Friday, August 12, 2011

Management and Enterprise

Any business needs four inputs - place, people, capital and enterprise. I am assuming that you have a business idea, to start with. Each of these four inputs is essential, though the quantum of each will vary for different types of businesses.You can do a business from home but you need to earmark at least a few square feet of space for you to sit and work and to keep a few things like accounts books and memos. You can even start a business with almost no capital but you still have to spend a little on things like office furniture etc.You can run the business with no employee but you will have to provide your time and efforts towards the business.

But one thing you can't compromise on is enterprise. There can be no business without enterprise. The word 'entrepreneur' is probably the best term to describe a businessman. The dictionary describes an entrepreneur as one who organizes and manages a business, usually with considerable initiative and risk. 'Initiative' and 'Risk' are the key components of enterprise.

Management mostly deals with enterprise. Though a professional manager may not be an investor, he should consider his stake in the business to be as much as that of an investor. Additionally, while an investor is not accountable to anyone else, a manager is accountable to the company, its employees, creditors, customers etc. This onerous responsibility devolves on him because if a manager does not perform well, it will affect everyone connected with the company.

To put it another way, of the four inputs we discussed earlier, the other three inputs are controlled by enterprise. Enterprise can either enhance their value or denude them. Let us see how the failure of an enterprise has a bearing on the other three inputs.

1) Place: When a business fails to generate the expected results, the place utilized by the business becomes wasted. It might have been put to some other use. Thus some other productive purpose is deprived of its potential resource.

2) People: People who are employed by the business lose the opportunity of gainful employment elsewhere. Apart from the fact that the time they have wasted and the income they have foregone are considerable losses to them, their future prospects also become bleak. Such dissipation of human resources is also a loss to the community/country who might have been benefited if these people had contributed their skills in a productive enterprise.

3) Capital: The capital remains idle without earning the interest due for its deployment. What more, it may also be eroded and even totally lost. Here again the loss is not confined to the investor but also to the community at large.

Considering the importance of enterprise, a separate function called 'management' is assigned to it. Management can be considered equivalent to enterprise or as an input that contributes to the quality of enterprise.

In short, the most important factor that governs (no pun intended!) a business is management.

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