Ever since the Industrial Revolution brought workers from small shops into large factories, supervision has been required. Only during the last hundred years, however, has industrial management grown into a highly organized set of modern methods for achieving r efficiency. Thus, management is a new institution in human history, and it has already become vitally important for the success of all kinds of businesses and of national economies.
Efficiency means getting results with the least possible waste of time, effort and money. Therefore, efficiency is the aim of ail management, both public and private. In private business, efficiency can be measured by profit, the surplus of income over expenditures.
The manager's job, then, is to get people to do things efficiently. The top manager managers other managers, chooses and trains them, plans their operations, and checks the results. All managers have practical and complex problems, but they utilize methods based on a growing body of-knowledge. Shop managers carry out time and motion studies to improve, workers' efficiency. Industrial managers employ specialists to keep machines working properly and to ensure the supply of spare parts. The flow of work is .supervised . to avoid any unplanned idleness of workers or equipment. Each step in manufacture is planned in detail, and the cost of each step is carefully calculated. Supervisors consult experts regularly in order to master new techniques. Personnel managers have learned.to obtain greater efficiency from workers by providing rest periods and by improving morale through better heating, lighting, safety devices, cafeterias, and recreation facilities - even when these have not been demanded by labour unions. The use of modern electronic . devices has led to increasing automation, in which many automatic- machines without any need for human labour.
Scientific management methods have spread to all branches of industry-not only manufacturing, but also accounting, finance, marketing, and other office work. There are planning systems, organization systems, and control systems. Within these there are other systems for delegations of authority, budgeting, information feedback for control and so on. The essence of all the functions of management is coordination, the harmonious combination of all individual efforts for the. achievement of the objectives of the enterprise.
Banks and lending
Lending money is one of the basic functions of a bank. It is the interest earned from ioans that brings in most of the revenue to pay the expenses, including staff salaries, of the bank and give a sufficient surplus to pay shareholders a dividend and retain funds in reserve accounts for expansion of the bank.
Before discussing the various forms of loans, it should always be remembered that the funds that are put out on loan belong to customers. It is their money that is put at risk, so that if a bank is continually making bad or unprofitable loans, this will sooner or later be reflected in the deposits. On the other hand, if banks are to lend sensibly, profitably and, as ;, far as possible, risk free, this will enhance the reputation of the bank and improve its public image.
Before any advance is given, it is necessary for the manager to know the purpose of the loan. The lending officer may wonder whether the loan is for a legal purpose. For example, if a customer wanted to borrow money to buy drugs, would the bank lend money if that customer had no government license to purchase drugs? The answer would be no. Taking the point a little further. The Bank of England will from time to time issue directives on lending policy. Would a particular loan be contrary to the Bank of England directive? If so, the loan would be refused. Third, the bank itself may have a particular policy on lending, so that instructions will be issued to managers and other officials on amounts, persons, projects, and so on, that they would not lend money on. Lastly, there may be legal constraints on a lending proposition, for example the Consumer Credit Act 1974, and the Companies Act 1985.
Before any loan is granted, the following questions must be answered by the customfr:
1. How much is required? This is an obvious question, as the bank must know-how much money the customer requires; at the same time the bank must be aware that whatever sum is required, it should not be the total requirement for the project. The customer must be prepared to put some of his own money at risk. The total financial risk must not be the bank's alone.
2. The purpose of the loan? The purpose of the loan must be legal, moral and within the policy of the government and the bank. Additionally, it must not breach legal requirements, such as the Consumer Credit Act. Loans to a company must be within the company's constitution, etc.
3. Length of time the advance is required? Obviously, there must be an agreement between the bank and its customer as to how long the money is required and whether the outstanding debt will be repaid monthly, quarterly or whatever.
4. The source of repayment? The answer to this question is important to the bank. Amy customer must have sufficient resources to repay the bank, within the stipulated agreed time- not only the capital, but the interest as well. The sources of repayment could be from wages, salary, dividends, an inheritance, profits, and so on. However, the bank would not look kindly on a loan proposition where the customer states that repayment would come from his winnings on the Grand National.