Imaginative Management Control

Ronald Ogden

• Publisher: Taylor & Francis
• Year: 2018
• eBook ISBN: 9781351260626
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Originally published in 1970. Drawing on his knowledge of business methods in Europe, America and Asia, Ronald Ogden examines the necessity for control in a business and the ways in which it should be exercised in order to obtain the most effective and profitable results. He shows that control can be exercised through carefully planned objectives which must, in their turn, be broken down into clearly defined targets. Realistic planning is discussed, and the author considers the effective implementation of plans by means of various techniques such as budgeting, costing, staff control, operational research, and network planning. The study will be of interest not only to managers but also to students of management concerned with modern business techniques and with the functions and responsibilities of management and control.

CHAPTER 1
The need for control in modern business

Meaning of control

Business, whether we like it or not, is the means whereby we live. Until comparatively recently business was looked upon as not entirely respectable. I am told that among some undergraduates of the older universities this is still the case. Napoleon referred to England contemptuously as 'a nation of shopkeepers'. Later, in spite of his contempt, England's customers included the greater part of the world. Now we have many rivals in the shopkeeping business, but we still need to be good shopkeepers if we are going to live, and our shop includes workshops as well as shop-windows.

Personally I look forward to the day when business will be largely automatic. Then we can really start to live. But until that day comes - and it appears to be coming fairly rapidly - we must run our businesses as efficiently as possible, whether they be 'big business', with international connections throughout the world, or small businesses supplying a mainly local market; and if business is going to be efficient it has to be efficiently controlled.

What do we mean by control? Let us consider the pilot of an airliner. He sits at what are called 'the controls'. These enable him not only to operate the aircraft - to go up or down, faster or slower, or to left or right - they also give him information about his height, his speed and his direction. In a large modern air-liner the pilot has to delegate some of these controls to others: to his navigator, his engineer. He is, however, in over-all control of the aircraft and if he gets the wrong information or pulls or pushes the wrong control he and his aircraft are in trouble. So, in business, the management is in control whether it be the chairman, the board of directors, the general manager or merely the proprietor of a small business. Somebody has to be in control, to operate 'controls' and use them for information and action.

Accounting and control

The most obvious business control is accounting. Management has to know whether its business is making a profit or a loss. It has to know what it is spending and what it is getting back. Unless it is making a profit, that is getting back more than it is spending, the business will eventually founder. Thus profit is essential to the survival of any business. In order to make a profit a business has to satisfy a market - it has to satisfy the requirement of a body of consumers at the price they are willing to pay; a price moreover which will yield a profit to the business. High volumes of sales do not necessarily mean that a business is making a profit, if the price at which an article is being sold does not cover the total costs of producing and distributing that article.

This is where accounting comes in. Basically the accountant's job is to analyse the costs of the business. Thus 'cost control' is one of the foremost tools of management. Without it management is blundering in the dark, whether it be operating a large international company of the size of I.C.I, or a small village grocery store or motor repair shop.

Financial control

Cost control, however, is only one of many controls required by business today. It is part of a wider system of control usually called 'financial control'. This includes many other factors which will be analysed later in this book. Briefly, however, financial control means the examination of all those factors which go to make up the financial activities of a business.

To start a business as well as to carry it on, capital is required. This applies equally to a nationalized industry like British Rail or the Coal Board as it does to a local hairdressing establishment. Equipment has to be purchased, premises rented, bought or built, staff has to be hired, raw materials purchased and reserves built up for emergencies.

All these need to be controlled. For this reason further controls are needed, such as budgetary control, or forecasting future capital requirements; and stock control, to determine the amount of stocks which should be held, the safeguarding of stocks from deterioration, the turnover of stocks, insurance, storage and so on. As a business grows there becomes necessary some form of staff control, which includes questions of pay, of holidays, of working conditions, of performance evaluation, of promotion, of redundancy and retirement.

Marketing control

Since the object of business is to satisfy a market, however, it is in this field of sales and marketing that some of its most important controls have to operate, and that the maximum amount of information is obtained and acted upon. Many people go into business believing that a market exists for their products because they see a large number of buyers for the product. Too often they find that, though a market may exist, it is already satisfied, and that the only way they can create a market for their own products is by selling them cheaper than their competitors or providing a better- quality article. This they may be unable to do except at a financial loss.

On the other hand potential markets may exist which their competitors have not exploited. But to find such markets requires research and analysis. An established business needs to be constantly on the watch for changes in markets, such as alterations in taste or variations in demand. A market is not a static entity; it is constantly changing and developing, expanding or diminishing. A successful business cannot be static either. It is an essentially dynamic entity, constantly adapting itself to new conditions, new needs and changing circumstances. In order to keep itself fully and quickly informed of these changes, effective controls are necessary. A sales force is not merely a channel for unloading goods upon the market, it should be a sensitive source of up-to-date information about market conditions as a whole. It should constantly be feeding information back to management on changes in consumer tastes, new sources of demand and market developments of every sort. All this information has to be tabulated and stored, to be readily available as a guide for appropriate action and adjustment by other departments of the business.

In order to sell a product successfully a salesman himself must have the maximum information about the market as well as knowing the psychological techniques of salesmanship. He must know what his competition consists of, and something of the methods his competitors employ. He must know something of social psychology and social economics. Above all he must know his own product, its advantages and its limitations. All this comes under the general heading of sales control, together with sales administration, the organization of the sales force and the training of salesmen.

Management as control

It will already be seen that control in business entails a good deal more than sitting in an office chair and issuing orders. A business is always exploring and conquering new ground, like a successful military operation; it can never be content with past gains, but, having consolidated its position, must be ready to advance on a new objective. Also, like a military unit, it must be wisely and effectively controlled. The task of this control lies with management, and, in complicated modern business, the responsibilities of management are great.

It is often said that a manager is born and not made. Today it is recognized that, though a man may possess potential management qualities, they need development to be effective. No doubt there are many people who, lacking the basic qualities of management, will never make good managers; but such are the complications of modern business that a good manager today needs something more than leadership qualities, courage, imagination and tenacity to manage a business effectively. He also needs considerable knowledge of the various techniques of management. These include accounting, business economics, market research, statistics, industrial psychology, quality control, operational research and the various technical sciences with which his business is concerned, whether they be chemical, constructional or mechanical.

It is clear, therefore, that education in a number of skills is essential for a good manager. He does not have to be an expert in all of them, but he must know how to appreciate the work of the specialist and know enough about it to be able to judge the importance and quality of the specialist's work. He must also be able to talk to the specialist to some extent in his own language, appreciate his point of view, and assess it in its correct relationship to other specialist opinions.

The manager must also know a good deal about the world in which he lives and in which his business operates, about its social and economic background and about new trends and developments which are likely to affect his business. This is the justification for the amount of attention which is being paid today to management education and training. But it is doubtful if any amount of management education can produce the character which is basic to management. What this character consists of will be discussed below, but suffice it to say that if it does not exist in embryo it can never be developed, though much can probably be done to eliminate those factors which inhibit it. Experience also helps, but even experience may merely consist of continually repeating the same mistakes. A manager must be a man who can recognize his own mistakes and learn to avoid repeating them. He must also be capable of commanding men through respect and not through fear. Above all he must possess intelligence, which is the power to act realistically in terms of unfamiliar circumstances. A knowledge of management theory is no substitute for intelligence. Intelligence is the power of discrimination as to when and when not to apply a theory; it is the power to assess a situation clearly and apply the appropriate knowledge.

To sum up, a manager is a person who, while possessing the basic qualities of leadership, has acquired sufficient knowledge of business practices to be able to apply them effectively. Business today can afford neither the purely intuitive manager nor the purely theoretical manager. The modern manager must be a mixture of the two because he can never possess all the knowledge required to assess a situation fully. He must therefore use imagination and foresight and have the courage to take calculated risks: but he must be capable of calculating them and not merely of acting by guesswork. For this he needs knowledge and training, and a capacity for clear analysis as well as for positive action.

Management decisions

The manager's main function is decision-making; and to make decisions in modern business one must have a maximum of information. When information is incomplete, however, as it only too often is, in spite of controls, a manager often has to make decisions on insufficient evidence, and he must be able to persuade his colleagues that his decisions are the right ones. It is here that integrity is important because unless he is known for his integrity he cannot command the respect and authority to carry his colleagues with him and gain co-operation from his staff, particularly if he has to make decisions which he cannot support with adequate evidence.

Because a manager is human, he is bound, at times, to make the wrong decisions. If he does he must have the courage and humility to admit his error and not blame someone else - a common practice of bad management. This in itself will be evidence of his integrity and it will command respect and loyalty. The manager who is always 'passing the buck' loses the respect of his colleagues, his staff and superiors. He is in fact a bad manager. The manager who tries to substitute theory for realistic action is as dangerous as the manager who ignores theory, knowledge and intelligence and acts exclusively on hunches. Both intuition and knowledge have their place in management and one of a manager's requirements is to know when each is appropriate and the relation of each to the other.

Thus while controls are necessary in business to keep managers informed about facts they can never be a substitute for control, which implies personal managerial qualities, which can only be observed in action and must be innate in character.

The role of management

The role of management in modern industrial society is to organize the resources at its disposal in order to supply the needs of the consuming public as efficiently as possible and at prices which they are willing to pay. These resources consist broadly of capital, raw materials and labour. Each of these has a number of subdivisions.

Capital and 'capitalist' have become almost words of opprobrium in some sections of modern society, but without capital no business enterprise is possible whether under communism or a system of free enterprise. In a communist or socialist state capital is obtained either by taxation or appropriation. Under free enterprise it is contributed voluntarily by those who have a surplus of wealth, either through saving or inheritance, to invest in productive activity. Such people expect payment for the loan of their surplus wealth which they receive - or hope to receive - in the form of dividends or interest. Marx called this the 'unearned increment' and looked upon it as rightfully the property of the worker. Its justification is however that it is (a) the reward of saving, (b) payment for risk, or (c) payment for the hire of essential resources.

The idea popularized by Marx, and still widely believed by many, that the manual worker is the only creator of wealth, is based on a fallacy. Work is useless without capital resources and management, without raw materials, organization and marketing machinery. Emerson's legendary creator of the ideal mousetrap would have been ineffective without resources with which to make it and methods by which to market it. Living, as Emerson suggests, in the middle of the jungle he had first to inform the public of its existence, which today is known as advertising. It is doubtful, in fact, if anyone would have beaten a path to his door and more likely that the path-beating would have taken place in the other direction in order to allow some form of primitive transport - a donkey for instance, or a mule - to convey his mousetraps to the nearest town. This would have been the start of his marketing operation.

An historical case in point was the inventor of the spinning mule, Samuel Crompton, who lived in the days when spinning and weaving were domestic industries carried on in the homes of the operatives themselves. Being of an ingenious turn of mind he invented a greatly improved spinning device combining the advantages of the existing spinning jenny with that of the spinning frame - which was the reason for its name.

Though a shy and retiring man Crompton took the results of his invention, a far finer thread than had hitherto been spun in England, to the local market at Bolton and soon caused a stir by its excellence. Hitherto such fine thread had only been spun in India, but now it was available for making the fine muslins for which thread had formerly to be imported. Naturally he was able to charge much higher prices for his product than his rival spinners and, when spinning factories were opened, his mule became the main form of spinning machinery; with certain modifications it still remains so.

Unfortunately Crompton, though a brilliant inventor, was a poor business man; after a fruitless struggle for recognition of his services to the British cotton industry, he died in penury. Ark- wright, his contemporary, was an indifferent inventor but a better business man, and by filching and exploiting other people's inventions eventually became a millionaire. Had Crompton possessed more capital and more management ability, he too might have made a fortune. In fact it was the application of these factors by others to his invention which made it the basis of Britain's cotton industry for succeeding generations. No doubt Marx saw this as an example of capitalist exploitation. In fact it was an example of capitalist development, by more competent business management, of the inventor's original idea.

Capital

Capital is generally thought of as money or purchasing power, but of course if it remains merely money it is useless. It must be used to purchase buildings, machinery, equipment and other 'fixed capital assets'. It must also be used to hire labour, for management and to purchase raw materials. Only a small proportion remains in the form of money or credit to fall back on in case of emergency.

Few businesses start making a profit immediately, and resources are needed to carry a business over the interim period of initial establishment, and to subsidize those losses which it is likely to make until it has fully established a market for its goods or services. Even Crompton, with the small resources at his disposal, had to wait until his invention was completed before he could start reaping the benefit from it in the greatly improved yarn he was able to market. His troubles began when he started to market his products and to try to cope with the demand which their great superiority created. It is said that Arkwright himself sent spies to Crompton's garret near Bolton...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Title
• Dedication
• Preface
• 1 The Need for Control in Modern Business
• 2 The Functions of Management
• 3 Human Relations in Management
• 4 The Control of People
• 5 Motivation and Communication
• 6 Commonsense of Management
• 7 Customer Relations and Advertising
• 8 Innovation and Expansion
• 9 The Marketing Concept
• 10 Science as an AID to Management
• 11 Management Accounting
• 12 Planning
• A Network analysis and planning
• B Trees Of Decision
• C linear programming
• D Stock Or Inventory Control
• Select Bibliography
• Index