internal organisation v4

8/14/2019 Internal Organisation v4

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Internal Organisation

Higher Business Management


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Today

What is an organisation

Types of organisational groupings

FunctionalProduct/Service

Customer

Place/TerritoryTechnology

Line/Staff


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Types of Organisational

GroupingFunctional

Product/Service

Customer

Place/Territory

TechnologyLine/Staff


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Functional Grouping

Production Marketing AccountsHuman

ResourcesIT

Board of Directors

Chief Executive


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Functional Groupings +/-

Advantages

Staff with similar

skills kepttogether

Allowsspecialisation

Clearorganisationalstructure

Staff know formal

Disadvantages

Organisation maybecome too large

May be unresponsiveto change

Departmental

competition mayemerge

Departments may putown interests before

organisations


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Product/Service Grouping

Divisions/departments where eachdeals with a different product orproduct range.

E.g. a TV company may have aSports division, a Film division and a

Music division. Each division has itsown functional staff.

Virgin and General Electric areexam les of Product/Service


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Product/Service Grouping

Imaging andPrinting Group

PersonalSystems Group

EnterpriseSystems Group

HP ServicesHP Financial

Services

Hewlett Packard


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Product/Service Grouping+/-

Advantages

Each division self-contained

Each division moreresponsive tochanges

Incentive for staffto perform better

Can identifyproducts under

performing

Disadvantages

Duplication of

resources/ tasks/personnel

Divisions may becompeting with

each other


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Customer Grouping

Customer groups are divisionsdealing with different types of

customers.

May be a different division for

Retail, Trade, Overseas and forMail Order.

E.g. Doctors Surgery, Clydesdale


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Customer Grouping


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Customer Groupings

Advantages

Each division ableto give a servicesuited to its owntype of customer

Customer loyaltybuilds due topersonal service

Quicker torespond tocustomer needs

Disadvantages

Can be expensivedue to greaterstaff costs

Duplication ofadmin, marketing& finance

Staff turnovererodes personalservice benefits


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Place/Territory Grouping

Staff divided into divisions, eachdealing with a geographic area.

For example, South, West, North,Scotland division.

Example: Nestle, Water Boards


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Place/Territory Grouping

AmericasHouston, Texas

Europe, Middle East, AfricaGeneva, Switzerland

Asia PacificHong Kong

Hewlett Packard


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Place/Territory Grouping+/-

Advantages

Allows the

organisation tocater for differentlocal, regional,national tastes

More responsive tocustomer needs

Disadvantages

Again, duplication

of effort

Such groupings are used often by European

firms, but not by American ones. Why?


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Technology Grouping

Manufacturing companies group itsbusiness activities according totechnological or production processes.

Only suitable for large organisationswith different products and productionprocesses.

WH Smith (Wholesale, Retail Internet)and Ford (Bodywork, Glass, Plastics,

Paints) are example of this.


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Technology Grouping

Advantages

Increased

specialisationTeethingproblems ortechnological

problemsidentified easily

Disadvantages

Specialist training

requiredCapital-intensive


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Line/Staff Grouping

Core Activities LINE

Support Activities STAFF

This grouping divides into linedepartments involved in

generating revenue (ie sales) andstaff departments providing wholefirm support (Finance, HRM).


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Recap

What is an organisation

Types of organisational groupings

Functional

Product/Service

Customer

Place/TerritoryTechnology

Line/Staff


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Today

Levels of Management

Span of Control

Hierarchy

Matrix

Entrepreneurial

Centralisation

Decentralisation


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A s s i s t a n t s

S u p e r v i s o r s

J u n i o r M a n a g e r s

M a n a g e r s

S e n i o r M a n a g e r s

B o a r d o f D i r e c t o r s

C h i e f E x e c u t i v e

This is how wewould normally see

an organisationstructure.

This is anorganisation chartof a business.

There is anotherway we can view

the same


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Organisation Pyramid

Chief Executive

Board of Directors

Senior Managers

Managers

Junior Managers

Supervisors

Assistants


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Span of Control

Span of Control means the numberof people who report to a manager

Narrow span of control Wide span of control

EmployeesEmployees

Manager Manager


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Hierarchical Structures

Hierarchical structures can either a tall orflat structure

Tall Flat


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Tall Structures

Many levels ofmanagement

Managers willhave narrow spanof control

Management

posts usuallyspecialised

Clearly defined

roles

C fi l i f ll


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Cost/Benefit Analysis of TallStructures

Benefits

Easier for managersto supervise staff

More promotionopportunities

Employees will knowimmediate boss

Clear lines ofresponsibility andcommunication

Costs

Many layers ofcommunication

Slow decision-making

High labour costsdue to many levels

of management

Workers may havelittle freedom orresponsibility


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C /B fi A l i f Fl


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Cost/Benefit Analysis of FlatStructures

Benefits

Employees have moreauthority and

responsibility

Better communicationbetween managers andworkforce

Decision-making isquicker

Communicationchannels less

complicated

Costs

Employees havegreater workload

Employees mayneed training formulti-tasks

Fewer promotion

opportunities

If span of control istoo wide people mayfeel isolated or

ignored


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Matrix StructureA project teamcreated to carry out aspecific task.

Team members comefrom differentfunctional areas, andwould report to the

Project Manager andtheir own FunctionalManager.

Software

Marketing

Manager

Finance

Manager

Project

Manager

Marketing

Worke

r Finance

Worke

r


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Matrix Structures +/-

Advantages

Increased

experienceMotivation and

job satisfaction

Good for tackling

complex problems

Disadvantages

Expensive to have

many teamsCo-ordinationproblems

Confusion as to

who reports towhom

Lack of supervision and confusion is thoughtto have led to Nick Leesons demise ofBarings Bank


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Entrepreneurial Structure

Small businessesuse this structure

Decisions madeby a few people,normally the

owner


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Entrepreneurial Structure

Advantages

Decisions made

quicklyStaff know whothey areaccountable to

Decision-makerdoes not need toconsult staff

Disadvantages

Difficult to use in

large businessesCan create aheavy workloadfor decision-

makersCan stifle otherstaffs initiative


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Centralisation

Control anddecision-makinglies with topmanagement inHead Office (HQ)

HQ


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Centralisation

Advantages

Decisions can be

made for wholeorganisation

Easier to promotecorporate image

Disadvantages

Slower decision-

makingSlowercommunication

Less room for

staff initiative


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Decentralisation

Control anddecision-makingis delegated todepartments

Relieves seniormanagement

from routine, day-to-day tasks

HQ


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Decentralisation

Advantages

Motivates staff

Empowers staffDecision-makingquicker

Decisions canmatch local needs

Disadvantages

Decisions may

differ from otherbranches

Transfer of staffmay lead to

confusion due todifferent practices

Less supervision


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Definitions

Chain of Command

Unity of Command

Span of Control


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Recap


Span of Control

Hierarchy

Matrix

Entrepreneurial

Centralisation

Decentralisation


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Today

Factors affecting organisationstructure

Definition of relationshipsDelayering

Downsizing


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Definitions

Line relationships exist when amember of staff is in charge of anothermember of staff

Functional relationships - exist withpeople on the same level ofmanagement

Staff Relationships exist with peoplewho have skills which support the firmas a whole rather than individualdepartments

Informal Relationships exist as


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Delayering

What happens?

Levels ofmanagement are

reduced (movefrom tall to flatstructure)

Wider spans ofcontrolSavings inmanagementwages

Effect on Org.Chart

Flatter structureFewermanagementposts

Increased workerresponsibilities


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Downsizing

What happens?

Staff laid-off

Wages (labourcosts) arereduced

Effect on Org.Chart

Greater workloadfor departments

Some posts willdisappear

Workers havemore duties


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Recap

Factors affecting organisationstructure

Definition of relationshipsDelayering

Downsizing


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Today

What is Culture?

Culture Definitions

Cultural EvidenceImportance of Culture

How to develop a strong corporate

cultureAdvantages of a strong corporateculture


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What is Culture?

Define what you think culturemeans.

Identify 3 cultures you know.

Give evidence that they exist.


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Culture Definitions

Way of life

Traditions

Customs

Norms

Ethos

Ambience

Atmosphere

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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Culture Definition

The values, beliefs and norms

relating to the organisation that areshared by all staff


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Cultural Evidence

ARTEFACTS

VALUES

BELIEFS


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Importance of Corporate
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Importance of CorporateCulture

Peters & Waterman (1982) observed USand Japanese firms to see thedifferences between each.

The US firms compared favourably withthe Japanese on strategy and structure,

but when it came to shared values andthe other things hard to measure, theylagged behind.
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Corporate Culture

Think of an organisation you know.

What can you tell about its cultureas an outsider looking in?


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The HP Way

Hewlett Packards success was notdeemed to

be related to quality or service but tointernal

issues:

1. Respect for others

2. Sense of community

3. Hard work


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Southwest Airlines

For 5 years in a row they were theonly US airline to make a profit

Southwest put this down to:

Hiring look for positive people

Demeanour treat everyone like ahuman being


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Advantages of a strong


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Advantages of a strongcorporate 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 andresponsibilities within theorganisation


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Recap

What is Culture?

Culture Definitions

Cultural EvidenceImportance of Culture

How to develop a strong corporate

cultureAdvantages of a strong corporateculture


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Schools have Principal Teachers incharge of departments. Explain

why schools need PTs to be incharge of individual departments

What decisions can they make for

their departments?


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Your local supermarket will havevery different departments in store

from those mentioned above. Whatwill its departments be?


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Identify one organisation whichwould have a large Human

Resources department, and justifyyour choice


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Describe what you understand byfunctional grouping

What are the main advantages anddisadvantages of a functionalgrouping?


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Identify the main functionalactivities of organisations, and

briefly describe what they doExplain how each of the functionaldepartments interacts with, and is

dependent on, each other


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The Virgin Group provides a widevariety of goods and services.

Identify as many of their productsas you can, and then describewhat advantages anddisadvantages Virgin have ingrouping this way


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Insurance companies will grouptheir organisation around the

different categories of customersthey have, such as life assurance,motor insurance, house insuranceetc.

Describe why insurance companieswill do this, and what thedrawbacks of such grouping would

be.


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W H Smith organises activitiesaround 3 areas: wholesale

operations, retail operations andInternet sales.

Explain why W H Smith could be

described as grouping arounddifferent technologies used indifferent processes.


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Think of the school

Identify those activities whichcould be described as core, andthose which could be described as

support.


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Describe what you understand bya flat structure (include diagrams)

Identify the advantages anddisadvantages of such a structure

Explain the meaning of the terms

empowerment and delayering


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Describe what you understand bya matrix structure

Identify the advantages anddisadvantages of this type ofstructure

Explain the meaning of the termmulti-skilling


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Describe what you understand byan entrepreneurial structure



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Describe what you understand bya centralised structure



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Describe what you understand bya decentralised structure

Identify the advantages anddisadvantage of this type ofstructure


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Look at the following examples andthen decide what type of structurewould best suit them, and describethe factors that made this the bestchoice

A) a national supermarket chain

B) a supplier of drilling equipmentto a single oil company inAberdeen

C) a small graphic design business


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Explain why organisation chartsare useful

Explain what is meant by span ofcontrol


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Describe the culture of the school.Identify the areas decided upon by

managers (SMT) and those by thepupils

What actions could a school take

to improve its culture?


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Explain why organisations may feelthey have to change

Describe what you understand bythe term outsourcing


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Why would trade unions workagainst attempts to downsize an

engineering business?


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internal organisation v4

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