The Best Small Business Management for Entrepreneurs

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By: Site Engineer, Staff

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Management is simply the art and science of achieving the objectives of a business in the most efficient way. It involves the direction and control of an organization and of the people who work in it.

It has also been said to be concerned with men, money, materials, and machines this is particularly true with business administration, compared with other fields of work where attention might be concentrated on the first two: men and money.

Functions of Management

  • Forecasting and Planning: This means the assessing of the future and then the making of decisions for future action.
  • Organization: This is concerned briefly with the division of work and the allocation of duties authority and responsibility
  • Command: Giving instruction to ensure that the decisions are carried out.
  • Control: The setting up standards the regular comparing of physical events with them and then the taking of corrective action.
  • Coordination: The unification of effort and the ensuring that all activities of a business are in pursuance of the same policies.
  • Communication: This is concerned with the transfer of information between different people in the business. Communication is particularly important between management and the working level.
  • Motivation: This is the driving force behind action. Psychological considerations make it important to recognize the motivations behind (the public buying goods, and the personnel working in the concern).

Although for academic purposes these elements are separated in practice they are often indistinguishable. Thus control is closely connected with the organization and the functioning of an organization depends very greatly on good communication, and so on.

Principles of Management

  • The primary purpose of a business concern is to provide goods and/or services as required by its customers and at a profit to the business.
  • Since policies are the expression of the direction of purpose, it is important that good policies should be practiced by that good police.
  • Formulation of such policies in broad outline should be the duty and responsibility of management.
  • Having enunciated the policies it is the task of management to ensure that they achieve their purpose in the most economical way.
  • While the making of profit and the satisfaction of customers’ want are paramount, management should also seek the promotion of staff welfare and good morale.
  • Whatever its policies are management should always accept responsibility for what is committed in its name.

Social Responsibilities

Business is primarily in existence to make a profit for its owners and to provide goods and /or services to the public. Even though a business is brought into being for the first purpose, it must at the same time fulfill the second if it is to continue successfully.

However, a business can be said also to have certain social responsibilities:

  • To customers: to provide good quality products and goods and sales service, not to misrepresenting its advertising, to sell goods at reasonable prices and to keep to delivery dates.
  • To employees: to provide security of tenure, fair wages, and good working conditions and generally to look after the interest of employees.
  • To investors: to ensure a fair profit return on capital invested, to ensure the safety of the capital invested.
  • To the community: to compete and to keep itself competitive (not monopolist) and to engage only in fair competition.
  • To suppliers: to pay for all goods promptly in accordance with the “terms of trade” to give them proper notice of requirements.

None of these should be neglected in good management, although very often some of these obligations may conflict e.g., lower prices to customers may conflict with higher profits to the owner of the business, it is the task of management to effect a compromise between these obligations and to make decisions accordingly.

Forecasting and Planning

Whereas forecasting means looking into the future, planning means the making of decisions on what course of action shall be followed.

It would be inadvisable to plan for the future without making reliable forecasts, and the more than facts can be used in making the forecasts, the better are the planning decisions likely to be.

It is not possible to forecast with one hundred percent accuracy, because there are variable factors, which it is. Almost impossible to forecast for a production forecast it is necessary first of all to forecast sales where there are such unpredictable as the economic state of the nation and government action (particularly regarding tariffs and hire purchase restrictions), even the weather, and who can reliably forecast fashion or public taste?

Types of Planning

Planning should be carried out at all levels of concern.

  • Top management should concern itself mainly with planning strategy and with formulating broad policy. Thus it should be the task of top management to plan product strategy, taking into account sales and production difficulties. Top management should be concerned with the overall shape of the organization (how much central control and how much regional control, and so on), as well as with the financial control of the whole concern. Financial planning is probably the most important planning of all.
  • Executives should plan tactics, that is, in the job administering and interpreting top management policy they should be more concerned with how the objectives will be achieved. To state it in this way is an over-simplification because in practice top management rarely makes policy without the advice of its executives, and in many business concerns, managers do not wait for a policy to be given them they often make policy in the course of business even though they may get their actions subsequently ratified.
  • Supervisors at the lowest level of management plan work activities and decide on individual assignments. Again, they may do this with the advice of executives and they, in turn, advise the executives on the planning of tactics.

Areas of a business which are capable of planning (although in different degrees) are:

  • Sales policy and the whole of the marketing concept, including advertising publicity distribution and transport.
  • Product research and development, which may have a bearing on the general growth and development of the business as a whole
  • Planning of financial resources, including cash flow and liquidity of a business; profitability use of and raising of capital.
  • Staffing, and the recruitment and training of staff, this is important to the successful continuance of the business.
  • Production and the methods of production sitting of factories, etc.

Long-Term Planning

The expression “long-term planning” has no precise meaning because what would be long-term for one kind of business may well be comparatively short-term for another. However, in general, it means the planning years, as opposed to weeks or months, ahead of a company’s activities. Long-term planning to be effective must be a team effort and it is essential that it should have the backing of management from its inception. Long-term planning is far from being as easy as earlier mentioned above.

Procedures for Long-Term Planning

The usual method is to appoint a planning committee consisting of representatives of all sections of business: finance, sales publicity, production, personnel, etc. The team should have a chairman whose job it is to coordinate all the different activities. The committee should meet at regular intervals to assess and revise its plans and it must be in constant touch with top management, to ensure that its plans are in accordance with agreed policy.

Aspects of Long-Term Planning

Starting from sales, the long-term plan will concern itself with production, publicity, research, and development and finance.

The matters to be considered are:

  • Price at which it will sell
  • Finance for capital expenditure
  • Type of product likely to be required
  • Manufacture plant and labor resources required
  • Anticipated future demand

Benefits of Long-Term Planning

  • Helps anticipated and avoid crises
  • Helps avoid the making of expensive mistakes
  • Assists in framing the organization. Assists control by creating programmes with established standards
  • Gives the whole concern an objective and acts as a stimulus
  • Ensures consistent and integrated action

Principles of Planning

  • It should be in the right amount of detail (short medium or long term).
  • All alternative courses of action should be considered when planning.
  • Planning must be feasible.
  • Planning should be based on facts and not mere opinions.
  • It should be performed by the right persons.
  • Not only the effects of the main decision should be considered, but also side – effects.
  • Planners must ensure that standards are set up for proper control of plans.
  • They should ensure that instructions are issued for the performance of the plans.
  • Planning should include a degree of flexibility – plans can never be one hundred percent accurate.
  • It should be for the right period of time in the future.

Techniques of Planning

  • Examine all the alternative causes of action which can be taken.
  • Decide on objectives, what are the ultimate aims?
  • Decide on certain assumptions regarding such variable factors as a share of the market, political action, etc.
  • Select the best course of action and draw up a timetable for the plan.
  • Assess the results at regular intervals so that the plan can be revised in the light of experience.
  • Gather information and statistics which give a guide to forecasting (always based on past performance).

Importance of Planning

There are some businessmen who state that, because of the difficulties involved, they do not believe in planning. This is nonsense because even if it means merely forecasting how much money will be needed in the bank to pay wages at the end of the week, some planning is essential.

It is entirely a matter of how much planning, how far ahead, and in what detail.

  • Planning in its broadest sense means the making of policies, for a business without fixed policies is like a ship without a rudder.
  • Planning means the setting up of targets or objectives which not only offer a means of measuring the actual performance but the only way of achieving improvement on what has gone before.
  • To plan and state objectives and lay down policies is a great mean of achieving coordination between different departments, which might otherwise pull in different directions.

Proper planning can be a way of avoiding trouble and can enable corrective action to be taken as required.

Organization

The organization is concerned with the division of work into sections and departments and with the allocation of responsibilities authority and duties to all members of the concern. In its fullest sense, the organization is a very wide subject and includes such aspects as “span of control”, the number of levels of management delegation, centralization, and so on.

Types of Organization

Some writers assert, with some truth, that there is only one kind of organization – line organization – and that all others are elaborations of this, but other writers generally agree on the following classifications.

  • Line (or Vertical) Organization: This is the commonest type in business, and is where there are direct lines of authority from top to bottom of a concern where each executive has definite responsibility for his section of the business and where authority and responsibility is greatest at the top level of management and decreases at each successively lower level.
  • Functional (or Lateral) Organization: This is where experts are placed in charge of a certain kind of work throughout the organization. It is often stated that to operate functional executives should be advisory only but in practice, they are often very much executives with powers of decision.
  • Line and Staff Organization: This is a combination of vertical and horizontal and as such, is said to possess the virtues of each, without the corresponding disadvantages. Here it can be said that line officers are executives responsible for their sections of the business, with functional or staff officers to give them specialist advice on their operation.
  • Committee Type of Organization: This is where the managing body assisted by a number of standing advisory or ad hoc committees. Usually, there is also a line organization below the committees to support them.

Organization Relationships

Part of the importance of organization is that it is also concerned with the various kinds of relationship existing between all its members. Thus the amount of authority delegated to an executive has a distinct bearing on his relationship with subordinates below, it also greatly affect his function and relationship with other executives.

The more usual relationships are said to be:

  • Line Relationship: Here, a senior has greater authority and responsibility than the subordinates below him, and they take instructions from him.
  • Service Relationship: Here, a department provides a general service (e.g., such as a maintenance department to the whole factory) and where the executives in-charge of sections of the business are not senior to them and cannot give them orders, executives can only confer with the head of other departments regarding its issues. Such a relationship must be mainly advisory, for otherwise, it detracts from the authority of the line officer.
  • Staff Relationship: Here, an assistant to an executive carries out certain prescribed duties delegated to him- and his task is to give advice to the executive and execute those duties delegated to him. This is really a mixture of the executive (line) and advisory relationships.
  • Working Relationship: Some modem writers have been establishing a relationship by the nature of the work. Information is given by members of one department to another, which is best described as a working relationship, and where there is no question of seniority or of being advisory.

Control

Forecasting and planning involve the making of decisions for the future, and control is then the continuous follow-up to ensure that policies are implemented and properly interpreted. Control is also the guiding and regulating of a business in order that it achieves its objectives.

The essence of control falls into three parts:

  • Taking corrective action where required.
  • Setting up standards as the result of declared policies.
  • Making regular periodic comparisons with these standards.

Control in Business

(a) Control at Board Level: The board of directors exercises general control over all areas of a business which can be divided into:

  • Financial: Capital expenditure and costs of labor, materials, and overhead expenditure.
  • Trading: Order received, work executed, sales by territory or product. Quantitative aspects rather than financial are important here although the two are related.
  • Technical: Machinery, research, and development.
  • Personnel: Number of staff salaries recruitment, training.

(b) Control at Management Level: Specific controls most frequently found inside the above areas are:

  • Costing/budgetary control
  • Production control
  • Quality control of products
  • Office and management (control over clerical efficiency)
  • Work study (control over productive efficiency)
  • Internal audit (mainly an attempt at controlling fraud as accounting efficiency)
  • Stock control to ensure that the right quantities of goods and materials are maintained – neither too much nor too few.
  • Critical path analysis (where parallel chains of activity are maintained)

Coordination

Coordination means the unification of effort by which activities of all sides of business is aimed at achieving common objectives and to follow common policies. This is an age of specialization, and the greater the degree of specialization, particularly in the business the greater is the need for coordination.

Techniques of Coordination:

Coordination is achieved by the following means:

  • By regular progress meeting of top-level executives.
  • Appointment of a powerful overall manager such as a managing director, a general manager who can ensure that common policy is followed.
  • By the top management having clearly defined policies and communicating them to all departments concerned.
  • By having budgetary control as mentioned above.
  • By setting up a planning officer, whose job is to coordinate the supply of raw materials production, maintenance etc.
  • Encouraging good morale in the business (cooperation which is “willingness” and should be differentiated from coordination).
  • By appointing functional officers such as personnel officer, work study officer.
  • Indirectly by inter-departmental training.
  • By having a sound organization.

 

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