PLANNING

 According to Peter Drucker:
Planning is continuous process of making present entrepreneurial decision (risk taking) systematically and with best possible knowledge of their futurity, organizing systematically the efforts needed to carry out these decisions and measuring the result of these decisions against the expectation through an organized systematic feedback.

 According to Koontz o’ Donnell:
Planning is an intellectual process, the conscious determination of course of action, the basing of decisions on purpose, facts and considered estimates.

 According to David Ewing:
Planning is to a large extent the job of making things happen that would not otherwise occur.

Features of planning :
 Planning is an intellectual activity
 Planning is an primary function of management
 Planning involves futurism
 Planning involves decision – making
 Planning is goal – oriented process
 Planning is continuous process
 Plan is all Pervasive

Need for planning :
 The increasing time span between present decisions and future results.
 Increasing organizational complexity
 Increased external change
 Planning and other management functions

Importance of planning :
 Planning determines the future destination of an organization
 Planning makes activities of employees meaningful
 Planning economizes operations
 Planning helps in reducing the risk of uncertainties
 Planning leads to discovery of new ideas and opportunities
 Planning facilitates co-ordination

Types of plans :
 Purposes or missions
 Objectives or goals
 Strategies
 Policies
 Procedures
 Rules
 Programs
 Budgets

Steps in planning :
1. Being aware of opportunities
2. Setting objectives and goals
3. Considering planning premises
4.Identifying alternatives
5.Comparing alternatives in light goals of sought
6.Choosing an alternative
7.Formulating supporting plans
8.Number zing plans by making budgets

Advantages of planning :
 Competitive spirit
 Conducive to systematic and Methodical work
 Minimizes irrelevant wastes
 Better and more constructive use of facilities
 Provides an overall picture of the operation of an enterprise
 Ensures co – ordination

Limitations of planning :
 Limitation of information
 Time limit
 Administrative limitation
 Action delay limit
 Psychological barrier

TYPES OF BUSINESS ORGANISATION

TYPES OF BUSINESS ORGANIZATIONS
When organizing a new business, one of the most important decisions to be made is choosing the structure of a business.

Forms of Business Ownership
This decision will have long-term implications, so consult with an accountant and attorney to help you select the form of ownership that is right for you. Your choice will be based on:
1. Your vision regarding the size and nature of your business.
2. The level of control you wish to have.
3. The level of "structure" you are willing to deal with.
4. The business's vulnerability to lawsuits.
5. Tax implications of the different ownership structures.
6. Expected profit (or loss) of the business.
7. Whether or not you need to re-invest earnings into the business.
8. Your need for access to cash out of the business for yourself.
9. The risks of your personal assets from business liabilities.
10. Are their partners and/or investors that will be part of the business.

Sole Proprietorships
The vast majority of small business start out as sole proprietorships . . . very dangerous. These firms are owned by one person, usually the individual who has day-to-day responsibility for running the business. Sole proprietors own all the assets of the business and the profits generated by it. They also assume "complete personal" responsibility for all of its liabilities or debts. In the eyes of the law, you are one in the same with the business.

Advantages of a Sole Proprietorship
1. Easiest and least expensive form of ownership to organize.
2. Sole proprietors are in complete control, within the law, to make all decisions.
3. Sole proprietors receive all income generated by the business to keep or reinvest.
4. Profits from the business flow-through directly to the owner's personal tax return.
5. The business is easy to dissolve, if desired.

Disadvantages of a Sole Proprietorship
1. Unlimited liability and are legally responsible for all debts against the business.
2. Their business and personal assets are 100% at risk.
3. Have almost be ability to raise investment funds.
4. Are limited to using funds from personal savings or consumer loans.
5. Have a hard time attracting high-caliber employees, or those that are motivated by the opportunity to own a part of the business.
6. Employee benefits such as owner's medical insurance premiums are not directly deductible from business income (partially deductible as an adjustment to income).

PARTERNERSHIP :
In a Partnership, two or more people share ownership of a single business. Like proprietorships, the law does not distinguish between the business and its owners. The Partners should have a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed. Yes, its hard to think about a "break-up" when the business is just getting started, but many partnerships split up at crisis times and unless there is a defined process, there will be even greater problems. They also must decide up front how much time and capital each will contribute, etc.

Advantages of a Partnership
1. Partnerships are relatively easy to establish; however time should be invested in developing the partnership agreement.
2. With more than one owner, the ability to raise funds may be increased.
3. The profits from the business flow directly through to the partners' personal taxes.
4. Prospective employees may be attracted to the business if given the incentive to become a partner.

Disadvantages of a Partnership
1. Partners are jointly and individually liable for the actions of the other partners.
2. Profits must be shared with others.
3. Since decisions are shared, disagreements can occur.
4. Some employee benefits are not deductible from business income on tax returns.
5. The partnership have a limited life; it may end upon a partner withdrawal or death.

Types of Partnerships that should be considered:

General Partnership
Partners divide responsibility for management and liability, as well as the shares of profit or loss according to their internal agreement. Equal shares are assumed unless there is a written agreement that states differently.

Limited Partnership and Partnership with limited liability
"Limited" means that most of the partners have limited liability (to the extent of their investment) as well as limited input regarding management decisions, which generally encourages investors for short term projects, or for investing in capital assets. This form of ownership is not often used for operating retail or service businesses. Forming a limited partnership is more complex and formal than that of a general partnership.

Joint Venture
Acts like a general partnership, but is clearly for a limited period of time or a single project. If the partners in a joint venture repeat the activity, they will be recognized as an ongoing partnership and will have to file as such, and distribute accumulated partnership assets upon dissolution of the entity.

Corporations
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique "entity", separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.

Advantages of a Corporation
1. Shareholders have limited liability for the corporation's debts or judgments against the corporations.
2. Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
3. Corporations can raise additional funds through the sale of stock.
4. A corporation may deduct the cost of benefits it provides to officers and employees.
5. Can elect S corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.

Disadvantages of a Corporation
1. The process of incorporation requires more time and money than other forms of organization.
2. Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
3. Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.

Subchapter S Corporations
A tax election only; this election enables the shareholder to treat the earnings and profits as distributions, and have them pass thru directly to their personal tax return. The catch here is that the shareholder, if working for the company, and if there is a profit, must pay herself wages, and it must meet standards of "reasonable compensation". This can vary by geographical region as well as occupation, but the basic rule is to pay yourself what you would have to pay someone to do your job, as long as there is enough profit. If you do not do this, the IRS can reclassify all of the earnings and profit as wages, and you will be liable for all of the payroll taxes on the total amount.

Limited Liability Company (LLC)
The LLC is a relatively new type of hybrid business structure that is now permissible in most states. It is designed to provide the limited liability features of a corporation and the tax efficiencies and operational flexibility of a partnership. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. The time limit can be continued if desired by a vote of the members at the time of expiration. LLC's must not have more than two of the four characteristics that define corporations: Limited liability to the extent of assets; continuity of life; centralization of management; and free transferability of ownership interests.

EVOLUTION OF MANAGEMENT THEORY

SCIENTIFIC MANAGEMENT THEORY :
 Modern management began in the late 19th century.
 Organizations were seeking ways to better satisfy customer needs.
 Machinery was changing the way goods were produced.
 Managers had to increase the efficiency of the worker-task mix.

 Defined by Frederick Taylor, late 1800’s.
 The systematic study of the relationships between people and tasks to redesign the work for higher efficiency.
 Taylor sought to reduce the time a worker spent on each task by optimizing the way the task was done.

 Four Principles to increase efficiency:
1. Study the way the job is performed now & determine new ways to do it.
Gather detailed, time and motion information.
 Try different methods to see which is best.
2. Codify the new method into rules.
 Teach to all workers.
3. Select workers whose skills match the rules set in Step 2.
4. Establish a fair level of performance and pay for higher performance.
 Workers should benefit from higher output.
PROBLEMS OF SCIENTIFIC MANAGEMENT :
 Managers often implemented only the increased output side of Taylor’s plan.
 They did not allow workers to share in increased output.
 Specialized jobs became very boring, dull.
 Workers ended up distrusting Scientific Management.
 Workers could purposely “under-perform”
 Management responded with increased use of machines.
BEHAVIOURAL MANAGEMENT THEORY:
 Focuses on the way a manager should personally manage to motivate employees.
 Mary Parker Follett: an influential leader in early managerial theory.
 Suggested workers help in analyzing their jobs for improvements.
 The worker knows the best way to improve the job.
 If workers have the knowledge of the task, then they should control the task.

THEORY X AND Y:
 Douglas McGregor proposed the two different sets of worker assumptions.
 Theory X: Assumes the average worker is lazy, dislikes work and will do as little as possible.
 Managers must closely supervise and control through reward and punishment.
 Theory Y: Assumes workers are not lazy, want to do a good job and the job itself will determine if the worker likes the work.
 Managers should allow the worker great latitude, and create an organization to stimulate the worker

THEORY Z:
William Ouchi researched the cultural differences between Japan and USA.
USA culture emphasizes the individual, and managers tend to feel workers follow the Theory X model.
Japan culture expects worker committed to the organization first and thus behave differently than USA workers.
Theory Z combines parts of both the USA and Japan structure.
Managers stress long-term employment, work-group, and organizational focus.
MANAGEMENT SCIENCE THEORY :
Uses rigorous quantitative techniques to maximize resources.
Quantitative management: utilizes linear programming, modeling, simulation systems.
Operations management: techniques to analyze all aspects of the production system.
Total Quality Management (TQM): focuses on improved quality.
Management Information Systems (MIS): provides information about the organization
ORGANISATION-ENVIRONMENT THEORY :
Considers relationships inside and outside the organization.
The environment consists of forces, conditions, and influences outside the organization.
Systems theory considers the impact of stages:
Input: acquire external resources.
Conversion: inputs are processed into goods and services.
Output: finished goods are released into the environment.

Fayol's Management principles

Henry Fayol, a French mining engineer, developed 14 principles of management based on his management experiences. These principles provide modern-day managers with general guidelines on how a supervisor should organize her department and manage her staff. Although later research has created controversy over many of the following principles, they are still widely used in management theories.

• Division of work: Division of work and specialization produces more and better work with the same effort.

• Authority and responsibility: Authority is the right to give orders and the power to exact obedience. A manager has official authority because of her position, as well as personal authority based on individual personality, intelligence, and experience. Authority creates responsibility.

• Discipline: Obedience and respect within an organization are absolutely essential. Good discipline requires managers to apply sanctions whenever violations become apparent.

• Unity of command: An employee should receive orders from only one superior.

• Unity of direction: Organizational activities must have one central authority and one plan of action.

• Subordination of individual interest to general interest: The interests of one employee or group of employees are subordinate to the interests and goals of the organization.

• Remuneration of personnel: Salaries — the price of services rendered by employees — should be fair and provide satisfaction both to the employee and employer.

• Centralization: The objective of centralization is the best utilization of personnel. The degree of centralization varies according to the dynamics of each organization.

• Scalar chain: A chain of authority exists from the highest organizational authority to the lowest ranks.

• Order: Organizational order for materials and personnel is essential. The right materials and the right employees are necessary for each organizational function and activity.

• Equity: In organizations, equity is a combination of kindliness and justice. Both equity and equality of treatment should be considered when dealing with employees.

• Stability of tenure of personnel: To attain the maximum productivity of personnel, a stable work force is needed.

• Initiative: Thinking out a plan and ensuring its success is an extremely strong motivator. Zeal, energy, and initiative are desired at all levels of the organizational ladder.

• Esprit de corps: Teamwork is fundamentally important to an organization. Work teams and extensive face-to-face verbal communication encourages teamwork.

MANAGEMENT CONCEPTS

Organizations: People working together and coordinating their actions to achieve specific goals.

Goal: A desired future condition that the organization seeks to achieve.

Management: The process of using organizational resources to achieve the organization’s goals by... Planning, Organizing, Leading, and Controlling

Additional Key Concepts
Resources are organizational assets and include:
People,
Machinery,
Raw materials,
Information, skills,
Financial capital.
Managers are the people responsible for supervising the use of an organization’s resources to meet its goals.
Achieving High Performance
Organizations must provide a good or service desired by its customers.
Physicians, nurses and health care administrators seek to provide healing from sickness.
Organizational Performance
Measures how efficiently and effectively managers use resources to satisfy customers and achieve goals.
Efficiency: A measure of how well resources are used to achieve a goal.
Usually, managers must try to minimize the input of resources to attain the same goal.

Effectiveness: A measure of the appropriateness of the goals chosen (are these the right goals?), and the degree to which they are achieved.
Organizations are more effective when managers choose the correct goals and then achieve them.

Managerial Functions
Henry Fayol was the first to describe the four managerial functions when he was the CEO of a large mining company in the later 1800’s.
Fayol noted managers at all levels, operating in a for profit or not for profit organization, must perform each of the functions of:
Planning, organizing, leading, controlling.

PLANNING:
Planning is the process used by managers to identify and select appropriate goals and courses of action for an organization. 3 steps to good planning :
1. Which goals should be pursued?
2. How should the goal be attained?
3. How should resources be allocated?
The planning function determines how effective and efficient the organization is and determines the strategy of the organization.

ORGANIZING : In organizing, managers create the structure of working relationships between organizational members that best allows them to work together and achieve goals.
Managers will group people into departments according to the tasks performed.
Managers will also lay out lines of authority and responsibility for members.
An organizational structure is the outcome of organizing. This structure coordinates and motivates employees so that they work together to achieve goals.

LEADING : In leading, managers determine direction, state a clear vision for employees to follow, and help employees understand the role they play in attaining goals.
Leadership involves a manager using power, influence, vision, persuasion, and communication skills.
The outcome of the leading function is a high level of motivation and commitment from employees to the organization.

CONTROLLING: In controlling, managers evaluate how well the organization is achieving its goals and takes corrective action to improve performance.
Managers will monitor individuals, departments, and the organization to determine if desired performance has been reached.
Managers will also take action to increase performance as required.
The outcome of the controlling function is the accurate measurement of performance and regulation of efficiency and effectiveness

MANAGEMENT LEVELS: Organizations often have 3 levels of managers:
First-line Managers: responsible for day-to-day operation. They supervise the people performing the activities required to make the good or service.
Middle Managers: Supervise first-line managers. They are also responsible to find the best way to use departmental resources to achieve goals.
Top Managers: Responsible for the performance of all departments and have cross-departmental responsibility. They establish organizational goals and monitor middle managers.

RESTRUCTRING :
Top Management have sought methods to restructure their organizations and save costs.
Downsizing: eliminate jobs at all levels of management.
Can lead to higher efficiency.
Often results in low morale and customer complaints about service
MANAGEMENT TRENDS :
Empowerment: expand the tasks and responsibilities of workers.
Supervisors might be empowered to make some resource allocation decisions.
Self-managed teams: give a group of employees responsibility for supervising their own actions.
The team can monitor its members and the quality of the work performed

MANAGERIAL ROLES : Described by Mintzberg. A role is a set of specific tasks a person performs because of the position they hold.
Roles are directed inside as well as outside the organization. There are 3 broad role categories:
1. Interpersonal
2. Informational
3. Decisional

INTERPERSONAL ROLES : Roles managers assume to coordinate and interact with employees and provide direction to the organization.
n Figurehead role: symbolizes the organization and what it is trying to achieve.
n Leader role: train, counsel, mentor and encourage high employee performance.
n Liaison role: link and coordinate people inside and outside the organization to help achieve goals.

INFORMATIONAL ROLES : Associated with the tasks needed to obtain and transmit information for management of the organization.
Monitor role: analyzes information from both the internal and external environment.
Disseminator role: manager transmits information to influence attitudes and behavior of employees.
Spokesperson role: use of information to positively influence the way people in and out of the organization respond to it.

DECISIONAL ROLES : Associated with the methods managers use to plan strategy and utilize resources to achieve goals.
Entrepreneur role: deciding upon new projects or programs to initiate and invest.
Disturbance handler role: assume responsibility for handling an unexpected event or crisis.
Resource allocator role: assign resources between functions and divisions, set budgets of lower managers.
Negotiator role: seeks to negotiate solutions between other managers, unions, customers, or shareholders
MANAGERIAL SKILLS :
There are three skill sets that managers need to perform effectively.
1. Conceptual skills: the ability to analyze and diagnose a situation and find the cause and effect.
2. Human skills: the ability to understand, alter, lead, and control people’s behavior.
3. Technical skills: the job-specific knowledge required to perform a task. Common examples include marketing, accounting, and manufacturing.
All three skills are enhanced through formal training, reading, and practice.

MANAGEMENT CHALLENGES :
Increasing number of global organizations.
Building competitive advantage through superior efficiency, quality, innovation, and responsiveness.
Increasing performance while remaining ethical managers.
Managing an increasingly diverse work force.
Using new technologies