PRINCIPLES OF MANAGEMENT
Proper
Definition of Management and Business:
Management is defined as the systematic
process of Planning, Organizing, Staffing,
Directing, and Controlling (POSDC) all
activities and resources in an organization
for effective and efficient realization of
specific objectives.
Business is defined as an organization of
people with varied skills. It uses property or
talents, to produce goods or services, which
can be sold to others for more than their
cost to gain profit or an enterprising entity
engaged in commercial, industrial, or
professional activities to meet their
objectives.
 Businesses can also be non-profit
organizations that operate to fulfill a
charitable mission or further a social
cause.
 Whether the purpose is for-profit or
non-profit, both needs careful
management process to attain
specific goals.
THE CONCEPTUAL FRAMEWORK OF
BUSINESS MANAGEMENT
 INPUTS (Men, Money, Materials,
Methods)
 These inputs are called as resources
which managers use:
MEN - human resources
MONEY – financial resources
MATERIALS – physical resources
METHODS – informational/system/
formula/procedural resources
A BUSINESS HAS BASIC MANAGEMENT
FUNCTIONS
-Planning
-Organizing
-Staffing
-Directing
-Controlling
-Evaluating
A BUSINESS HAS BASIC BUSINESS
FUNCTIONS
-Production/Operation
-Marketing
-Finance
-HRM (Human Resource Management)
EVERY BUSINESS ASPIRES
-To effectively and efficiently attain
organizational goals and objectives
-To produce products or services
THE INPUTS
 Men become part of the
company as the human
resources, which belief to be
the most valuable assets of
every organization because
they are the one who controls
and process all other
resources to accomplish the
company goals or purposes.
 Money is also a major and
significant input of business
because the company makes
use of it as the primary fuel to
run the business machine.
Money or financial resources
is the main reason why there is
a business.
Management of financial
resources is one of the main
concerns of business
managers and owners.
 Materials are all of the tangible
things being used by organizations
to run their businesses; these are
the physical resources of the
company in the forms of land,
building, machines, equipment, raw
materials, and supplies. Proper
Management of physical assets is
very important in running the
business.
 Methods are also very important
inputs. The company needs relevant
ideas to run the business well.
Methods, also known as
informational resources, are
company assets being used by the
managers for managing the affairs of
the Organization. Business ideas
such as; plans, strategies, tactics,
policies, rules, procedures, and other
information are gathered and used
by the organizations for their
advantage.
The Five (5) Basic Management
Functions
 Planning – is the process of
establishing goals and a suitable
course of action in anticipation of
future trends so that the desired
result for achieving those goals will
be realized.
 Organizing – is the process of
engaging two or more people in
working together in a structured way
to achieve a specific goal or set of
goals. It is designing the relationship
 between jobs, personnel, and
physical factors.
 Staffing – is the process of filling the
positions provided in the
organizational structure to
accomplish the tasks effectively.
 Directing - is the process of
influencing people and motivate
them to work willingly and effectively
and perform essential tasks.
 Controlling - is the process of
ensuring that actual activities
conform to planned activities. It
means keeping all efforts within the
channels prescribed by the
Management.
The Four (4) Basic Business Functions:
1 Production/Operations Department – is
in charge of the transformation process that
converts raw materials and other inputs into
finished products in the form of goods or
services.
2 Marketing Department – perform a group
of activities designed to facilitate and
expedite the distribution and selling of
goods or services produced by the
Organization to satisfy customers' needs
and wants.
3 Finance Department – is concerned with
the procurement and administration of
funds. With the view of achieving the
objectives of the business.
4 Human Resources Department – is
responsible for the recruitment, selection,
training, and development, compensation,
integration, and maintenance as well as
discipline and separation of organization
members.
Effectiveness, Efficiency, and Goals
or Objectives
 Effectiveness – means the ability to
determine appropriate objectives,
"DOING THE RIGHT THING." The
performance is said to be effective
when the job was done exactly
following the information specified in
the plan and was finished within the
specified budget and time allotment
 Efficiency – means the ability to
minimize the use of resources in
achieving organizational objectives,
"DOING THINGS RIGHT." The
performance is efficient when the
task was done following the plan in a
minimize budget and a shorter
period.
 Goals or Objectives – the purpose
that an organization strives to
achieve; organizations often have
more than one goal. Goals or
objectives are fundamental elements
of organizations.
The Outputs
Products – are all of the tangible finished
goods produced by the Organization.
Services – are all of the intangible products
produced by the Organization.
The Foundation
 Knowledge, Skills, and Attitude
(KSA) represents the strength of any
organization. Managers and members
of the Organization's workforce must
possess the right knowledge, skills,
and attitude to obtain true success.
The External Environment Forces
The external forces might directly or
indirectly affect the performance of the
Organization; for this reason, Management
must be keenly aware of these external
forces and must incorporate these concerns
in their decision-making process. During
the environmental scanning process, the
company must assess the internal strength
and weaknesses of the company in contrast
with the opportunities and threats to the
external environment (SWOT ANALYSIS).
 Political – legal Forces – Business
firms' operations are also much
affected by legal and political factors
in their environment, which directly
or indirectly have an impact on the
operation of a business firm. These
are various laws, ordinances, and
regulations. The following examples
are Minimum wage law, Price control
laws, Tax laws, Patent law, Tariff
rates, Employment laws, Business
License or permit, Occupational and
safety laws, Social welfare laws,
Environmental laws, and other local
ordinances.
 Economic Forces – Focuses on
how individuals or groups of people
produce, distribute, purchase, and
use various goods and services.
The indicators are the following:
Unemployment, Debt, Inflation,
Interest rates, Income decline,
 Money supply, Value of peso,
Investment level, etc. These
economic factors are a vital source
of information for making business
decisions.
 Socio-Cultural Forces – Describe
the characteristics of the society in
which the Organization exists. The
indicators are the following: Level of
education, Lifestyle, Taste, and
preference, customs, Beliefs,
Attitudes, Buying habits, Mobility of
population, Religious beliefs, Fad or
fashion or social trend.
 Technological Forces – The sum
or total of the knowledge we have of
ways to do things. It includes
techniques, and it includes the vast
store of organized knowledge about
everything. But its main influence is
on ways of doing things, on how we
design, produce and sell goods as
well as services.
 Ecological Forces – These are
Climate and Weather conditions that
directly affect the business
operations such as; global warming,
natural calamities, and catastrophes.
 The negative impact of the external
forces can be greatly reduced if the
company has an advance forecast
about the effect of these forces.
Consequently, the company can
make use of their strength to
encounter the threats of the external
forces. Scanning of the environment
will also open the doors of
opportunities that can be used by
the managers of business
organizations for their advantage.
The Major Types of Business
 COMMERCE - It refers to the
exchange of goods and services,
with the movement of goods from
the point of production to the point of
consumption.
 INDUSTRY- Primarily concerned
with the creation of form utility or the
production of goods that are used
either by the consumer called
consumers good, or by other
industries in the further production of
other goods called producer's
goods.
INDUSTRIES ARE GROUPED INTO:
a. Genetic- from the word "genesis" or
beginning, include agriculture,
forestry, and fish culture.
b. Extractive- Characterized by the
extraction of goods from natural
resources. Include mining,
lumbering, hunting, and fishing.
c. Manufacturing- involved in the
changing of raw materials or
secondary products into more useful
forms. The changing from a basic to
a more advanced. Examples are
food, beverage, tobacco, textiles,
etc.
d. Construction- may range from the
building of multi-billion-peso
highways, airports, houses.
 SERVICES - It caters to the personal
needs of people, or with the
rendering of personal service.
Businesses engaged in service are
not involved in the buying and selling
of goods or the manufacture of
products.
a. Recreation- includes motion
picture production and distribution,
theaters for drama, television, and
many others.
b. Personal Services- include
businesses such as hotels,
restaurants, laundry shops, parlors
and barber shops, and many others.
It must be noted that these broad
classifications are not mutually exclusive.
Some businesses that do not fall clearly into
one classification or another but may
overlap into two or three groups.
Example: Transportation may be classified
as commercial if it ended in the transfer of
goods, but if the bus was used to transport
a passenger from one place to another,
then it is considered service.
Reasons why People Go Into Business
A.Social Approval- the businessman
has a high social standing in the
community. People look up to
successful people in the business.
B.Profit- the major factor of
motivation for going into business.
Individuals enter into these activities
because of the anticipation of a
"reward" in the form of monetary
benefits.
C.Personal Satisfaction- this
personal Satisfaction comes about
from the social status conferred on
those engaged in business. It
satisfies his creative urge, desire to
witness the fruits of his endeavors,
and search for self- fulfillment.
 D.Livelihood- People go into
business to earn a living.
E.Power- Some people enter the
business because they expect to rise
to positions of prestige, power, and
leadership. The successful
businessman wields power in the
community, exercise influence with
the money or productive facilities
under his control, and command
authority over the subordinates
working under him.
F.Protection- Quite often,
individuals inherit a business,
instead of suffering loss by selling
the business. They decide to run the
business.
G.Service to the Community and
the Employees- Businessmen have
become more conscientious hence
the desire to promote the social
welfare of others. Many businesses
render service in the community and
provide employment opportunities.
MANAGEMENT HISTORY
 The history of business management
can be traced from many years back,
but in this module, we will just identify
the brief origins of business
management how the different
theories of Management evolved until
it becomes the current principles that
are being practiced today.
Business and Its History
 Barter System is an age-old method
that was adopted by people to
exchange their services and goods.
 The Code of Hammurabi (2000B.C.)
had provisions for government
commercial transactions.
 The Roman Empire had a clearly
defined wage system while during the
middle ages, devices of business
control like accounting and business
functions like insurance and banking
data.
 The commercial revolution of the
15th and 16th centuries. The influx
of luxuries such as spices, silk,
perfumes, and other items from the
East, and realization by Europeans
that there are material things in life
worth buying and enjoying, gave rise
to an unprecedented increase in trade
and commerce. The demand for
goods developed and had to be
satisfied.
 The industrial revolution gave rise
to mechanical inventions. Mass
production gave rise to expand
industry and trade. The techniques
and methods of business activity
were developed and polished.
History of Business in the Philippines
 Arab traders were our visitors in the
9th century, while the Chinese took
over most of the Philippine trade in
the 12th century and even
established trading communities in
the Philippines.
 The famous Galleon Trade between
Manila and Acapulco in Mexico in the
18th century did little for the
development of the Philippines
because the one who obtained the
profit were the Chinese. Most of the
cargoes originated from China with
Silk as the main item were traded.
There were also precious metal works
from India and Persia.
 Though the business transaction was
done here in the Philippines, the
Filipinos were only the laborers. It
was the Spaniards, and the Chinese
played as distributors or
entrepreneurs. This went on until
1898.
CAPITALISM
 Businesses in the Philippines and
other countries of the free world are
Capitalistic in Nature. This means
that society entrusts the workings of
the business process to the guidance
of the private businessman.
 Capitalistic means:
1. Private Ownership. A large part of
the community’s goods is owned by
individual persons or private corporations
and not the state.
2. Production for a private account.
Means that the earnings from the business
go to private individuals or group.
3. Voluntary Savings and the
institution of bank credit
A. Scientific Management Theory
 Theory and its Importance
Theory explains the relationship
between two or more facts or events.
 An example is the Theory of
Evolution of Man by Charles Darwin;
he explained how man evolved.
From Ape to what we are today.
 Another example is the Theory of
Law of Supply and Demand in
Economics. It states that as the price
of a good increase, the demand for a
good decrease because a price
increase reduces the purchasing
power of consumers.
 Why is Theory Important?
A Theory is important as it provides
guides in Management. Theories can be
used as inputs for effective Management.
There are many theorists in Management
that are being used by organizations today.
A wise manager knows the most
appropriate theories for different situations.
Theories were developed towards effective
Management and productivity.
Three Classification of Theories in
Management
1.Classical Management or
Traditional Theories
2.Behavioral School Theories
3.Quantitative Management Theory
or Management Science
Classical Management or
Traditional Theories
This started with the growth of
factories owned by private
individuals where the government
did not interfere in business
activities.
 As a result, the capitalists exploited
their workers, suppliers, and
consumers. Working children and
the old ones were forced to work up
to 18 hours a day with very low
wages.
 Forerunners of Scientific
Management
 Robert Owen - he was one of the first
industrialists to recognize how the
growing factory system was
demeaning to workers as he saw in
factories, such as the employment of
young children (as young as 10), 13
hours workdays, and miserable
working conditions, he became a
reformer.
 Owen believed that production and
profit would increase if the conditions
of the workers were improved. He
executed several reforms and argued
for regulated work hours, child labor
laws, public education for children,
company- furnished meals at work,
and business involvement in
community projects (community
service).
 Frederick Taylor - he is called the
“Father of Scientific Management.” He
is an engineer who researched on
Time and Motion Study.
 The Time and Motion Study
formulates the best and fastest
methods of operation for every part of
the job or the “one best way” for a job
to be done.
 He also introduced the Differential
Rate System, which encouraged
employers to pay more productive
workers. According to him, such a
system would increase production
(Example: Sales commission above
the quota).
 Henry Gantt - an industrial engineer
who is an associate of Frederick
Taylor in several projects. He decided
to abandon the Differential Rate
System due to its small effective effect
on production.
 He introduced a motivational scheme
where a bonus is given to supervisors
whose workers achieve their daily
standard. He believed that this would
motivate supervisors to train their
workers to work better.
 He also introduced the charting
system for production scheduling, the
Gantt Chart.
 Frank and Lilian Gilbreth - This
husband and wife team researched
fatigue and motion. Frank found out
that a reduction in motion is also a
reduction in fatigue.
 The couple claimed that motion study
would uplift the morale of the workers
due to its physical benefits and
 reflection of management concern for
workers. If the workers can lessen the
movement from one place to another,
it would improve the output.
B. Classical Organization Theory
This theory is concerned with the
development of management principles to
increase the productivity of complex
organizations like factories. Such principles
serve as guidelines for managers. The
Basic Principles of Management that we will
discuss came from the theories in classical
organization theory.
Forerunners of Classical Organization
Theory:
Henri Fayol - considered the “Father of
Classical School” that is for being the first to
place the system on it.
 He believed that managers are made,
which means Management can be
learned.
 He developed the 14 Basic Principles
of Management.
The 14 Principles of Management
are:
1. Division of Work
2.Authority and Responsibility
3.Discipline
4.Unity of Command
5.Unity of Direction
6.Subordination of Individual Interest
7.Remuneration
8.The Degree of Centralization
9.Scalar Chain
10.Order
11.Equity
12.Stability of Tenure of Personnel
13.Initiative
14.Esprit de Corps
Max Weber - He developed a theory of
bureaucratic Management that provided a
strictly defined hierarchy with specific
regulations and lines of authority.
 According to the bureaucratic theory,
bureaucracy is the basis for the
systematic formation of any
organization and is designed to
ensure efficiency and economic
effectiveness. It is an ideal model for
management and its administration to
bring an organization’s power
structure into focus.
 His model has contributed to the
Management of giant corporations or
multinational companies.
THE BEHAVIORAL SCHOOL THEORIES
A. The Behavioral School
 This emerged due to the limitations of
the Classical or Traditional Theory.
Behavioral School Theorists believed
that Classical Theory failed to attain
production efficiency and work
harmony.
 Because of this, it motivated some
individuals to introduce better
concepts of Management. They
applied both psychological and social
factors in managing people.
Two Approaches to Behavioral School:
A. Human Relations Approach - The
human Relations movement believed that
the key to higher productivity in
organizations was increasing employee
satisfaction.
 Elton Mayo and his associates
conducted research called
Hawthorne Studies, where they
examined lighting conditions at a
workplace and wages. They
concluded that financial incentives did
not improve productivity.
 The researchers believed that the
special attention given to workers
during the experiments motivated
them to improve their productivity.
 They concluded that workers would
work harder if Management was
concerned about their welfare, and if
supervisors gave them special
attention.
 This theory became known as the
Hawthorne Effect.
 Elton Mayo and his associates further
concluded that informal workgroups,
like associations and friendships, had
the strongest influence on
 productivity, stronger than
Management.
(Example; Bad influenced friends urging
classmates to cut classes to watch a
movie.)
B.Behavioral Science Approach
applied today. However, both
researchers and practitioners are
now giving more attention to the
interaction of the organizations with
their external environment.
The contemporary approaches to
management include:
In the systems theory, organizations are
seen as systems composed of a set of
interdependent parts that coordinate their
efforts to achieve common goals.
Organizational systems operate based on
four elements:

This is where Behavioral Science Theorists 1. The Contingency Theory

relied on the scientific method in studying
people in their work environment objectively
and not where their personal beliefs affect
the result of the research. The scientific
method is a collection of facts through
observation and experiments
THE QUANTITATIVE MANAGEMEN
APPROACHES
 3. Quantitative Management Theory
 The emphasis of quantitative
management theory is the application
of quantitative or mathematical
approaches to the solution of
management problems.
 Like statistical analysis (Statistics),
Linear Programming, Production
Scheduling, and Financial Analysis.
 The problem with management
science is it is not accurate to place
the attitudes or behaviors of workers
in the form of mathematical models.
Contemporary management
approaches:
 Classical, behavioral, and scientific
management approaches tend to
focus more on the internal workings
of organizations. The contributions of
each school of thought are still being
2. The Systems Theory
A.Contingency theory of Management
 Contingency theorists argue that each
organizational circumstance is
unique, and as a result, management
approaches should be selected and
applied based on the specific
situation at hand.
a.Inputs - organizational resources,
 The contingency theory, therefore, e.g., raw materials, human resources,
financial resources, information, and
supports the view that "there is no
one best way to manage" and equipment.
emphasizes the use of any
b.Transformation processes - the
management approach - scientific,
conversion of inputs into outputs
behavioral, and quantitative -
through managerial functions,
provided it is suited to the
technological operations, and
organizational situation and helps
production activities.
managers to manage more
effectively. c.Outputs - the results of the
transformation processes, which
 This theory implies that managers
include profits/losses,
can make decisions based on the
goods/services, and so on. Some of
situation at hand rather than a "one
these outputs, like, for example,
size fits all" method. A manager takes
products and services, are returned to
appropriate action based on aspects
the environment for use by other
most important to the current
organizations and individuals.
situation.
d.Feedback - the environment's
reactions to these outputs are relayed
back to the system.
B.System theory of Management

 A systems approach allows
managers to assess their
Organization’s interaction with the
larger environment.
 An open system is an organizational
system that interacts with its
environment, whereas a closed
system is one that does not do so
and is therefore self-sufficient.
 However, in reality, an organization
cannot be a closed system because,
for survival, an organization has to
interact with its environment.
MANAGEMENT & SOCIETY
Social Responsibility
& Ethics of the Firm
Management and Society
Definition of Organization:
 An organization is a collection of
people working together in a
coordinated and structured fashion to
achieve one or more goals.
Definition of Society:
 Society is a group of individuals that
have common features in many
aspects.
CLASSIFICATION OF SOCIETY: 2. To make the social structure more
organized and directed towards achieving
1.Economic resources – can be run thru desires mission and vision
feudalism, communism, socialism,
capitalism 3. Combination of individual functions in the
community to fulfill their needs.
2.Religious belief – Slam, Buddhism,
Christianity, Catholicism 4. The catalyst to a better-civilized group
and competitive environment
3.Language usage – English, Spanish,
French, Chinese, etc. 5. Organization as a primary changing tool
for better-civilized nations.
TWO TYPES OF SOCIETY:
1. Simple Society:
 Simple organizational structures;
clear and does not have many
procedures, open discussion,
relationship based on family and not
formal
Factors that contribute to the formation of
organizations in society
2. Complex Society:
1. Need to achieve desired goals
 Not unique and difficult to identify
individual’s involvement in the 2. Need to have better administration and
society, loose and structured specialized task or job
relationship among members, 3. Need for responsibilities to have better
systematic and organized lives
interaction, using high technology,
organizations take over the role 4. Need to have leadership in society
played by individuals to develop the
nation. 5. Needs in several aspects such as
security, defense, politics, and socio-
Organizations Role in the Society economic well-being
1. Organizations exist to allow the 6. Need for control in society
accomplishment of work that could not be
achieved by people alone. As long as the
goals of an organization are appropriate, Organizations and People
society will enable them to exist, and they
can contribute to society
1. Organizations are influenced strongly by
the people that form part of them. They can
take part in the personality of the people
within them, and their attitudes, perceptions,
and behaviors affect how an organization
will operate.
2. Organizations require management.
3. Organizations use management to
accomplish the work that is required to
achieve the goals.
NATURE OF ORGANIZATIONAL
ENVIRONMENT
1. The external environment is everything
outside an organization that might affect it.
(PESTLE I Factors – political, economic,
socio-cultural, technological, legal,
environmental, international)
2. The internal environment consists of
conditions and forces within the
Organization. (5 M’s-Manpower, Money,
Method, Material, Machinery)
THE EXTERNAL ENVIRONMENT
 The general environment is the
nonspecific dimension or forces in its
surrounding that might affect its
activities. (PESTLEI)
 The task environment consists of
specific organizations or groups that
are likely to influence an organization.
(regulatory agencies, interest groups,
labor, owners, strategic groups,
allies)
General Environment:
1. The economic factors include inflation,
interest rates, unemployment, and demand.
2. The technological factors refer to the
methods available for converting resources
into products or services.
3. The socio-cultural factors are customs,
mores, values, and demographic
characteristics of the society in which the
organization functions.
4. The political-legal factors refer to
government regulation of business and the
relationship between business and
Government.
5. The international factors refer to the
extent to which an organization is involved
in or affected by the business in other
countries.
Task Environment:
1. Competitors are other organizations that
compete for resources
2. Suppliers are organizations that provide
support for other organizations
3. Regulators are units in the task
environment that have the potential control,
regulate, or influence an organization’s
policies and practices
Types of Regulators:
1. Regulatory agencies - created by the
Government to protect the public from
certain business practices or to protect
organizations from one another. An
example is the Securities and Exchange
Commission (SEC)
2. Interest groups are groups organized by
their members to attempt to influence
organizations. An example is the Philippine
Chamber of Commerce (PCC)
3. Labor includes all workers who provide
the service or produce the products. Labor
is especially a concern when it is unionized.
4. Owners are individuals, groups, or
organizations that have a significant stake in
the Organization. An example is a
stockholder.
5. Strategic allies are two or more
companies that work together in joint
ventures
THE INTERNAL ENVIRONMENT
 Board of Directors:
A board of directors is required only of
organizations that are incorporated;
however, many other firms have them. The
board of directors is elected by the
stockholders and in-charged with
overseeing the general management of the
firm. To ensure that it is being run in a way
that best serves the stockholders’ interests.
 Employees:
When the Organization’s employees hold
the same values and goals as its
Management, everyone wins. However,
when managers and employees work
toward different goals, everyone suffers.
The composition of the Organization’s
employees is changing, and managers must
learn how to deal effectively with these
changes
 Culture:
The culture of an organization is the set of
values that helps its members understand
what the organization stands for, how it
does things, and what it considers essential.
An influential organizational culture can
shape the firm’s overall effectiveness and
long-term success and help employees to
be more productive.
Impacts that organizations have on the
world:
 In the current practice of capitalism,
as organizations grow, gaining
financial sustainability, influence, and
impact on society, they tend toward
self-protection and self-interest.
 Every Organization should make it
their core operating principle to make
the world a better place. Management
should consider their Organization on
each of the following dimensions
working fully to foster these
dimensions.
1. To further people’s knowledge and
capacity for insight.
2. Assists those who need help—affordably,
effectively, and compassionately.
3. To be of service to others.
4. Fosters people’s capacity to work and live
at their best.
5. Foster individuals and collective liberty.
6. Use natural resources wisely and without
waste or harm to the environment.
7. Protect people from harm.
8. Operate ethically and with integrity.
9. When self-interest and common good are
at odds, chooses the common good.
SOCIAL RESPONSIBILITY IN BUSINESS
 SOCIAL RESPONSIBILITY - Means
the moral obligation of a company
concerning the welfare of the society
or stakeholders. The business has to
assume concern for the health of the
community in which it operates.
 STAKEHOLDERS – are people or
groups of people who have an
interest in what is going on in the
Organization. Which composed of the
following;
Employees
Owners/shareholders/investor
Government
Consumer
Supplier
Community
Financial Institution
WHAT ARE THE SOCIAL
RESPONSIBILITIES OF BUSINESSMEN
TOWARDS THEIR STAKEHOLDERS?
A. To the Employees,
1.Provide the right compensation as
mandated by the law– the firm must be fair,
and payment must be equal to the job
description and job specification.
2.On-time salary, not exceeding 16 days in
case of force majeure.
3. Provide the fringe benefits as mandated
by law.
4.Provide the right working conditions like
proper ventilation, clean workplace, and
safety place/measure.
B. To Investors or Shareholders,
1. The primary responsibility of business to
its owners is to protect their investments or
ensure the security of their investments.
2.Provide an adequate return on
investment.
3.Use their financial resources to provide
goods or services and efficiently use their
financial resources.
4.Furnish the owners or investors with
correct information, specifically the financial
report.
C. To the Government,
1.Pay the right taxes.
2.Following the rules and regulations
3Providing the right information
D. To the Suppliers,
1.Paying obligations on time
2.Maintain a good relationship
E.To the community,
1.The firm is required to provide a job
opportunity.
2.The firm is expected to get involved in the
local community or participate in civic
programs, give donations or charitable
projects.
3.The firm must keep the environment clean
or protect the environment and make the
community a better place to live.
F. To the Financial Institutions
1.Pay the financial institution on due time or
agreed with the date.
2.Must not breach contracts to maintain
creditworthiness.
G. To the Customers,
1.Provide good quality of the
product/service
2.Provide product safety.
3.Provide adequate goods or services at a
fair or reasonable price.
WHAT ARE CONSUMER RIGHTS?
1.The right to basic needs
2.The right to safety product
3.The right to redress
4.The right to be informed
5.The right to choose
6.The right to clean environment
PURPOSES OF SOCIAL
RESPONSIBILITY
1.To alleviate the standard of living of the
community, particularly the employees.
2.Promote and improve the community
where the business is, especially helping
community thru donating, charitable works,
involved in the social program, and
providing jobs.
3.To maintain an orderly legal society:
paying taxes and provide the right of the
workers.
4.To improve the public image of the firm.
Provide excellent services, good quality,
and reasonable price and good service
5.It is an ethical thing to do a) pay the
supplier on time b) give correct and
complete information of the investors.
TYPES OF SOCIAL RESPONSIBILITIES:
1. LEGAL RESPONSIBILITY - The firm
must follow the laws, thus fulfilling its
statutory responsibilities. Legal
responsibilities are defined by the
Government in-laws that Management is
expected to obey.
2.ECONOMIC RESPONSIBILITY - A
business firm must first make a profit to
satisfy its financial responsibility to continue
in existence.
3.ETHICAL RESPONSIBILITY - the
organizations or Management are to respect
the general beliefs, values, and customs of
society.
4.DISCRETIONARY RESPONSIBILITY -
Purely voluntary obligation of a firm. This is
ingenuity given by the firm to the society.
ETHICAL ISSUES IN BUSINESS
Definition:
 Ethics - came from the Greek word
“ethos,” which means character or
custom refers to distinguishing
disposition, character, or attitude of
specific culture or group.
 Etiquette- is a prescription for
socially acceptable behavior.
 Business Ethics- the study of what
constitutes right and wrong, good or
bad human conduct in a business
context.
 Business ethics covers all areas
encompassed by business
transactions. The ethical conduct of
business persons may be measured
against how the following are
adhered for:
•Laws and regulations promulgated
by the Government; and
•Specific ethical conduct is not yet
passed into law.
list of concerns relating to laws and
regulations requiring ethical behavior is
provided as follows:
1.Product, safety, and quality;
2.Fair employment practices;
3.Fair marketing and selling practices;
4.The use of confidential information for
personal gain;
5.Community involvement;
6.Bribery; and
7.Illegal payments to foreign governments
to obtain business.
Ethical Codes:
 Codes of ethics are documents that
specify practices that are unethical
and which the company expressly
forbids.
 Examples are kickbacks, payoffs,
receiving gifts, falsification of
records, and false claims about the
product.
 A code of ethics is a formal
document that provides clear
direction to Management and
employees in the performance of
their duties.
 “Ethics is an important aspect of
managing a business. Thus, its
practice should be expected from the
firm’s Management and rank-and-file
employees.”
CONTROLLING
Introduction:
 Controlling is the last function of
management. The other essential
functions- planning, organizing,
staffing, and directing must be put in
control to achieve the objectives of
the organization effectively and
efficiently. Controlling compares the
events or the accomplishments with
the original plans and makes
necessary corrections when the
circumstances differ from the plans.
 To make it simple, you, as a
manager, must-see if what happened
was what was supposed to happen.
STEPS IN THE CONTROL PROCESS
-Controlling is a process of measuring and
correcting actual performance against
standards established by the organization. It
includes the restraining, checking, and
motivating influences exercised by the
management.
-The purpose is not only to prevent failures
but also to improve performance.
-Planning and controlling is like a Siamese
twin that cannot be separated from each
other. Plans without control will fail.
1. Establishment of Standards of
Performance.
You must first set the standards to be
followed by the members of the team. The
criteria or objectives must be clear, specific,
measurable, and acceptable by workers or
employees involved.
 Standards refer to the criteria of
performance. For example, in
planning sales targets for college
textbooks, both the sales manager
and the sales representatives should
plan together with the standards of
production to ensure realistic goals.
2. Measurement of Performance. If
the results are equal to the
standards, there are no problems,
but If performance is below
standards, then the sales manager
has to find out the possible
deviations and then take corrective
action. If the return is very high, the
manager may have made an
underestimation. Say the quota is to
sell 2,000 books, but it turns that all
the sales are over target.
3. Take Corrective Action. This action is
to stop deviations (differences). However,
the work to be taken depends on three
factors: the standard, the accuracy in
measuring deviation, and the analysis made
by the person or device investigating the
causes of variations. Standards can be low
or high.
 Measurements can be defective and
inaccurate. Managers or supervisors
could use poor judgment in
determining the corrective action to
be done. Nevertheless, in the case
of production standards or targets,
deviations can be corrected
employing mechanical process or
quality control. The machine
automatically rejects substandard
products.
FEATURES OF AN EFFECTIVE
CONTROL SYSTEM
1. Accurate and Adequate Data. Data
are essential in any control system.
They pinpoint the causes of
deviations. If data are inadequate and
inaccurate, the control system cannot
correctly solve the problems. Wrong
data result in the wrong solution.
2. Timely and Relevant. Data should be
appropriate to enhance the effectiveness of
any control system. It is challenging to solve
problems if data are not relevant to the
issues. Likewise, if the corresponding data
are not available on time, managers cannot
act on the issues. Managers should also
have enough time to respond quickly to
problems.
3. Economically and Organizationally
Realistic. The cost of installing a control
system should be less or equal to the
benefits generated. A control system which
is more expensive than its benefits is a
losing venture. Also, a control system
should be compatible with organizational
realities. For instance, employees should
understand the relationships between
performance and reward. They are
naturally eager to achieve realistic
standards if there are corresponding
incentives.
4. Unbiased, Measurable, and
Comprehensible. The data should not be
biased, must be measurable, and easy to
understand so that it will not create
confusion, frustration, and perhaps, non-
compliance.
5.Flexible and Acceptable. The control
system is a dynamic process and conforms
to the changing internal and external
environment of the organization. Flexibility
is of essential factor. The control system
should also be acceptable by employees.
DIFFERENT CONTROL AREAS
IN THE FIELD OF BUSINESS
FINANCIAL MANAGEMENT- pertains to
activities that are involved in raising money
and using it properly. The objective here is
to maximize the earnings of the owners.
PRODUCTION MANAGEMENT- refers to
the creation of goods and services to satisfy
human wants and other needs. Production
Management involves planning,
organization, coordination, and control of
resources to maximize the creation of
products and services and to minimize the
costs of production
MARKETING MANAGEMENT- is the art
and science of choosing target markets and
getting, keeping, and growing customers
through creating, delivering, and
communicating customer value.
HUMAN RESOURCE MANAGEMENT-
(HRM) is the function within an organization
that focuses on recruitment of, management
of, and providing direction for the people
who work in the organization.
BASIC TYPES OF CONTROLS
The basic types of controls include
Financial Controls, Production Controls,
and General Management Controls
FINANCIAL CONTROLS
 Financial Controls are observed in
Financial Statements, Budgets
and Audits
A. Financial Statements. These
indicate the flow of goods and services
to, within, and from the organization.
Such flow is analyzed in terms of
money.
1. Statement of Financial Position or
Balance Sheet. This tool shows the assets,
liabilities, and net worth of the organization.
2. Income Statement. This toll shows
records of the income and expenses of the
organization. Profit or loss is determined by
comparing income and expenses.
 3. Ratio Analysis. The ratio is a
relationship between two numbers.

 Ratios provide the information needed

to measure progress towards the
objectives and to evaluate the
financial performance or condition of
the organization. The ratio is obtained
either by comparing the present to the
past performance of the company or
by comparing it to others within the
same industry.

Example: Liquidity Ratio = Current

Assets - Current Liabilities

4Break-Even Analysis. - shows the

relationship between total revenue (price x
quantity) and overall cost. Managers can
determine when TR=TC. The break-even
point means sales = costs.

B. Budgets. A budget is a statement of

sources of funds and the corresponding
planned activities to be funded in a given
specific period. It serves both as a plan and
control.

C. Audits. This is to check the accuracy of

the data being used in the control system.
Audits are formal investigation, which is
intended to verify if records, reports,
statements, and other relevant information
are correct. Another purpose of audits is to
determine if such information or data
conform with the rules and procedures of
the organization. Audits are conducted by
insiders and outsiders to check financial and
management practices