Lesson 1.1-Bussiness Management_JM
Transcript of Lesson 1.1-Bussiness Management_JM
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
1/33
Lesson 1.1
Organisational Structures andManagement Theories
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
2/33
Disclaimer
Kindly note, LCM study materials are available FREE ofcharge to students and are intended to be used ONLYas supplementary reference material. They do not inany way replace the recommended books that
students are advised to use to supplement knowledgeand understanding of the module.
Students can purchase the recommended readingbooks from a retailer of their choice. However,students experiencing problems in obtaining booksindependently can contact us to make a purchase usingLCMs account with Amazon.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
3/33
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
4/33
Agenda
Organisational Structure
Functional structure
Divisional structure
Matrix structure
Network structure
Virtual organisation
Theories of Management
Classical School
Human relations school
Systems theory
Contingency theory
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
5/33
Organisational Structure
Organisational structure refers to the pattern of relationships among positions in theorganisation and members of the organisation(1).Structure determines the way
information flows between levels in the organisation and degree to which
responsibilities are delegated, controlled, and coordinated.
Types of organisational structures:
Functional
Divisional
Product/brand
Geographical
Matrix
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
6/33
Organisational Structure
OrganisationalStructure
Vertical structure Horizontal structure
Organisational structure can be further divided in to two types:
Vertical /hierarchical organisation-The authority and responsibility is depicted with
clear limits. e.g. Divisional
Horizontal /Flat structureWhere activities are grouped in order to use theresources toward goal achievement. e.g. Network
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
7/33
Organisational Structure
Dimensions of Organisational Structure
Formalisation
Centralisation
Specialisation
Standardisation
Configuration
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
8/33
Organisational Structure
Challenges in shaping structure Organisational structure and strategy are very closely related. Whenever there is a
change in the strategy it should be accompanied by a change in structure. If not there
can be business failures.
Size of the organisation
Level of diversification
Type of technology
Control
Change
Knowledge
Globalisation
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
9/33
Organisational Structure
Choosing Structures
1.Market advantage test:
According to Alfred Chandler structure follows strategy :Does the structurefacilitate the strategy?
2.Parenting advantage test:
Does the structure match the parenting role of the business unit?
3.People test:
Are necessary people and expertise and skills available?
4.Feasibility study:
Technical, financial, social/ecological, commercial
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
10/33
Functional Structure
Chief ExecutiveOfficer
Production Marketing Finance HR
The organisation is divided main activities (production, marketing etc) where
similar activities are grouped under independent departments. This structure is
suitable for stable environments with routine technology where interdependence
between departments is less and functional specialisation is emphasised.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
11/33
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
12/33
Divisional Structure
Product/ Brand Organisational Structure
Head Office
Pharmecutical Divisional Manager
Production
Marketing
HR
Finance
Cosmetics Divisional Manager
Production
Marketing
HR
Finance
Healthcare Divisional Manager
Production
Marketing
HR
Finance
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
13/33
Divisional Structure
Geographical StructureHead Office
Divisional Manager-North
Production
Marketing
HR
Finance
Divisional Manager-South
Production
Marketing
HR
Finance
Divisional Manager-Central
Production
Marketing
HR
Finance
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
14/33
14
Matrix Structure
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
15/33
Project-based Structure
A project can be defined as a unique undertaking to achieve a specific objective that
requires resources and activity. It has a definitive beginning and an end. Teams are
formed, undertake project activities, then dissolved.
This type of structure is used for events with a limited time duration, e.g.
Construction. Project life cycle may vary in terms of time frame from a couple of weeks
to several years, dependent on the complexity, size and content of the project.
This is suitable where organisational structure has to constantly change. A small
corporate group will steer the project teams.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
16/33
Virtual Structure
A virtual organisation exists within a network of alliances, using the Internet and
other technological innovations such as e-mail and VoIP. It does not actually need to
exist in a physical form in one location.
The unique aspects of virtual organisations is that the company can operate globally
while the core of the organisation can be small amazon.com is a an example of a
successful virtual organisation.
It helps to overcome certain disadvantages of traditional structures due to its
flexibility and adaptability to change.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
17/33
Network Structure
This structure is more complicated than other structures. This consists of multiple
organisations that work together for one purpose.
Corecompany
Purchasingagencies
Manufacturingcompany HR Agency
Distributioncompanies
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
18/33
Theories of Management
There are four main schools of management thinking
Classical School
Scientific Management
Functions of Management
Bureaucracy
Human relations school
Systems theory
Contingency theory
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
19/33
Theories of Management
Contemporary perspective on organisations
Unlike the early days, the recent literature on management is immense and it is
difficult to categorise all these theories.
According to Gareth Morgan (author of management theory), we use different
perspectives as we try to understand organisations. e.g. the photographs of the
Parthenon from different angles can give different perspectives.
Likewise, the way we look at an organisation influences our understanding.
One such perspective is thinking organisation as a machine,where jobs, activities
and departments are organised to perform certain functions effectives and
smoothly.
This idea is implicit in early theories such as scientific and classical management.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
20/33
Theories of Management
Managers or leaders
Generally the definitions for managers and leaders tend to overlap, however there
is a distinct difference. Managers require leadership skills but not all leaders are
managers.
Leaders providing direction, developing a vision and then influencing others, work
towards attaining organisational objectives.
We can observe natural leaders emerging in groups. But managers are usually
appointed or nominated as leaders and sometimes lack qualities displayed by a
strong leader. In spite of the fact that leadership is one of the most researchedareas in organisations and management,defining leadership qualities is complex.
However the importance of leadership to an organisation and its link with power,
authority and influence is widely accepted.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
21/33
Theories of Management
Organisational Structure and Classical Management Theory
This theory tries to find the best form of organisational structure. It aims at
presenting general principles of management to guide the design of appropriate
organisational structure.
The followers of the classical management theory believe there is one best way
to perform and manage tasks.
Therefore principles of classical management theory emphasise tightly organised
bureaucratic structures where there is clear division of authority.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
22/33
Theories of Management
Organisational Structure and Contingency Theory
Contingency theory is focused on finding optimum structure for particular
circumstances. In this regard, the following factors are taken into consideration.
Sizeorganisationssize
Technologytechniques, equipment, special knowledge
Peopletype of people, their skills, competencies and level of motivation
Past experiencegained from facing similar circumstances
Pattern of ownershipwhether owner is directly involved in management
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
23/33
Classical School
Under this approach, the emphasis of the management is on the technical and
economic aspects of the organisation. Organisational behaviour is assumed to be
rational and logical. Three approaches can be identified under classical school (1).
Scientific Management
Functions of Management
Bureaucracy
The foundation of these theories is based on the belief that management can be
learnt and codified.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
24/33
Classical School
Scientific management
Fredrick W. Taylor developed the scientific management approach. His
experience in the steel and paper making industry helped him to introduce the
following four principles.
1. the development of a true science of work. This was the assessment of what constituted a
fair days work, as well as a fair days pay.
2. The scientific selection and progressive development of workers, involving careful
recruitment and training to ensure that the worker was capable of achieving output and
quality targets.
3. The bringing together of science of work and the scientifically selected and trained men.
This was referred to as mental revolution, as the workforce is encouraged to develop to their
full potential.
4.The constant and intimate cooperation between management and workers. Work was
allocated by consultation and cooperation between management and workers.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
25/33
Classical School
The Administrative School
This was introduced by Henri Fayol, who was a manager of a group of mining
and engineering companies in France. He defined the following operations as
ones, that give business control.
Technical: production, maintenance ,design
Commercial: sales, purchasing , marketing
Financial: capital investment
Security: protection of goods and people
Accounting: accounts, balance sheets, stock taking
Managerial: various functions
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
26/33
Classical School
The Administrative School contd...
From the study of managerial aspect of organisations and role of managers Fayol
identified the following common features:
Forecasting and planning
Organising: allocation of resources, duties and authority
Coordinating: giving orders and instructions
Controlling: comparing actual performance with expected or budgeted
A managers effectiveness is judged by the efficiency in applying these elements.
Fayol also identified the need for managers to be trained for their new roles before
promotion.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
27/33
Classical School
Bureaucracy
This word does not have positive image. However Max Weber developed bureaucracy
as a the ideal type model. He identified eight characteristics of ideal type bureaucracy.
1.Specialisation
2.Heirachy
3.Rules
4.Impersonality
5.Appointes officials
6.Career officials
7.Full-time officials
8.Public /private division
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
28/33
The Human Relations School
Elton Mayo developed this theory from the famous Hawthorne studies (1) on fatigue andproductivity. Mayos team discovered the experimenter effect'. i.e. workers efficiency
improved because of the scientists interest in them.
Fredrick Herzberg carried forward Mayo's identification of the motivational needs of
individuals. Herzberg introduced the two factor theory on motivation
According to Herzberg, hygiene factors prevent dissatisfaction and motivational factors move
employees towards action.
Motivational factors Hygiene factors
Challenging tasks Rules
A feeling of achievement Environment
Responsibility work breaks
Personal growth Supervision
Advancement Wages and fringe benefits
Recognition of ability
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
29/33
Systems Theory
This was developed by Trist and Bamforth. They identified the link between social
needs and technological needs,through observing the long wall method of
mining.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
30/33
Contingency Theory
The classical management schools have not always been successful as per the
experience of consultants, researchers and managers. Therefore concept that one
method is correct is abandoned in favour of contingency.
Contingency suggests that the circumstances of the situation have a direct impact
on the effectiveness of the management practice that is used. However issues
arise when two such contingencies are in conflict and the contingency theory does
not state how such conflicts can be resolved. Popular advocates of contingency
theory are:
Burns and Stalker
Joan Woodward
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
31/33
Contingency Theory
Joan Woodward focused mainly on the following factors in through the EssexStudies:
Number of levels of authority
The spans of control at different levels
Communication processes
Use of specialists
Use of management committees
Recruitment of graduates
These studies contributed to the debate as to whether technology forced
organisations to change their structure and culture.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
32/33
Management by Objectives (MBO)
Peter Drucker : Management by Objectives (MBO) (1)
Drucker proposed the concept of linking objectives to a timescale. According to
him objectives should be agreed for areas where performance and results have a
direct influence on the attainment of the basic company aims.
Profitability
Managerial performance
Worker performance
Public responsibility
In order for objectives to be effective, they must be stated in measurable and
behavioural terms. Then any deviation can be identified and corrective action
taken.
-
8/12/2019 Lesson 1.1-Bussiness Management_JM
33/33
References
1. Mullins Laurie J, Management and Organisational
Behaviour: Pearson Education LTD; 2007.