1. Competency 2.00
Analyze the management functions and their implementation and integration within the business environment.

2. Management Functions
Planning
Organizing
Leading
Controlling

3. Objective 2.01
Explain the planning function and how the decision-making process is applied in business

4. Analyzing information and making decisions about what needs to be done
Planning
Analyzing information and making decisions about what needs to be done

5. The Importance of Planning
Sets direction for the business
Establishes specific goals
Serves as a guide for making decisions
Helps determine if the business is making progress
Helps managers communicate with each other and their employees

6. Levels of Planning Strategic Planning Long-term planning
Provides broad goals and direction for the entire business
SWOT analysis – internal and external analysis
Examination Strengths, Weaknesses, Opportunities and Threats

7. Steps in Strategic Planning
External Analysis
Managers study factors outside firm that can affect effective operations – customers, competitors, economy government
Internal Analysis
Managers study factors inside the business that can affect success – finances, personnel, resources
Mission Statement – a short specific statement of the purpose and direction of the business
Managers agree on the most important direction for the business based on the information gathered. Write a short
Goals
Managers develop outcomes for the business to achieve that fit within the mission
Strategies
Managers determine the efforts expected from each part of the firm if goals are to be achieved

8. Operational Planning Determines how work will be done
Determines who will do the work
Determines what resources will be needed to complete the work
Examples:
developing department budgets
planning inventory levels
developing employee schedules

9. Formal Planning
Systematic studying of an issue and the preparation of a written document to deal with the problem
3 Basic Time Spans for Business Plans
Short-range plans – cover a one year period of time
Long-range plans – cover a 3-5 year period of time
Intermediate plans – cover time span between short and long-range plans, either from 1-3 years or 1-5 years

10. Planning Tools Goals Budgets Schedules Standards Policies Procedures
Provide the direction for a business
Budgets
Help determine the best way to use available money to reach goals
Schedules
Identify the tasks to be completed and the approximate time required to complete each task
Standards
Used to compare products and services for quality
Policies
General rules to be followed by a business or department
Procedures
Steps to be followed when implementing policies
Research
Used to collect data for managers and provide information needed to improve planning decisions

11. Decision-making Process
Identify the problem
List possible solutions for solving the problem
Analyze possible solutions
Select the best solution
Evaluate the decision

12. Barriers to Effective Decision-Making
Complacency
Manager thinks that making the decision is easier that it really is
Avoidance
Manager denies the importance of a problem
Panic
Manger becomes frantic trying to make a decision
Indecisiveness
Manager becomes unable to make a final decision

13. Objective 2.02
Discuss the importance of goals setting within the context of the business environment.

14. Characteristics of Effective Goals
Goals must be specific and meaningful
Should relate to activities and operations of business so employees see how their jobs relate to goals
Factors to consider when setting goals
General economic conditions facing the business
Past sales and profits
The demand for products and services
Reactions of current and prospective customers
Resources of the business
The actions of competitors

15. Characteristics of Effective Goals
Goals must be achievable
Goals should be clearly communicated
Goals should be communicated to all employees
Communication will help employees understand that they are part of team effort
Goals should be consistent with each other and with the overall company goals

16. Common Goal Setting Areas
Profitability – measures the level of profits the company is making
Markets – reflects the company’s position in the marketplace
Productivity – measures the efficiency of internal operations
Products – describes the introduction or elimination of products and services
Financial Resources – reflects goals relating to the funding needs of the company
Physical Facilities – describes the physical facilities of the company
Research and Innovation – reflects the research, development, and/or innovation objectives
Organization Structure – describes objectives relating to changes in the company’s structure and related activities
Human Resources – describes the human resource assets of the company
Social Responsibility – refers to the commitments of the firm regarding society and the environment

17. Objective 2.03
Compare/contrast the basic forms of business ownership and their organizational variations

18. Organizing
Determining how plans can most effectively be accomplished; arranging resources to complete work

19. Sole Proprietorships Owned by a single individual, or proprietor
Easy to start

20. Sole Proprietorships Advantages Disadvantages
Owners control business and keep profits
Can make decisions quickly
Pay fewer taxes than other kinds of business
Disadvantages
Owner may lack necessary skills and abilities
Owner may not have necessary funds when needed
Owner has full liability for all debts
Business can fail if owner becomes ill or disabled

21. Partnerships Owned by two or more people
Partners must share the profits from their business
Allows partners to combine their talents and financial resources

22. Partnerships Advantages Disadvantages
partners combine their talents and skills
have increased sources of capital
pay less in taxes than a corporation
Disadvantages
unlimited financial liability
disagreement among partners
partners bound by contracts and decisions of other partners

23. Corporations
Formed under state or federal statutes – corporate charter
Authorized to act as a legal person, separate from its owners
Owners are called stockholders
Owners have limited liability
Board of directors is the ruling body
Officers of corporation are hired to manage the business

24. Corporations Advantages Disadvantages
limited liability of stockholders
can raise capital by selling stock
easy to transfer ownership
able to get credit easier than other types of businesses
Disadvantages
must comply with more federal and state laws
pay more taxes than any other types of businesses
must register within a state government to begin business

25. Franchise
Right to sell parent company’s product or service under the company’s name and trademark.
Franchisee pays initial fee and a percentage of weekly sales
Franchisor helps in start up and operation of business

26. Franchise Advantages Disadvantages
gets help of franchisor in establishing business
gets exclusive rights to sell franchised product or service in a specified geographical area
Disadvantages
must follow strict guidelines in running business
requires large amount of money to purchase franchise

27. E-Commerce Dot.com businesses Use of Internet to buy and sell products
A company that does most of its business activities through the Internet
Use of Internet to buy and sell products
Businesses progress through 3 stages of Internet use
Information Stage – customers use Web site to get information only about the business
Interaction Stage – Web site offers information and interaction with business in form of and data bases to search within the Web sit
Integration Stage – entire customer transaction can be completed using the Internet. Customers can get pricing, ordering, shipping information and place order over the Internet

28. Limited Liability Company (LLC)
Formerly called an “S-Corporation”
Company must meet certain conditions to qualify as LLC
no more than 35 stockholders
cannot own 80% of stock of another corporation
no more than 25% of income of corporation can be from other sources
Stockholders must be permanent citizens of US
Company taxed as a sole proprietorship
Owners have limited liability
Profits go directly to stockholders
Lower taxes than corporation

29. Joint Venture
agreement among two or more businesses to work together to provide a good or service
each partner brings management skills and/or money to the project
Examples:
America Online, Phillips Electronic & Direct TV formed joint venture to develop and offer interactive TV that lets customers access the Internet through their TVs
Ford Motor Company produces cars with Mazda

30. Strategic Alliances
cooperative agreements between potential or actual competitors
agree to cooperate on certain aspects of business but remain competitors on other aspects
Strategic alliances allow companies to:
gain access to new markets
share research
expand product lines
learn new skills
Examples:
American Airlines-British Airways One World Alliance – airlines share seating on some flights and let passengers use the alliance members’ airport lounges
Daimier-Benz (Mercedes-Benz) and Chrysler – both companies gained access to the partners market in Germany and US

31. Virtual Corporation
Network of independent companies that form alliances to take advantage of fast-changing market conditions
Relationships are usually temporary
Information technology helps world-wide companies carry out their alliance
Examples
Puma Athletic Shoe Co – 80 companies world-wide make and sell the shoes – marketed in Germany, Asian companies purchase materials, companies in China, Taiwan, Indonesia, Korea manufacture the shoes, separate companies on all continents sell the shoes
AT&T and Japan’s Marubeni Trading Company linked with another company to produce the Safari notebook computer

32. Objective 2.04
Explain the organizing function and how it is used to align resources and relationships to achieve business goals

33. Organizing
Arranging resources and relationships between departments and employees
Defining responsibilities employees have for accomplishing work

34. Characteristics of Good Organization
Responsibility – assigned tasks are clearly defined
Authority
Right to make decisions about assigned work
Right to make assignments to others concerning that work
Each employee and each manager show know the following
Description and duties of each job
What authority accompanies the job
The manager in charge
Who reports to the manager
What is considered satisfactory performance
Accountability
Employee is accountable to manager for performing assigned tasks
Manager is accountable to his/her boss for the outcomes of all work
Unity of command
No employee reports to more than one supervisor
Confusion and poor work relations result when an employee is accountable to more than one supervisor

35. Characteristics of Good Organization
Span of management
The number of employees a manager can effectively control
Manager who supervises too many people is overworked and unable to perform all duties effectively
Manager who supervises too few people is a waste of valuable time
Factors used to determine how many employees a manager supervises
The complexity of the jobs being performed
The quality of the employees being supervised
The ability of the manager
Delegating
Task may be too time-consuming for a manager to handle alone
Some tasks are too routine for a manager to do – better use of the manager’s time
Some tasks require special skills the manager may not possess

36. Types of Organizational Structure
Line structure
Authority starts at the top and moves downward in a line
All managers perform functions that contribute directly to the profits of the company
Common form of structure among small businesses
President has direct control over all units of business
Line and staff structure
Adds staff specialists to the line organization
Designed to solve the problem of complexity
Staff specialists give advice and assistance to line personnel
Staff personnel have no authority over line personnel
Matrix structure – project organization
Combines workers into temporary work teams to complete specific projects
Employees report to a project manager with authority and responsibility for project
No permanent organizational structure – employees work for a manager until the project is finished then they are assigned to a new project and manager
Team structure
Divides employees into permanent work teams
Teams have responsibility and authority for business activities with limited management control over daily work
Team leaders replace the traditional supervisor and act as facilitators

37. Types of Organizational Structure
Flat Structure
Small number of levels with broad span of management at each level
Requires a great deal of delegation by manager
Employees have more power within the company
Tall Structure
Many levels with small spans of management
Power centralized at the top levels
More control over the employees
Centralized Organization
Top managers do all major planning and decision making
Requires many policies and rules to control the organization
Decentralized Organization
Large businesses divided into smaller operating units
Unit managers have almost total responsibility and authority for operation of their units

38. Objective 2.05
Differentiate between leading and managing and identify appropriate leadership styles used in business situations

39. Leading
Influencing individuals and groups to cooperatively achieve organizational goals

40. Leadership
Ability to influence individuals and groups to cooperatively achieve organizational goals
Managing – deciding how to best use a business’s resources to produce goods or provide services

41. Sources of Power Position power – position in the organization
Reward power – ability to provide rewards
Expert power – skill, expertise, knowledge
Identity power – employee’s perception of manager
Personality power – characteristics that attract others
Coercive power – ability to punish

42. The general way a manager treats and supervises employees.
Leadership Styles
The general way a manager treats and supervises employees.

43. Autocratic Leadership
Leader gives direct, clear, precise orders
Employees usually do not make decisions about their work
Disadvantages
Discourages employees from thinking of better ways to
do their work
May lead to employee dissatisfaction and decrease work performance
Does not prepare employees for leadership opportunities or promotion
Advantages
Best style to use in emergencies
Can be used with temporary employees
Efficient – employees know how the manager expects them to perform the task

44. Laissez-faire leadership
Leader gives little or no direction to employees
Decisions are left to individual employees or team
Works best with experienced workers and in businesses where there are few major changes
Should be used very carefully and when employees are prepared and comfortable with the responsibility

45. Democratic leadership
Leader encourages workers to share in making decisions in planning work, solving work problems, and making decisions
Disadvantages
All employees do not like to participate in decision making
Time consuming because planning and discussing problems takes time
Employees will be upset if they are only asked about unimportant decisions
Advantages
Effective when employees are committed to jobs and want to have more responsibility
Employees more likely to carry plans and decisions they helped to create

46. Situational leadership
Leader understands employees and job requirements
Matches actions and decisions to the circumstances

47. Objective 2.06
Relate management theories to the leading/directing functions of management.

48. Management Theories

49. Scientific Management
Developed by Frederick Winslow Taylor
Study work procedures and determine best methods for performing particular tasks
Based on four main ideas
Jobs should be designed according to specific rules – determine “one best way” of performing a task
Employees should be selected and trained according to scientific methods
Principles of scientific management should be explained to workers
Management and workers should be interdependent so that they cooperate

50. Hawthorne Studies of Productivity
Looked at relationship between working conditions and productivity
Tested different variables and productivity increased
Hawthorne effect – change of any kind increases productivity
Other results of study
Productivity increased because workers worked harder when they received any kind of attention
Factors other than physical environment affected workers productivity – psychological and social conditions at work
Effective supervision greatly affected productivity and employee morale

51. Theory X and Y
Theory X
People are basically lazy and will avoid work if they can
Managers will impose strict rules to make sure they make all important rules
Theory Y
People find satisfaction in their work
Managers think people will work productively if put in the right environment
Managers give employees more freedom and allow them to make mistakes
People are creative and will come up with good ideas

52. Theory Z Integrates Japanese and American business practices
Incorporates Japanese emphasis on collective decision-making and concern for employees
Incorporates American emphasis on individual responsibility

53. Total Quality Management
Developed by W. Edwards Deming
Mathematical approach to quality control
System of management based on involving all employees in a constant process of improving quality and productivity by improving how they work
Focuses totally on satisfying both customers and employees

54. Deming’s Fourteen Points of TQM
Create consistent purpose for improving products and services in order to remain competitive.
Adopt a new philosophy.
Stop spending on mass production.
Consider quality as well as price in awarding business.
Constantly improve the system of production and service.
Institute a vigorous program of job training.
Adopt and implement leadership.
Drive out fear so that everyone may work effectively for the company
Break down barriers between departments.
Eliminate numerical goals, posters, and slogans for the workforce that ask for new levels of productivity without providing new methods.
Eliminate work standards that prescribe numerical quotas.
Remove barriers that stand between the hourly worker and his/her right to pride of workmanship.
Encourage education and self-improvement for everyone.
Create a structure in top management that will work every day to achieve the above 13 points.

55. Motivation Theories

56. Maslow’s Hierarchy of Needs
People seek to satisfy needs in a certain order from lowest to highest
People will only move to next level after lowest levels are fulfilled
Managers can influence employee behavior by recognizing the levels that are motivating employee behavior
Hierarchy Levels – (from lowest to highest)
Physical or physiological needs
Safety or security needs
Love or social needs
Ego or status needs
Self-actualization, self-realization, self-fulfillment

57. McClelland’s Achievement Theory
Developed by David McClelland
People influenced most strongly by 3 specific needs
achievement need
affiliation need
power need
Managers who believe this theory can help fulfill these needs by assigning duties based on employee needs
Achievement need – provide opportunities for employees to make decisions and control own work
Affiliation need – assign employees to group projects and teams
Power need – employees will work best when they can be a project leader or be involved in planning and decision-making

58. Herzberg’s Two-factor Theory
Developerd by Frederick Herzberg
Studied employees to see what satisfied and dissatisfied them
Identified two distinct groups of factors related to motivation
Hygiene factors – dissatisfy when absent but do not contribute to satisfaction when present
Amount of pay
Fringe benefits
Working conditions
Rules
Supervision
Motivators – factors that increase motivation
Challenging work
Recognition
Achievement
Accomplishment
Increased Responsibility
Personal development

59. Objective 2.07
Discuss the importance of the evaluating/ controlling function and determine adaptations when goals are not being achieved

60. Controlling
Evaluating the results to determine if the company’s objectives have been accomplished as planned

61. Controlling
Determining whether goals are being met and what actions to take if performance falls short of the goals.
Provides information needed to improve the management process and business operations.

62. Why Controls are Needed
Prevent crisis – solve small problems before they become big problems
Standardize outputs – processes and procedures can be used to improve products
Appraise employee performance – goods controls are objective so employees can be evaluated fairly
Update plans – managers can react quickly to a changed environment
Protect the organization’s assets – protect assets from waste and theft

63. Basic Steps in Controlling

64. Setting Standards Part of planning goals for the company
Outline what is expected of employees or organizational unit

65. Types of Standards Quantity standards Quality standards Time standards
Take different forms depending on the tasks being performed
Examples
Minimum number of units to produce in each hour, day, or month
Number of prospective customers to contact by sales representative
Number of lines of information to be keyed per hour by information processing personnel
Quality standards
Quality of work performed
Work with no errors may be the only acceptable standard for some products and services
Time standards
Amount of time it takes to complete an activity
Cost standards
Businesses pay more attention to cost standards – must be cost conscious at all times
Wasting material or taking more time than necessary increases costs
Increasing costs with an increase in sales decreases profits
Most widely used controlling device is the budget
Actual cost information is collected and compared with budgeted amounts
Quantity standards
Take different forms depending on the tasks being performed
Examples
Minimum number of units to produce in each hour, day, or month
Number of prospective customers to contact by sales representative
Number of lines of information to be keyed per hour by information processing personnel
Quality standards
Quality of work performed
Work with no errors may be the only acceptable standard for some products and services
Time standards
Amount of time it takes to complete an activity
Cost standards
Businesses pay more attention to cost standards – must be cost conscious at all times
Wasting material or taking more time than necessary increases costs
Increasing costs with an increase in sales decreases profits
Most widely used controlling device is the budget
Actual cost information is collected and compared with budgeted amounts

66. Monitoring Performance
Standards basis for effective performance
Managers monitor performance to gather data and detect problem areas then they compare performance to standards
Variance – difference between performance and standard
Variance can be positive – performance exceeds standard
Variance can be negative – performance falls short of standard
Managers must identify reasons for variance

67. Causes of Performance Deviation
Faulty planning
Insufficient communication – employees may not know what is expected of them, manager may not know issues affecting performance
Training – performance may decline during training period
Lack of motivation – reduces efficiency and prevents employees from meeting objectives
Unforeseen forces –new government regulations, natural disasters

68. Tools for Control Budgets
Financial controls – income statements, balance sheets
Direct Observation
Written Reports
Audits – detailed look at an organization’s financial or other practices
external audit – performed by outside accountants
internal audit – performed by members of the organization

69. Taking Corrective Action
Managers can take 3 possible actions when performance is not meeting standards
Take steps to improve performance
Make sure supplies and materials are available
Make sure work is organized
Make sure employees are well-trained
Change policies and procedures
Policies and procedures may not be appropriate
Major changes such as new equipment or new procedures
Revise standard
When it is clear standards will not accurately reflect performance
When attempts to improve performance have not been successful
New standards and reasons for change should be clearly communicated to employees affected