INTRODUCTION TO BUSINESS ADMINISTRATION

Table of Contents Page

1. Purpose of the Presentation 22. Objectives of the Training Workshop 23. Forms of Business Enterprise 24. Business Ownership 25. The Managerial Role 46. Managerial Skills 57. The Management Process 58. Crisis Management 89. Summary 910. Way-forward 911. Bibliography 10

1. Purpose of the Presentation

1.1. To increase knowledge about business administration as identified by Molemo Development Foundation (MDF) to be a major challenge of businesses in Lesotho.

1.2. To assist existing and potential entrepreneurs attending this course to better manage their business ventures for growth.

2. Objectives of the Training Workshop

At the end of the session, participants will be able to:

2.1. Identify the two overall sectors in the economy;

2.2. Define three basic forms of business ownership;

2.3. List the four steps in the management process;

2.4. Cite three leadership styles, and explain why no one style is best;

2.5. Enumerate the five steps in the control cycle;

2.6. List five measures that companies can take to better manage the crisis;

3. Forms of Business Enterprise

The economy can be divided into two overall sectors comprising a total of eight subsidiary sectors:

3.1. Service Sectors3.1.1. Wholesale and retail trade;3.1.2. Finance and insurance;3.1.3. Transportation and utilities;3.1.4. Other services.

3.2. Goods-Producing Sectors3.2.1. Manufacturing;3.2.2. Construction;3.2.3. Mining;3.2.4. Agriculture

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4. Business OwnershipThe three most common forms of business ownership are:

4.1. Sole ProprietorshipThis is a business owned (and usually operated) by just one person, although it may have many employees. It is the easiest form of business to start with limited funds.

4.2. PartnershipThis is a legal association of two or more persons as co-workers of a business for profit. In a General partnership, all partners are legally equal and are liable for the business’s debts. In a limited partnership, one or more people act as general partners and run the business; the remaining partners are passive investors whose liability is limited to the amount of their capital contribution.

4.3. CorporationThis is legally chartered enterprise with most of the legal rights of a person, including the right to conduct a business, to own and sell property, to borrow money, and to sue or be sued. A corporation has five important characteristics.

4.3.1. It is an artificial person with specific legal standing.4.3.2. It has an unlimited life span;4.3.3. It is empowered by the state to carry on a specific line of business.4.3.4. It is owned by shareholders (stockholders).4.3.5. Its shareholders are usually liable for damages only to the extent of their

holdings.

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4.4. Advantages and Disadvantages of the Three Forms of Business Ownership

FORM OF OWNERSHIP

ADVANTAGES DISADVANTAGES

Sole Proprietor

Easy of formulation and dissolution

Limited potential for big profits

Control and freedom Restricted financial resources Secrecy of operations Reliance on owner for all managerial

skills Tax advantages Unlimited liability

Life of business limited to owner’s interest or life span

Partnership Easy of formulation Unlimited liability of general partners Tax advantages Ever-present danger of interpersonal

conflict between partners Ownership opportunities for

skilled persons Potential for aggressive competition

among employees for partnership status

Legal standing in case of disputes

Lack of clear-cut management responsibility

Increased capital and credit resources

Ability to continue despite changes in ownership

Corporation Limited liability for shareholders (owners)

Requirements for public disclosure

Investment liquidity Costs to establish and dissolve Unlimited life span Tax rates

5. The Managerial Role

5.1. Management is a process of coordinating resources to meet an objective.

5.2. Why should there be such an interest in management? It is because management is universally necessary in organizations. It is the force holding everything in a business enterprise together and setting everything in motion; it is the coordination of an organization’s resources – land, labour, and capital – to meet an objective. Whenever people work together to achieve a goal, someone

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must take decisions about who will do what when and what money and other resources are to be used.

6. Managerial SkillsWhatever the type or size of organization, managers must employ three basic kinds of skills:

6.1. TechnicalThis is the ability to perform the mechanics of a particular job. A person who knows how to operate a machine, prepare a financial statement, program a computer, or pass a football has technical skills.

6.2. Human RelationsThese are skills required in order to understand other people and to interact effectively with them. Managers need human relations skills in countless situations, because their main job is to get things done through people. One of human relations skill that all managers must have is communication skill – that is, a skill at exchanging information.

6.3. ConceptualThis is the ability to understand the relationship of parts to the whole. Managers must be able to think – to see the organization as a whole and to understand the relationships among its parts. Managers use their conceptual skills to acquire and interpret information, analyze the information, infer the underlying principles, see relationships, find both problems and opportunities, come to conclusions, make decisions, and formulate plans.

7. The Management ProcessManagers at all levels participate in all phases of the management process – planning, organizing, directing and controlling. However, the degree of responsibility a manager has in each phase depends on her or his position in the management hierarchy.

7.1. The Planning FunctionPlanning is the first function of management and the one on which all other aspects of management depend. It has to do with an establishment of objectives for an organization and determination of the best ways to accomplish them. The manager has to consider budgets, schedules, data about the industry and the general economy, the company’s existing resources, and resources that may realistically be obtained. Through the planning process, the company’s mission must be supported by statements of goals and objectives. Goals are the broad,

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long-range targets of the organization. Objectives are the specific short-range targets. Goals and objectives are typically set in eight areas:

7.1.1. Market standing: What is the desired position of the company or its product compared with others.

7.1.2. Innovation: What types of new products or services or procedures, or improvements in old ones, should be developed?

7.1.3. Productivity: How much work should come from each of the organization’s resources?

7.1.4. Physical and financial resources: how much of these basic resources will be needed to accomplish other objectives?

7.1.5. Profitability: How much of the organization need to get back from its business activities?

7.1.6. Manager performance and development: What are today’s leaders expected to accomplish, and where will tomorrow’s leaders come from?

7.1.7. Worker performance and attitude: What is required of lower-level employees?

7.1.8. Social responsibility: How can the organization best fulfill its responsibilities to society?

7.2. The Organizing FunctionAfter planning, the second management function is organizing. This is a process of arranging resources to carry out the organization’s plans. At this stage, the manger must think through all the activities that employees carry out and all the facilities and equipment that employees need to carry out those activities – from programming of organization’s computers through driving its trucks to mailing its letters. The most problematic area that managers face in organizing is figuring out the division of labour best suited to the goals and objectives of the organization and then staffing the various positions. Or finding and selecting people who can do what needs to be done. Figuring out how to compensate employees, helping them develop their skills, and evaluating their performance are other important parts of the job.

7.3. The Directing FunctionThe third type of management activity is directing. This is a complex function aimed at getting people to work effectively and willingly. While directing employees, managers may assign work, demonstrate how to do the job, issue orders, and evaluate and correct work. Directing consists of two different but related processes.

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7.3.1. Motivating which is the aspect that gives employees a reason to do the job and to put forth their best performance.

7.3.2. Leading which is the aspect that involves guiding employees in a job, both through actual demonstration of specific tasks and through the manager’s own behaviour and attitude.

7.3.3. Leadership StylesThese are the ways authority is used by a manager to lead others. Three broad categories have been identified as follows:

7.3.3.1. The Autocratic LeaderThis is a manager who centralizes authority and does not involve others in decision making. This manager uses authority in a straightforward manner and simply issues orders.

7.3.3.2. The Democratic LeaderThis is a manager who delegates authority and involves employees in decision making, and encourages employee participation and a free flow of communication, all the time making it clear that he or she has the final say.

7.3.3.3. The Laissez-faire LeaderThis is a manger who leads by taking the role of consultant, leaving the actual decision making up to employees. This approach encourages group members to express themselves creatively, but it may fail if the group pursues goals that do not match the organization’s goals.

No one manager always uses one style. Instead, different situations may call for different styles.

7.4. The Controlling FunctionThe fourth crucial management function is controlling. This is a process of ensuring that organizational objectives are being attained, resetting the course if the objectives change to meet changing conditions and of correcting deviations if those objectives are not reached. When managers control, they compare where they with where they should be. Top managers usually establish control systems and set standards. These are criteria against which performance may be measured. The control cycle has five basic steps involving all management levels:

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7.4.1. Top management sets the standards by which the organization’s overall performance will be measured;

7.4.2. All levels of management establish a feedback system for regular progress reports:

7.4.3. These progress reports are used to compare actual performance to the previously established standards;

7.4.4. Appropriate corrective action is taken;7.4.5. Standards are revised as necessary.

8. Crisis ManagementSuccessful crisis management is a system for minimizing the harm that might result from some unusually threatening situation. Companies that experience a crisis for which they are ill prepared seem to make a series of mistakes. First, warnings about possible problems are ignored at one or several management levels. Then the crisis hits. Under pressure, the company does the worst thing it could do: it denies the severity of the problem or its role in the problem. Finally, when the company is forced to face the reality, it takes hasty, poorly conceived action. There is a better way of handling a crisis.

8.1. The management experts caution that the first 24 hours of a crisis are critical. The first move should to explain the problem – to both the public and company’s employees – in order to squelch rumours and stop panic.

8.2. Simultaneously, the offending product should be removed from store shelves, and the offending action should be stopped or the source of the problem, whatever it is, should be brought under control to the extent possible.

8.3. Set up crisis teams composed of people who respond well under stress. These teams identify the areas where their companies are most vulnerable.

8.4. They plan ways to deal with the most serious threats.8.5. As a final step, the best prepared companies hold drills, simulating crisis

conditions to test the systems they have developed.

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9. Summary

9.1. The two overall sectors in the economy are:

9.1.1. The service sector, which include wholesale and retail trade, banking and insurance, transportation and utilities and others.

9.1.2. The goods-producing sector, which includes manufacturing, construction, mining and agriculture.

9.2. The three basic forms of business ownership are:

9.2.1. Sole proprietorship;9.2.2. Partnership;9.2.3. Corporations.

9.3. The four steps in the management process are:

9.3.1. Planning;9.3.2. Organizing;9.3.3. Directing;9.3.4. Controlling.

9.4. The three leadership styles are:

9.4.1. Autocratic;9.4.2. Democratic:9.4.3. Laissez-faire

Each style may be best in a different situation and leaders should be flexible enough to respond with the best approach for the situation.

9.5. The five steps in the control cycle are as follows:

9.5.1. Setting standards;9.5.2. Establishing a feedback system;9.5.3. Comparing performance to the standards;9.5.4. Taking corrective action; and9.5.5. Reevaluating the standards.

9.6. The five measures that companies can take to better manage the crisis:9.6.1. Explain the problem to the public and to the company’s employees;9.6.2. Control the source of the problem;9.6.3. Set up a crisis team of people who react well under stress;9.6.4. Plan ways to deal with the most serious threats; and 9.6.5. Hold drills under simulated crisis conditions.

10.Way-forward10.1. The knowledge about business administration as discovered to be a challenge for

many businesses in Lesotho should be increased and,

10.2. The participants should be in a better position to manage their businesses for growth.

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Bibliography

1. David J. Rachman, Michael H. Mescon, Courtland L. Bovee’, John V. Thill, Business Today. 6th Ed., McGraw-Hill Publishing Company, 1976, United States of America.

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