Administrative and Management Coordination - Essay Example

By Question one I. Administrative Coordination In his book the “Visible Hand “Chandler argues that the evolution of organizations is divided into pre-1850 and post-1850s. The first period consisted the following; there were small firms in America and most of them employed at least 250 people. The factories were textile firms on the east coast. There were no middle managers; there were low production and people used traditional tools. Markets coordinated a high percentage of the economic activities, and the accounting systems were underdeveloped. However, the second period was so much different because of the revolution that constituted American businesses. The owners of the companies transferred their authority to full- time paid managers. There were also other developments during this period like the administrative hierarchies, dependable energy sources, transportation infrastructures like the railway and sophisticated accounting systems. To benefit from these industrial developments, Chandler argued that entrepreneurs had to make three forms of interrelated investment. The first investment was in technology itself in terms of quality machines that would enable the company produce many goods efficiently. The second was investment in management, and the third was investment in marketing and distribution networks. Structure and processes involved in management coordination The market remained the generator of goods and services, but business empires took over the functioning of controlling products and services through existing processes of distribution and production. They also allocated funds for future production and distribution. Modern enterprises became the most powerful organizations in America’s economy. The managers also became the most influential decision makers leading to managerial capitalism. Administrative coordination resulted in improvements in productivity, lower costs, and higher gains than coordination by market techniques. The structure of administrative coordination as described by Chandler was hierarchical, and authority flowed from the top to the bottom. Upper-level managers in charge of planning, purchasing inputs, planning new products and market expansions and finally setting the corporate strategy, held the top positions. The middle managers held the second place in charge of the daily operations. Making sure inputs are at the right place at the right time, making sure that production runs smoothly, coordinating processes through which output moved to distribution network. Managing the individual stores, finally monitoring local demand conditions and reporting to the upper-level management. To achieve maximum results, related efforts are put together and segregating unrelated efforts. The principle of coordinating related efforts involved placing broad sets and of functional activities in different administrative units. The middle-level managers then headed these units. The hierarchical structures were built around people who understood the business world perfectly. The earliest form of industry to adopt this co-ordination was the railroads cooperation. II. Definition and differences between direct and indirect costs Direct costs are the costs traced or identified with the final product for example leather in making a shoe. Direct materials and direct labour are mostly in this class. Indirect costs are those costs that we cannot be directly traced or identified with the final product. Such costs are incurred to benefit a number of operations and cannot be directly determined. Indirect costs are divided into three categories indirect material, Indirect labour and all other production expenses such as taxes, audit fees and general expenses, depreciation, rent, and storage. III. How an indirect function can contribute to administrative coordination One category of indirect costs is the indirect labour .indirect work consists of workers who repair and maintain equipments. Work that can be classified as indirect can contribute to management’s coordination in the production department in the following manner. The workers who get involved in the daily maintenance of the equipments used in the production have to be checked on a regular basis. Therefore, the supervisor is the first-line manager who is in direct contact with the employees. The director makes sure that the employees report to duty on time and sign the attendance sheet. The supervisors then give a daily report to the middle-level managers in the production department .the middle-level manager puts together all the reports from the different managers and writes a complete report to the top management. The top management goes through the reports submitted, and they consider a number of factors such as the efficiency of the workers, and their level of output. The top management then makes decisions concerning the number of employees they need in the company according to the demand and supply labour report submitted by the middle managers. They then consider the resources to allocate to pay wages and salaries. The information they get from the managers enables them to prepare an annual budgetary allocation for the indirect labour. Therefore, an indirect work like repairing and maintenance of equipments requires administrative coordination for it to succeed. Question two a) REPORT To: QMF top management Date: 05 /12/ 2014 Subject: How to integrate the hygiene team into the production team management function Introduction Hygiene and inspection activities have been stand-alone functions for the support and maintenance department. However, they are very costly activities that are necessary to the company. In the recent past, the rate of food scandals has increased, and if the business is involved in such, it will make huge losses. The company’s reputation will be ruined, and loss of customers will be inevitable. Therefore, it is very necessary to consider changing the set up of the two functions as they are paramount to the overall success. Hygiene costs consume a high percentage of company’s resources, and they should be considered as direct expenses. As Sarah has suggested, it is necessary to consider including the hygiene department into the production management function. This will not only reduce the costs incurred, but it will also lead to reduced time spent in carrying out the whole hygiene process. The following report gives the findings on how this will affect the production department. Findings The goal of the production department is producing more quantity at a very short time in order to complete the high number of orders. The production team in the company has mainly been dealing with machines. Therefore, their cost set up is the traditional costing method. This process involves spreading all the overheads to products based on the number of machine hours. The hygiene department though includes activities that are not associated with machine hours. These activities include : checking if the production area is clean and disinfected regularly ,checking all the machinery and utensils are disinfected daily, checking that all the personnel involved in food preparation, cooking and packing have proper protective clothing. Ensuring the zero contamination by following proper personal hygiene procedures, checking for any contamination of raw materials and food dishes at preparation and packaging stage and offering initial health training to new staff. They also update all the staff on how to improve health when issues about hygiene arise. Therefore, the department will have to change its cost set up to an activity based costing, this costing method will require the production department to assign costs to the activities which will be the real cause of the hygiene overhead. The costs will then be allocated to the products that are demanding the activities. The department will calculate the cost of the resources used in each of the activities, for example, the cost of the equipments used by the personnel in relation to the number of products produced or the cost of training a new employee relating to the products they will produce. Recommendation Hygiene should be considered as a direct cost of production in the new setup to signal its importance to the production process. This is because if it will be treated as such the real cost of carrying out the whole hygiene process will be quantified b) In measuring the Hygiene team performance, the focus should be on the quality of inspection outcomes. This is because quality inspection will ensure that there will be zero incidences of hygiene. The team will be working efficiently to ensure that the food items are to the maximum standard. When the customers purchase quality food, they will remain loyal to the company. In addition to that, the company’s reputation will be boosted, and new customers will be attracted to purchase its products. This in turn led to a generation of high revenues and therefore the company will be more profitable. Quality of inspection will also mean no food scandals for the company; therefore, the company will avoid legal suits. Therefore when compared to considering time taken per control quality of the review is the best option. It is better to be slow but sure. c) The top management should reward the production management if they can reduce the hygiene activities costs and still maintain high quality. Their performance can be measured using a balanced scorecard. The method is very effective as it measures both the quantitative and qualitative part of the management. The management performance is then valued against the set objectives. If the management of the production department scores above 90%, they should be given a bonus to their salaries. If they score an average of 70% to 80%, they should receive a fully paid trip for a whole weekend. If they score 50 % to 60%, they should be given a party in a five star hotel. If they score, less than 50% they should be taken to benchmark another company that is performing better. The evaluation should also be carried out to find out the cause of the underperformance. The company should also provide adequate training to the managers of the department and invite professionals to advise them on how to maintain quality at a lower cost. Reference List CHANDLER, A. D. (1977). The visible hand: the managerial revolution in American business. Cambridge: Mass, Belknap Press. TURNEY, P. B. B. (1996). Activity based costing: the performance breakthrough. London: Kogan Page. BROOM, H. N. (1967). Production management. Homewood, Ill, R.D. Irwin. EVANS, J. R., & EVANS, J. R. (1997). Production/operations management: quality, performance, and value. Minneapolis/St. Paul, West Pub. Co. HODGETTS, R. M. (1998). Measures of quality and high performance simple tools and lessons learned from Americas most successful corporations. New York: AMACOM. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=2435. HORNGREN, C. T. (1999). Management and cost accounting. London: Prentice Hall Europe. Read More