CHAPTER

Key Aspects of
Corporate
Organization,
Operating
Policies and
Control
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The management process coincides with
the planning process. It should be a
circular, integrative and self
reinforcements.
2 functions of a top management:
 Conceptualization. Involves the
formulation of the major policies,
objectives, strategies and plans.
 Implementation. The strategies and
plans to achieve the objectives may be
executed through:
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1. The development and maintenance of

the appropriate organization that can
most efficiently implement plans.
2. The correct choice of policies to ease the
burden of decision-making at all levels of
management; and
3. The conduct of an efficient system to control
the firm operation; that is to ascertain that the
plan is being implemented or to decide whether
it is necessary to make changes in the plan,
strategies, or objectives.,
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Organization
Organization can be grouped in one of six
major categories:

 One-man operation. The one-man

operation eliminates the need for any
intermediate levels of management. He
concentrates all responsibility and authority
in himself.
 Father-son or manager-assistant. Either
one or more sons or one or more assistant,
are used to multiply the efforts of “the boss”
who retains all authority and responsibility and
makes all the decisions.
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 Functionalorganization. Favors significant

growth in many direction for its introduces
the concept of delegation of authority and
sanctions the use of professional
management.
 Functional organization, but with central
headquarters and geographical dispersion.
All strategic decisions, all plans, all policies,
and even major operating decision, therefore,
are made at headquarters, while only
responsibility for routine operating decisions is
delegated to the individual field functional
managers.
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 Multi-divisional firm. This type permits
the firm to cope the desperate product
lines because it has separate lines
divisions for each product line for each
geographical location. Each division has
its own general managers.
 Conglomerate. The central headquarters
only maintains financial control over a
number of wholly-owned companies. The
unit has a different product line and
marketing system.
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The reasons why reorganization of a firm
takes place.
 New chief executive may require a new
organization to match his management
philosophies.
 Death and resignations may have resulted
in the loss of several key managers on
whom the former organizational structure
depended.
 There may be unexpected personality
clashes between managerial personnel.
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After the reorganization of a firm takes
place.
 Ideal Organization. One that is best
suited to the total needs of the company,
but the implementation of which is not yet
feasible.
 Organizational Charts. Is usually required
to effectively plan and analyze alternative
organizations.
 Organizational Manual. It helps to avoid
overlapping of functions and conflict in
responsibilities. It serves as a guide in job.
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Operating Policies
 Operating policies act as a lubricant for the
effective, efficient, and smooth operation of the
organization. It will take the form of statement
which tell the managers how they should act in
specific frequently-recurring situations. By this
policies the organization as a whole must be
united by a policy framework that gives some
impression of the individuality of its sub-units.
When a question arises as to whether a certain
action should or should not be taken, it can be
appraised in the light of the existing policy that
covers such a situation.
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Clarification of the role of policy.

 Policy. A verbal, written or implied guide
setting up boundaries and directions within
which managerial decisions should take
place.
 Rule. A prescribed course of an action
which must be followed. Hence, a rule is a
guide to individual action.
 Procedure. A series of related tasks that
make up the chronological sequence and
the established way of performing the work.
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Advantages of Written Policies

1. Written policies greatly promote

delegation of authority.

2. Written policies promote consistency

and reduce arbitrary bases for decisions.
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Disadvantages of Written Policies

1. Some policies are highly confidential and,

if distributed among many people in the form
of a policy manual, would soon be available
to competitors.

2.Written policies is that their affectivity

remain even long after they have become
obsolete.
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Two basis of Operating Policies

1.General Policies for Administrator

- It is applicable for all levels in all parts of
the organization and it is to examine a set of
policies.

2. Functional Policies
- it must also developed for each
functional area of management.
- a well developed set of policies can be
very comprehensive.
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Managerial Control of Operation

All other efforts of management are
wasted unless a very determined effort
is made to control the many aspects of
the operating of the firm. Control is
done by different people at different
levels of management; there are time
delays in collecting the data and getting
them to the person who controls as well
as the factor.
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Steps of Managerial Control Operation

1. Standard of performance established.

2. Actual performance is measured in relation
to the standards.
3. Performance information is channeled to
the person responsible for controlling that
operation.
4. Where discrepancies between standards
and performance occur, corrective action is
initiated.
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• The goals of a management control

system should be to attain the degree of
perfection as that of an air conditioning
system. Obviously, a managerial control
system of such exactitude is not feasible
in life.
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1. The process of managerial control

the four steps in control process:

1. Setting of standard of performance.

2. The measurement of performance.
3. Information system must be established.
4. Prompt corrective action is taken.
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2. Management information system

- for the large company especially the very
large public firms in developing countries. A
major problem in control is the delay in
collecting and processing the enormous
amount of data required for intelligent decision
making.
- a large company wishing to establish and
elaborate control system must start by
deciding what kind of data are required by
management to achieve the desired degree of
control.
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According to D.R Daniel

“ Information system maybe increasingly

used to mold and shape executive behavior.
Better data handling might become a
substitute for much of the laborious shuffling
and reshuffling of positions and lines of
authority that now goes on. Most re-
organizations seek to alter the way certain
managers or groups of managers operate.
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But simply drawing new organization

charts and rewriting job descriptions
seldom ensure the implementation of new
concepts and relationship. The timing,
content, and format of the information
provided to management, however, CAN
be a strong influence in bringing about
such purposeful change.”
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GENERAL POLICIES OF ADMINISTRATION

1.Organization: lines of authority and

responsibility
2.Development of leadership
Objective and self- organization
3.Efficiency and quality
 General efficiency
 Improvement of efficiency
 Control of operation
 Delegation of responsibility
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 Individual responsibility
 Employee selection and welfare
4. Morale building
 Information
 Supervision
 Labor management
 Job performance and promotion
 Working conditions
 Company dealers with outsider
5. Planning for future
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CATEGORIES OF FUNCTIONAL OPERATING

POLICIES

1. Marketing
2. Distribution
3. Purchasing
4. Finance
5. Employee relations
6. Production
7. Engineering
8. Research
9. Public relations
MARKETING
 Advertising branches  Intracompany sales
 Brands  Inventory records

 Business  Market research

 Markets
 Inquiries
 New products
 Competitor Relations
 Packaging
 Complaints
 Pricing
 Contracts
 Proposals
 Credit customer relations
 Reciprocity
 Discounts  Return of gods
 Expenses  Sales promotion
 Exporting  Sales of employees
 Forecasting  Services to customers

 freight charges  Territories

DISTRIBUTION
 Freight
 Inventory levels
 Labeling
 Materials handling
 Product shipments
 Receiving
 Stock shipments
 Traffic
 Warehousing
PURCHASING
 Buying for employees  Buying for employees
 Centralized purchasing  Inventory levels
 Conservation  Investments
 Contracting  Make or buy

 Control of material  Material purchase

 Gifts  Procurement

 Interdivisional  Reciprocity

purchasing  Standard

 Inventory control  Supplier relations

FINANCE
 Accounting  Expenses
 Assets  Financial reporting

 Auditing  Forecasting funds

 Banking  Incentives
 Insurance
 Billing
 Lease
 Budgets
 Loans
 Capital appropriations
 Payment of suppliers
 Capitalizations
 Payroll
 Collection
 Pensions
 Cost control
 Profits
 Credit  Reserves
 Depreciation and amortization  Return on investments
 Dividends  Securities
 Expenditures  Surplus property
 Expense accounts  Taxes
EMPLOYEE RELATIONS
 Absenteeism  Outside employment
 Appraisal  Pensions
 Benefits  Promotions
 Compensation  Recreation
 Complaints  Recruitment

 Discharge  Retirement

 Education  Selection

 Equal employment opportunity  Seniority

 Federal and state employment regulations  Sickness

 Termination
 Hiring
 Training and development
 Hours
 Transfer and relocation
 Loans
 Unions
 Manpower utilization
 Vacations
 Medical examinations
 Working conditions
PRODUCTION
 Contacting  Production control
 Cost estimates  Quality control
 Equipment
 Quantity
 Facilities
 Safety
 Inventory
 Scheduling
 Maintenance
 Standards
 Plant protection
 Plant test
 Time studies

 Process specifications  Tooling

 Product specifications  utilities
ENGINEERING
 BIDS AND QUOTATIONS  PRODUCT RELIABILITY
 CONSTRUCTIONS  PROJECTS
 CONTACT SERVICES  QUALITY
 DESIGN
 RENTAL
 EQUIPMENT REPLACEMENT
 SAFETY AND SECURITY
 JOB ORDERS
 STANDARDS
 LEASING
 PATTERNS  TECHNICAL IDEAS
 PRODUCT ENGINEERING  TECHNICAL SERVICES
 TESTING
 VALUE ENGINEERING
RESEARCH
 Applied research  Payout of projects
 Basic research  Product development
 Coordination  Projects
 Copyrights  Royalties
 Development inventions  Secrecy agreements
 Laboratory  Security
 Patents  Selection of projects
 Trade marks