This summary includes:
- Business administration chapter 6/7/8/9/10, by Thuis and Stuive. Chapter 6 is a combination of notes and the book. All the other chapters are fully summarized, every paragraph. Including some pictures.
- Barrett and Finch notes, required chapters (for IFM 2021)
-...
Chapter 6
6.1 planning and control: forms and criteria
Planning and control = the way business processes are ‘regulated’.
Why do we plan and control?
• To reduce errors and prevent errors
• To adjust to changed circumstances after
• An accumulation of errors
• To handle complexity
• To minimise costs
Forms of planning and control
• Curative planning and control: A business can observe that it has not reached its
targets and needs to adjust ‘for the next phase’.
• Preventive planning and control: Planning and control where the business tries to
prevent errors of the non-attainment of objectives. Example: training.
Criteria of planning and control effectiveness
6.2 Planning and control by systematic approach
System engineering provides a valuable contribution to business planning and control.
Norm setting = setting targets which lead to adjustment whenever they are under or
overshot.
Forward looking actions: Measuring incoming input before it reaches the business the
business can control whether the process stage will proceed well. Also called measurement
and regulation system or feedforward.
,Backward looking action: Planning and control crosses whereby measurement data can give
rise to invent interventions at previous stages of the organisation process. It is a curative
form of planning and control.
6.3 Planning and control according to Merchant
The American professor Kenneth Merchants distinguishes 3 forms of planning and control:
1. Result planning and control: The feedback planning and control process realised
results or compared with production goals deviations from the goals lead to
interventions. Backward.
2. Activity planning and control: Planning and control process used to ensure that
individuals carry out certain actions that you know will deliver advantages to the
firm. Forward.
3. Personnel planning and control: Form of planning and control by which leadership
encourages employees to adopt desired attitude and show the desired behaviour.
Forward.
,6.4 Planning and control according to De Leeuw
In the De Leeuw system model for planning and control there is a ‘controlling organ’, namely
the actor who wants to exercise influence, and a ‘controlled system’ – the part of the
organisation that is to be administered.
Conditions for effective planning and control: Does the controlling organ have:
1. An idea about the desired situation?
2. Sufficient and adequate information about the contextual influences on the CS?
3. Information about the condition of the CS?
4. Insight into the working of the system (a model of the system)?
5. Sufficient planning and control measures of its own?
6. Sufficient capacity to process information?
7. The possibility to function as a CS itself?
6.5 Financial planning and control
Six elements for the starting business administrator:
Budget
• Internal budget: for people within the business
• External budget: for interest groups outside the business
• Liquidity budget: monitors the business’s financing structure
• Multi-year budget: gives business management insight into consequences from
policy intended to be carried out over a series of years.
Budget functions:
• Budget function. A budget is a means for allocating money to the various
components and processes in a business.
• Financing function. A budget should indicate how assets should be financed.
• Policy function. A budget indicates in which way policy will be carried out.
• Management function. A budget indicates the framework of the policy that will be
carried out.
• Authorisation function. A budget indicates who (which department or manager) can
authorise expenditures and up to what amount.
• Information function. A budget contains information meant for many stakeholders.
,Financial planning and control cycle
1. budget: they set down the expected resources against expected revenue
2. budget approval
3. realization: The period the budget applies to.
4. post-calculation and annual report: It can see where there are deviations between the
goal and achieved results.
5. the next round in the cycle -> 1.
Balance sheet
A balance sheet gives an overview of the possessions and debts of businesses.
Profit and loss account
The profit and loss account provides the basis for making adjustments. The goal is to provide
insight into how business the deducts each cost from revenues in order to arrive at the
ultimate net profits
Balanced scorecard
In a balanced scorecard, the business’s performance is viewed from four different
perspectives:
1. Financial perspective: what is the business value?
2. Internal perspective: what do we want to be good doing? How evaluate that?
3. Customer’s perspective: How does the customer see us?
4. Innovation perspective: what do we do to improve ourselves? How evaluate that?
The essence of the balanced scorecard is that it formed a mini cockpit for the business. With
one glance at the cart, you know where you stand and where you were going to
,Key performance indicators
Key numbers = figures that bring together a number of measured quantities in a pre-defined
relationship.
Management ratios:
Ratios are figures that bring together a number of measured quantities in a pre-defined
relationship.
Thus, key performance indicators are those key figures managers use to measure the
business’s performance and planning and control.
Three types of key numbers (Parmenter, 2010):
1. Key Result Indicators (KRI’s): indicators of important results. It indicates how you
performed in the past.
2. Performance Indicators (PI’s): indicators of important achievements.
3. Key Performance Indicators (KPI’s): indicators of critical achievements. It indicates
what you have to do in order to drastically improve businesses performance and are
linked to the most important business processes.
Key financial management numbers
• Solvency: The degree to which the business is in position to repay its debts
• Liquidity: The degree to which the business is in a position to repay its short-term
debts within short periods
• Activity: The degree to which the best season a position to use its assets in a targeted
and effective way.
• Profitability: The degree to which the financing that the firm uses returns profit.
Management by objectives = A cascade of goals from businesses level to the individual work
level by which the organisation is mainly managed.
, Chapter 7
7.1 The structuring of organisations
Organising = the management function that is oriented to creating a structure of relations
between personnel whereby those personnel are in position to attain the prescribed goals.
The division of labour = the fact that in organisations we have to divide the work among the
people. This can be done systematically as follows:
A. Break down all the work that has to be accomplished in a
business into the smallest possible parts. These are the
individual tasks.
B. The tasks are then grouped in a logical manner into functions.
C. The various functions are then grouped into departments.
D. Then the departments can fit in various ways into a structure.
7.1.1 Tasks
Task = the responsibility and duty for someone to carry out a certain activity.
Responsibility = the right to take decisions that are necessary for carrying out the task.
Tasks must be carefully bundled together, take care of the following:
• The task must be at the level of the assignee.
• The task must form a logical, clear and complete whole.
• The task must pose a challenge to the assignee.
• The task of must contain no contradictions, such as serving several different interests
at the same time.
Frederick Herzberg (1959) thought up three ways to keep employees motivated by adjusting
their assigned tasks:
1. Task expansion = job enlargement = increasing the range of tasks that someone has.
2. Task rotation = exchanging tasks with someone else. Often done periodically.
3. Task enrichment = job enrichment = the set of tasks is expanded with more difficult
tasks from a higher level.
7.1.2 Functions
Function = the entirety of the tasks that someone must carry out.
In order to determine functions in the correct we apply a functional analysis. Basis of the
four Ws:
1. Work content. Relates to the question of precisely what someone must do.
2. Work circumstances. the circumstances under which the person must carry out the
function.
3. Work relationships. How much power does a person have, to whom must he report
and what is his position within the business?
4. Work conditions. A matter of the salary and secondary work conditions (business car)
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