Internal Organisations Higher Business Management Organisation? Relationships between people form the structure A name which gives a corporate identity Resources are organised to achieve objectives Importance? Defines how the organisation operates Role(s) of individuals & authority Relationships between people Channels activities towards the goals Best use of scarce resources Large Business Impossible for one person to make all the decisions Put people in charge of their expert areas eg accountant for finance Who makes which decisions? Who is responsible for what? Grouping of Activities There are lots of options available! Functional Grouping Activities are grouped into departments based on similar skills, expertise and resources used: Marketing Operations Human Resources R&D Administration Size depends on importance to organisation eg 1 or 2 customers = smaller marketing dept Functional Grouping Advantages No duplication of resources Become experts in field Career paths developed Communication and cooperation Teamworking Decision-making improved Disadvantages Loyalty to department vs organisation Communication barriers Slow to respond to change Decision-making time consuming One problem vs >1 department Product/Service Grouping Grouped around product or service offered Each product requires specialist knowledge and expertise Product/Service Grouping Advantages Self-contained units Expertise develops Which parts are doing well? Quicker response to external changes Disadvantages Duplication of resources Difficult to share research or equipment In competition with other divisions Customer Grouping Putting the needs of customers first eg suppliers for oil companies create teams which work closely with the oil companies in their offices and on the platforms Customer Grouping Advantages Price/promotion suit customer Customer loyalty develops Quick response to changing needs Disadvantages Expensive staff costs New group for new customer eg ecommerce Duplication of resources Place/Territory Grouping Organised by geographical region eg North-East Scotland and Midlands group Needs of customer in that area Place/Territory Grouping Advantages Local offices = local knowledge Language and cultural differences Accountable for success/failure in area Customer loyalty Responsive to customer needs Disadvantages Administration is time consuming Staff change = loss of personal contact Duplication Technology Grouping Grouped around the technical requirements of the product eg car manufacturers workers in the paint area need to focus on the high skill to ensure defects in finish are kept to a minimum They do not need to learn other skills easier to train more staff Advantages Increased sophistication in production process Problems with technology easily identified Disadvantages Specialist training required Industries tend to be capital-expensive - expense Technology Grouping Line/Staff Grouping Dividing the organisation into line departments (generating revenue) and staff departments (providing specialist support for the whole organisation eg Finance and Human Resources) Combinations of Groupings A business may use more than one type of grouping to organise its business eg geographically and then functionally Types of Organisation Structures Hierarchical Traditional tall pyramid structure Flat Pyramid with few management levels Entrepreneurial decisions made by a few people at the core Matrix used for project work Decentralised control and decision-making delegated Centralised control and decision-making lies with senior management Types of Organisation Structures Task: Research the different structures available and prepare a display to illustrate the key ideas of each structure. Choosing a Structure Size of the organisation/market eg large becomes harder to control Technology eg working from home Product more products = more departments Staff Skills independence to work Organisation Charts Relationships between staff Who has authority over whom (span of control) Who is in charge of the organisation Who is in charge of the department Chain of command Lines of communication No informal relationships shown But how much authority? Span of Control 3-6 subordinates is the ideal Decisions based on: Calibre and ability of manger Calibre and ability of subordinates Importance of task to organisation Practices and customs Span of Control Narrow Span Can supervise Not many to share ideas with Task overload interference Wide Span Delegation required Queues for mangers time Snap judgements Loss of control Less time to plan Changes in Organisation Structure: Delayering Cutting out levels of management Improves communication Decision-making is quicker Empowers staff Cuts costs (management salaries) Responds quicker to market forces Redundancies will result, leaving fewer promotion opportunities for others Changes in Organisation Structure: Downsizing Removing areas of organisational activities closing/merging and then possibly outsourcing Cuts costs -> increases profits Empowers remaining staff Competitive and efficient May lose important skills and decrease staff morale Empowerment See additional note Giving more responsibility to staff for: their own work decision-making and access to information Corporate Culture See additional note A set of behavioural and attitudinal norms, to which most or all members of an organisation subscribe, either consciously or subconsciously, and which exert a strong influence on the way people resolve problems, make decisions and carry out their everyday tasks Congratulations You have completed Internal Organisations in Higher Business Management