MANAGEMENT

STUDY

Reporter: Dacuro, Nelybeth C.

Learning Objectives:

At the end of this chapter, the students should be able to:

Discuss the nature of a management study;

Explain the basic aim of a management study;
Identify the major process in conducting a management
study;
Describe the internal organizational structure;
Discuss the staffing process; and
Prepare compensation schedules
 MANAGEMENT

refers to the scientific and procedural contributions of human

resources towards the accomplishment of a proposed business
endeavor. A management study, therefore, determines the human
resource requirements of the project.
The raw materials and overhead provisions, including the
infrastructure requirements, of the project have been critically
evaluated and determined in the technical study. However, these
physical components will remain idle and unproductive unless
there are people who are technically qualified and competent to
handle them and accomplish the desired objectives. There must be
a group of individuals with different skills, attributes, and
specializations but with common objectives, desires, and intentions
working together for the success of the proposed project.
BASIC AIM OF A MANAGEMENT

• Management study aims to determine the

most appropriate type of business
organization, in terms of formation and
structure, that will effectively accomplish
the objectives of the business. At the end of
this study, the proponent should
categorically include in the conclusion a
recommendation as to what type of business
organization should be established.
 PROCEDURAL STEPS IN CONDUCTING A
MANAGEMENT STUDY
• The following are the basic steps in conducting a
management study:
1. Selecting a business organization
2. Designing the internal structure
3. Staffing for the internal structure
4. Computing total salaries, compensation, and fringe benefits
5. Preparing a time table
The different sections of a management study are designed
according to these steps.
Business Organization

• The first section of a management study aims to answer the

fundamental question, "What type of business organization
must be formed to effectively carry out the objectives of the
proposed project?".
There are three types of business organizations. These are as
follows:
1. Sole proprietorship
2. Partnership
3. Corporation
Factors Affecting the Choice of Business
Organization
Several factors affect the choosing of the type of business
organization that is best fitted to the proposed project. These
are as follows:
1. Capital requirement
2. Liability of owner or owners
3. Managerial skills needed
4. Ease of formation
5. Tax implication
6. Government intervention
7. Nature of business
8. External financing
 Factors Affecting the Choice of Business
Organization
1. Capital Requirement - The capital requirement to start a business
may either come directly from fresh cash infusion of the owners
or be sourced from creditors, particularly financial institutions.
The amount of capital should be enough to cover the
infrastructure requirements and scale of operation.
2. Liability of Owner or Owners - The liability of owners may either
be limited or unlimited. Limited liability means that the owner is
liable only to the extent of his/her capital contributions, whereas
unlimited liability implies that creditors may run after the
personal properties of the owners in case the business cannot
fully settle its financial obligations. The underlying element in a
liability is the degree of risk exposure. In case a business
operation involves more risk, such as banks and other financial
intermediaries, a corporate form of business organization is
Factors Affecting the Choice of Business
Organization

3. Managerial Skills Needed - Since sole

proprietorships or partnerships need only a small
amount of capital, the operation is usually simple. In
most instances, one person with managerial skills is
employed to handle the daily operating activities of
the business.
However, if the operation of the business is highly
complicated and covers a wider market, there is a
need to hire several managers to run the day-to-day
operation of various departments. This also requires
the creation of a corporation.
Factors Affecting the Choice of Business
Organization
4. Ease of Formation - All types of business
organizations require papers to be prepared and
submitted to different national and local government
offices at formation. Partnerships in the Philippines must
be registered with the SEC.
5. Tax Implication - The tax liability of sole
proprietorships is computed using the schedular tax
rates, and the amount is usually lower compared to
those of partnerships and corporations. The business
owner includes the income realized from the business in
the computation of his/her gross income.
 Factors Affecting the Choice of Business
Organization
6. Government Intervention. The government usually
imposes greater and wider control on corporations. Various
government agencies closely monitor the operations of
corporations, and it imposes more stringent measures to
be complied with. Sole proprietorships usually comply with
the local government reportorial and legal requirements;
less intervention is imposed by the national government.
7. Nature of Business - Merchandising and service
entities do not usually have complicated operations; they
conduct routine activities all throughout the year. Sole
proprietorships and partnerships are highly advisable for
these kinds of business.
Factors Affecting the Choice of Business
Organization

8. External Financing - Financial institutions such

as banks usually favor the granting of credit to
corporations rather than to sole proprietorships and
partnerships. In other words, corporate entities can
more easily seek external funding from outside
sources should they need additional working capital
compared to sole proprietorships and partnerships.
Internal Organization Structure

The internal organizational structure serves as the framework

that outlines the hierarchy and communication process
between the employees and the departments. It also defines
the responsibilities and functions of each employee in the
organization.

The internal organizational structure may be any of the

following
1. Flat structure
2. Department-focused structure
3. Product-focused structure
 Internal Organization Structure

1. A flat structure is highly advisable for sole proprietorships

and partnerships that only have a few personnel. Usually,
there are only two or three levels of reporting in this
configuration. The simple structure is advantageous because
it hastens the decision-making process by empowering
employees to formulate decisions.
2. Department-focused structure is applicable to corporate
entities where the work to produce a product is broken down
into different functions. The prevalent functional areas of a
business are operation, marketing, finance, and human
resources. This type of internal structure is highly advisable to
be adopted by a corporation that values teamwork in the
attainment of its objectives and goals.
Internal Organization Structure

3. A product-focused structure prioritizes the product

offered by a business. All efforts are joined together to
deliver quality products or services to customers. The
enhancement of product quality is the primary concern
of a product-focused structure.
This structure is often adopted by huge retail corporate
stores in corporate form with very strong leadership
teams across several functional areas.
flat structure
product-focused structure
 Organizational Chart

• An organizational chart is a diagram of the structure of an

organization which shows the positions, ranks, and relationships of
employees in the organization. It, likewise, identifies the positions
that execute line or staff functions. At a glance, an organizational
structure should depict the formal relationships among
employees. It is considered the best formal arrangement of
employees that would meet the objectives of the organization.
• An organizational chart is not static. It is restructured in response
to the changing conditions and opportunities both in the local and
international markets. In case there is an expected change in the
structure after two or three years based on the expected external
events in the business community, the proponent is required to
present the new organizational chart as well.
Staffing Requirements

• The staffing of the internal structure is a management

function that usually involves the following:
• 1. Determining the appropriate number of employees
required by the organization
• 2. Recruiting employees who would qualify for the position
based on education, knowledge, trainings, experience,
skills, and abilities
• 3. Deploying and retaining employees
Staffing Requirements
A listing of the positions is usually made with the corresponding
qualifications and functions. The format may appear as follows:
No. of Position Qualification Job Description
Position Descriptio Requirements
s n
3 Mechanical • Licensed mechanical To confer with other mechanical
engineers engineers engineers on the implementation of
operation systems
• Varied experiences on To conduct specification reviews of
automotive engine engine components
designs
• Exposed to quality To provide technical guidance based
assurance and inspection on computer reports about the
trainings system
To oversee the overall installation,
maintenance, and repair of
Computation of Salaries, Compensation,
and Fringe Benefits
• Determining the compensation level of employees is a very
sensitive issue that must be critically evaluated and studied.
An attractive compensation package may lure highly
qualified workers to the position, whereas low salaries will
discourage them from joining the business.
• In formulating the level of compensation, allowances, and
other fringe benefits, the proponent consider the following:
1. The amount legally provided in the Labor Code.
2. The statutory minimum wage in the regions as stipulated by
the Regional Tripartite Wages and Productivity Board.
Computation of Salaries, Compensation,
and Fringe Benefits
3. The prevalent practice in the industry
4. The demand of the position based on expertise,
qualification, and work experience
5. The technical requirements of the work to be performed
This section should, thus, provide definite answers to the
following questions:
1. How much is the salary for the position?
2. What benefits should be added to the position?
3. Is the position entitled to representation and travelling
allowance (RATA)?
 Computation of Salaries, Compensation,
and Fringe Benefits
4. Will the compensation package create imbalance or distortion
among employees?
A schedule of compensation and allowances is usually presented in
this section following the format below.
Position Salary Basic Monthly Total 13th Total
Descripti Grade Monthly Allowanc Annual Month
on Pay e Pay and
Other
Benefits
Financial 30 P35,000 P2,000 P444,000 P35,000 479,000
analyst
Bookkeep XX XXXX XXXX XXXX XXXX XXXX
er
Receivabl XX XXXX XXXX XXXX XXXX XXXX
 Project Schedule
• The project schedule is usually the last section of the management
study. The proponent is advised to work closely with a quantitative
analyst or operation science specialist.
A project schedule defines the time frame of the pre-operating phase
of a prope project and the differer defines the timed out within that
time. It is a planning tool that used for the following:
1. Identifying the activities or tasks during the project implementation
2. Determining the required resources (e.g., materials, technology, and
personnel) complete tasks
3. Describing the work to be accomplished within a particular time
frame
4. Determining the date to start the project and the expected date of
completion
Project Schedule

The two most common techniques used in scheduling the

various interrelated activities in project implementation are
the following:
1. Gantt chart
2. PERT/CPM model
The Gantt chart or network of activities provided by the
PERT/CPM model may be shown in this section of the study
or in the appendix. The preparation of the Gantt chart and
the PERT/CPM networks is discussed and illustrated in
Appendix C.
Project Schedule
Project Schedule