Internal Organisation V4

Internal Organisation Higher Business Management

Today… What is an organisation Types of organisational groupings Functional Product/Service Customer Place/Territory Technology Line/Staff

What is an organisation? A group of people working towards a defined set of goals and objectives.

Types of Organisational Grouping Functional Product/Service Customer Place/Territory Technology Line/Staff

Functional Grouping Departments where staff have similar skills & expertise, and do similar jobs. Functional grouping usually consists of marketing, finance, human resources and operations. What other functional areas might there be?

Functional Grouping Chief Executive

Board of Directors

Production

Marketing

Accounts

Human Resources

IT

Functional Groupings +/Advantages Staff with similar skills kept together Allows specialisation Clear organisational structure Staff know formal

Disadvantages Organisation may become too large May be unresponsive to change Departmental competition may emerge Departments may put own interests before organisation’s

Product/Service Grouping Divisions/departments where each deals with a different product or product range. E.g. a TV company may have a Sports division, a Film division and a Music division. Each division has its own functional staff. Virgin and General Electric are examples of Product/Service

Product/Service Grouping Hewlett Packard

Imaging and Printing Group

Personal Systems Group

Enterprise Systems Group

HP Services

HP Financial Services

Product/Service Grouping +/Advantages Each division selfcontained Each division more responsive to changes Incentive for staff to perform better Can identify products under performing

Disadvantages Duplication of resources/ tasks/ personnel Divisions may be competing with each other

Customer Grouping Customer groups are divisions dealing with different types of customers. May be a different division for Retail, Trade, Overseas and for Mail Order. E.g. Doctors Surgery, Clydesdale

Customer Grouping

Customer Groupings Advantages Each division able to give a service suited to its own type of customer Customer loyalty builds due to personal service Quicker to respond to customer needs

Disadvantages Can be expensive due to greater staff costs Duplication of admin, marketing & finance Staff turnover erodes personal service benefits

Place/Territory Grouping Staff divided into divisions, each dealing with a geographic area. For example, South, West, North, Scotland division. Example: Nestle, Water Boards

Place/Territory Grouping Hewlett Packard

Americas Houston, Texas

Europe, Middle East, Africa Geneva, Switzerland

Asia Pacific Hong Kong

Place/Territory Grouping +/Advantages Allows the organisation to cater for different local, regional, national tastes More responsive to customer needs

Disadvantages Again, duplication of effort

Such groupings are used often by European firms, but not by American ones. Why?

Technology Grouping Manufacturing companies group its business activities according to technological or production processes. Only suitable for large organisations with different products and production processes. WH Smith (Wholesale, Retail Internet) and Ford (Bodywork, Glass, Plastics, Paints) are example of this.

Technology Grouping Advantages Increased specialisation Teething problems or technological problems identified easily

Disadvantages Specialist training required Capital-intensive

Line/Staff Grouping Core Activities Support Activities

LINE STAFF

This grouping divides into line departments involved in generating revenue (ie sales) and staff departments providing whole firm support (Finance, HRM).

Recap… What is an organisation Types of organisational groupings Functional Product/Service Customer Place/Territory Technology Line/Staff

Today… Levels of Management Span of Control Hierarchy Matrix Entrepreneurial Centralisation Decentralisation

Levels of Management C h ie f E x e c u t iv e B o a r d o f D ir e c t o r s S e n io r M a n a g e r s M a n a g e rs J u n io r M a n a g e r s S u p e r v is o r s A s s is t a n t s

This is how we would normally see an organisation structure. This is an organisation chart of a business. There is another way we can view the same

Organisation Pyramid Chief Executive Board of Directors Senior Managers Managers Junior Managers Supervisors Assistants

Span of Control Span of Control means the number of people who report to a manager Manager

Employees

Narrow span of control

Manager

Employees

Wide span of control

Hierarchical Structures Hierarchical structures can either a tall or flat structure

Tall

Flat

Tall Structures Many levels of management Managers will have narrow span of control Management posts usually specialised Clearly defined roles

Cost/Benefit Analysis of Tall Structures Benefits Easier for managers to supervise staff More promotion opportunities Employees will know immediate boss Clear lines of responsibility and communication

Costs Many layers of communication Slow decisionmaking High labour costs due to many levels of management Workers may have little freedom or responsibility

Flat Structures Few levels of management Managers have wider spans of control Faster communications Quicker decisionmaking

Cost/Benefit Analysis of Flat Structures Benefits Employees have more authority and responsibility Better communication between managers and workforce Decision-making is quicker Communication channels less complicated

Costs Employees have greater workload Employees may need training for multi-tasks Fewer promotion opportunities If span of control is too wide people may feel isolated or ignored

Matrix Structure Marketing Finance Manager

Manager

A project team created to carry out a specific task.

g n i e Team members come t c e n a rk Project n a i r F rfrom different M e e rk functional areas, and rk o o Manager W W

would report to the Project Manager and their own Functional Manager. Software

Matrix Structures +/Advantages Increased experience Motivation and job satisfaction Good for tackling complex problems

Disadvantages Expensive to have many teams Co-ordination problems Confusion as to who reports to whom

Lack of supervision and confusion is thought to have led to Nick Leeson’s demise of Barings Bank

Entrepreneurial Structure Small businesses use this structure Decisions made by a few people, normally the owner

Entrepreneurial Structure Advantages Decisions made quickly Staff know who they are accountable to Decision-maker does not need to consult staff

Disadvantages Difficult to use in large businesses Can create a heavy workload for decisionmakers Can stifle other staff’s initiative

Centralisation

HQ

Control and decision-making lies with top management in Head Office (HQ)

Centralisation Advantages Decisions can be made for whole organisation Easier to promote corporate image

Disadvantages Slower decisionmaking Slower communication Less room for staff initiative

Decentralisation

HQ

Control and decision-making is delegated to departments Relieves senior management from routine, dayto-day tasks

Decentralisation Advantages Motivates staff Empowers staff Decision-making quicker Decisions can match local needs

Disadvantages Decisions may differ from other branches Transfer of staff may lead to confusion due to different practices Less supervision

Definitions Chain of Command Unity of Command Span of Control

Recap… Levels of Management Span of Control Hierarchy Matrix Entrepreneurial Centralisation Decentralisation

Today… Factors affecting organisation structure Definition of relationships Delayering Downsizing

Factors Affecting Organisation Structure Size of organisation Technology used Market firm operates in Staff skills within organisation Products/services made or supplied by organisation

Definitions 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 which support the firm as a whole rather than individual departments Informal Relationships – exist as

Delayering What happens? Levels of management are reduced (move from tall to flat structure) Wider spans of control Savings in management wages

Effect on Org. Chart Flatter structure Fewer management posts Increased worker responsibilities

Downsizing What happens? Staff ‘laid-off’ Wages (labour costs) are reduced

Effect on Org. Chart Greater workload for departments Some posts will disappear Workers have more duties

Recap… Factors affecting organisation structure Definition of relationships Delayering Downsizing

Today… What is Culture? Culture Definitions Cultural Evidence Importance of Culture How to develop a strong corporate culture Advantages of a strong corporate culture

What is Culture? Define what you think culture means. Identify 3 cultures you know. Give evidence that they exist.

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”

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

Cultural Evidence ARTEFACTS VALUES BELIEFS

Japanese Work Customs Low employee turnover Promotion based on longevity Socializing among employees Group tasks and rewards Bottom-up consensus for decisions

Think of your local school What is the visible evidence of its culture? Academic or vocational? Uniform? Discipline? Homework? Approachable SMT?

Importance of Corporate Culture Peters & Waterman (1982) observed US and Japanese firms to see the differences between each. The US firms compared favourably with the Japanese on strategy and structure, but when it came to shared values and the other things hard to measure, they lagged behind.

Corporate Culture Think of an organisation you know. What can you tell about its culture as an outsider looking in?

The HP Way Hewlett Packard’s success was not deemed to be related to quality or service but to internal issues: 1. Respect for others 2. Sense of community 3. Hard work

Southwest Airlines For 5 years in a row they were the only US airline to make a profit

Southwest put this down to: Hiring – look for positive people Demeanour – treat everyone like a human being

How to develop a strong corporate culture… Use of uniforms, logos, symbols Ideals and principles of organisation (a mission statement) Reward schemes for employees Code of conduct for employees (attitudes and beliefs) Advertising (promote their corporate values) Teambuilding among employees

Advantages of a strong corporate 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

Recap… What is Culture? Culture Definitions Cultural Evidence Importance of Culture How to develop a strong corporate culture Advantages of a strong corporate culture

Schools have Principal Teachers in charge of departments. Explain why schools need PTs to be in charge of individual departments What decisions can they make for their departments?

Your local supermarket will have very different departments in store from those mentioned above. What will its departments be?

Identify one organisation which would have a large Human Resources department, and justify your choice

Describe what you understand by functional grouping What are the main advantages and disadvantages of a functional grouping?

Identify the main functional activities of organisations, and briefly describe what they do Explain how each of the functional departments interacts with, and is dependent on, each other

The Virgin Group provides a wide variety of goods and services. Identify as many of their products as you can, and then describe what advantages and disadvantages Virgin have in grouping this way

Insurance companies will group their organisation around the different categories of customers they have, such as life assurance, motor insurance, house insurance etc. Describe why insurance companies will do this, and what the drawbacks of such grouping would be.

Shell exploration and production has facilities all around the world. Explain why it would group geographically, describing the benefits and drawbacks of such a grouping

W H Smith organises activities around 3 areas: wholesale operations, retail operations and Internet sales. Explain why W H Smith could be described as grouping around different technologies used in different processes.

Think of the school… Identify those activities which could be described as core, and those which could be described as support.

Describe what you understand by a flat structure (include diagrams) Identify the advantages and disadvantages of such a structure Explain the meaning of the terms empowerment and delayering

Describe what you understand by a matrix structure Identify the advantages and disadvantages of this type of structure Explain the meaning of the term multi-skilling

Describe what you understand by an entrepreneurial structure Identify the advantages and disadvantages of this type of structure

Describe what you understand by a centralised structure Identify the advantages and disadvantages of this type of structure

Describe what you understand by a decentralised structure Identify the advantages and disadvantage of this type of structure

Look at the following examples and then decide what type of structure would best suit them, and describe the factors that made this the best choice A) a national supermarket chain B) a supplier of drilling equipment to a single oil company in Aberdeen C) a small graphic design business

Explain why organisation charts are useful Explain what is meant by span of control

Describe the culture of the school. Identify the areas decided upon by managers (SMT) and those by the pupils What actions could a school take to improve its culture?

Explain why organisations may feel they have to change Describe what you understand by the term outsourcing

Why would trade unions work against attempts to downsize an engineering business?

Explain what is meant by delayering Give an example of an organisation which has delayered What are the benefits and costs of delayering?