internal organisation internal organisation internal organisation higher business management

ION Internal OrganisationInternal Organisation

Higher Business Management

NWhat is an organisation?What is an organisation?A group of people working towards a

defined set of goals and objectives.

N ‘An organisation is the rational co-ordination of the activities of a number of people for the achievement of some common explicit purpose or goal, through the division of labour and a hierarchy of authority.’

Edgar Schein

NTypes of organisational groupingTypes of organisational grouping

FunctionalProduct/serviceCustomerPlace/territoryTechnologyLine/staff

NFunctional groupingFunctional grouping

Departments where staff have similar skills and expertise, and do similar jobs.

Functional grouping usually consists of marketing, finance, human resources and operations.

What other functional areas might there be?

NFunctional groupingFunctional grouping

AdvantagesAllow specialisationClear

organisational structure

Staff aware of formal relationships

DisadvantagesOrganisation may

become too large and wieldy

May be unresponsive to change

Departments may compete against each other

NProduct/service groupingProduct/service grouping

Divisions/departments where each deals with a different product or product range.

eg Sky has Sky Sports, Sky Movies, Sky Atlantic etc. Each division has its own functional staff.

Virgin and General Electric are other examples of product/service grouping.

Imaging andPrinting Group

PersonalSystems Group

EnterpriseSystems Group

HP ServicesHP Financial

Services

Hewlett Packard

AdvantagesEach division self-

containedMore responsive to

customer changes in tastes/fashions

Easier to identify low sales in products

DisadvantagesDuplication of effortDivisions may be

competing with each other

NCustomer groupingCustomer groupingCustomer groups are divisions dealing

with different types of customers.

May have different divisions based on distribution, eg retail, online and international.

NCustomer groupingCustomer grouping

AdvantagesEach division has

varying customer needs

Customer loyalty can build due to personal touch

Can respond quickly to customer needs or changes in taste

DisadvantagesExpensive due to

higher staff costsDuplication of effortWhen key staff

leave, personal relationship is lost

NPlace/territory groupingPlace/territory groupingStaff divided into divisions, each

dealing with a geographic area, eg south, west, north, Scotland.

Examples: Nestle, water boards

NPlace/territory groupingPlace/territory grouping

AmericasHouston, Texas

Europe, Middle East, AfricaGeneva, Switzerland

Asia PacificHong Kong

Hewlett Packard

NPlace/territory groupingPlace/territory grouping

AdvantagesCan cater for

different local, regional, national tastes

More responsive to customer needs

DisadvantagesDuplication of effort

NTechnology groupingTechnology groupingManufacturing companies group their

business activities according to technological or production processes.

Only suitable for large organisations with different products and production processes.

Ford (bodywork, glass, plastics, paints) is an example.

NTechnology groupingTechnology grouping

AdvantagesIncreased

specialisationTeething problems

or technological problems easy to identify

Economies of scale

DisadvantagesSpecialist training

requiredHigher salaries for

skilled workforceCapital intensive

NLine/staff groupingLine/staff grouping

Core activities – lineSupport activities – staff

Core activities are essential to the business, eg teachers are essential or core in the education sector.

Janitors, office staff and canteen workers are involved in the support (staff) activities that are required for a school to function.

NAnswer a questionAnswer a question

Many organisations group their activities by function. Discuss other methods an organisation could use to group their activities.(8 marks) 2008

15 minutes

NPeer markingPeer markingYou are going to swap answers.

Has your partner answered well?Does the answer make sense?Is it worth a mark?

NSolution Solution

Product/service grouping is when each division will be grouped according to a product or product range, eg Sky Sports, Sky Movies, Sky Atlantic.

Allows an organisation to be more responsive to changes in that market.

Expertise is developed within each specialised division.

Allows management to identify poorly performing products.

There can be duplication of resources and personnel across groups.

Divisions may find themselves competing against each other.

NSolution (cont’d)Solution (cont’d)

Place/territory grouping is when grouping of resources is carried out across a geographical area, eg midlands, Scottish, south-east etc.

Allows for the needs of different areas.Can become familiar with local customs and

cultures.Expensive with regards to administration and

staffing costs.

NSolution (cont’d)Solution (cont’d)

Technological grouping is when organisations group their activities according to technological process.

Suitable for large organisations with different production processes.

Duplication of resources can occur.

Customer grouping is when resources are organised around groups of customers with similar needs.

Allows for services to be tailored to each group of customers or a specific customer.

Builds up customer loyalty due to the personal service they receive.

There can be large staffing costs with this type of grouping. Duplication of resources in administration, finance, etc.

NOrganisation pyramidOrganisation pyramid

Board of directors

Chief executive

Senior managers

Managers

Junior managers

Supervisors

Assistants

NSpan of controlSpan of controlSpan of control means the

number of people who report to a manager.

Narrow span of control

Wide span of control

EmployeesEmployees

Manager Manager

NHierarchical structuresHierarchical structuresHierarchical structures can be either tall or flat.

Tall Flat

NTall structuresTall structures

Many levels of management

Managers have narrow span of control

Management posts usually specialised

Clearly defined roles

NCost/benefit analysis of tall Cost/benefit analysis of tall structuresstructures

BenefitsEasier for managers

to supervise staffMore promotion

opportunitiesEmployees will

know immediate boss

Clear lines of responsibility and communication

CostsMany layers of

communicationSlow decision-

makingHigh labour costs

due to many levels of management

Workers may have little freedom or responsibility

NFlat structuresFlat structures

Few levels of management

Managers have wider spans of control

Faster communications

Quicker decision-making

NCost/benefit analysis of flat Cost/benefit analysis of flat structuresstructures

BenefitsEmployees have more

authority and responsibility

Better communication between managers and workforce

Decision-making is quicker

Communication channels less complicated

Better team spirit

CostsEmployees have

greater workloadEmployees may

need training for many tasks

Fewer promotion opportunities

If span of control is too wide people may feel isolated or ignored

NMatrix structureMatrix structure

A project team created to carry out a specific task.

Team members come from different functional areas, and report to the project manager and their own functional manager.

Software development follows matrix structures

Marketing

manager

Finance

manager

Project

managerMarketin

worker Finance

worker

NMatrix structuresMatrix structures

AdvantagesIncreased

experienceGood motivation

and job satisfactionGood for tackling

complex problems

DisadvantagesExpensive to have

many teamsCo-ordination

problemsConfusion as to

who reports to whom

Lack of supervision and confusion is thought to have led to the demise of Barings Bank.

NEntrepreneurial structureEntrepreneurial structure

Small businesses use this structure

Decisions made by a few people, normally the owner

NEntrepreneurial structureEntrepreneurial structure

AdvantagesDecisions made

quicklyStaff know who

they are accountable to

Decision-maker does not need to consult staff

DisadvantagesDifficult to use in

large businessesCan create a heavy

workload for decision-makers

Can stifle other staff’s initiatives

NCentralisationCentralisation

Control and decision-making lie with top management in head office (HQ)

NCentralisationCentralisation

AdvantagesDecisions can be

made for whole organisation

Easier to promote corporate image

DisadvantagesSlower decision-

makingSlower

communicationLess room for staff

initiative

NDecentralisationDecentralisation

Control and decision-making are delegated to departments

Relieves senior management from routine, day-to-day tasks

NDecentralisationDecentralisation

AdvantagesMotivates staffEmpowers staffDecision-making

quickerDecisions can

match local needs

DisadvantagesDecisions may

differ from other branches

Transfer of staff may lead to confusion due to different practices

Less supervision

a) Explain the advantages and disadvantages of the entrepreneurial structure.(4 marks) 2008

b) Describe the main features of the matrix structure.(3 marks) 2010

12 minutes

NSelf-markingSelf-markingYou are going answer on your own!

Have you answered well?Does the answer make sense?Is it worth a mark?

NSolution to a)Solution to a)

Advantages

Decisions are made quickly as managers do not consult staff, who rely on their expertise.

Staff know who they are accountable to as they have only one superior.

Disadvantages

Difficult to use in larger businesses as they have more complex operations.

Top managers carry a heavy workload/burden as they have to make all the key decisions.

Does not allow for initiative from staff, which can demotivate talented employees.

NSolution to b)Solution to b)

Matrix structures are created for specific projects.They are made up of specialists from different

functional areas, and offer a good mix of skills and ideas.

They are a a good method of solving complex problems, having different abilities and disciplines involved.

Each staff member can have two managers: the project manager and their own functional manager. This can cause confusion and conflict as staff are unsure of their priorities.

Gives staff increased experience in different situations, which improves their skills and potential for promotion (career progression).

NFactors affecting organisation Factors affecting organisation structurestructure

Size of organisationTechnology usedMarket firm operates inStaff skills within organisationProducts/services made or supplied

by organisation

Click for clip

NDefinitionsDefinitions

Line relationships – exist when a member of staff is in charge of another member of staff.

Functional relationships - exist with people on the same level of management.

Staff relationships – exist with people who have skills that support the firm as a whole rather than individual departments.

Informal relationships – exist as friendships between workers who may have no formal contact in the workplace.

NDelayeringDelayering

What happens?Levels of

management are reduced (move from tall to flat structure)

Wider spans of control

Savings in management wages

Effect onorganisation chartFlatter structureFewer

management posts

Increased worker responsibilities

NDownsizingDownsizing

What happens?Staff laid-offWages (labour

costs) are reduced

Effect onorganisation chartGreater workload

for departmentsSome posts will

disappearWorkers have

more duties

Distinguish between delayering and downsizing. (3 marks) 2008

6 minutes

NSolution Solution

Delayering involves removing a whole level of management to flatten an organisation’s structure.

Downsizing involves closing specific areas of the organisation to cut costs.

Communication – Delayering will quicken communication between management levels. Downsizing may not, as it closes certain departments and does not affect management structures.

Efficiency – Delayering may be viewed as more efficient by removing levels of management, but downsizing may affect productivity and efficiency as staff are not replaced.

Cost – Delayering reduces costs through fewer promotions, saving on salaries, whereas downsizing saves costs by making employees redundant.

NWhat is culture?What is culture?Define what you think culture means.

Identify three cultures you know.

Give evidence that they exist.

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NCulture definitionsCulture definitions

Way of lifeTraditionsCustomsNorms

EthosAmbienceAtmosphere

Culture is: ‘the way things are done around here’or‘the (often unwritten) code affecting attitudes, decision-making and management style’.

NCulture definitionCulture definition

The values, beliefs and norms relating to the organisation that are shared by all staff.

Another video on Google!

Click for clip

NCultural evidenceCultural evidence

Artefacts

Values

Beliefs

NThink of your local schoolThink of your local schoolWhat is the visible evidence of its culture?

Academic or vocational?Uniform?Discipline?Homework?Approachable SMT?

NImportance of corporate cultureImportance of corporate culture

Peters & Waterman (1982) observed US and Japanese firms to examine the differences between each.

The US firms compared favourably with the Japanese on hard skills such as strategy and structure, but not on soft skills such as values and culture.

NCorporate cultureCorporate cultureThink of an organisation you know.

What can you tell about its culture as an outsider looking in?

NHow to develop a strong corporate How to develop a strong corporate cultureculture

Use of uniforms, logos, symbols.Ideals and principles of the organisation

(a mission statement).Reward schemes for employees.Code of conduct for employees (attitudes

and beliefs).Advertising (promote their corporate

values).Teambuilding among employees.

NAdvantages of a strong Advantages of a strong corporate culturecorporate culture

Increased staff loyalty.Less turnover of staff (saves in

training costs too).Increased staff motivation.Increased awareness by the public.All employees know their role and

responsibilities within the organisation.

NAnswer a questionAnswer a questiona) Describe the different methods organisations can use to develop a corporate culture.

(4 marks) 2010

b) Explain the advantages to an organisation of having a strong corporate culture.

(4 marks) 2010

15 minutes

NSolution to a)Solution to a)

Implementing the ideals and beliefs of the owner.Use of symbols or logos that customers

recognise.Staff uniforms consistent throughout the

organisation.Uniformity of layout of offices/branches.Use of a phrase or motto that can be recognised

by customers/used in marketing.Standardise how staff interact with customers.Merchandising of products linked to the

organisation.

NSolution b)Solution b)

Improved customer satisfaction and loyalty – consumers associate themselves with the organisation because of brand/logos, etc.

Increased staff motivation as they can associate themselves with the organisation.

Staff can move between branches/departments more easily as they are aware of their practices and policies.

Staff will identify with the organisation, which could result in reduced absences or lower staff turnover.

A single corporate identity is given to customers, who will then associate with that organisation.

The organisation can be easily recognised anywhere in the world, which will allow customers to feel comfortable with products/services wherever they are.

internal organisation internal organisation internal organisation higher business management

internal organisation

functional staff

edgar schein slide

customer changes

customer groups

functional areas

different divisions

key staff

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