Organization and Management

1. Prepared by:
IVY B. BUNCARAS

2. 3 TYPES OF COMPENSATION
1. Direct Compensation – includes workers’ salaries, incentive pays, bonuses, and
commissions.
2. Indirect Compensations – includes benefits given by employers other than
financial remuneration; for example; travel, educational, and health benefits,
and others.
3. Non-financial Compensation – includes programs, being assigned to do
rewarding jobs, or enjoying management, support, ideal work environment, and
convenient work hours.

3. Compensation pay represents a reward that an employee receives for good
performance that contributes to the company’s success. With this, the following must be
considered:
1. Pay Equity – related to fairness; the Equity Theory is a motivation theory focusing on
employees’ response to the pay that they receive and the feeling that they receive less or
more than they deserve. Pay equity is achieved when the pay given to them by their
employers is equal to the value of the job performed; thus, this motivates them to perform
well and to do their jobs to the best of their abilities
2. Expectancy Theory – another theory of motivation that predicts that employees are
motivated to work well because of the attractiveness of the rewards or benefits that they may
receive from a job assignment.

4. Improving individual job performance through performance evaluation is just one of
the reasons why employees are subjected to assessments continuously. There are other
purposes behind employee assessment that are beneficial to the company and employees.
1. Administrative Purposes – These are fulfilled through appraisal/ evaluation programs
that provide information that may be used as a basis for compensation decisions,
promotions, transfers, and terminations.
2. Developmental Purposes – These are fulfilled through appraisal/ evaluation programs that
provide information about employees’ performance and their strengths and weaknesses that
may be used as a basis for identifying their training and developmental needs.

5. It is said that performance appraisal is an investment for the company which can be
justified by the following advantages:
1. Promotion: Performance Appraisal helps the supervisors to chalk out the promotion
programs for efficient employees. In this regard, inefficient workers can be dismissed or
demoted in case.
2. Compensation: Performance Appraisal helps in chalking out compensation packages for
employees. Merit rating is possible through performance appraisal. Performance
appraisal tries to give worth to performance.
3. Employees Development: The systematic procedure of performance appraisal helps the
supervisors to frame training policies and programs. It contributes to analyzing the
strengths and weaknesses of employees so that new jobs can be designed for efficient
employees.
4. Selection Validation: Performance Appraisal helps the supervisors to understand the
validity and importance of the selection procedure. The supervisors come to know the
validity and thereby the strengths and weaknesses of the selection procedure.
5. Motivation: Performance Appraisal serves as a motivation tool. Through evaluating the
performance of employees, a person’s efficiency can be determined if the targets are
achieved.

6. Management offers different types of rewards:
1. Monetary rewards – rewards that pertain to money, finance, or currency.
a. Pay/Salary – financial remuneration given in exchange for work performance that will help the organization attain its goals;
examples: weekly, monthly, or hourly pay, piecework compensation, etc
b. Benefits – indirect forms of compensation given to employees/ workers to improve the quality of their work and personal
lives; health care benefits, retirement benefits, educational benefits, and others are examples of these
c. Incentives – rewards that are based upon pay-for-performance philosophy; it establishes a baseline performance level that
employees or groups of employees must reach to be given such reward or payment; examples; bonuses, merit pay, sales
incentives, etc.
d. Executive Pay – a compensation package for executives of organizations that consists of five components: basic salary,
bonuses, stock plans, benefits, and perquisites
e. Stock Options – are plans that grant employees the right to buy a specific number of shares of the organization’s stocks at a
guaranteed price during a selected period
2. Nonmonetary Rewards – rewards that do not pertain to money, finance, or currency; refer to intrinsic rewards that are self-
granted and which have a positive psychological effect on the employee who receives them.
a. Award – a nonmonetary reward that may be given to individual employees or groups/teams for meritorious service or
outstanding performance; trophies, medals, or certificates of recognition may be given instead of cash or extrinsic rewards
b. Praise – a form of nonmonetary, intrinsic reward given by superiors to their subordinates when they express oral or verbal
appreciation for excellent job performance

7. A labor union is a formal union of employees/workers that deals with employers,
representing workers in their pursuit of justice and fairness and their fight for their collective or
common interests.
Employees or workers unionize because of financial needs, unfair management practices,
or social and leadership concerns.
a. Financial needs – complaints regarding wages or salaries and benefits given to them by the
management are the usual reasons why employees join labor unions
b. Unfair management practices – perceptions of employees regarding unfair or biased
managerial actions are also the reason why they join mass movements; examples of lack of
fairness in management are favoritism related to promotion and giving of training
opportunities and exemption from disciplinary action
c. Social and leadership concerns – some join unions for the satisfaction of their needs for
affiliation with a group and the prestige associated with coworkers’ recognition of one’s
leadership qualities

8.  The grievance procedure is a formal procedure that authorizes the
union to represent its members in processing a grievance or
complaint. Such grievance must be expressed orally or in writing to
the employee’s immediate supervisor and the union steward. If the
immediate supervisor shows a willingness to discuss the complaint
with the employee and the union steward, the grievance may be
resolved immediately.

9. MOTIVATION
Motivation encourages individuals to work enthusiastically,
often performing more work than what is required. According to
Kreitner and Kinicki (2013), early Theories of Motivation revolved
around the idea that motivation is brought about by the
employees’ desire to fulfill their need, their work habits, and their
job satisfaction. Among these are:

10. 1. Maslow’s Hierarchy of Needs Theory – refers to Maslow’s Hierarchy of Five Human
Needs: physiological, safety, social, esteem, and self-actualization.
a. Physiological Needs – refers to the human need for food, water, shelter, and other
physical necessities.
b. Safety Needs – refers to the human needs for security and protection from physical
and psychological harm.
c. Social Needs - pertains to the human desire to be loved and to love, as well as the
need for affection and belongingness.
d. Esteem Needs – include the human need for self-respect, self-fulfillment, and
becoming the best according to one’s capability.
e. Self-actualization Needs – are the final needs in Maslow’s hierarchy.

11. 2. McGregor’s Theory X and Theory Y – refer to the theory that
was proposed by Douglas McGregor.
 Theory X is a negative view of workers which assumes that
workers have little ambition, dislike work, and avoid
responsibilities; they need to be closely monitored and
controlled for them to work effectively.
 Theory Y is a positive view of workers which assumes that
employees enjoy work, seek out and accept responsibility, and
are self-directed.

12. 3. Herzberg’s Two Factor Theory – was proposed by Frederick Herzberg. This theory is
also known as the Motivation-Hygiene Theory which states that intrinsic factors
(achievement, recognition, growth, and responsibility) are associated with job
satisfaction, while extrinsic factors (company policy, salary, security, and supervision)
are associated with job dissatisfaction. Intrinsic factors are motivators while extrinsic
factors are called hygiene factors.
4. McClelland’s Three Needs Theory - was proposed by David McClelland and states
that individuals have three needs that serve as motivators at work.
 The three (3) needs McClelland referred to are the need for Achievement (nAch), the
need for Power (nPow), and the need for affiliation (nAff).
5. Alderfer’s ERG Theory – was developed by Clayton Alderfer in the 1960s. For
Alderfer, a set of core needs explains the behavior. E stands for existence needs, R refers
to relatedness needs, and G pertains to growth needs. The needs or desire for
physiological and materialistic well-being, to have meaningful relationships with others,
and to grow as a human being, to have a meaningful relationship with others, and to
grow as a human being are similar to the needs presented in Maslow’s Theory.

13. Modern Theories of Motivation are process theories that focus on the notion that
motivation is a function of employees’ perceptions, thoughts, and beliefs. Among these
are:
1. Goal Setting Theory – a theory stating that specific goals motivate performance and that
more difficult goals, when accepted by employees, result in greater motivation to perform
well, as compared to easy goals.
2. Reinforcement Theory – a theory which states that behavior is a function of its
consequence. If the result or consequences that immediately follow a behavior is good,
then there is a probability that the individual will be motivated to repeat the behavior.
3. Job Design Theory – a theory which states that employees are motivated to work well by
combining tasks to form complete jobs.
4. Equity Theory – A theory developed by J. Stacey Adams states that employees assess job
outcomes concerning what they put into it and then compare these with their co-workers.
5. Expectancy Theory – states that an individual tends to act in a certain way, based on
the expectation that the act will be followed by an outcome that may be attractive or
unattractive to him or her.

14. Communication applies to all management functions and its general purpose is
for the organization to bring positive changes that influence activities leading to the
firm’s welfare. Accurate communication occurs when the sender and the receiver
understand one another, according to Hobbins and Coulter (2009).
Types of Communication
Communication may be verbal (through the use of oral and written words) or
non-verbal (through body movements, gestures, facial expressions, eye contact, and
touching).
It may also be classified as formal, if communication takes place within
prescribed, routine organizational work arrangements, or informal if
communication is not defined by an organizational hierarchical structure.
Communication is formal when the manager gives an assignment to a subordinate
and informal when employees talk to their friends in the office about a weekend
party or a vacation which they plan to take.

15. Direction and Flow of Communication
Communication flows in different directions within an organization.
Communication may be vertical, upward, downward, horizontal/lateral, or
diagonal.
1. Vertical Communication involves communication flow between people belonging to
different organizational levels.
2. Upward Communication is the flow of information from an employee who belongs to
a lower hierarchical level to the boss/manager who belongs to a higher hierarchical
level.
3. Downward Communication is the flow of information from the manager, who
belongs to a hierarchical level, to the subordinates/employees, who belongs to lower
hierarchical levels.
4. Horizontal/lateral Communication takes place among employees belonging to the
same hierarchical level.
5. Diagonal Communication – entails communicating with someone or others who
belong to different departments/units and different hierarchical levels.

16.  Communication Networks in Organization
Communication networks are varied patterns of combined horizontal and
vertical flows of organizational communication. Types of communication networks
include the following;
1. Chain network – where communication flows according to the usual formal chain of
command, downward, and upward.
2. Wheel network – where communication flows between a leader and other members
of the team.
3. All-channel network – where communication flows freely among all members of a
team.

17. Barriers to Communication
Organization members may encounter various types of barriers that can alter the
meaning of communications that they receive. The barriers include filtering, emotions,
information overload, defensiveness, language, and national culture.
1. Filtering – the shaping of information communicated to make it look good or
advantageous to the receiver.
2. Emotions – the interpretation of communications which may be influenced by extreme
emotions felt by the receiver.
3. Information overload – another barrier to good communication since there are too many
pieces of information received by an individual may have a negative effect on a person’s
processing capacity.
4. Defensiveness – the act of self-protection when people are threatened by something or
someone.
5. Language – could also hamper good communications because words used may have
different meanings to different people belonging to different ages, educational
backgrounds, or cultural groups.
6. National culture – just like language, the prevailing national culture may also cause
problems in communication among members of an organization, especially if it is a
multinational company.


18. Overcoming Communication Barriers
To avoid conflicts resulting from communication problems, managers try to
overcome communication barriers through the following means:
1. Using feedback – This is usually done by asking questions about a memo sent to
subordinates or by asking them to give their comments or suggestions.
2. Using simple language – This is done by avoiding uncommon terms and flowery
words that may just cause misinterpretation.
3. Active listening – This means listening well to grasp the full meaning of the
communication.
4. Controlling emotions – this is another method of overcoming communication
misinterpretation. When the receiver is affected by extreme anger, his interpretation
of a message received may not be accurate.
5. Observing body language – This also influences how communication is interpreted.
Actions of the message receiver, like throwing away a letter delivered to him, betrays
his negative feelings regarding its message, even if he says “yes” or “okay” to what is
requested.

19. METHODS OF CONTROL
A firm may apply control techniques or methods which are either quantitative
or nonquantitative.
1. Quantitative Methods – make use of data and different quantitative tools for
monitoring and controlling production output. Budgets and audits are among the
most common quantitative tools.
a. Budgets. The budget remains the best-known control device. Budget and control are,
in fact, synonymous. An organization's budget is an expression in financial terms of
a plan for meeting the organization’s goals for a specific period. A budget is an
instrument of planning, management, and control.
b. Audits. Internal auditing involves the independent review and evaluation of the
organization’s nontactical operations, such as accounting and finances. As a
management tool, the audit measures and evaluates the effectiveness of
management controls. Audit service provides an independent audit of programs,
activities, systems, and procedures.

20. 2. Nonquantitative methods – refer to the overall control of performance instead of only
those of specific organizational processes. These methods use tools such as inspections,
reports, direct supervision, and on-the-spot checking and performance evaluation or
counseling to accomplish goals.
Other control methods include feedforward control, concurrent control, feedback control,
employee discipline, and project management control.
a. Feedforward control – prevents problems because managerial action is taken before the
actual problem occurs.
b. Concurrent control – takes place while work activity is happening. The best example of
this type of control is direct supervision or management by walking around.
c. Feedback control – is a control that takes place after the occurrence of the activity. It is
advantageous because, by the time the manager receives the information, the problem
had already occurred.
d. Employee discipline – is a control challenge for managers. Enforcing discipline in the
workplace is not easy. Concerns regarding this include workplace privacy, employee theft,
and workplace violence, among others.
e. Project Management control – ensures that the task of getting a project activity done on
time, within the budget, and according to specifications, is successfully carried out.
Project managers need technical and interpersonal skills to control the implementation of
the project efficiently and effectively.

21. The goal of business is to gain profit. To achieve this, managers need
accounting/financial controls. Managers must also analyze the organization’s
financial condition, which is done with the help of the following financial ratios.
1. Liquidity Ratio – tests the organization’s ability to meet short-term obligations; it
may also refer to acid tests done when inventories turn over slowly or are difficult to
sell.
2. Leverage ratio – determines if the organization is technically insolvent, meaning that
the organization’s financing is mainly coming from borrowed money or the owners’
investments.
3. Activity ratio – determines if the organization is carrying more inventory than what
it needs; the higher the ratio, the more efficiently inventory assets are being used.

22. 4. Profitability ratio – determines the profits that are being generated; or it measures
the efficiency of assets to generate profits.
BENCHMARKING
 Benchmarking is an approach or process of measuring a company’s services
and practices against those of recognized leaders in the industry to identify
areas for improvement. It is a widely used and well-accepted approach because it
helps organizations gather data and information against which performance can be
measured and controlled