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Chapter contents
Feudal Organizations
Early Writings
The Merchants of Venice
The Arsenal of Venice: warehousing,assembly line, personnel, standardization,control by accounting, inventory control, costcontrol.
The Sixteenth Century Writers: Sir ThomasMoore, Niccolo Machiavelli
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Feudal OrganizationThe Emergence
With the fall of Roman Empire, the peoples of
Western Europe were filling the basic need ofself-preservation. The necessity was protectionagainst murder, robbery and violence. Theindividual sought the protection of a personmore powerful than himself and in return he
paid the price of subservience, including theloss of individual freedom and the rise offeudal relationship.
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Feudal Organization (continued) The Structure
A brief description of the
main features of thefeudal organization cangive us a better idea of thesystem of the state
organization thatdominated Europe duringthese four centuriesknown as the Dark Ages.
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The organization of feudalism was a scalar onewith descendinggrades of delegated authority.
At the top of the great feudal pyramid stoodthe emperor of the kingand all the land in hisdominions belonged to him.
He kept large areas for his personal use andinvested the highest nobles with the remainder.
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The process ofdecentralization was
further emphasized by thegrowth of the institution ofimmunity where the vassalwon the right to govern hisown territory as he wished.
The feudal unit, the manor,became the governmentalunit with its one-man court.
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Feudal Organization (continued)
The Primary Problem The primary problem was to determine how to
preserve the proper balance between centralizedauthority and local autonomy.
Decentralized operation was necessary to providethe immediate attention and flexibility needed to
adjust policies to local conditions. Centralized authority was equally important to
insure that all advantages arising out of the totalintersection of all the parts would be realized.
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Feudalism taught managers that strength oforganization was gained through scalar control.
They also found that t he common i nt erestconcept must exi st .
One major defect of feudalism was theinaccurate assumption that this common interest
did exist. The same assumption was also made by the
organizers of the Roman, Egyptian and Greekempires.
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Finally, feudalism organization taughtmanagement that del egat i on of aut hori t y i s notabdication.
Delegation was conferringnot a transferringofauthority.
The inappropriate delegation of authority bytransfershowed that if a manager wished to
organize a function on a decentralized basis, theorganization must be accomplished on a base ofconferr ed aut hori t y, otherwise the sought-afterdecentralization would turn into disintegration.
The Lesson
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Early Writings During the Dark Ages, virtually no books were
written concerning the concepts ofmanagement.
People lived under hostile conditions and littleor no attention was given to concepts asopposed to physical things.
Those who wrote were either scribes, membersof religious orders or well educated leaders ofthe court.
Books were written by hand and only the mostimportant concepts were worth recordingunder these circumstances.
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Alfarabi 900 AD
- Emphasized HierarchicalOrganizational Structure
- Listed the traits of a Leader,e.g.,Great IntelligenceExcellent MemoryFirmness without weakness
Firmness in the achievement ofgood
Love for justiceLove for studyLove for truth
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Early Writings (continued)
According to Alfarabi, for running astate, these traits-
Must be possessed by one individualif not found in one person,
Two or more individuals my be chosen, whojointly possess these traits
(dual manager ship or control by complementary group)
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AlGhazali 1100 AD- AlGhazali, like Alfarabi, also listed
some traits- According to him a King must keep
with him
JusticeIntelligencePatienceModesty
-
Further, a King must not possess Envy Arrogance Narrow-mindedness Malice
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Luca Pacioli 1494 ADDouble Entry BookkeepingEven today his concepts remain
applicable
Pointed out the need for internalmanagerial controlsRecommended that
memorandum, journal andledger be numbered and dated
Documents for all transactionsmust be complete in detailThey must be recordedpermanently
Periodic audits must be madefor internal checks
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Merchants of Venice (continued)
Partnerships were very tightly organizedOne man, owner of large capital, would
join with partners of lesser power andwealth
The duration of the partnership wasspecified usually 3 to 5 years
Partnerships are renewable.
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Merchants of Venice
(continued)Partnerships were centralizedHowever, typical family partnerships were
loose and decentralized in which brotherspooled their inheritance
The family partnerships became combinationinvestment trusts and holding company
These Partnerships spread among real-estate,government bonds etc.
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Merchants of Venice
(continued)These family firms with their enormous
prestige and wealth were able to exert political
and economic pressure International businesswere carried out using legal relationships suchas joint ownership and agency
Joint ownership usually was a joint venturewith limited liability
These joint ventures had shares, shareholders,
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Merchants of Venice
(continued)Owners shared expenses and profit proportionatelyAre comparable with the modern day joint stock
companiesBesides Joint ownerships, Agencies were also usedThese commission Agents were paid fixed p.c. of
transaction
Agents could in turn appoint agentsAgents and sub-agents formed a network tosupport market informational need.
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Merchants of Venice
(continued)
Loose business organizations were droppedonce the project were completed
This offered the flexibility shift from venture toventure, product to product, agent to agent
This flexibility gave more success over fixedfocus on one type of product
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Merchants of Venice
(continued)Accounting as a managerial devise
Venetian merchants necessitated a systemof documentation and record keeping
Showed that an important function ofJournal was to serve as the basis for theledger.
Barbarigo had account for goods in process.
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Merchants of Venice
(continued)
He drew consolidations of accounts so as tosimplify the statement of his net worth.
He also used a profit and loss accountsRecords relating to cost accounting were foundDetailed wages for the spinner, weaver, dyer
etc
Corresponding prices and materials inventoryrecords were also maintained
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The Arsenal of Venice Maritime power needed to protect trade routes In 1436 Government built a shipyard called the Arsenal In this Venetian Shipyard bookkeeping was just as
important as it was in business The Shipyard kept strict accounting of money, materials
and men An early form of cost accounting
was used
All accounts were consolidatedinto two journals and one ledger
The ledgers were kept separatefor safe keeping
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The Arsenal of Venice (continued) The Arsenal of Venice
became the industrialplant as a consequence
It covered 60 acres ofground and water &employed 2000workers
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The Arsenal of Venice (continued) Problems associated with large size was also
created
Such problems, however, were solved, efficiently The Arsenal of Venice was Noted for checks and
balances
While the top management looked after functionssuch as financial management, purchasing etc
The foreman and the technical advisors headed theactual ship building
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The Arsenal of Venice(continued)
The Arsenal had three fold tasks:
The manufacture of galleys, arms, and equipment
The storage of the equipment until neededThe assembly and the refitting of the ships onreserve
The management practices of the Arsenal thatdemand attention are
Numbering and warehousing of finished partsAssembly line outfitting of the galleysPersonnel practices
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The Sixteenth Century Writers
Sir Thomas Moore
Niccolo Machiavelli
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Sir Thomas Moore (continued) They were the unproductive parasites, did not
learn a trade nor earned a livelihood, lived on thelabour of their farm tenants
Moore was contemptuous of the rich for theirexcesses in consumption, dresses and foods
The poor on the other hand were underemployed,even unemployed
Added to their misery, the poor squandered theirmeager money into anti social activities andenjoyment
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Utopia emphasizedon specialization
Economies of massproduction was alsohighlighted inUtopia
He was a moralistand a humanist.
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Niccolo Machiavelli
Reliance on Massconsent
CohesivenessLeadershipWill to survive