Kamis, 14 April 2011

Concept of Management and Its Role on Enterprise

Management of a business enterprise is based upon three structure of levels
  1. The operating management group, consist of foremen and supervisors.
  2. The middle management group, consist of department heads, division managers and branch managers.
  3. The executive management, consist of president, executive vice president, the executives of marketing, purchasing, engineering, manufacturing, finance and accounting.

They are people whose activities must be planned and controlled through top level directives, decisions and instructions. They always use plans on each moves and activities.

Plan should be considered under the term “planning” and the continuous of the plans under the term “control”. Planning refers to the construction of an operating program to cover all phases of operations and specific attention may be given to the program’s fulfillment in controllable segments.

Control guides the business to compare of performance with predetermined policies and decisions. Management needs systematic, comparative cost information as well as analytical cost and profit data to manage an enterprise. This kind of information is needed to assist in :

  1. Setting the company’s profit goal by executive management.
  2. Establishing departmental targets which direct middle and operating management move toward the final goal.
  3. Measuring and controlling departmental and functional activities with the aid of budgets and standards.
  4. Analyzing and deciding on adjustments and improvements to keep the entire organization moving toward established profit and company objectives.

In making decisions, giving orders, establishing policies, providing work and rewards and hiring people to carry out policies, are not as simple and easy thing to do. Management sets certain objectives which have to accomplish through the efforts of the people through a series of steps and processes. They requires the integration of knowledge, skills,  practices and experience of those who are entrusted with the task of carrying out the objectives. The objectives can be achieved by management together with the efforts of all employees and workers through planning and controlling.

Planning is a basic thing to the management process of an organization to external opportunities and threats, determining objectives and deploying resources to match the objectives. Without planning there is no basis for controlling. Planning provides the foundation upon which the control function operates. Effective planning is based on facts collected and analyzed. As a planner, he or she should be able to visualize the proposed pattern of activities. Planning is looking a head, preparing the future, it involves a choice of several alternatives, a matter of making a decision and precede the doing.
One kind of plan is called “the budget”. Budget is the most important plan of an enterprise and basic link of cost accounting with management. The use of budgets as a tool of control called “budgeting control” to anticipate results.

Budgets are expressed in quantitative data such as dollars, working hours, number of employees, units of input and output, units of products made and sold. Another kind of plan made by engineering, manufacturing, marketing, research and development, finance and accounting, must be maintained and participate in the establishment of the corporate plan. No single function should plan and act individually from other functions since all are interdependent. The failure of this process can cause complexity and disaster result for the organization at all.

Profits are the indispensable elements in a successful business enterprise. A firm with inadequate profit will not survive and perhaps become a social or economic disaster to the society where they belong.
Social responsibility is a fair weather concept. Management cannot begin to think about it unless profits are adequate. However, profit cannot become the sole objective of the company and its management. Management must execute a series of thinking processes and actions which will guide them to produce specific products or services in a manner or method that will effect in the long run and assure a profit, win the cooperation of employees, gain the goodwill of customers and meet social responsibilities.

Business logic and public expectations suggest that plans should be formulated within a framework of economic, technological, social and political. As a result, organizational objectives and performance criteria must be broader and more sophisticated.

On the other side, controlling or management control is the systematic effort by business management to compare performance to plans. The control function is important to accomplish the final objectives. The need for control increases along with the size and complexity of the organization. Continuous supervision of an activity is required to keep it within previously defined boundaries and these boundaries termed “budgets or standards” are set up for manufacturing, marketing, finance and all other activities.

They measure actual results against plans and if significant differences happened, remedial action are taken.

In a small company, planning and control activities often tend to be performed by a single person. The owner or general manager often perform their tasks without elaborate fact finding and analysis due to his intimate knowledge of men, materials, money and customers. However in a large company with numerous divisions and a variety of products or services, planning and control responsibilities are not combined in the same person or group of persons. Larger business organizations faced greater problem of planning and process of controlling the activities of individual units. For this reason, many firms have initiated the decentralization of certain planning and control functions in order to place the reports and necessary corrective actions closer to the scene of activity.

Overall responsibility for control rests with exevutive management or the president of the company. President cannot attend to every aspect of the control program so he must delegate authority and assign responsibilities to the middle and operating echelons of management. The delegation of authority and the assignment of responsibility are fundamental requirements if management’s plans are to succeed and control is to be exercised.

Authority is the key to the managerial job and the basis for responsibility. It is not only the force that binds the organization together, but also the power to command others to perform or not perform certain activities. Authority vested in a division manager, a departmental head, a supervisor or a foreman enhances compliance with the plans and objectives of the organization. Delegation of authority is essential to the existence of an organizational structure, however delegation does not mean a permanent release from obligations.

Closely related to authority is responsibility. The essence of responsibility is obligation. It arises particularly in the superior since the superior has the authority to require specified work or services from another person. This other person accepts the obligation to perform the work, he creates his own responsibility. Responsibility cannot be delegated, his responsible for performance or nonperformance.

Responsibility have two facets. To securing results and accountability or reporting back to higher authority of results achieved. The reporting phase is important as budgetary control and standard cost accounting. It makes possible to compare of actual performance with predetermined plans to measure the quantity, quality, time and cost of the extent to which objectives were reached.

Accountability is basically an individual rather than a group problem. The principle of single accountability has become well established in business organizations. Divided authority and responsibility results in divided accountability. The organizational structure must avoid duality or pooling of judgment for this diffuses responsibility and nullifies accountability. Without single accountability, control reports would not only be meaningless but corrective actions would be delayed or not forthcoming at all.

Organizing is essential to establish the framework within activities are to be performed and a designation of who should do them.Without proper organization a person cannot function as a manager. The terms of organize or organization refer to the systematization of various interdependent parts and units into one whole. Considered in this sense, organizing requires many functional units of an enterprise into a well conceived structure and assigning authority and responsibility to certain individuals. These efforts include the task of getting people to work together for the good of the company. All of attitudes, ambitions, ideas of many persons involved, indoctrination, instruction and patience are needed to arrive at the desired organizational structure. Creation of an organization involves the establishment of organizational or functional units into divisions, departments, sections, branches, etc. These units are created for the purpose of breaking the tasks into workable parts leading to division and specialization of labor. Actually there are three large fundamental activities in a manufacturing enterprise, they are manufacturing, marketing and administration. Within these three basic organizational units, numerous departments or section are formed according to the nature and the amount of work, specialization, number of employees and location of the work. After organizational units have been created, management must assign the work to be done within each unit. Appropriate division and distribution of work among the employees combined in organizational units are vital to the attainment of company objectives and the relationships between superior, subordinate and among managers within the management team must bind the units into one whole for ultimate success.

The organzation chart sets forth each principal management position to define authority, responsibility and accountability. The accountant’s reports help management to evaluate the effectiveness of its plan and establish the conditions to corrective action.
An organization chart is essential to develop cost system and cost reports which parallel the responsibilities of individuals for implementing management plans. The coordinated development of a company’s organization with cost and budgetary system will lead to “responsibility accounting”.

Generally, the type of organization chart is based on the line staff concept, a concept that is particularly useful when a product lines of a company are simple and not subject to frequent changes over the years. All positions or functional divisions can be simply categorized into two groups, the line group which makes decisions and performs the true management functions and the other group called staff gives advise or performs any technical functions. The functional teamwork is structured to place proper emphasis and balance on the truly important functions of any enterprise. These business functions can be grouped into


a. Resources

  • Acquisition
  • Disposal
  • Husbanding of a wide variety of resources
                 Tangible
                 Intangible
                 Human
                 Physical


b. Processes

  • Product design
  • Research and development
  • Purchasing
  • Manufacturing
  • Advertising
  • Marketing
  • Billing

c. Human interrelations
    Directs the company's effort toward the behavior of people inside and outside the company.




The use of company capital is one of management’s chief concerns because this capital is invested in the form of productive facilities (factory building, machinery, tools and equipment). The use of this capital is determined by management’s plans for the immediate future and by plans for more than two years ahead. The budget emerges as the result of management’s planning and plays an important role in controlling operations. Comparison fo the budget plan with actual results not only provides a measure of the amount of deviation but also reflects the reasons for variances or differences.


The effectiveness of the control of costs depends upon proper communication through control and action reports from accounting function from the various levels of management. Accounting and cost control reports are directed to executive management, middle management and operating management. Each managerial level requires data for deciding and solving varied and difficult problems. The data assembled for one purpose may not be usable for another purpose. Data collected and assembled for measuring and reporting to operating management of the past in using of materials, labor, machines and money cannot be used for future price and output decisions made by executive management.


A member of the management team called “controller” assists management in planning and control. In planning he classifies and presents the financial data of men, money, material, machines and methods into a coordinated plan for management’s considerations and decisions. In recent years, the controller and his staff have become the nerve center of many large corporations. Their knowledge and control of the basic communication network permit them to extract diverse data from computer to suggest to executive management for alternative plans in certain crucial areas of operations. In this control phase, the controller’s function is the result of a need for checks and balances within the business. Actually, the controller does not control but through the issuance of performance reports advises all levels of management where and what jobs or tasks require corrective action.


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