18/04/23Dr. Jovo Ateljevic, University of

Stirling

BUSINESS ORGANISATIONS: THEINTERNAL ENVIRONMENT

MGT9A2

L3

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Learning Outcomes

To understand the conceptual meaning of organisation and management and theories underpinning these notions

To understand the importance of organisation and management within the business context

To identify alternative organisation structures used by business organisations

To discuss major aspects of the functional management of firms

To explain the interaction between a firm’s internal and external environments

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Management and organisation; concepts, science, overview

The notion of Management is the central to the org. internal environment

Organisation and management as field of theoretical analysis, science

Science, what does that really mean? Natural vs. social science Different views, approaches, theories to organisational

and management study 3 main approaches: classical, human relations, system

approach

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Development of Organisation Theory 1

Late 19th early 20th century: – Scientific management, 1890s (F.W. Taylor)– Classical management (H. Fayol)– Bureaucracy (M.Weber)

1920s-1930s:– Human relations approach (E. Mayo,

Roethlisberger and Dickson)

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Development of Organisation Theory 2

1930s-1960s:- – Neo-human relations approach (Likert, Maslow,

Herzberg)

1960s-present:-– Systems theory (R.Ackoff)– Contingency theory (J. Woodward)– Teams and team building (E. Belbin)

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Organisation Theory (F. W. Taylor 1856-1915) Scientific management (micro approach).

father of scientific management. An industrial engineering that established the organization of work in

Ford's assembly line. Fundamental thinks: Find the best practice wherever it exists (today

it’s benchmarking); Decompose the task into its constituent elements (today business process re-design); Eliminated things that don't add value (work out, we say today).

Believed in economic man, i.e.. people are motivated by money. Attempted to use skills acquired as a professional baseball player in an

industrial setting. Adopted a bottom up approach Put forward general principles to enable organisations to become more

efficient and effective.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Classical ManagementHenri Fayol (1841-1925) Functions and Principles of Management

(macro approach)

Founded modern operational management theory

Put forward general principles to enable organisations to become more efficient and effective.

Similar to bureaucracy (see Weber). Adopted a top down approach as opposed to

Taylor’s bottom up approach.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Fayol’s Six Managerial Activities

Forecasting Predicting what will happen in the future.

Planning Devising a course of action to meet that expected demand.

Organising Mobilising materials and resources by allocating separate tasks to different departments, units and individuals.

Commanding Providing direction to employees, (leadership and motivation)

Co-ordinating Making sure that activities and resources are working well together towards the common goal.

Control Monitoring progress to ensure that plans are being carried out properly.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Fayol’s Fourteen Principles

Division of Labor: Specialization increases output by making employees more efficient

Authority: Managers must be able to give orders. Authority and responsibility go together

Discipline: Employees must obey and respect the rules of the organization.

Unity of Command: every employee should receive orders from only ONE superior.

Unity of Direction: Each group of organizational activities that has the same objective should be directed by one manager using one plan.

Subordination of Individual Interests to the General Interests: the greater good. The organization’s interests come first.

Remuneration: workers must be paid a fair wage for their services. Centralization: degree to which subordinates are involved in decision

making. What works best for the organization? Centralized: management-driven. Decentralized: subordinate-driven

18/04/23Dr. Jovo Ateljevic, University of

Stirling

…con’ed

Scalar chain: line of authority from top management to the lowest ranks. Communications should follow this chain whenever possible.

Order: People and materials should be in the right place at the right time.

Equity: Managers should be kind and fair to their subordinates Stability of Tenure of Personnel: High employee turnover is

inefficient. Initiative: Employees who are allowed to originate and carry

out plans will exert high levels of effort. Esprit de Corps: Promoting team spirit will build harmony and

unity within the organization.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

BUREACRACY and Max Weber (1864-1916)

– Weber’s study represented an ideal or completely rational form of organization

– Divides organizations into hierarchies, establishing strong lines of authority and control

– Used to describe a structure based on the sociological concept of rationalization of collective activities

– Had NONE of the negative connotations the terms has today (“red tape,” etc.)

– Despite being based on the idea of formal rationality, Weber's concepts were idealistic.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

The key features

Clear division of labor: each task performed by employees is formally created and recognized as an official duty (yours and no one else’s). Specialization.

Hierarchical arrangement of positions: each lower position controlled and supervised by a higher one. Chain of Command

Formal rules and regulations: uniformly guide employee behavior. Provide continuity and stability to work environment. Reduce uncertainty about task performance.

Impersonal relationships: managers don’t get involved in employees’ personalities and personal preferences. No emotional attachments. Principles for fairness.

Employment based entirely on technical competence: get job because you can do the job, not because of who you know. Rigid selection criteria. No arbitrary dismissal or promotion.

18/04/23Dr. Jovo Ateljevic, University of

Stirling

In practice (education)

Clear division of labor – economist not teach chemistry, and vice versa

Hierarchical arrangement of positions – to whom your lecture reports, whom they in turn report to

Formal rules and regulations – the number of courses you need to pass for a degree

Impersonal relationships – admission criteria, emphases on previous exam performance, not friendship

Rationality – appointed new staff to departments that have highest ratio of students to staff

18/04/23Dr. Jovo Ateljevic, University of

Stirling

The human relation (HR) approach

Emphasis importance of people (social and psychological influence on org.)

HR theory focuses on e.g. motivation, leadership, communication, group dynamic

Mayo - communication between management and the workers, the relation of working groups to management the now accepted notion, work satisfaction lay in recognition, security, and sense of belonging, rather than monetary rewards

Maslow– theory of individual needs (hierarchy of needs) Likert & Herzberg- human factors determining org.

effectiveness Ouichi’s theory Z – management of people (workers’

empowerment) (for theory X and Y, see The human side of enterprise by Douglas McGregor,1960)

Elton Mayo (1880-1949)

18/04/23Dr. Jovo Ateljevic, University of

Stirling

18/04/23Dr. Jovo Ateljevic, University of

Stirling

The system approach (1960s-

An integration of the previous works on org. structure, people and technology (org. is socio-technical system)

Characterised by complexity, volatile environment, unpredictability, interdependency etc.

Org. is an open system interacting with its environment (inputs and outputs see the L2)

Subsystems – org. elements interacting with each other (e.g. education system, university, faculties, departments)

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Contingency (management) approach

It further develops the open system view of the org. Woodard (1958) UK; Lawrence & Lorsch (1967) USA The key thesis – org. must adapt to the its environment Lessons for managers – how to cope with uncertainty and

change, identify reasons for success Well performing orgs. do not see people as rational beings

(motivated by fear and willing) but as emotional, intuitive and creative social creatures need security and meaning of achieving goals thru org.

Creation of a such org. culture reflecting overall goals, to develop relevant mechanisms 4 transmitting of original and good ideas from founder to new members ad sustain them thru shared experience

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Organisation Structures

It is an org. framework designed to achieve its objectives

It’s a business model – org core logic and architecture (the key aim to create profit)

The org structure enables org to achieve a number specific objectives (use of resources, monitoring, accountability of people, cooperation between deps. Create job satisfactions, adopt to changes)

Pattern of responsibilities thru a number of relationships: linear, functional, staff and lateral

Org structure by division of work by: function, products/services, location, processes and client group

18/04/23Dr. Jovo Ateljevic, University of

Stirling

A functional organisation structure

18/04/23Dr. Jovo Ateljevic, University of

Stirling

A product-based structure

18/04/23Dr. Jovo Ateljevic, University of

Stirling

A divisional structure

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Matrix structure

18/04/23Dr. Jovo Ateljevic, University of

Stirling

The virtual organisation

Flexibility underpinned by various forces and needs (market, costs, processes etc.) with greater emphasis on the use of knowledge to create new and innovative products.

(legally) independent organizations that share resources forming strategic alliances to share the work and gain

experience in developing and sharing common goals. outsourcing mainly to reduce costs where there is some

experience in working at a distance, but three is one dominant party and high certainty of what everyone must do.

Any part of org. can become virtual (team, laboratory, shops etc.)

Virtual org. management (Pierre Coupet, 1997), VOR takes a macroview of an org from top down to create best practice

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Aspects of functional management

Human resource management (HRM)– Recruitment – Working conditions – Carrier development – Job evaluation – Industrial relations – Legal aspects

Marketing (various activities)

18/04/23Dr. Jovo Ateljevic, University of

Stirling

Key points

Management is a key aspect the internal environment

Three main management and organisation theories: classical theories; human relations approaches; system approaches

Business org. is an open system structure of the organisation is dynamic Internal org. structure is influence external forces of

both a general and operational kind