1.4. Read the information about Follet’s theory of man-agement, give it the title and answer the questions:

1. What is Follett’s definition of management?

2. What five functions does management consist of?

3. What word is equivalent to the word ‘management’? Mary Parker Follett (1868–1933), who wrote on the topic in

the early twentieth century, defined management as ‘the art of get-ting things done through people’. One can also think of manage-ment functionally, as the action of measuring a quantity on a regu-lar basis and of adjusting some initial plan; or as the actions taken to reach one's intended goal. This applies even in situations where planning does not take place. From this perspective, Frenchman Henri Fayolconsiders management to consist of five functions:

1) planning 2) organizing 3) leading

4) co-ordinating 5) controlling

6) measuring results

Some people, however, find this definition, while useful, too narrow. The phrase ‘management is what managers do’ occurs widely, suggesting the difficulty of defining management, the shift-ing nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class.

One habit of thought regards management as equivalent to ‘business administration’ and thus excludes management in places outside commerce, as for example in charities and in the public sec-tor. More realistically, however, every organization must manage its work, people, processes, technology, etc. in order to maximize its effectiveness. Nonetheless, many people refer to university de-partments which teach management as ‘business schools’. Some institutions (such as the Harvard Business School) use that name

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while others (such as the Yale School of Management) employ the more inclusive term ‘management’.

Speakers of English may also use the term ‘management’ or ‘the management’ as a collective word describing the managers of an organization, for example of a corporation. Historically this use of the term was often contrasted with the term ‘Labor’ referring to those being managed.

1.5. Agree or disagree with the following using ‘nothing of the kind’, ‘wrong’, ‘not at all’ or ‘right’, ‘true’, ‘I agree with you’:

1. Financial management in a small firm doesn’t differ from that of a large corporation.

2. One difference is that small firms do not have the oppor-tunity to publicly sell issues of stocks or bonds in order to raise funds like large corporations do.

3. The owner-manager of a small firm must rely primarily on trade credit, bank financing, lease financing and personal equity to finance the business.

4. Many financial problems facing the small firm are very similar to those of larger corporations.

5. The analysis required for a long-term investment decision such as the purchase of heavy machinery or the evaluation of lease-back alternatives, is essentially the same regardless of the size of the firm.

6. The main task of financial managers in both small firms and large corporations is the effective management of working capital.

7. Net working capital is defined as the difference between current assets and current liabilities and is often called the ‘circulat-ing capital’ of the business. Lack of control in this key area isn’t a primary cause of business failure in both small and large firms.

8. The business manager mustn’t be attentive to changes in working capital accounts.

9. Managers must understand the cause of these changes and the importance of these changes for the financial health of the com-pany.

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