internal organisation v3

8/8/2019 Internal Organisation v3

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Internal Organisation

Higher Business Management


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What is an organisation?

A group of people working towards adefined set of goals and objectives.


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Schools have Principal Teachers incharge of departments. Explain why

schools need PTs to be in charge ofindividual departments

What decisions can they make for their

departments?


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Types of Organisational

GroupingFunctional

Product/S

erviceCustomer

Place/Territory

TechnologyLine/Staff


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Functional GroupingDepartments where staff have similarskills & expertise, and do similar jobs.

Functional grouping usually consists ofmarketing, finance, human resourcesand operations.

What other functional areas might therebe?


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Functional Grouping

Production Marketing AccountsHuman

ResourcesIT

Board of Directors

Chief Executive


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Your local supermarket will have verydifferent departments in store from

those mentioned above. What will itsdepartments be?


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Functional Groupings +/-

Advantages

Staff with similar

skills kept togetherAllows specialisation

Clear organisationalstructure

Staff know formalrelationships

Disadvantages

Organisation may

become too largeMay be unresponsive tochange

Departmental

competition may emergeDepartments may putown interests beforeorganisations


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Describe what you understand byfunctional grouping

What are the main advantages anddisadvantages of a functional grouping?


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Product/Service Grouping

Divisions/departments where each dealswith a different product or product range.

E.g. a TV company may have a Sportsdivision, a Film division and a Musicdivision. Each division has its own

functional staff.

Virgin and General Electric are examplesof Product/Service grouping.


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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-

containedEach division moreresponsive to changes

Incentive for staff to

perform betterCan identify productsunder performing

Disadvantages

Duplication of

resources/ tasks/personnel

Divisions may becompeting with each

other


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The Virgin Group provides a widevariety of goods and services. Identify

as many of their products as you can,and then describe what advantages anddisadvantages Virgin have in grouping

this way


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Customer Grouping


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Customer Groupings

Advantages

Each division able to

give a service suitedto its own type ofcustomer

Customer loyalty

builds due topersonal service

Quicker to respondto customer needs

Disadvantages

Can be expensive

due to greater staffcosts

Duplication ofadmin, marketing &

financeStaff turnovererodes personalservice benefits


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Insurance companies will group theirorganisation around the different

categories of customers they have, suchas life assurance, motor insurance,house insurance etc.

Describe why insurance companies willdo this, and what the drawbacks ofsuch grouping would be.


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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 to caterfor different local,regional, nationaltastes

More responsive tocustomer needs

Disadvantages

Again, duplication of

effort

Such groupings are used often by European firms,

but not by American ones.W

hy?


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Shell exploration and production hasfacilities all around the world. Explain

why it would group geographically,describing the benefits and drawbacksof such a grouping


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Technology Grouping

Manufacturing companies group its businessactivities according to technological orproduction processes.

Only suitable for large organisations withdifferent products and production processes.

WH Smith (Wholesale, Retail Internet) andFord (Bodywork, Glass, Plastics, Paints) areexample of this.


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Technology Grouping

Advantages

Increased

specialisationTeething problemsor technologicalproblems identified

easily

Disadvantages

Specialist training

requiredCapital-intensive


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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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Line/Staff Grouping

Core Activities LINE

Support Activities STAFF

This grouping divides into linedepartments involved in generating

revenue (ie sales) and staffdepartments providing whole firmsupport (Finance, HRM).


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Think of the school

Identify those activities which could bedescribed as core, and those whichcould be described as support.


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Look at the following examples andthen decide what type of structure

would best suit them, and describe thefactors that made this the best choice

A) a national supermarket chain

B) a supplier of drilling equipment to asingle oil company in Aberdeen

C) a small graphic design business


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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 number ofpeople 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 or flatstructure

Tall Flat


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Tall Structures

Many levels ofmanagement

Managers will havenarrow span ofcontrol

Management posts

usually specialisedClearly defined roles


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Cost/Benefit Analysis of TallStructures

Benefits

Easier for managers tosupervise staff

More promotionopportunities

Employees will knowimmediate boss

Clear lines ofresponsibility andcommunication

Costs

Many layers ofcommunication

Slow decision-making

High labourcosts dueto many levels ofmanagement

Workers may have littlefreedom orresponsibility


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Flat Structures

Few levels ofmanagement

Managers havewider spans of

control

Fastercommunications

Quicker decision-making


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Cost/Benefit Analysis of FlatStructures

Benefits

Employees have moreauthority and responsibility

Bettercommunicationbetween managers andworkforce

Decision-making is quicker

Communication channelsless complicated

Better team spirit

Costs

Employees havegreater workload

Employees may needtraining for multi-tasks

Fewerpromotionopportunities

If span of control is toowide people may feelisolated or ignored


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Describe what you understand by a flatstructure (include diagrams)

Identify the advantages anddisadvantages of such a structure

Explain the meaning of the terms

empowerment and delayering


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Matrix StructureA project team created tocarry out a specific task.

Team members comefrom different functionalareas, and would reportto the Project Managerand their own Functional

Manager.

Software Developmentfollow Matrix structures

Marketing

Manager

Finance

Manager

Project

Manager


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Matrix Structures +/-

Advantages

Increased

experienceMotivation and jobsatisfaction

Good for tacklingcomplex problems

Disadvantages

Expensive to have

many teamsCo-ordinationproblems

Confusion as to whoreports to whom

Lack of supervision and confusion is thought tohave led to Nick Leesons demise of Barings Bank


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Describe what you understand by amatrix structure

Identify the advantages anddisadvantages of this type of structure

Explain the meaning of the term multi-

skilling


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Entrepreneurial Structure

Small businessesuse this structure

Decisions made by afew people, normallythe owner


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Entrepreneurial Structure

Advantages

Decisions made

quicklyStaff know who theyare accountable to

Decision-maker doesnot need to consultstaff

Disadvantages

Difficult to use in

large businessesCan create a heavyworkload fordecision-makers

Can stifle otherstaffs initiative


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Describe what you understand by anentrepreneurial structure



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Centralisation

Control anddecision-making lies

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-making is

delegated todepartments

Relieves seniormanagement from

routine, day-to-daytasks

HQ


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Describe what you understand by acentralised structure



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Decentralisation

Advantages

Motivates staff

Empowers staffDecision-makingquicker

Decisions can matchlocal needs

Disadvantages

Decisions may differ

from other branchesTransfer of staffmay lead toconfusion due to

different practicesLess supervision


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Describe what you understand by adecentralised structure

Identify the advantages anddisadvantage of this type of structure


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Definitions

Chain of Command

Unity of Command

Span of Control


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Explain why organisation charts areuseful

Explain what is meant by span ofcontrol


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Factors Affecting OrganisationStructure

Size of organisation

Technology used

Market firm operates in

Staff skills within organisation

Products/services made or supplied byorganisation


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Definitions

Line relationships exist when a member ofstaff is in charge of another member of staff

Functional relationships - exist with people on

the same level of management

Staff Relationships exist with people whohave skills which support the firm as a whole

rather than individual departmentsInformal Relationships exist as friendshipsbetween workers who may have no formalcontact in the workplace.


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Delayering

What happens?

Levels ofmanagement arereduced (move fromtall to flat structure)

Wider spans ofcontrol

Savings inmanagement wages

Effect on Org. Chart

Flatter structure

Fewer managementposts

Increased workerresponsibilities


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Explain what is meant by delayering

Give an example of an organisation

which has delayered

What are the benefits and costs ofdelayering?


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Downsizing

What happens?

Staff laid-off

Wages (labourcosts) are reduced


Greater workload for

departmentsSome posts willdisappear

Workers have more

duties


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Why would trade unions work againstattempts to downsize an engineering

business?


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Outsourcing

What happens?

Sub-contractors come into do activities

Sub-contractors bringtheir expertise

Organisation can focuson core activities

May result fromdownsizing


Simpler organisation

chart (fewerdepartments &fewer specialistmembers of staff)


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Explain why organisations may feel theyhave to change

Describe what you understand by theterm outsourcing


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What is Culture?

Define what you think culture means.

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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Cultural Evidence

ARTEFACTS

VALUES

BELIEFS


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Think of your local school

What is the visible evidence of its culture?

Academic or vocational?Uniform?

Discipline?

Homework?Approachable SMT?

I t f C t


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Importance of CorporateCulture

Peters & Waterman (1982) observed US andJapanese firms to see the differences

between each.

The US firms compared favourably with theJapanese on strategy and structure, but when

it came to shared values and the other thingshard to measure, they lagged behind.


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Corporate Culture

Think of an organisation you know.

What can you tell about its culture asan outsider looking in?


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The HP Way

Hewlett Packards 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


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How to develop a strong


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How to develop a strongcorporate culture

Use of uniforms, logos, symbols

Ideals and principles of organisation (amission statement)

Reward schemes for employeesCode of conduct for employees (attitudesand beliefs)

Advertising (promote their corporatevalues)

Teambuilding among employees

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 the organisation

internal organisation v3

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