BM Unit 2 - LO1 1

Higher Business Management

Unit 2Learning Outcome 1Internal Organisation

BM Unit 2 - LO1 2

An Organisation

“An organisation is the rational co-ordination 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

BM Unit 2 - LO1 3

Organisation by Function

T ypical O r ganisat ion Char t

M ar ket ing H uman

R esour ces

F inance O per at ions R & D A dmin

B oar d of D ir ect or s

4 main departments found in most organisations

2 departments found mainly in

large organisations

Regarded as “typical” and associated with a centralised

organisational structure

BM Unit 2 - LO1 4

Organisation by Function

Advantages Efficient use of

resources Staff specialisation Career progression Centralised decisions Good communications

within the department Team motivation Problems sharing and

solving

Disadvantages Departmental rivalry Poor communication

between departments Slow response to

external factors Slow decision-making Over specialised

workforce Difficult to pinpoint

problems

BM Unit 2 - LO1 5

Organisation by Product/Service

O r ganisat ion int o "D ivis ions"

D eb enhams B ur t on

(M enswear )

D or ot hy

Per k ins

E vans T opshop

(and T opman)

Pr inciples

(Pr inciples f or M en)

B ur t on

Gr oup

Each division has its own functional staff

Find other examples of this!

Generally associated with large multi-national organisations

BM Unit 2 - LO1 6

Organisation by Product/Service

Advantages Each division can focus

on its own market segment

Each division’s performance can be measured

Healthy competition between divisions

Allows flexibility - can close down or sell off loss-making divisions

Co-operation between divisions can reduce costs - eg shared transport for the whole group

Disadvantages Duplication of

functions may be wasteful

Competition may de-motivate a poorly performing division

Loss of control by central management over divisional managers

BM Unit 2 - LO1 7

Organisation by Customer

Advantages Can cater for

specific customer needs

The market can be segmented

Disadvantages Can be inefficient

if a division is too small (insufficient customers)

Loss of control by senior management over divisional managers

BM Unit 2 - LO1 8

Organisation by Area

Advantages Can serve the

needs of local people more easily

Improved communications - on the spot

Healthy competition between regions

Disadvantages Duplication of

resources Loss of control by

senior management over area managers

BM Unit 2 - LO1 9

Organisation by Technology

Used in the manufacturing sector where different technological processes are involved in a diverse range of products

Scope for specialisation of the workforce and simplified training within the same manufacturing process

BM Unit 2 - LO1 10

Line/Staff Groupings

Line Departments Hierarchical

system Superior -

subordinate relationships

Clear lines of authority

Can be very long chains of command leading to slow actions

Staff Departments Examples - Human

Resources, Finance, Research & Development, Strategic Planning

Specialist advice but often have no authority

Many companies out-source staff activities

BM Unit 2 - LO1 11

The Marketing Function

The Marketing Mix

Product Price Promotion Place

“Marketing is the management process responsible for identifying, anticipating and satisfying customer requirements profitably.”

BM Unit 2 - LO1 12

The Human Resource Function

Recruitment Training Appraisal Collective bargaining Employment legislation Personnel records

“HR is concerned with people at work and with their relationships within an organisation.”

BM Unit 2 - LO1 13

The Finance Function

Financial Accounting

Management Accounting

Financial Reporting

BM Unit 2 - LO1 14

The Operations Function

The Production Process Inputs - raw materials and labour

Process - making the goods

Outputs - products/services

BM Unit 2 - LO1 15

Forms of Organisational Structure

Hierarchical (tall) structures Flat structures Matrix structures Entrepreneurial structures Centralised structures Decentralised structures

BM Unit 2 - LO1 16

Aspects of Organisational Structure

Organisation charts Span of control Line/functional/staff relationships Formal and informal structures Organisational culture Recent trends in structure Delayering Down-sizing Management roles/responsibilities