internal organisation internal organisation internal organisation higher business management
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ION Internal OrganisationInternal Organisation
Higher Business Management
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NWhat is an organisation?What is an organisation?A group of people working towards a
defined set of goals and objectives.
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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
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NTypes of organisational groupingTypes of organisational grouping
FunctionalProduct/serviceCustomerPlace/territoryTechnologyLine/staff
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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?
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NFunctional groupingFunctional grouping
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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
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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.
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NProduct/service groupingProduct/service grouping
Imaging andPrinting Group
PersonalSystems Group
EnterpriseSystems Group
HP ServicesHP Financial
Services
Hewlett Packard
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NProduct/service groupingProduct/service grouping
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
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NCustomer groupingCustomer groupingCustomer groups are divisions dealing
with different types of customers.
May have different divisions based on distribution, eg retail, online and international.
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NCustomer groupingCustomer grouping
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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
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NPlace/territory groupingPlace/territory groupingStaff divided into divisions, each
dealing with a geographic area, eg south, west, north, Scotland.
Examples: Nestle, water boards
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NPlace/territory groupingPlace/territory grouping
AmericasHouston, Texas
Europe, Middle East, AfricaGeneva, Switzerland
Asia PacificHong Kong
Hewlett Packard
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NPlace/territory groupingPlace/territory grouping
AdvantagesCan cater for
different local, regional, national tastes
More responsive to customer needs
DisadvantagesDuplication of effort
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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.
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NTechnology groupingTechnology grouping
AdvantagesIncreased
specialisationTeething problems
or technological problems easy to identify
Economies of scale
DisadvantagesSpecialist training
requiredHigher salaries for
skilled workforceCapital intensive
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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.
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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
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NPeer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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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.
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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.
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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.
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NOrganisation pyramidOrganisation pyramid
Board of directors
Chief executive
Senior managers
Managers
Junior managers
Supervisors
Assistants
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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
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NHierarchical structuresHierarchical structuresHierarchical structures can be either tall or flat.
Tall Flat
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NTall structuresTall structures
Many levels of management
Managers have narrow span of control
Management posts usually specialised
Clearly defined roles
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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
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NFlat structuresFlat structures
Few levels of management
Managers have wider spans of control
Faster communications
Quicker decision-making
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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
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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
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worker Finance
worker
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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.
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NEntrepreneurial structureEntrepreneurial structure
Small businesses use this structure
Decisions made by a few people, normally the owner
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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
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NCentralisationCentralisation
Control and decision-making lie with top management in head office (HQ)
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NCentralisationCentralisation
AdvantagesDecisions can be
made for whole organisation
Easier to promote corporate image
DisadvantagesSlower decision-
makingSlower
communicationLess room for staff
initiative
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NDecentralisationDecentralisation
Control and decision-making are delegated to departments
Relieves senior management from routine, day-to-day tasks
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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
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NAnswer a questionAnswer a question
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
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NSelf-markingSelf-markingYou are going answer on your own!
Have you answered well?Does the answer make sense?Is it worth a mark?
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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.
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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).
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NFactors affecting organisation Factors affecting organisation structurestructure
Size of organisationTechnology usedMarket firm operates inStaff skills within organisationProducts/services made or supplied
by organisation
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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.
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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
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NDownsizingDownsizing
What happens?Staff laid-offWages (labour
costs) are reduced
Effect onorganisation chartGreater workload
for departmentsSome posts will
disappearWorkers have
more duties
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NAnswer a questionAnswer a question
Distinguish between delayering and downsizing. (3 marks) 2008
6 minutes
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NPeer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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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.
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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’.
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NCulture definitionCulture definition
The values, beliefs and norms relating to the organisation that are shared by all staff.
Another video on Google!
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NCultural evidenceCultural evidence
Artefacts
Values
Beliefs
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NThink of your local schoolThink of your local schoolWhat is the visible evidence of its culture?
Academic or vocational?Uniform?Discipline?Homework?Approachable SMT?
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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.
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NCorporate cultureCorporate cultureThink of an organisation you know.
What can you tell about its culture as an outsider looking in?
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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.
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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.
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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
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NPeer markingPeer markingYou are going to swap answers.
Has your partner answered well?Does the answer make sense?Is it worth a mark?
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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.
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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.