C M A ALPHA

Business Studies Department

PRINCIPLES OF BUSINESS
4th Form
Section 2: Internal Organizational Environment

Lesson Notes: Responsibilities of Management

Outline the responsibilities of management

Businesses has responsibilities to the society in which they operate, in the same
way management of businesses have responsibilities to all persons who work to
secure the success of the businesses. Managers are accountable to the key
stakeholders whose interest they represent. The key stakeholders (often groups
of people) that managers are responsible to are:

1. Owners and shareholders

2. Employees
3. Customers
4. Society
5. Government

Responsibility of management to owners and shareholders

Managers are responsible for managing the assets (the buildings, machinery,
raw materials and employees) of the owners and shareholders of a company, to
maximize profits and to ensure optimum returns on investments. Good managers
will combine these resources and carry out the management roles (coordinating,
controlling, etc.) to keep costs as low as possible, to maximize efficiency and
productivity, and to earn profits. A surplus will be achieved when the profits of the
business outweighs the cost of running the business.

Management of the organization should ensure that:

a) the company is operating efficiently and maximizing profits for

shareholders.
b) the firm meets the strategic goals in an efficient and effective manner.
c) it operates within the scope of its authority and in keeping with the
prevailing laws and the companies’ act that are in place.
d) it advise shareholders on any changes that may be necessary to ensure
growth of the firm.

Shareholder: someone who is a part owner of the business; the shareholder will
typically have shares.
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Responsibility of management to employees
Good managers are responsible for running a profitable business, enabling
suitable wages to be paid to the employees. In addition, they are responsible for
providing safe and adequate working conditions (including appropriate rests
breaks, adequate toilet facilities and suitable temperatures, by enforcing legal
requirements for safety and cleanliness). Managers are also responsible for
creating good human relations so that employees feel valued, listened to and a
part of the work family.
Managers should provide training opportunities for employees, so that
employees can perform their work tasks well and are able to develop and
progress in the workplace. They are also responsible for providing and
maintaining good communication so that instructions are clear, employees are
kept informed, and teamwork encouraged.
In summary Management should:
a) provide suitable working conditions:
b) provide adequate training facilities to workers
c) maintain good interpersonal relations among staff
d) maintain good communications whether through oral, written or visual
methods.
e) provide adequate remuneration and incentives
f) provide promotional opportunities, engender loyalty and trust and
acknowledge good performance by members of staff
In short, management must ensure good industrial relations practices are
followed by the organization.

Responsibility of management to customers

All managers work with customers – people whose expectations and needs they
have to meet. Customers are the people that an organization serves. There are
two types customers: internal customers (people within an organization who are
served by someone else within the organization), and external customers (people
outside the organization who are served by people within the organization). We
are more familiar with external customers, for example the customer who is
served by a shopkeeper. However, internal customers are just as important, for
example the production-line worker who is served by a colleague in the stores
department of a factory.

One important role of a manager is to make sure that all customers are served
efficiently, for example by setting reasonable prices, establishing good customer
services, meeting customer expectation of products, etc. The marketing manager
has a key role in making sure that the marketing department identifies what
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customers are looking for, and that the company services these needs. Other
managers will want to make sure that people in their department get the service
that they require form others in the organization.

In summary management should:

♦ Management should produce goods and services of marketable quality and at
reasonable price.
♦ It is the responsibility of management to provide adequate customer
information on goods and services that the business provides.
♦ Management should ensure that service to the customer continues after a
sale has been concluded, and there is adequate room for redress in the event
that the customer is dissatisfied with the product.
♦ Management should honour all guarantees and warranties, and provides
adequate and fair arbitration in dealing with customers’ complaints.

Responsibility of management to society

Businesses provide jobs and income, which benefits the economic development
of communities, but they also provide some less-welcome side effects such as
pollution. Wider society is therefore a key stakeholder in business. Good
managers will also seek to get into the community, for example by sponsoring
community activities such as sporting events and by giving talks that show how
the business is interacting with the wider society.
In summary:
♦ Management is obliged to operate within the law by carrying out fair trade
practices and ensuring that the environment is not damaged by the business’s
operation.
♦ As a corporate citizen, management should enhance its social standing in the
community by supporting charitable organizations and other worthy goals of
voluntary groups within the community.

Responsibility of management to government

Businesses are accountable to the government, and managers need to ensure
that they abide by government rues, as well as provide the government with the
required information and resources. For example, compliance officers must make
sure that the company has effective policies and practices in place to comply with
all government legislation, and must provide all required information to the
government, such as output and pollution levels etc.
In summary

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♦ Management must abide by the laws of the land by paying corporation taxes
and making deductions from employee’s salaries, such as National Insurance
and income taxes, for subsequent transfer to government.
♦ Management should see the business as contributing to welfare of society by
adopting nationalistic goals, such as assisting in reducing unemployment and
contributing to economic growth by adding to gross national product
♦ Management has an economic responsibility (through the firm) to add to the
economic prosperity of a nation by annually increasing its productivity. It is
hoped that continued prosperity will mean expansion of the firm and thus will
assist in reducing the country’s unemployment.

Ways in which management contribute to good manager worker

relationships

Management can contribute to good management-worker relations by:

Maintaining good communication with workers
Establishing grievance procedures
Practising good leadership
Seeking to motivate workers with adequate compensation and incentives
Providing more interesting work through job enrichment and job enlargement\
schemes.
Improving working conditions.

Stakeholder Management Responsibilities How responsibilities are met

Group
Owners/Sharehold - Maximize efficient use of - Keep costs as low as
er resources. possible.
- Earn profits or surpluses. - Earn revenue in excess
- Keep owners informed. of total costs.
- Provide annual report.
Employees - Fair wage. - Pay at least the minimum
- Working conditions. wage.
- Training. - Issue written contract of
- Good communication. employment.
- Human relation.
Society/Community - Employment/Income - Provide stable
- Environment employment
- Cultural and social to local workers.
activities - Sponsor events.
Customers - Prices - observe price
- Quality control.
- Service4 - meet customer’s
 expectations of
quality for the
product.
Government - Legal - Observe all national laws.
- Tax - Pay taxes
- Information - provide information

Management responsibility to:

✔ Owners of the business – to raise profit, protect assets, prepare financial reports
✔ Customer – provide high quality goods and services, compensate customers for
injury, guard against misleading advertisements, and deliver orders on
time.
✔ Employees – protect unfair dismissal, provide proper working conditions and
equipment, avoid discrimination against workers.
✔ Society - avoid pollution to the environment, conserve scarce resources, preserve
local culture and tradition.
✔ Government – adhere to the laws of the country.