Business administration

In business and finance terms, business administration refers to the activities involved in managing and running a business or organization. This includes making decisions and setting the goals under which an organization operates. The administrator strives to allocate resources effectively to achieve the business's objectives.

Some consider business administration separate from management, the process of directing and guiding employees to accomplish tasks, while others use the two terms interchangeably. This has resulted in three different viewpoints: administration is above management; administration is part of management; and administration and management are the same. French theorist Henri Fayol, the father of administrative theory, categorized an administrator's functions into five elements: planning, organization, command, coordination, and control.

Business administration plays a vital role in the development of business and industry. As a discipline of study, business administration degrees can prepare students for a variety of careers in the business field.

Background

Business administration and management are inextricably linked. Generally, administration is a wider term than management. Administration deals with determining policies and objectives, while management concerns enacting those policies to attain those objectives.

The terms were synonymous until British business theorist Oliver Sheldon drew a distinction between them in 1923. Sheldon classified business administration as a decision-making function, while labeling management as an executive function.

The controversy over the terms and their meanings led to the formation of three viewpoints. The first postulates that administration is a higher-level function than management. As outlined by Sheldon, administration devises corporate policies and establishes goals. Management's function is to execute these policies by organizing human efforts.

The second suggests that administration is a part of management. British management theorist Edward Brech considered management a generic term for executive evaluation. He described administration as "that part of management" responsible for the implementation and maintenance of procedures.

The third view puts forth that administration and management are interchangeable. Fayol shared this view, indicating no difference between administration and management. Administration is often used by nonbusiness entities, such as governments, military, and educational organizations, while management is used in business.

The job of a business administrator is to distribute resources—human and capital—in pursuit of an organization's goals. Administrators are the brains behind business activity. They determine what to do and decide how to do it.

Fayol divided an administrator's duties into five elements:

• Planning involves looking ahead to formulate a plan of action to accomplish the organization's ultimate objectives. Fayol placed great importance on creating short-range and long-range plans, from one year to ten years out.
• Organization includes identifying the physical and human resources needed to put the plan into action. It involves providing the necessary materials, technology, and equipment, and establishing a structure of labor divisions.
• Command refers to the ability of administrators to lead personnel, motivate them, and train them to implement the plan.
• Coordination involves overseeing all duties of the various parts of the plan. An administrator delegates responsibilities and allocates resources to find the right working balance.
• Control includes comparing the work and production of personnel to the plan of action. The administrator monitors and evaluates progress made toward achieving the organization's objectives.

As businesses and organizations work toward their goals, they seek out advances in technology and encourage industrial development. Business administration promotes the efficient use of resources and factors of production.

Overview

Business administrators coordinate and direct resources, including capital, such as land, machinery, and equipment, and labor, including employees, to where they are most needed. They hire and train the most qualified people and designate responsibilities accordingly. The efficient allocation of resources allows businesses to get the most out of them and minimize waste.

Business administration is important to the evolution of the business sector and its practices. It affects competition, production, industrial growth, labor issues, technology, and philanthropy.

Businesses are constantly trying to set themselves apart in a competitive market. The decisions made by an administrator can increase efficiency and boost production, giving an organization an edge over the competition. Effective administration can help a business not only survive, but also thrive.

Through an organized administration, businesses can manage the challenges of large-scale production and streamline the distribution of goods and services.

Proper administration can also facilitate industrial development. The effective management of a nation's or area's raw materials can spur the building of industries in various locations, leading to a diversified economy.

Business administration can address labor issues. The process of production brings together human power, material, machinery, money, market, and method. These six items must be managed in any business operation. The only component that is alive and active is human power. Employees have feelings, aspirations, and seek respect. Through business administration, employees can be motivated to work for the good of the company. Administration can help improve employer-employee relations.

Businesses are always looking for the latest technology. By choosing to upgrade technology, the administration adjusts the business's procedures to maximize efficiency. They can bring in new machines or equipment, and determine a training regimen for workers. By the 2020s, there was even discussion around the potential for increasingly advanced artificial intelligence (AI) software to fulfill more of the duties of, or replace altogether, head administrators like chief executive officers (CEOs) for the sake of efficiency. Some argued that AI had the capability to perform as a corporate leader, including communication, analysis, and rational decision-making skills. Others maintained that this software would never be a suitable replacement for human beings in the role. As the debate went on, a small number of companies in various countries began to at least experiment with this concept.

Administration can encourage businesses to connect with their communities by developing a philanthropic strategy. Businesses engage with the community through philanthropic projects that give back to their cities and towns. The donation of time and money benefits the business and builds relationships with the community.

Students interested in entering the business world may consider pursuing business administration degrees. Such study opens doors to careers in private business, finance, retail, government, education, and more.

Business administration is essential to the day-to-day operations of a business or organization. Its impact, however, is also felt on a larger scale. As the business sector has continued to evolve, administrators and their strategic decisions have shaped the landscape.

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