Thursday, July 11, 2013

Employee Motivation Theories

Employee Motivation Theories
As a manager, to promote the overall performance of your organization, you need to focus on the human factor of your business; in other words, to push your employees' performance to its highest level. 

But how can a smart manager achieve this???
Lots and lots of studies concerning human behavior in organizations tend to help managers understand and manage human behavior in the workplace. In the following lines, we will highlight some of the most influential early theories and research studies in this regard.
Frederic Taylor's scientific Management
Frederic W. Taylor, the mechanical engineer, he was called the father of scientific management, had his own approach to improve the firm's performance that is based on economic incentives and on the idea that there is no one best way to perform any job. He believed that we can improve a firm's productivity by studying the individual jobs in the mill, and by redesigning the equipment and methods of work used by workers.
By organizing each job using a stopwatch, we can break down every task into separate segments, then we prepare an instruction sheet to tell us the amount achieved of each job and how much time it should take, then we can figure out what are the tools we need to perform this, that was Taylor's plan to increase productivity which resulted in developing four basic principles of scientific management:
1-    Create a scientific approach for each segment of the job
2-   Select, train, teach and develop workers in a scientific manner
3-   Encourage cooperation between workers and managers
4-   Distribute the responsibility between managers and workers based on how much suitable they're to the job
Maslow's Hierarchy of Needs
Maslow handled the motivation theory based on human needs, he believed that each one of us has a hierarchy of needs, consisting of psychological, safety, social, esteem and self actualization needs; the following figure can represent the hierarchy in an organized manner:

Based on the above shown hierarchy, the most basic human needs are psychological needs, such as the need for nutrition, home, clothing…etc. These psychological needs have greater power in motivating individuals to look for a job, a job with sufficient income to cover the mentioned above needs. Once these needs are satisfied we turn to the next level of needs until we reach the highest level, the self actualization needs.
X and Y theory of McGregor
Influenced by Maslow's work, Douglas McGregor focused on two contrasted sets of assumptions relative to human nature in his study of motivation; he called it X and Y theory.
** The theory X is based on pessimistic view of human nature, it proposes certain pessimistic assumptions:
1-    The average person dislikes work and will avoid it if possible
2-   As people do not like work, we must put them under control, direction, and punishment to push them to perform greater effort
3-   The average person prefers to be oriented and reduce his exposure to responsibility
These three assumptions imply that managers must push workers to perform harder while controlling their on-the-job behavior.
** On the other hand, the theory Y of management is based on optimistic assumptions relevant to human behavior:
1-     Work is as natural as play or rest. People need to be self-directed and they will seek to achieve the organizational goals they believe in
2-   We can motivate workers by positive incentive to push them to achieve these goals
3-    Most workers have a high level of creativity and are willing to solve problems
There are other early theories focusing on employee motivation, such as theory Z of William Ouchi, Herzberg's Motivator-Hygiene theory, and the Hawthorne studies as well.
Other contemporary theories can be pointed out, such as Expectancy theory, Equity theory and Goal-Setting theory, that worth to be highlighted in other similar articles.


The Corporate form of Organizations

The Corporate form of Organizations

Three forms of organizations are commonly used: Sole Proprietorship, Partnership and Corporation.
In 1918, corporation was first defined by John Marshall as "an artificial being, invisible, intangible, and existing only in contemplation of law". By this definition, we figure out that corporation creation is emerged first by law. Speaking of law, corporation represents a legal entity having an existence separate from its owners; we call them stockholders, who are not personally responsible or liable for the debts of this entity. In its legal form, the corporation is subject to the state laws; we mean here by "state" the area in which it is formed.
The corporate form of organization tends to be relevant to large companies, such as Microsoft and IBM; its size ranges from large-scale multinational firms with large numbers of employees and higher rates of profit, to Startup Corporation with small budgets.
The main difference between corporations and other legal entities, such as sole proprietorship and partnership, is that corporations are double taxation entities with a life separate from its owners.
Corporation classifications
Commonly; we can classify corporations either by purpose or by ownership.
When we classify it based on the purpose of making profit, it can be either a for-profit or a not-for-profit organization.  Examples of for-profit corporations are numerous, such as Fujitsu, PepsiCo, Google, Motorola, and Apple ...etc.
Not-for-profit corporations are established for charitable, medical or educational purposes, such as national military projects.
When we classify corporations by ownership, we can distinguish between public or private companies. A publicly held firm may have thousands of stockholders, whose stock is traded on a national security exchange, such as New York Exchange. Most of large-scale companies, IBM or General Motors for instance, are publicly held.
On the other hand; privately held companies have only few stockholders, they do not offer their stocks for public sale. Most of privately held companies are usually smaller than publicly held companies.
The Incorporation Process
It is much more complex to set up a corporation than if you are starting up a sole proprietorship or partnership. To start up a corporation, you need to go through the following steps:
1)    Select the company name (it will be your business trade name)
2)  Write the articles of incorporation, and fill them; these articles include the following items:
a.     Name of corporation
b.    Firm's goals
c.     Type of stock (common or preferred) and number of shares of each type to issue
d.    Corporation's lie
e.     Minimum investments by owners
f.       Address of the corporate headquarter
g.     Address and names of the first board of directors
3)  Pay necessary fees and taxation
4)  Hold organizational meetings
5)   Adopt bylaws
Characteristics of Corporations
As a form of organization, corporations are distinguished from other forms of organizations by the following characteristics:
(1)            Possibility to transfer ownership of shares; stockholders can sell their stocks to dispose a part or all their interest in the corporation
(2)          Separate legal entity from its owners, as it acts under its own name rather than in the name of its stockholders
(3)          Ability to obtain capital through the issuance of stocks
(4)          Limited liability of stockholders, as the corporation is a separate entity from its owners
(5)           Corporation is subject to governmental regulations (state or federal)
(6)          Additional taxation; stockholders must pay additional taxes on cash dividends



Monday, July 1, 2013

Cash-Flows statement

Cash-Flows statement…Step by Step
 In today's environment, any accountant, expert or beginner, needs to obtain a good background of the four basic financial statements needed for any business:

1)     Income Statement
2)   Owner's (Stockholders') Equity Statement
3)    Balance Sheet, and
4)   Statement of Cash-Flows
In this article we will focus on the statement of Cash-Flows, how to build it, and why we need it.
Statement of Cash-Flows as a management tool
Any business, a large one or a startup, needs to produce new goods and services and expend it into new markets continually. To achieve this, the firm will be in need to huge amounts of cash. However, getting cash only is the point, but how to manage it is where we should focus on.
Large-scale companies tend to accumulate cash to invest in new business opportunities, buy other companies or buy certain amounts of other businesses shares.
In spite of their importance, the balance sheet, income statement and retained earnings statement do not always show the whole picture of the financial situation of a specific company. They provide only limited information about the company's cash flow, in terms of both receipts and payments. The income statement, for instance, shows only the net income, but how this income is generated and what activities are involved in both inflows and outflows activities of cash, this can be viewed inside the statement of Cash-Flows.
Benefits of the statement of Cash-Flows
The statement of Cash-Flows reports both cash receipts and cash payments, it reflects the net change in cash resulting from three types of activities: operating, investing and financing activities, during a specific period of time.
Investors can use the statement of Cash-Flows as an indicator for potential cash flows generated by the firm; they can observe the relationship between its items, in order to make predictions of the amounts, timing and uncertainty of future cash flows of a certain business.
Statement of Cash-Flows Activities
Transactions can be classified into three categories of activities inside the statement of Cash-Flows (either cash receipts or cash payments) as follows:
(1)             Operating activities: involve income statement items.
a.     Cash Inflows: Resulting from:
                                                             i.      Sales of goods or services
                                                          ii.      Interest and dividends received
b.    Cash Outflows: Paid to:
                                                             i.      Suppliers for inventory
(2)            Investing Activities: involve changes in investments and long-term assets.
a.     Cash Inflows: Resulting from:
                                                             i.      Sale of PPE (Property, Plant and Equipment)
                                                          ii.      Sale of investments in debt or equity securities of other entities
                                                       iii.      Collection of principal on loans to others entities
b.    Cash Outflows: paid to:
                                                             i.      Purchase of PPE
                                                          ii.      Purchase of investments in debt or equity securities of other entities
                                                       iii.      Make loans to other entities
(3)            Financing activities: Involves change in long-term liabilities and stockholders' equity.
a.     Cash Inflows: resulting from:
                                                             i.      Sale of common stock
                                                          ii.      Issuance of long-term debt (bonds and notes)
b.    Cash Outflows: paid to:
                                                             i.      Stockholders as dividends
                                                          ii.      Redeem long-term debt or reacquire capital stock (treasury stock)
Skeleton of the Statement of Cash Flows
Company Name
Statement of Cash Flows
For the Year Ended December 31, 201…

Cash flow from operating activities
Net income
Adjustments to reconcile net income
Depreciation expense
Increase in accounts receivable
Decrease in accounts payable
Decrease in inventories
Net cash flow provided by operating activities
Cash flow from investing activities
Sale of land
Purchase of equipment
Net cash flow used by investing activities
Cash flow from financing activities
Issuance of common stock
Decrease in bonds payable
Dividends paid
Net cash flow used by financing activities
Net increase in cash
Cash at beginning of year
Cash at end of year

Non-cash investing and financing activities
Retirement of Bonds payable through issuance of common stock.


Significant Non-Cash activities
As mentioned in the last section of the above table, there is another type of activities to calculate in the statement of Cash-Flows, which we call the Non-Cash activities. Examples of Non-Cash activities are:
·        Direct issuance of common stock to purchase assets
·        Conversion of bonds onto common stock
·        Direct issuance of debt to purchase assets\exchange of plant assets


Saturday, June 29, 2013

"Just In Time" Technique


"Just In Time" Technique…. A Matter of Perfection
From the very first moment you hear the term "Just In Time", you can figure out the underlying meaning it refers to. Even if you have no previous background in marketing or if you are not graduated from a business school, you can guess that this technique is based on the idea of performing tasks in a perfect manner.
Initially developed by Taiichi Ohno in 1950s, "Just In Time" technique, or manufacturing system in other words, was first deployed by Ohno, the successor to Henry Ford's mass production system in Toyota. The system involved making the product only when it is needed using materials that the suppliers make available for producers only as required. Frequently, this manufacturing technique is adopted by producers who want to be seen as having something new and different, when in fact it is not.
General Definition
When we try to define the simple meaning of "Just In Time", we can describe it as if it refers to a process that aim to get materials delivered just when we need them, by that meaning or definition, you can understand that suppliers will keep their material stocks until producers need it. From its general perspective, "Just In Time" can be seen as a management philosophy that seeks to eliminate all forms of waste in production, processes and their relevant activities, anything not adding value to the product from the customer's point of view is considered as a waste. Therefore, suppliers should not provide the material until the manufacturer need it. "Just In Time" directs the production activities from the opposite end of the line. Rather than pushing materials into processing and then store them until they can be accommodated. As a result, "Just In Time" technique controls the production line from the output end.
Development of JIT
Several names worth to be mentioned when we put the light on JIT system development; however, the most notable name, as we mentioned earlier, will be Taiichi Ohno as being the creator of the "Just In Time" technique in manufacturing and production. In the following few lines we can highlight some of the most notable names that participated in the development of JIT system.
The first name is Henry Ford; Henry had great anxiety towards material waste, in his 1926 book titled "Today and Tomorrow", he talked about the waste of inventory in raw materials, work-in-process, and finished goods in the pipeline to market, he focused on the huge efforts made to reduce the investment in this waste. Ford also revealed another sources of waste that come from transportation, waiting lines and efficiency.
Ford has the ability to transfer his ideas to Toyota family- Sakichi Kiichiro and Eiji.
Sakichi Toyota is credited with the concept of Automation. His automatic loom could determine whether a thread was broken or missing, which leads to shutting itself down instead of making defective products.
In brief, JIT is a total management system that seeks to eliminate all types of waste, by producing what is needed, when it is needed, in the quantity needed.


Tesla Slashes Model Y, S, X Prices Ahead of Earnings Announcement

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