CHAPTER 5

Key Aspects of Corporate Organization, Operating

Policies and Control
The functions of Top Management may be classified according to two closely
interrelated categories:
Conceptualization involves the formulation of the major policies, objectives,
strategies, and plans. Once this is accomplished, the emphasis shifts to implementation.
Implementation of the strategies and plans to achieve the objectives may be executed
through:
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;
3. The conduct of an efficient system to control the firms 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.

Organization
Specifically, industrial, organizations can be grouped into six (6) major
categories:
One-man operation

Most organizations start this way. This single manager may formulate vague
strategies and plans, make all decisions on the basis of experience and limited
first-hand knowledge, and issue orders to all operating personnel.
Father-son or manager-assistant type

In this case, 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.
Functional Organization

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 a central headquarters and geographical
dispersion

 This type of organization is an extension of the third form just described but
permits manufacturing or sales operations in two or more locations.
Multi-divisional firm

This type permits the firm to cope with disparate product lines because it has
separate divisions for each product line and/or for each geographical location.
Conglomerate

Where the central headquarters only maintains financial control over a number of
wholly-owned companies.
Synergy is defined in the context of improved total performance resulting from coordinated
strategies, as compared against the sum of the individual performances of the divisions where the inputs
are the same but the strategies are uncoordinated.

Operating Policies
Operating policies acts as a lubricant for the effective, efficient, and smooth operation
of the organization.
Policies are often confused with rules and procedures. It may, therefore, be helpful to
define these terms to clarify the role of a policy, as contrasted to the other two.
Policy: A verbal, written or implied guide setting up boundaries and directions within
which managerial decisions should take place. Hence, a rule is a guide to individual
action.
Rule: a prescribed course of 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 to be done.
Two Basis Sets of Operating policies
General policies are applicable at all levels and in all parts of the organization.
Functional policies must also be developed for each functional area of management.
A well-developed set of policies can be very comprehensive.

Managerial control of operations

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 made difficult because there are many operations to be controlled.

Not all of them are quantifiable: control is done by different people at a different levels
of management; there are time delays in collecting the data and getting them to the
person who controls; as well as other factors.
This process of managerial control may be thought of as a four-step process.
These steps are:
1. Standard of performance is 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.

1. The process of managerial control

What are the areas of interest to managerial control?
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Certainly, the major areas are those of profits and costs. In addition, however,
management will wish to control such areas as sales, production, quality, etc.

The first step, the setting of standard of performance, present no great difficulty if
management has developed an operational plan. The standards of performance will be
based on that plan, on the policies, objectives, and strategies which were part of the
earlier phases of the management (planning) cycle.
The second step, the measurement of performance, may be done at different levels,
depending upon the companys organization and the activity being monitored.
The third step, because a large number of performance reports are generated; an
information system must be established to get these reports quickly into the hands of
the individual who must compare actual performance against the predetermined
standard and decide whether or not corrective action is acquired.