and, by actions to correct
deviations and help assure the success of plans.
• MANAGEMENT AS A SCIENCE AND AS AN
ART
a. ART it results to the accomplishment of objectives
through the use of human efforts. Requires skill and
careful study in the management of any endeavor.
b. SCIENCE It is a systematic body of knowledge. gathers
and analyzes facts and formulates general laws or
principles from these facts.
*** Management seeks to integrate into a unified,
coordinated whole the essential factors that makes up an
organization – personnel, finance, production, sales or
marketing, purchasing, and procurement, administration, and
advertising.
• TYPES OF MANAGERS
a. First-line Managers / Supervisor
They are responsible for the daily supervision of the non-
managerial employees who perform many of the specific
activities necessary to produce goods and services.
b. Middle Managers
They are responsible for finding the best way to organize
human and other resources to achieve organizational
goals.
c. Senior/Top Managers
They are responsible for the performance of all
departments (they have cross-departmental
responsibility). They are also responsible for the success
or failure of an organization.
• MANAGERIAL ROLES
ROLE is a set of specific tasks that a manager is
expected to perform because of the position he or she holds
in an organization.
a. Decisional Role
- Closely associated with the methods managers use to
plan strategy and utilize resources.
b. Informational Role
- Closely associated with the tasks necessary to obtain and
seek information, which is monitor role.
c. Interpersonal Role
- Provide direction and supervision for both employees
and the organization as a whole.
• MANAGERIAL SKILLS
a. Conceptual Skills
- Demonstrated in the ability to analyze and diagnose a
situation and to distinguish between cause and effect.
b. Human Skills
- The ability to understand, alter, lead and control the
behavior of the other individuals and groups.
- The ability to communicate, co-ordinate, motivate
people and mold individuals into cohesive teams,
distinguish effective from ineffective managers.
c. Technical Skills
- The job-specific knowledge and techniques required to
perform an organizational role.
• CHALLENGES FOR MANAGEMENT IN A
GLOBAL ENVIRONMENT
A. Building a Competitive Advantage
Competitive Advantage is the ability of one
organization to outperform others because it produces
desired products or services more efficiently and
effectively than its competitor.
➢ Four Building Blocks
a. Increasing Efficiently
Organizations increase their efficiency when they
reduce the quantity of resources, they use to produce
goods and services.
b. Increasing Quality
They need to improve the skills and abilities of their
workforce. One way to improve quality has been to
LM INST 3 (Entrepreneurial Management)
introduce different techniques to ensure tighter
quality controls.
Total Quality Management are often organized into
quality control terms responsible for continually
finding new and better ways to perform their jobs.
c. Increasing Speed, Flexibility and Innovation
How fast they can bring new products to market How
easily they can change or alter the way they perform
their activities to respond to the actions of their
competitors.
Innovation is the process of creating new or
improved products and services that customers want
or developing better ways to produce or provide
goods and services.
d. Increasing Responsiveness to Customers
Organizations compete for customers with their
products and services, so training employees to be
responsive to customer’s needs is vital for all
organizations and particularly for service
organizations.
B. Maintaining Ethical and Socially Responsible
Standards
- Managers at all levels are under considerable pressure to
increase the level at which their organizations perform.
- Pressure to increase performance can be healthy for an
organization because it causes managers to question the
way the organization is working and it encourages them
to find new and better ways to plan, organize, lead and
control.
C. Managing a Diverse Workforce
- Managers need to recognize the need to treat human
resources in a fair and equitable manner.
D. Utilizing IT and E-Commerce
- New technologies such as computer-controlled
manufacturing and information system that link and
enable employees in new ways are continually being
develop.
Chapter 3: PLANNING
PLANNING
- Is a logical and systematic approach of formulating the
objectives, programs, policies, procedures, budgets, rules
and regulations, and other types of plans.
- Considered the most basic of all managerial functions.
Without this, other functions of a manager cannot be
tackled efficiently and effectively.
- Managers organizes, staffs, directs, and controls in order
to guarantee the attainment of objectives and the other
types of plans made.
• Nature of Planning – 4 Major Factors
1. Contribution to Purpose and Objectives - planning
is required to facilitate accomplishment of business
purpose and objectives. This statement is taken from
the nature of organized business.
2. Planning as the First Basic Function – logically
performed before the execution of all other
managerial functions. All managerial functions must
be planned if they are to be effective and efficient.
3. Planning as a Function of All Managers – the
character and scope of planning will differ from one
authority to another.
4. Planning for Efficient Organization – evaluated by
the amount it contributes to purpose and objectives as
offset by the expenses and other things required to
formulate and implement it.
• Major Types of Plans
Objectives or Goals
- Goal prescribes definite scope and suggests direction to
maximize the efforts of a manager. Synonymous to aim,
purpose.
- Objectives have to do with the direction in which an
individual or organization wants to move. Planning
involved determination of desired future events. These
results or events are objective and go by the name of
targets. Objectives should be clear, concise and
quantified when possible.
Mission
- It is the purpose or reason for the existence of an
organization. Can be defined in terms of an
organization’s products/service or markets/customers.
Long-Range and Short-Range Objectives
- Long-range generally go beyond the current fiscal or
calendar year of the organization. Ex. Increase sales to a
specific level within the next four years.
- Short-range should be derived from an in-depth
evaluation of the organization’s long-range objectives.
Ex. Listing of priorities.
Guidelines in Implementing Management by Objectives
(MBO)
1. Adapt your objectives directly to organizational goals
and strategic plans.
2. Quantify and target the results whenever possible.
3. Test your objectives for challenge and achievability.
4. Adjust the objectives to the availability of resources
and realities of organizational life.
5. Establish performance reports and milestones that
measure profess toward the objective.
6. Put your objectives in writing and express them in
clear, concise, and unambiguous statements.
7. Limit the number of statements of objectives to the
most relevant key result areas of your job.
8. Communicate your objectives to your subordinates so
as they can formulate their own.
9. Review your statements with others to assure
consistency and mutual support.
10. Modify your statements to meet changing conditions
and priorities.
11. Do not continue to pursue objectives which have
become obsolete.
Simplest form of MBO:
1. Individual objectives are jointly set by the
subordinate and the superior.
2. Individuals are periodically evaluated and
receive feedback concerning their performance.
3. Individuals are evaluated and rewarded on the
basis of objective attainment.
Program
- The actual course of action designed to carry out the
established objective. Indicated use of different resources
in an integrated pattern and establishes a sequence or
required actions and time schedules for each in order to
achieve stated objectives.
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Policies
- These are basic guidelines for action. The indicated what
is permitted and what is not permitted. Policies are broad,
general guides for action which constrain or direct
objective attainment. Ex. Promotion policy.
Procedures
- Series of related steps expressed in chronological order
for a specific purpose. It outlines precisely how a
recurring activity must be accomplished.
Rules
- Require specific and definite actions for a given
situation. It permits no flexibility and deviation. Do not
have to specify sequence.
Budget
- Plan stated in financial terms. Estimate of income and
expenditures for a future period.
Philosophy
- The values and beliefs an organization holds as the
guiding light is the company’s philosophy. Usually
passed on by the founder of the organization.
Strategy
- Method of shaping a company’s future and involves
determining the long-run direction of the organization.
• Basic Steps in Planning
1. Define the Business Idea – writing the description of the
idea. The most important and most difficult part of the
business plan.
2. Establish Goals and Objectives – identification of goals
for individuals, group, and for the entire organization.
Use of MBO, can be a process for explicitly teaching the
objectives of the organization.
3. Evaluate the Ideas, Goals, and Objectives – determine
whether or not specific idea makes sense, it can work, it
can fulfil the series of goals and objectives.
4. Forecast Cash Needs – indicates the cash investment,
funding or investment requirements.
5. Identify Sources of Funds – from personal equity,
borrowing from financial institutions
6. Write a Business Plan – summary and evaluation of the
business idea. Written result of the planning process.
• Other Types of Plans
1. Standing Plans – serve as guidelines to managerial
action, brings consistency to the operations.
2. Single-Use Plans – designed for specific purpose or
period. Ex. Budget
3. Long-Range Plans – these are strategic plans of the
organization. It takes time to achieve this goal.
4. Intermediate Plans – follow once the long-range plans
are formulated and made for the its realization.
5. Short-Range Plans – provide guidelines for day-to-day
actions
6. Marketing Plans – to increase their present market share
and develop new products.
7. Production Plans – producing the desired amount of
goods demanded at the market place.
8. Financial Plans – tells the managers how well they are
doing, the need for working capital, need for expansion
and sources of funds.
9. Manpower Plans – determining types of personnel
needed in the long and short-range for the organization.
10. Strategic Plans – determining the major goals of the
entire organization and the policies to guide the
achievement of these goals.
11. Tactical Plans – determination of the short term-specific
utilization of the resources of the org. in achieving its
strategic goals.
12. Functional Plans – classified by function or use.
Planning Horizon: Short-Range Versus Long-Range
Short-Range Plans – covers up to one year.
Long-Range Plans – extends into the future
Operational Versus Strategic Plans
Strategic Planning – analogous to top-level long-range
planning
Operational or Tactical Plans – a short-range planning
and concentrate on the formulation of functional plans –
done by managers at all levels in the organization.
• Decision Making
- This is the process of choosing a specific procedure or
course of action from among several possible
alternatives.
- Judgment is important in decision making.
- Can be determined by non-quantitative means, such as
intuition, facts, experiences, and opinions.
- Can also be determined by quantitative means such as
operations research, linear programming, simulation,
PERT, etc.
Other Techniques:
Marginal Analysis
- Used to figure out how much more output will result if
one more variable worker is added while other factors are
being held constant.
Financial Analysis
- Used for estimating the profitability of an investment,
calculation the payback period and analyzing cash
inflows and outflows.
Break-Even Analysis
- Total revenue equals total cost and there is no profit.
Ratio Analysis
- An accounting tool used for the interpretation of
accounting information. Basic financial ratios compare
costs and revenue for a particular period:
Operation Research Technique
- Defined by Miller and Starr as “Applied Decision
Theory”, which seeks scientific, logical, or mathematical
means. Observation, analysis, hypothesis formulation,
and experimentation.
1. Queuing or Waiting-Line Method
Balancing waiting lines and services provided.
When people in queues are not going to be provided
quick service, they may go elsewhere.
2. Linear Programming
Used in involving the allocation of resources or
limited resources to reach a particular objective such
as least cost, highest margin and so on.
3. Game Theory
Involves selecting the best strategy, taking into
consideration one’s actions and the action of one’s
LM INST 3 (Entrepreneurial Management)
competitors. When one individual wins, the other
losses.
4. Simulation
Involves the building of a model that represents a
real or an existing system in evaluating and selecting
the best one.
5. Decision Tree
Through a graphic illustration, alternative solutions
can be identified.
• The Decision Making Environment
Most companies have three levels of management:
1. Strategic-Level
Determine long-term strategies and set corporate
objectives and policy consistent with these objectives.
2. Tactical-Level
Charged with the responsibility of implementing the
objectives and policies set fort at the strategic level of
management.
3. Operational-Level
Complete specific tasks as directed by tactical-level
managers.
As a rule of thumb, the higher the decision maker
is in the organization, the more complex and difficult
he has to make. Also, the number of people affected
by the decision increases at the level of the decision
maker.
• The Decision Making process
Steps in Decision Making Process:
1. Set Objectives
Decision maker sets the objectives for the decision.
2. Identify Constraints
Constraints in some way limit the decision maker’s
choices. Defined by legal, economic, or political
considerations.
3. Identify Alternatives
Making a choice between two or more alternatives. Most
cases alternatives are chosen as solution to the problem.
4. Gather Appropriate Information
Decision maker gathers information that may provide
insight as to which alternative to choose.
5. Evaluate Alternatives
Decision maker evaluates each alternative.
6. Choose the Most Acceptable Alternative
Examines the ranking of alternatives and selects the most
acceptable alternative, which is often the top-ranked
alternative.
• Planning Techniques and Tools
1. Forecasting
- An attempt to foretell or predict future trends, events or
conditions from known data and to prepare for the
expected changes in business or industry.
- Many decisions are based on estimates of what is likely
to happen in the future.
Methods in Forecasting
a. Survey Method – involves probing the customer or
respondents through questionnaires or interviews.
b. Trent Method or Time-Series Analysis – future
predicted using past data or information.
c. Econometric Models – Based on statistical methods
of analyzing data and making predictions.
2. Break-Even Analysis
Through the use of break-even chart.
3. Scheduling
- Term used for planning time for various activities in an
organization.
- Program Evaluation Review Technique (PERT) and
Critical Path Method (CPM)
- Two basic concepts:
a. Events – identifiable accomplishments that occurs
at a definite point in time.
b. Activities – the work required to complete the event.
- Three Types of Timing:
c. Optimistic Time (minimum time if could take);
d. Pessimistic Time (maximum); and
e. Probable Time.
An average of these times (expected) is computed.
4. Management by Objectives
- The boss and the subordinates function as a team in
setting objectives and accomplishing those objectives
through cooperation.
• Why Managers Fail in Planning
1. Lack of Real Commitment in Planning – lack real
commitment by managers from the top level down to the
lowest supervisor.
2. Interchanging Planning Studies with Plans – nothing
is planned unless it includes a decision of some kind.
3. Failure to Develop and Implement Sound Strategies –
without sound strategy, plans go in the wrong direction.
Unless implemented by action plan, it becomes only a
statement of wishes and hopes.
4. Lack of Meaningful Objectives and Goals – clear and
attainable?
5. Tendency to Underestimate the Importance of
Planning Premises – plans and decisions should be
consistent and implemented.
6. Failure to See the Scope of Plans – neglecting other
types of plans
7. Failure to See Planning as a Rational Process –
requires clear goals, knowledge of alternatives, ability to
analyze alternatives to come up with the best possible
answer.
8. Too Much Reliance on Experience – what happened in
the past may not likely fit a future situation.
9. Failure to Use the Principle of Limiting Factor –
anticipating the worst, most problem situation
10. Lack of Top Management Support – top management
does not support, believe and encourage
11. Lack of Clear Delegation – do not know what the jobs
are, how their jobs relate to others, no clear authority to
make decisions.
12. Lack of Adequate Control Techniques and
Information – knowing how well they are doing with
the plan.
LM INST 3 (Entrepreneurial Management)
Chapter 4: ORGANIZING
ORGANIZING
- The process of grouping together of men and establishing
relationships among them, defining the authority and
responsibility of personnel by using the company’s other
basic resources to attain predetermined goals and
objectives.
- The identification of the grouping of work to be done, the
delegation of authority and responsibility to the
employees, and the establishment of relationships among
the personnel in order to use to maximum advantage the
company’s basic material resources in the
accomplishment of a common goal.
- “Executive structure of a business”, Webster – It
indicates that organization is the framework or backbone
- Connotes a “creative process”. – All the parts of a
business do not come into existence spontaneously. They
are the results of managerial efforts to carry out a
predetermined course of action.
- Sometimes used to mean the “total business
organization”, including facilities, materials, money,
and manpower.
• Organizing – Nature and Process
Nature of Organizing:
- Some believe it includes the behavior of all member of
the group.
- Others say it is the total system of social and cultural
relationships.
- Generally, most managers think that the term means a
formalized design of intentional structures, roles and
positions.
Organizing as a Process:
- First, the structure must reflect objectives and plans
because activities of the organization are based on them.
- Second, the structure must reflect authority given to top
and middle management.
- Third, organization structure, like any other plan, should
reflect their external environment (must be economic,
technological, political, social or ethical)
- Fourth, the organization must be manned.
• Types of Organization Structure
1. Line Organization – simplest form of structure and
refers to a direct straight-line responsibility and control
from the top management to the middle management and
to the lower level.
2. Line and Staff Organization – This utilizes the
assistance of experts or specialists. Companies expands
from single to complex by adding more people to the
organization.
3. Functional Organization – It utilizes the pure services
of experts or specialists. This removed the staff specialist
from his “assisting” capacity and gave him the pure
authority and responsibility for supervision and
administration of the function.
4. Committees – Used in situation where group
participation and decision are required. These are created
to undertake special activities rather than routinary
activities.
ORGANIZATION CHART
- It is a diagram or drawing showing the important aspects
of an organizational structure. It shows the relationship
among positions as to authority, responsibility, and
accountability and the people who occupy them.
- As defined by George Terry: “is a diagrammatical form
which shows important aspects of an organization
including the major functions and their respective
relationships, the channels of supervision, and the
relative authority of each employee who is in charge of
each function.”
• Purpose and Type of Organization Chart
Purpose:
- assists one to view the firm’s structure as a whole. It
shows the principal divisions and lines of formal
authority.
- assists management to divide the different duties or
functions in the business establishment so that they will
be performed effectively and efficiently.
Types of Organization Chart
1. Master Chart or Chart of Authority – it shows the
entire organizational structure.
2. Functional Chart – Shows at a glance the functions and
activities of the positions and/or departments. It shows
the major responsibilities or departments or positions.
Listed below each job title are brief statement of the
responsibilities.
3. Personnel Chart – same relative manner as the
functional chart. Instead of listing the functions, the tiles
of the positions of the names of persons are indicated.
• REORGANIZATION
- is the process by which an existing organization
undergoes changes in the size and shape of the
organization structure. The change may range from
simple to complex.
• DEPARTMENTATION
- Results from the grouping of work, the desire to obtain
organization units of manageable size, and to utilize
managerial ability.
- Four bases for departmentalizing an organization.
Departmentation by function, product, process and
geographical location.
• Results of Good Organization
A good organization would result in the following
1. Establishing responsibility and preventing “buck
passing.”
2. Providing for easier communication
3. Eliminating jurisdictional disputes between individuals
4. Helping develop executive ability
5. Aiding in measuring a person’s performance against his
charges and responsibilities
6. Aiding in equitable distribution of work, functions,
and/or personnel supervision
7. Permitting expansion and contraction without seriously
disrupting the structure.
8. Pointing out “dead-end” jobs.
9. Affording movement in the direction of the “ideal”
organization, in times of change.
10. Establishing closer cooperation and higher morale.
11. Delineating avenues of promotion.
LM INST 3 (Entrepreneurial Management)
12. Preventing duplication of work.
13. Making growth possible with adequate control and
without literally killing top executives through overwork
and.
14. Aiding in wage and salary administration through forced
job analysis and description.
• The Elements of Delegation
DELEGATION is the process of entrusting and
transferring responsibility and authority by the top
management to the lowest level.
The elements of delegation are the following:
1. Responsibility – the work or duty assigned to a
particular position. Involves mental and physical
activities which must be performed to carry out a task or
duty. Two categories: management functions which
covers POSDICON and operative functions which
include all activities that have to do directly with their
specialization.
2. Authority – refers to the power or the right to be
obeyed.
3. Accountability – this is the answerability of the
obligation to perform the delegated responsibility and to
exercise the authority for the proper performance of the
work. It cannot be delegated. It is given to the person who
accepts the responsibility and is accountable only to the
extent that he is given the authority to perform.
• The Art of Delegation
- Delegation is considered an art and a science. It is an art
because it is a skill that the manager performs effectively
if he practices it.
- Delegation should first and foremost be tackled before
the establishment of goals and objectives and a clear
definition of responsibility and authority has been made.
- To be effective, the manager must motivate the
subordinates to work on the delegated responsibility and
authority. Positive motivation instead of negative, should
be given.
- Positive motivation maybe described as psychological as
well as monetary and other tangible benefits.
• The Exception Principle
- also known as management by exception is closely
related to the parity principles.
- states that managers should concentrates their efforts on
matters that deviate significantly from the normal and let
subordinates handle routine matters.
- the idea here is that managers should concentrate on
those matters that require their abilities and not become
bogged down with duties that their subordinates should
be doing.
- it can be hard to comply with when incompetent or
insecure subordinates refer everything to their superiors
because they are afraid to make decisions.
• Formal and Informal Organizations
Every organization structure has two systems of
operation: the formal and informal.
Formal
- composed of recognized and formalized lines of
communication, authority, and control
- have a rigid organization structure, showing the
functional roles.
- all business, industrial organizations and educational
institutions are formal organization.
Informal
- much more subtle and invisible in the organization chart
- lack rigid structure
- formed for the purpose of satisfying some social needs
- may exist in the formal organizations or may exist and
operate independently.
- clubs, teams, associates come under this category.
• Centralized and Decentralized Organizations
Centralized Management
- major decisions are made by a few top executives,
subordinates exercise little (if any) initiate in decision
making.
- even when there are multiple branches, most decisions
are made at the main office rather than the local branch.
Decentralized Management
- represents a systematic effort to delegate to lower levels
all authority, except that which can only be exercised at
the highest levels.
- authority is dispersed throughout and decision making is
distributed throughout the organization.
• Nature of Line and Staff Relationship
- Line personnel are those who contribute directly to the
accomplishment of organizational objectives. Staff
personnel advise and assists the line personnel
- One accepted concept of the line and staff is that which
has direct responsibility for accomplishing the primary
objective of the business
- Simply speaking, a department or a position is called a
line if its objectives are directly in line with the
company’s objectives.
- On the other hand, a department or a position is called a
staff it its objectives are indirectly in line with the
company’s objectives.
• “Flat” and “Tall” Structures
- As the span of supervision or control increases (the
number of subordinates being supervised), the
organization develops a “flat” structure. On the other
hand, the narrow spans lead to a “tall” structure. “Flat”
structure permits general supervision while “Tall” leads
to close or tight supervision.
Chapter 5: STAFFING
Learning Objectives: At the end of the chapter, you are all
expected to understand the following:
✓ Definition of Staffing
✓ Nature of Staffing
✓ Recruitment
✓ Selection
✓ Training
✓ Identifying Training Needs
✓ Types of Training
✓ Human Asset Accounting
✓ Movements of Personnel
LM INST 3 (Entrepreneurial Management)
STAFFING
- the process of recruiting, selecting and training of men.
- putting the right men on the right jobs.
- involves manning the organizational structure through
proper and effective evaluation, selection and
development of people to perform the roles.
NATURE OF STAFFING
• All business organizations should focus their attention
and be concerned about the effectiveness and efficiency
of their employees especially their managers.
• The staffing function includes the determination of
manpower needs, the discovery of persons to fill these
needs, their recruitment and employment, their
replacement and orientation and the rearrangement of
team members through promotion and transfers.
RECRUITMENT
- The process of encouraging, inducing, or influencing
applicants to apply for a certain vacant position.
- Whenever there are vacancies, it is necessary to find a
person to fill those vacancies.
- Some organizations do not wait until the vacancy arises,
but they anticipate such vacancies and new openings in
the short and long run and thus plan for the future needs.
STEPS IN RECRUITMENT
Step One - Studying the Different Jobs in the Company and
Writing Description and Specifications (Job Analysis)
- Job description defines the duties and responsibilities of
a particular position. A description of the duties and
responsibilities attached to the job enables the
employment officer to determine the special
qualification which an individual must possess in order
to do the job successfully.
- Job specification gives the specific qualifications
required for the position: amount and type of experience,
special training, skull and physical demands, age, and
others.
Step Two – Requisition of New Employee
- To inform the personnel department, the line supervisor
or the department head concerned should accomplish a
formal requisition form, indicating the position to be
filled, the date when the new employee will be needed,
the pay rate, the required qualifications, job description,
approval by the responsible official of the company and
others.
Step Three – Actual Recruitment of Applicants
- Process by which prospective applicants are induced to
apply in the company in order that their qualifications for
present and anticipated vacancies can be evaluated
through sound screening and selection procedures.
SOURCES OF LABOR/APPLICANTS:
a. Internal – employees recruited within the company.
b. External – applicants recruited through schools,
references, advertisements, placements agencies, etc.
SELECTION
- The process of getting the most qualified applicant
among different job seekers.
Step 1 – Reception of Applicants
- Preliminary screening or sight screening to eliminate
undesirable applicants. Applicants are being interviewed
to be considered or not for further interviews or
examination.
Step 2 – Preliminary Interview
- Purposes 1. how qualified the applicant,
Purpose 2. to provide information of the job,
Purpose 3. to create goodwill to the company.
Interviewer uses the applicant’s resume, employment
tests and background investigation.
Step 3 – Application Form
- Used for the following:
1. As a guide when interviewing the applicant
2. Basis for eliminating applicants with unfavorable
personal data
3. Matching the qualifications of the applicant
4. For checking applicant’s records
5. As part of employee’s permanent record
Step 4 – Employment Test
- Testing the applicant’s abilities
Step 5 – Final Selection by Immediate Supervisor or
Department Head
1. Management’s Decision – Applicant’s best fit for
the job.
2. Applicant’s Decision – If the job is really for him.
3. Supervisor Decision – If the applicant can work for
him and the team.
Step 6 – Physical and Medical Examination
- Must pass the medical and physical exam to prevent
contamination of contagious disease and hiring of
liability employees.
Step 7 – Hiring
- After steps 1 – 6, applicant to the HR dept for the
completion of the hiring process.
Step 8 – Orientation/Induction/Indoctrination
- New employees are oriented on company policies, rules
and regulations, etc.
TRAINING
- According to Labor Code of the Philippines, it is the
systematic development of the attitude,
knowledge, behavior patterns for adequate performance
of a given job or task.
- It is a day to day, year-round task.
- All employees on a new job undergo a learning process
whether or not formal training exists.
IDENTIFYING TRAINING NEEDS
Training must be aimed at the accomplishment of
some organizational goals, such as more efficient production
methods, improved quality product/services, or reduced
operating costs.
LM INST 3 (Entrepreneurial Management)

COMMON TYPES OF TRAINING increase. Higher salary does not always accompany it but at
least will follow soon.
1. On-the-Job Training and Job Rotation – Normally
given by a senior employee or supervisor. Trainee is Separation – may either be temporary, permanent, voluntary
shown how to perform the job and allowed to do it under or involuntary
the trainer’s supervision. Job-rotation or cross-training
allows flexibility in the department. 1. Lay-off – Temporary and involuntary usually traceable
to a negative business condition.
2. Vestibule Training – Procedure and equipment similar 2. Discharged – Permanent separation of an employee at a
to those used in the actual job are set up in a special will of the employer.
working area. Trainee is taught how to perform the job at 3. Resignation – Voluntary and permanent due to low
a comfortable pace without the pressure of production morale, low salary, etc.
schedule. 4. Retirement – Either voluntary or involuntary. Voluntary
if employee retires upon reaching the number of years of
3. Apprenticeship Training – Generally lasts from one service in the company. Involuntary if the employee
month to a year. During this time, the trainee works under reached the retirement age of 65.
the guidance of a skilled worker.
Chapter 6: DIRECTING
4. Classroom Training – Use of classroom for teaching
actual material, concepts, principles and theories. Learning Objectives: At the end of the chapter, you are all
expected to understand the following:
5. Programming Instructions – Training is facilitated ✓ Definition of Directing
through computers in text form and/or computer video ✓ The Nature of Directing
displays. ✓ Motivation
✓ Theories of Motivation
6. Management Development Program – a systematic ✓ Communication
process of training and growth by which individuals gain ✓ Types of Communication
and apply knowledge, skills, insights and attitude to ✓ Barriers of Communication
manage work organizations effectively. Popular ✓ Leadership
methods: Understudy assignment, Coaching, ✓ Types of Leadership
Experience, Job Rotation, Special Projects, Lectures,
Case Studies, Role Playing, In-Basket Techniques,
Business Management Games and University and DIRECTING
Professional Association Seminars. - The process of motivation, communication and
leadership
- It deals with the relationship of managers and non-
HUMAN ASSET ACCOUNTING managers
- It evaluates costs incurred by organization in recruiting, - Managers as leaders should understand the motives of
hiring, training, and developing their human assets. people, and they should maintain or improve the
interpersonal relationship in an organization.
Methods in finding the financial value:
1. Start up costs – derive the original cost of hiring and MOTIVATION
training personnel as well as the costs of developing - The use of rewards and penalties in order to influence
working relationships. desired behavior.
- Rewards and punishment are still strong motivators.
2. Replacement costs – estimate costs of replacing current
employees with others of equivalent talents and THEORIES OF MOTIVATION
experiences. The theories of motivation described in this
discussion help to provide a broader understanding of what
3. Present-value-method – multiply the present value of motivates people.
the wage payment for the future five years.
a. Traditional Theory
4. Goodwill method – allocates a portion of the company’s - Based on the assumption that money is primary
earnings in excess to the industry average to HR. motivator. Financial rewards are directly related to
performance in the belief that if the reward is great
enough, employees will produce more.
MOVEMENT OF PERSONNEL
b. The Hierarchy of Needs
Transfer – refers to shifting of an employee from one - Postulated by Abraham W. Maslow, stated that human
position to another without increasing his duties, needs in the form of a hierarchy should be satisfied in
responsibilities, or pay. order, from the lowest to the highest needs.
Promotion – refers to shifting of an employee to a new c. Achievement – Power – Affiliation Theory
position to which both his status and responsibilities are
LM INST 3 (Entrepreneurial Management)
- 3 needs: (1) a need to achieve – desire to do something
better or more, (2) a need for power – a concern for
influencing people, and (3) a need for affiliation – need
to be liked.
d. Motivation – Maintenance Theory
- Contends that motivation comes from the individual, not
from the manager.
e. McGregor’s Theory X & Y
- Emphasizes that motivation of employees is best
achieved when management creates an environment that
encourages members involving both intrinsic and
extrinsic rewards, by directing their efforts towards the
goals of the organization.
f. Achievement Theory
- An individual’s ambition to do things better or achieve
something is due to a very specific motive or need. This
is not something “inborn” but it can be acquired through
training and teaching the trainees to think and behave in
terms of achievement.
g. Barnard-Simon’s Theory of Equilibrium
- States that the inducements provided by the organization
must be kept in equilibrium with the contributions made
by the employees. In other words, equal wages must be
paid for equal work.
h. Vroom’s Preference-Expectancy Theory
- Based on the premise that an individual assigns values to
the outcome of each alternative course of action.
i. Reinforcement Theory
- Components: (1) Stimulus – environment, (2) Response
– behavior itself, (3) Reinforcement – reward given to
performance only. High performance = High Pay.
j. Maturity Theory
- Contends that as people grow (psychologically) and
maturity they strive toward the highest level of need.
k. Job Enlargement
- Involves redesigning of jobs so that related activities are
added to those currently being performed.
l. Job Enrichment
- Putting meaning into the jobs.
COMMUNICATION
- The transfer of information that is meaningful to those
involved – in general, the transmittal of understanding.
- Can occur in many forms ranging from face-to-face
contact involving facial expressions and body
movements.
- GOOD COMMUNICATION – defined as interchange
of thought or information; it brings about mutual
understanding and confidence.
TYPES OF COMMUNICATION
1. Formal & Downward Communication – more
common method and flows down.
2. Upward Communication – can be facilitated thru
counseling methods, open-door policy, survey
3. Lateral or Peer-Level Communication - same level of
members in the organization share information.
4. Committees, Conferences, Group Discussion – lateral
communication
5. Grapevines or Informal Talk– informal paths of
communications
Ways to Communicate
Informal Talk or Grapevines, Memoranda,
Telephone Calls, Interoffice news, Letters, Reports,
Conferences/Conventions, Meetings, Bulletin Boards,
Exhibits and Displays, Visual Aids.
BARRIERS TO COMMUNICATION
- Reduce the effectiveness of communication
- These barriers are:
1. Distance – physical distance. Less face-to-face
communication may lead to misunderstanding or
lack of understanding of the message being
communicated.
2. Distortion – individuals fail to distinguish actual
data from his own views, feelings and emotions.
Being close-minded.
3. Semantics – language aspect of communication.
Certain words have multiple meanings.
4. Lack of Leveling – difference in the level of
knowledge and expertise of a supervisor and
subordinate.
5. Lack of Trust – previous experiences of
subordinates’ dealings with supervisor.
6. Inaccessibility – supervisors who are often out.
7. Lack of Clear Responsibilities – responsibilities
assigned to the subordinates are not clear.
8. Personal Incompatibility – personality between
supervisor and subordinate clash and thus create
communication blocks.
9. Refusal to Listen – careless attitude or arrogant
nature, refuse to listen.
10. Failure to Use Proper Media – use of jargons
11. Communication Gap – defects or loopholes
12. Lack of Direction – lack of direction of the
message.
LEADERSHIP
- The art and the science of influencing people so that they
willingly move toward the achievement of the group
goals.
- The ability to obtain followers and influence them makes
a leader.
LM INST 3 (Entrepreneurial Management)
TYPES OF LEADERSHIP
1. Dictatorial Leader – accomplish tasks through fear of
penalties and maintains a highly critical and negative
attitude in relations with subordinates.
2. Autocratic Leader – forces subordinate to rely on the
leader for their satisfaction.
3. Democratic Leader – depends not only on their own
capabilities but encourages consultation of
subordinates.
4. Laissez-Faire Leader – depends completely on
subordinates to establish their own goals and to make
their own decision.
POWER, AUTHORITY AND LEADERSHIP
• Power – ability to command or supply force. People can
be influenced by someone to do something that they
would not otherwise do.
• Authority – the right to issue directives and expend
resources
Leaders’ Attitude
• Theory X & Y Leader – X use a much more
authoritarian style of leadership than Y.
Assumption about People
• Theory X
1. Average human being has an inherent dislike of
work and will avoid it as possible
2. Therefore, people must be corrected, controlled,
directed, or threatened with punishment.
3. Average human being prefers to be directed, wishes
to avoid responsibility
• Theory Y
1. Physical and mental effort in work is as natural as
play or rest.
2. Threat of punishment are not the only means of
bringing effort, should exercise self-direction and
self-control.
3. Commitment to objectives is a function of reward as
achievement
4. Human being seeks responsibility
5. Exercise high degree of imagination, ingenuity and
creativity
6. Intellect are only partially utilized.
MANAGEMENT SKILLS
- Skills that managers must develop:
3 Basic Skills
1. Technical Skills – ability to perform a manager’s
job; specialization
2. Human Skills – ability to work with others by
getting along, motivating and communicating with
them.
3. Conceptual Skills – ability to coordinate and
integrate the entire organization’s interests and
activities. Bigger point of view.
MANAGEMENT ROLES
• A ROLE is defined as an organized set of behaviors
belonging to an identifiable job.
• Henry Mintzberg identified ten managerial roles
divided into three major groups:
a. Interpersonal
1. Figurehead - manager represents the
organizational unit in all matters of formality
2. Liaison – manager interacts with peers and
other people outside the organization
3. Leader – manager provides guidance and
motivation to the work
b. Informational
1. Monitor – manager serves as a receiver and
collector of information
2. Disseminator – manager transmit special
information within the organizational unit
3. Spokesperson – manager disseminates the
organization’s information into its environment
c. Decisional
1. Entrepreneur – manager’s role is to initiate
change
2. Disturbance handler – managers assume
conflicts, threat, loss in the organization
3. Resource Allocator – managers decides if
organization will expand resources
4. Negotiator – negotiates with other
organizations or individuals
MANAGEMENT FILIPINO STYLES
• Manager “By Kayod” – Action-hungry and committed
and his manners are rather serious and those of an
introvert.
• Manager “By Lusot” – managers will always find
loopholes to avoid hardwork or utilize an excuse for
failure
• Manager “By Libro” - managers literally goes by the
book.
• Manager “By Oido” – managers acquire his managerial
skills by playing it by ear.
• Manager “By Ugnayan” – participatory and
coordinative, he integrates various styles depending on
the companies’ needs and conditions.
Chapter 7: CONTROLLING
Learning Objectives: At the end of the chapter, you are all
expected to understand the following:
✓ Definition of Controlling
✓ The Nature of Controlling
✓ The Control Process
✓ Characteristics of Control
✓ Types of Control
✓ Control Methods and Systems
✓ Accounting Concepts and Techniques as Control
Devices
LM INST 3 (Entrepreneurial Management)
CONTROLLING
- The process of measuring and correcting activities
(plans, organization, personnel etc.) of an organization.
- Controlling determines what is being tackled by
evaluating the performance and if there is a deviation, by
applying corrective measures so that the activities take
place according to plans.
- Can be considered as the activity for knowing and
correcting important changes in the activities that are
planned.
NATURE OF CONTROLLING
• Where other fundamental functions of management are
performed perfectly, controlling is still inevitable, for it
is used to further effect some improvements.
• Controlling means big savings of money in operation
• Planning is related to controlling. The failure of
planning would mean failure in controlling and the
success of planning means success of controlling.
• Controlling alerts the manager to potentially critical
problems
a. Top Management – when goals are not met
b. Middle and Lower Management – when the
objectives are not met
• Managers can use the following:
a. Prevent crises
b. Standardized outputs
c. Appraise employees performance
d. Update plans
e. Protect an organization’s asset
THE CONTROL PROCESS
Controlling involves the following:
1. Establishing Standards – standards are desired
levels of performance and constitute the foundation
of the process. These serve as the criteria against
which the performance is evaluated.
2. Measuring Performance Against the Established
Standards – should be both quantity and quality:
o Quality – Quality of output. What is
produced compared to what should be
produced. Parallel to effectiveness
o Quantity - Finding out the amount or
number of output. Parallel to efficiency.
o Time – Formulating the timetable for
achieving certain goals at certain dates.
o Cost - Went over of the budget or not.
3. Comparison of Actual Performance – The core of
the controlling process. Checking the actual meets
the predetermined or planned performance.
4. Taking corrective action when and where
deviation from the standards occur. – corrections
and fine tuning may be necessary to improve results.
5. Follow-Through – Recommendations should have
a follow up.
CHARACTERISTICS OF CONTROL
The function of control is to keep work moving on
schedule as planned towards the established objectives and
goals. Control should meet the certain characteristics:
• Attuned to the activity – control should reflect needs of
people using them.
• Deviation must be identified quickly – what is the use
of checking the process or parts after they breakdown?
• Must be forward-looking – avoid historical, use
of forecast and other forward looking devices.
• Must be strategically oriented – selecting the crucial
points at which control is applied.
• Should be flexible – permits unexpected changes or
situations.
• Should be economical – cost of controlling should not
exceed the benefits of it.
• Should easy to be understood – people should
understand its purpose
• Should indicate corrective action – who or what is
causing the deviation and what should be done.
TYPES OF CONTROL
There are many different types of control to be used for
different purpose:
1. Control used to standardize performance – helps
to increase efficiency and decrease costs
2. Control used to safeguard company assets –
company assets must be protected from theft,
vandalism, wastage and misuse.
3. Control used to standardize quality – for specific
quality level of the product.
4. Controls designed to set limits within which
delegated authority can be exercised without
further top management approval – manuals,
procedures etc.
5. Control used to measure job performance –
special reports, output data etc.
6. Control used for planning and programming
instructions – sales and production costs
7. Control necessary to allow top management to
keep firm’s various plans and program in
balance – master budgets, use of outside consultants
etc.Controls designed to motivate individuals –
promotions, awards etc.
LM INST 3 (Entrepreneurial Management)

CONTROL METHODS AND SYSTEMS 9. Quality Control - deals with setting up of quality
standards in advance in such areas and comparing
Two Kinds Of Control Methods: these with actual standards.
1. Behavior (or Personal) Control – based on direct
and personal surveillance. 10. Production Control – aim is to produce the right
2. Output (or Impersonal) Control – based on product in the proper quantity and quality, at the right
measurement of output. Tracking production records time and by the best and least cost methods.
and sales as example of control output.
11. Inventory Control – excess and not maintaining
adequate inventory should be balanced.
• Flexible Budgets – are designed to vary with the volume
of sales or some other measure of output.
12. Economic Order Quantity (EOQ) – determines the
most economic level of inventory
• Zero-Based Budgeting – to justify an entire budget
request in detail, from scratch.
13. Maintenance of Inventory – alphabetical, mnemonics,
numerical, sign, combination
• Direct Observation – daily tour of the facility, annual
visit to all branches 14. Control Report – for feedback of information.
• Written Reports – can be prepared on a periodic or “as
necessary” basis
a. Analytical – interpret the facts
b. Informational – presents the facts

• Audits – may be conducted by internal or external

personnel

• Time Related Charts and Techniques – though the use

of Gantt charts, PERT, CPM

• Management By Objectives (MBO) – once

implements, could also be used in controlling

• Management Information Systems – providing

information in a systematic and integrated manner in
timely manner.

ACCOUNTING CONCEPTS AND TECHNIQUES AS

CONTROL DEVICES
1. Tests of Liquidity – used to determine a firm’s ability to
meet short-term obligations and to remain solvent in the
event of adversities.

2. Tests of Debt Service – are employed to present the

project’s ability to meet long-term obligations.

3. Tests of Probability – shows the operational

performance and efficiency of the project.

4. Test of Total Debt Coverage

5. Funds Flow Analysis – employed to determine the

major uses and sources of funds.

6. Tests of Operating Leverage – indicate how the

projects employ assets for which it pays a fixed cost.

7. Test of Financial Leverage – present how a project

employs funds which pay a fixed return.

8. Tests of Capital Investment – evaluate the justification

for investing in the project.