Chapter 4: The internal environment Area of Study 2: Internal
environment of large-scale organisations
Slide 2
Management Structure Management hierarchy: 1. Senior or
executive management: top level, has responsibility for strategic
(long-term) planning. 2. Middle management: managers in charge of a
designated department or organisational division, have
responsibility for tactical decision making 3. Front-line managers:
responsible for day-to-day planning and decision making
Slide 3
Organisational Structure Structure: way in which the parts of a
system or object are organised and coordinated Organisational
structure: framework within which the work of that organisation
occurs Structures vary between organisations depending on the
nature of what they do, their size, numbers of staff and
organisational culture
Slide 4
Features of Organisational Structure Division of labour
Organisational departments or divisions Segmentation and
coordination of activities Traditionally - degree of
specialisation, workers becoming experts in a particular activity
Changing towards employees being encouraged to become multiskilled
to increase worker motivation, productivity and flexibility
Departments can be based on the following: Function performed: such
as marketing, operations, finance, HR Geographic: location of
employees, branches Product: product produced by certain groups of
employees Customer: type of customer who has special
requirements
Slide 5
Features of Organisational Structure continued Chains of
command, control and authorityCommunication channels Authority:
legal and/or moral right to control something or someone
Organisational structure identifies who has responsibility for
seeing certain tasks are completed Span of control: number of
people a manager has direct responsibility for Narrow span of
control associated with a more hierarchical structure Communication
channels in an organisation can be upward, downward or lateral
Slide 6
Features of Organisational Structure continued Patterns of
decision making An organisational chart depicts: Lines of
authority, span of control Chain of command Reporting relationships
Job titles and responsibilities Formal channels of communication
Division of labour Levels of management CEO Chief Financial Officer
Manager Research and Development Chief Marketing Manager Brand
Manager Product Manager Brand Manager Product Manager General
Manager of Operations
Slide 7
Types of Organisational Structures Hierarchical organisational
structure: features centralised decision making (where management
make decisions and passes on directions to those below them
Bureaucratic 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
Slide 8
Forms of hierarchical organisation structures Functional
Structure A form of traditional organisational structure which is
based on the functions performed (e.g. finance, marketing) Chief
Executive Officer Manager Operations Quality Supervisor Production
Supervisor Maintenance Supervisor Manager Finance Manager Sales and
Marketing Manager Human Resources
Slide 9
Functional Structure Positive aspectsDifficulties Specialist in
charge of each functional area, expertise ensures high productivity
Workers have manager in their area for issues to be resolved Allows
for sideways career paths Structure only works if different
functional managers communicate with each other Structure best
suits medium-to-large organisations
Slide 10
Divisional Structure Same foundation as functional structure
but each functional area is further divided into subsections Chief
Executive Officer Human Resource Manager Training Manager Payroll
Manager Recruitment Manager Operations Manager Logistics Manager
Production Manager Quality Manager Finance Manager Purchasing
Manager Accounts manager
Slide 11
Divisional Structure Positive AspectsDifficulties Specialists
in charge of small sections of the organisation Allows for best
practice in areas Room for career advancement within one functional
area A more complicated structure so chances of difficulties in
communication become more pronounced Only suitable for quite large
organisations
Slide 12
Geographic Structure Where the business is conducted in several
different locations. Each location would have a functional,
divisional or some other type of structure Chief Executive Officer
General Manager Australia General Manager USA General Manager Asia
General Manager UK
Slide 13
Geographic Structure Positive AspectsDifficulties Allows LSO
access to wider markets Local issues/laws can be better handled
Employees may have opportunity to work in different countries
Allows the implementation of Follow the Sun project passed around
the world as each time zone starts its working day Different
languages can cause communication problems Time can be wasted for
senior managers travelling between branches Control can be lost as
senior managers cant be in every location Best suits multinational
LSOs
Slide 14
Product-based Structure Employees are grouped together
according to the product they make or sell Retail company: Chief
Executive Officer Manager Human Resources Manager Operations
Manager clothing and footwear Manager homewares Manager books &
stationary Manager Sporting goods Manager Sales and Marketing
Manager Finance
Slide 15
Customer-based Structure Departments based on the types of
customers dealt with by a group of employees Car Manufacturing
Company: Chief Executive Officer Manager Human Resources Manager
Operations Manager Sales & Marketing Manager fleet sales
Manager retail sales Manager Finance
Slide 16
Network/Organic Structure Becoming increasingly common as firms
downsize Structure has core business maintained by employees, with
non-core functions outsourced to other firms Core Business Legal
firm Advertising Agency Manufacturer Accounting Firm Research and
Development Firm HR Consultancy Firm
Slide 17
Network/Organic Structure Positive AspectsDifficulties Money
not wasted on employing people all year round when only needed
occasionally Sometimes 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
business Some control is lost when other businesses are completing
work
Slide 18
Matrix Structures A 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 management Project AProject BProject C HR Manager HR AHR
BHR C Finance Manager Finance AFinance BFinance C Operations
Manager Operations A Operations B Operations C Senior
Management
Slide 19
Matrix Structures Positive AspectsDisadvantages Control is
decentralised, better monitoring of all aspects of a job There can
be many opportunities for both horizontal and vertical career
directions Communication can become difficult between projects and
the head office due to complexity of structure There 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 once
Slide 20
Consequences of less hierarchical organisational structures
Elements of StructureTraditional Hierarchical Structure
Contemporary Strucutre CommunicationDownwardMultidirectional
Communication ChannelsSlow and unresponsive to change Shorter
communication paths Decision MakingCentralisedDecentralised
DelegationDownwardDownwards and Lateral Management
styleAutocraticConsultative/Participative Layers in
structureMultilayeredFewer layers Span of controlNarrowBroad
Division of labourSpecialisationMultiskilled Roles and
responsibilitiesClear and narrowGreater autonomy
DepartmentalisationWell definedCross-departmental teams
OutsourcingLimitedNon-core functions
Slide 21
What is corporate culture? The shared values or beliefs of the
people within an organisation, unwritten rules A pattern of basic
assumptions shared within an organisation Representative of things
that worked well in the past Taught to newcomers as the correct way
of thinking, feeling and doing
Slide 22
Indicators of corporate culture Formal written company policies
and objectives Physical environment (including dress code)
Organisational structures and management styles Organisational
processes Communication channels Rituals, symbols How people
address each other Language used Official company
documentation
Slide 23
Differences in corporate culture Degree to which people are
encouraged to become risk takers and innovators Attention to detail
People orientation Task or process orientation Team orientation
Level of competitiveness Degree of emphasis on ethical and social
responsibilities Diversity amongst employees Age of the
organisation
Slide 24
Causes of change of culture Time New managers may have a
different approach and cause changes Mergers Two LSOs with
different ways of doing things coming together may result in a new
culture Macro factors laws, economic conditions and so on may
change culture of an LSO
Slide 25
Importance of corporate culture Benefits of a positive
corporate culture for an LSO include: Better staff retention rates
Increased productivity Greater employee work ethic Greater
profitability Positive public perception Google Activity
Slide 26
Policy Development and its application A policy is a written
statement that outlines processes, procedures, rules and
regulations that must be observed in a given situation Sometimes
also include procedures: outline steps that should be followed when
completing a process Policies are necessary in LSOs because they:
Can help to enforce legal requirements Ensure consistency in
approaches to work Can prevent accidents Allow workers to clearly
know the boundaries in which they work
Slide 27
Pressures on policy development Copy table on page 91 External
and internal pressures on policy External Macro Environment
Legislative Compliance Social responsibility Changing markets and
international pressures Technological Developments External
Operating Environment Regulatory bodies Lobby groups Trade unions
Customers Suppliers Internal Environment Owners/shareholders
Management Employees
Slide 28
Policy development process Step 1: Issue Identification Policy
development is a process of continuous assessment, implementation
and reassessment as the company responds to external and internal
pressures The need for a new policy or the need to change an
existing policy Pressure from a source such as a new regulation,
manager or social pressure
Slide 29
Step 2: Research and analysisStep 3: Stakeholder input Research
is conducted into policies of competitors, trading partners and
organisations that are known to have best practice Assessment of
what is needed in the new/updated policy is conducted Stakeholders
informed of possible impeding policy change Comment and feedback is
collected from interested stakeholders
Slide 30
Step 4: Police Development Step 5: Draft policy is posted Draft
policy or policy amendment is prepared by a working party taking
stakeholder views and ideas into account Draft policy displayed in
a public place Stakeholders have opportunity to make comments
Comments invited
Slide 31
Step 6: Policy approvalStep 7: Evaluation Feedback considered
Necessary changes made Appropriate level of management approval
obtained Final copy issued Management and employee training on new
policy if required Did the policy work? Was the new policy
effective?
Slide 32
Business ethics and socially responsible management of the
internal environment Business ethics Social responsibility If way
in which people in an organisation conduct their day-to-day work in
a morally acceptable way The way in which an organisation
demonstrates some commitment to their community beyond that imposed
on it by laws E.g. charity work, environmental policies Corporate
Social Responsibility Looks at whether companies actually put into
practice the values and principles that they espouse
