Area of Study 2: Internal environment of large-scale organisations

Chapter 4: The internal environmentArea of Study 2: Internal environment of large-scale organisationsRead The role of management1Management StructureManagement hierarchy:Senior or executive management: top level, has responsibility for strategic (long-term) planning. Middle management: managers in charge of a designated department or organisational division, have responsibility for tactical decision makingFront-line managers: responsible for day-to-day planning and decision makingOrganisational StructureStructure: way in which the parts of a system or object are organised and coordinatedOrganisational structure: framework within which the work of that organisation occursStructures vary between organisations depending on the nature of what they do, their size, numbers of staff and organisational culture

Features of Organisational StructureDivision of labourOrganisational departments or divisionsSegmentation and coordination of activitiesTraditionally - degree of specialisation, workers becoming experts in a particular activityChanging towards employees being encouraged to become multiskilled to increase worker motivation, productivity and flexibilityDepartments can be based on the following:Function performed: such as marketing, operations, finance, HRGeographic: location of employees, branchesProduct: product produced by certain groups of employeesCustomer: type of customer who has special requirementsFeatures of Organisational Structure continuedChains of command, control and authorityCommunication channelsAuthority: legal and/or moral right to control something or someoneOrganisational structure identifies who has responsibility for seeing certain tasks are completedSpan of control: number of people a manager has direct responsibility forNarrow span of control associated with a more hierarchical structureCommunication channels in an organisation can be upward, downward or lateralFeatures of Organisational Structure continuedPatterns of decision makingAn organisational chart depicts:Lines of authority, span of controlChain of commandReporting relationshipsJob titles and responsibilitiesFormal channels of communicationDivision of labourLevels of management Types of Organisational StructuresHierarchical organisational structure: features centralised decision making (where management make decisions and passes on directions to those below themBureaucratic structures: Bureaucracy means to rule from the desk. Record keeping, following set rules and due process are at the heart of bureaucracy.Flatter organisational structures: features a wide span of control, few management levels and a short chain of command

Forms of hierarchical organisation structures Functional StructureA form of traditional organisational structure which is based on the functions performed (e.g. finance, marketing)Functional StructurePositive aspectsDifficultiesSpecialist in charge of each functional area, expertise ensures high productivityWorkers have manager in their area for issues to be resolvedAllows for sideways career paths

Structure only works if different functional managers communicate with each other

Structure best suits medium-to-large organisationsDivisional StructureSame foundation as functional structure but each functional area is further divided into subsectionsDivisional StructurePositive AspectsDifficultiesSpecialists in charge of small sections of the organisationAllows for best practice in areasRoom for career advancement within one functional areaA more complicated structure so chances of difficulties in communication become more pronounced

Only suitable for quite large organisationsGeographic StructureWhere the business is conducted in several different locations. Each location would have a functional, divisional or some other type of structureGeographic StructurePositive AspectsDifficultiesAllows LSO access to wider marketsLocal issues/laws can be better handledEmployees may have opportunity to work in different countriesAllows the implementation of Follow the Sun project passed around the world as each time zone starts its working dayDifferent languages can cause communication problemsTime can be wasted for senior managers travelling between branchesControl can be lost as senior managers cant be in every location

Best suits multinational LSOsProduct-based StructureEmployees are grouped together according to the product they make or sellRetail company:Customer-based StructureDepartments based on the types of customers dealt with by a group of employees

Car Manufacturing Company:Network/Organic StructureBecoming increasingly common as firms downsizeStructure has core business maintained by employees, with non-core functions outsourced to other firmsNetwork/Organic StructurePositive AspectsDifficultiesMoney not wasted on employing people all year round when only needed occasionallySometimes using an outside firm will assist in terms of accountability Firms under contract to complete work may not have a good understanding of the values and mission of the core businessSome control is lost when other businesses are completing workMatrix StructuresA structure that places managers and employees into project teams that cut across functional or departmental lines and requires them to report to both functional and task managementSenior ManagementMatrix StructuresPositive AspectsDisadvantagesControl is decentralised, better monitoring of all aspects of a jobThere can be many opportunities for both horizontal and vertical career directionsCommunication can become difficult between projects and the head office due to complexity of structureThere may be staffing issues when one project finishes if there is not another to begin immediately

Would suit LSO that works on several projects at onceConsequences of less hierarchical organisational structuresElements of StructureTraditional Hierarchical StructureContemporary StrucutreCommunicationDownwardMultidirectionalCommunication ChannelsSlow and unresponsive to changeShorter communication pathsDecision MakingCentralisedDecentralisedDelegationDownwardDownwards and LateralManagement styleAutocraticConsultative/ParticipativeLayers in structureMultilayeredFewer layersSpan of controlNarrowBroadDivision of labourSpecialisationMultiskilledRoles and responsibilitiesClear and narrowGreater autonomyDepartmentalisationWell definedCross-departmental teamsOutsourcingLimitedNon-core functionsWhat is corporate culture?The shared values or beliefs of the people within an organisation, unwritten rulesA pattern of basic assumptions shared within an organisationRepresentative of things that worked well in the pastTaught to newcomers as the correct way of thinking, feeling and doingIndicators of corporate cultureFormal written company policies and objectivesPhysical environment (including dress code)Organisational structures and management stylesOrganisational processesCommunication channelsRituals, symbolsHow people address each otherLanguage usedOfficial company documentationDifferences in corporate culture Degree to which people are encouraged to become risk takers and innovatorsAttention to detailPeople orientationTask or process orientationTeam orientationLevel of competitivenessDegree of emphasis on ethical and social responsibilitiesDiversity amongst employeesAge of the organisationCauses of change of cultureTimeNew managers may have a different approach and cause changesMergers Two LSOs with different ways of doing things coming together may result in a new cultureMacro factors laws, economic conditions and so on may change culture of an LSOImportance of corporate cultureBenefits of a positive corporate culture for an LSO include:Better staff retention ratesIncreased productivityGreater employee work ethicGreater profitabilityPositive public perception

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Policy Development and its applicationA policy is a written statement that outlines processes, procedures, rules and regulations that must be observed in a given situationSometimes also include procedures: outline steps that should be followed when completing a processPolicies are necessary in LSOs because they:Can help to enforce legal requirementsEnsure consistency in approaches to workCan prevent accidentsAllow workers to clearly know the boundaries in which they workPressures on policy developmentCopy table on page 91 External and internal pressures on policyPolicy development processStep 1: Issue IdentificationPolicy development is a process of continuous assessment, implementation and reassessment as the company responds to external and internal pressuresThe need for a new policy or the need to change an existing policyPressure from a source such as a new regulation, manager or social pressureStep 2: Research and analysisStep 3: Stakeholder inputResearch is conducted into policies of competitors, trading partners and organisations that are known to have best practiceAssessment of what is needed in the new/updated policy is conductedStakeholders informed of possible impeding policy changeComment and feedback is collected from interested stakeholdersStep 4: Police DevelopmentStep 5: Draft policy is postedDraft policy or policy amendment is prepared by a working party taking stakeholder views and ideas into accountDraft policy displayed in a public placeStakeholders have opportunity to make commentsComments invitedStep 6: Policy approvalStep 7: EvaluationFeedback consideredNecessary changes madeAppropriate level of management approval obtainedFinal copy issuedManagement and employee training on new policy if requiredDid the policy work?Was the new policy effective?Business ethics and socially responsible management of the internal environmentBusiness ethicsSocial responsibilityIf way in which people in an organisation conduct their day-to-day work in a morally acceptable wayThe way in which an organisation demonstrates some commitment to their community beyond that imposed on it by lawsE.g. charity work, environmental policiesCorporate Social ResponsibilityLooks at whether companies actually put into practice the values and principles that they espouseRevisionExamination Preparation Questions