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

Human
Production Marketing Accounts IT
Resources
Functional Groupings +/-
Advantages Disadvantages
Staff with similar Organisation may
skills kept become too large
together May be unresponsive
to change
Allows
specialisation Departmental
competition may
Clear emerge
organisational Departments may put
structure own interests before
Staff know formal 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 Personal Enterprise HP Financial

HP Services
Printing Group Systems Group Systems Group Services
Product/Service Grouping
+/-
Advantages Disadvantages
Each division self- Duplication of
contained resources/ tasks/
Each division more personnel
responsive to
changes Divisions may be
competing with
Incentive for staff
to perform better each other
Can identify
products under
performing
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 Disadvantages
Each division able Can be expensive
to give a service due to greater
suited to its own staff costs
type of customer Duplication of
Customer loyalty admin, marketing
builds due to & finance
personal service Staff turnover
Quicker to erodes personal
respond to service benefits
customer needs
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 Europe, Middle East, Africa Asia Pacific

Houston, Texas Geneva, Switzerland Hong Kong
 Place/Territory Grouping
+/-
Advantages Disadvantages
Allows the Again, duplication
organisation to of effort
cater for different
local, regional,
national tastes
More responsive to
customer needs
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 Disadvantages
Increased Specialist training
specialisation required
Teething Capital-intensive
problems or
technological
problems
identified easily
Line/Staff Grouping
Core Activities LINE
Support Activities 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
This is how we
B o a r d o f D ir e c t o r s would normally see
an organisation
S e n io r M a n a g e r s
structure.
M a n a g e rs
This is an
organisation chart
J u n io r M a n a g e r s
of a business.
S u p e r v is o r s
There is another
A s s is t a n t s
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 Manager

Employees Employees

Narrow span of control 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 Costs
Easier for managers Many layers of
to supervise staff communication
More promotion Slow decision-
opportunities making
Employees will know High labour costs
immediate boss due to many levels
Clear lines of of management
responsibility and Workers may have
communication little freedom or
responsibility
Flat Structures
Few levels of
management
Managers have
wider spans of
control
Faster
communications
Quicker decision-
making
 Cost/Benefit Analysis of Flat
Structures
Benefits Costs
Employees have more Employees have
authority and greater workload
responsibility Employees may
Better communication need training for
between managers and multi-tasks
workforce Fewer promotion
Decision-making is opportunities
quicker If span of control is
Communication too wide people may
channels less feel isolated or
complicated ignored
 Matrix Structure
A project team
Marketing Finance
created to carry out a
Manager Manager specific task.

i n g
e t c e Team members come
rk a n
Project a r F i n rfrom different
M e e
o rk o rk functional areas, and
Manager W W
would report to the
Project Manager and
their own Functional
Manager.

Software
Matrix Structures +/-
Advantages Disadvantages
Increased Expensive to have
experience many teams
Motivation and Co-ordination
job satisfaction problems
Good for tackling Confusion as to
complex problems 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 Disadvantages
Decisions made Difficult to use in
quickly large businesses
Staff know who Can create a
they are heavy workload
accountable to for decision-
Decision-maker makers
does not need to Can stifle other
consult staff staff’s initiative
Centralisation
Control and
decision-making
lies with top
HQ management in
Head Office (HQ)
Centralisation
Advantages Disadvantages
Decisions can be Slower decision-
made for whole making
organisation Slower
Easier to promote communication
corporate image Less room for
staff initiative
Decentralisation
Control and
decision-making
is delegated to
HQ departments
Relieves senior
management
from routine, day-
to-day tasks
Decentralisation
Advantages Disadvantages
Motivates staff Decisions may
Empowers staff differ from other
branches
Decision-making
quicker Transfer of staff
Decisions can may lead to
match local needs 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? Effect on Org.
Levels of Chart
management are Flatter structure
reduced (move
from tall to flat Fewer
structure) management
Wider spans of posts
control Increased worker
Savings in responsibilities
management
wages
Downsizing
What happens? Effect on Org.
Staff ‘laid-off’ Chart
Wages (labour Greater workload
costs) are for departments
reduced 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 Ethos
Traditions Ambience
Customs Atmosphere
Norms

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?