Budgeting
Chapter 1
Key points:


1. Introduction
2. The Role of Management
3. Maslow’s Hierarchy
3. The Functions of Management
4. The Managerial Planning Process
5. The Behavioral Aspects of
        Management


Chapter 1
The Management Process

Budgeting- (Comprehensive Profit Planning and Control):
   
It involves:
    1. Development and  implementation of LT.and   ST. company objectives
    2. Specification of company goals
    3. LT. Profit plan
    4. ST. Profit plan- (Very specific -assignments and responsibilities)
    5. Performance reports
    6. Follow up procedures

The role of management:
Management creates goals and implements these goals

The success of any plan is based in management (more specifically in LEADERSHIP).

LEADERSHIP is the most important factor in any business operation!
   
All organizations have objectives. Objectives can be broken into 2 specific orientations (Goal and People)

1. Goal Orientation
    Business must have goals!!!   Companies that have a goal orientation focus on money.

    Many companies have expanded this goal orientation to include other aspects of the life including social responsibility and customer  service.


The most successful companies have realized that customer satisfaction and customer orientation are the key to
profits. CUSTOMER ARE THE
REASON AND PURPOSE FOR OUR
BUSINESS. THEY ARE THE TRUE
SOURCE OF OUR PROFITS.

   

(Companies have to meet the  minimums social duties.
    This is called social  obligation - Paying taxes,
    observing the laws, etc.)



There are many companies   that have set their goals higher. They have become socially responsible. This includes pollution control, socially programs (Daycare, support of non-profits, etc.)

Primarily, business have two major goals:
    1. Return on investment
    2. Social improvement of the big environment

    Unless the goals are specified in clear fashion, goals cannot be achieved.

    Goals must be:
            A. Attainable
            B. Discussed- MBO
            C. Flexible (yet nflexible)
            D. Realistic
            E. Measureable

2. People Orientation   
        People are the most  important asset of the company
    People must be respected.
    People must be treated equally (Equity Theory).
    People must be involved
        (Participation).

It is the obligation of  management to build an
    organization that is people friendly.

Management must:
    1. Provide a well trained  staff. This reduces the stress of workers.
    2. Create a positive work climate. Climate is the general ‘feel’ of the work place. Do people like their work or do              they dislike their work  place.
Management sets the climate.
           

3. Set the motivational tone    Motivation is the process of encouraging employees  to perform their tasks. It is tied directly to strong leadership.


  Leaders must learn how to motivate people. One method of motivativating people is to focus on the needs of people. Leaders learn and care about people. The leader can then use different motivational techniques based on the indivual needs of the employee,

One theory that focuses on the needs of people is Maslow’s Hierarchy of Needs Theory.

    Maslow’s Hierarchy:
        Physiological
        Safety
        Love
        Esteem
        Self Actualization
       

Managers must properly use their authority to carry out these goals and objectives. Generally speaking, management use 5 primary functions of management to carry out these goals and objectives:

1. Planning- Developing     objectives, setting course      of action
        A. Operational
        B.     Tactical
        C.         Strategic


2. Organizing- Employees are assigned jobs, divided  for work, and set in a chain of command.
3. Staffing- Advertising, selecting, training
4. Leading
5. Controlling- Comparing actual performance against goals. Reinforcing successes and correcting short falls.
        (Positive and Negative
            Reinforcement).


The managerial process:
    This is PLANNING.
1. Set organizational objectives and goals
2. Developing the premises about the environment      (Internal, general, and specific)
    A SWOT analysis must be performed        

3. Decision making:
    A. Recognizing the Problem- Problems are obstacles to achieving goals
    B. Identify alternatives
    C. Specify sources of uncertainty
    D. Prioritize and evaluate alternatives
    G. Select the best alternative
    H. Implement

4. Implement
5. Establish a control system to review performance.

This 5 step process is best performed when managers solicit and receive FEEDBACK from their employees.
   
Exhibit 1-4
Exhibit 1-5

Line vs. Staff
    This is organizing
Line:                        
1. Contribute directly to              goals. Employees who
        are directly related to
        the primary purpose of
        the company.
2. In the Chain of Command   
3. Direct management and engineering, etc. of work units                


Staff:   
1. Contribute    indirectly   
2. Provides advise to
    Production, Purchasing, Accounting, PR, Sales, legal, etc.
3. Advisory

   
Conflict can develop between the line and the staff.
    (Staff members can cause conflict by over
    stepping their authority.  They are advisory in
    nature. They have NO authority over the line.)

   
Span of Control
    How many people can a manager properly manage?
    The spans of control can be wide or narrow.

Exhibit 1-6

Control

Types of control:
1. Feed forward- Anticipates  problems and resolves  the problems before they happen
2. Concurrent- Ex- Word  processing packages that immediately identify   misspelled
3. Feedback

Qualities of an effective control system
    1. Accuracy
    2. Timelines
    3. Economical
    4. Flexibility
    5. Understandability
    6. Reasonable- (and attainable)
    7. Placement of controls- We cannot have controls  in every area. We must put controls in sensitive areas
    8. Emphasis on the exception
    9. Multiple criteria

There are 2 types of control:
Operational control and Behavior Control
   
Operational control:
    1. Direct costs
    2. Indirect costs
    3. Purchasing controls
        -Inventory ordering Total cost, carrying cost, and ordering cost   
    4. Maintenance controls
            -Preventative maintenance
    5. Quality control
            -Sampling
            -Process control   (Sampling the items in WIP)
            -TQM
               
Managerial Behavior

    Behavior is the manner in which you conduct yourself
    Hard worker
    Ethical
    Pleasant/happy
    Excessive absenteeism
    Tardiness
    Failure to wear safety equipment
    Drug usage
       
Behaviorial management is complex.


Behavior management
    Positive Reinforcement
        Rewarding positive behavior tends to help
        repeat the positive behavior. By rewarding with the proper rewards, behavior can be changed.

    Negative Reinforcement
        Using punishment to change undesirable behavior
        Use sparingly.
        Consistently applied.
        Specifically related to particular behavior.