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A. The business organization, itsstake holders and the external
environment
B. Business organization structure,
functions and governance
1. Business organization, structure andstrategy
2. Organizational culture andcommittees
3. Corporate governance and socialresponsibility
Business
organization,
structure and
strategy
ORGANISATIONAL STRUCTURE
The established pattern or relationships
among components or parts of the
organisation Kast and Rosenzweig
Describes the:
lines of authority
communication channels (vertical and horizontal)
reporting lines
StrategyHistory
Ownership
Why DoStructures
Differ?
OrganizationSize
TechnologyObjectivesGeography
EnvironmentGeography
Legal
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Entrepreneurial structure
BOSS
TEAM
Advantages
Fast decision making
More responsive to market
Goal congruence
Good control
Close bond to the workforce
Disadvantages
Lack of career structure
Dependent ant on the
capabilities of manager/owner
Cannot cope with
diversification/ growth
Functional Structure
Advantages
Efficiencies from putting together similar specialties and people with
common skills, knowledge, and orientations
Coordination within functional area (avoids duplication)
In-depth specialization
Economies of scale, standardization and career opportunities
Centralized decision making
Disadvantages
Poor communication and coordination across functional areas
Focus on process and inputs rather than customer and outputs. Slow decision making
Geographical Departmentalization
Advantages
More effective and efficient handling of specific regional issues
that arise
Serve needs of unique geographic markets better
May be cheaper to establish area factories than to service
markets from one location. Such as transportation costs
Disadvantages
Duplication of functions
Can feel isolated from other organizational areas
Inconsistency in methods or standards may develop across
different areas
Product Structures
+ Allows specialization in particular products and services
+ Managers can become experts in their industry
+ Accountability
+ Closer to customers
Duplication of functions
Limited view of organizational goals
Different product divisions may fail to share resources and customers
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A Product Organization
Pro-
ductionAcctg.Sales R&D
Pro-
ductionAcctg.Sales R&D
Pro-
ductionAcctgSales R&D
Product
Group 2
Product
Group 1
Product
Group 3
President
Chief
Executive
Officer
Customer Departmentalization
+ Customers needs and problems can be met by specialists
- Duplication of functions
- Limited view of organizational goals
Divisional Structure
Divisionalization is the division of business in toautonomous regions or product business, each with itsown revenues, expenditures and capital asset purchaseprogrammes, and therefore each with its own profit andloss responsibility.
The Matrix Structure
Cross-Functional
Coordination
Clear
Accountability
Allocation
of Specialists
Dual Chain
of Command
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AMatrix Organization
Project
Gammamanager
Production
supportgroup
Legal
supportgroup
Accounting
supportgroup
Engineering
supportgroup
Project
Beta
manager
Production
support
group
Legal
support
group
Accounting
support
group
Engineering
support
group
Project
Alpha
manager
Production
support
group
Legal
support
group
Accounting
support
group
Engineering
support
group
Production
department
Legal
department
Accounting
department
Engineering
department
Farm Machinery
Division
President
Functional
authority
Project
authority
Emphasis on product (project, process, etc)
and customer orientation
Optimum resource allocation and flexibility.
Close customer contact.
Conflict between managers over allocation of
resources.
Lots of time taken up in meetings and fire-
fighting.
Role conflict/ambiguity due to a lack of unity
of command (Dual command).
Hybrid
Structure
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The shamrock organisation
Core
Professional core and permanent staff of theorganisation who are usually highly trainedindividuals with an in depth knowledge of theorganisation, how it is run and its mainobjectives.
These workers receive good remunerationpackages but in return work hard and arecommitted to the organisation and are
essential to the on-going success of theorganisation.
These are often managers, team leaders,professional staffs, skilled technicians, andskilled employees.
The second group represents the flexible and
casual labor force (referred to as interface
workers),made up of employees who work on
a part time, temporary, seasonal or standby
basis and perform relatively routine tasks and
have little career progression.
They allow the organisation to respond to
variations in demand, for example, many retail
outlets hire temporary sales employees over
the Christmas period
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The third group or leaf consists ofcontractors,
temporary and self employed staff(referred
to as suppliers) who are hired when their
particular skills and specialisms are required
and paid based on results/output, usually in
the forms of fees
A fourth leaf of the shamrock may exist,
consisting ofconsumers who do the work of
the organisation. Examples are shoppers who
bag their own groceries and purchasers of
assemble-it-yourself furniture.
Separation of direction andmanagement
Board sets the direction
Board oversees/monitors management
Management implement/carry out boards
instructions
The bigger the company, the greater the need
for separate boards and management
Role of the board
King Report (South Africa) - role of the board is:
To define the purpose of the company and the
values by which the company will perform its
daily existence and to identify the stakeholders
relevant to the business of the company. Theboard must then develop a strategy combining
all three factors and ensure management
implements that strategy
Role of management
To ensure that objectives (strategic, tactical,
operational, financial and non-financial) as
set by the board of directors, are achieved.
The manager will use resources (e.g. money,
people, material, equipment, information,
time and space) in the most effective andefficient way to achieve the objectives set (by
the board).
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Span of control and Scalar chain Span of control
The number of subordinates directly managed.
Depends on:
Geographical distribution
Ability
Personality
Support
Organizational culture
Scalar chain
Complexity
Scalar chain
Organizations always havea hierarchy of commandand authority.
Fayol referred to thevertical arrangement ofdirect authority andresponsibility as a scalarchain or line of authority.
The length of the chain isthe number of levels ofauthority andresponsibility whichconstitute anorganization's hierarchy,CEO through to cleaners.
Tall organizations
Large number of management levels
Long scalar chain and small span of control.
Typically connected to centralization, formal
rule setting and division of labor (e.g. one
man, one job).
Top-down, command and control structures.
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Flat organizations
Few management levels, shorter scalarchains, wider spans of control.
Typically decentralized and task orientated.
Self-directed, self-managed, multi-disciplinary, cross functional work teamswhere power flows from expertise, notposition.
Customer, problem and opportunityorientated.
Tall versus Flat OrganizationsChief
Executive
ChiefExecutive
Tallhierarchy
Flathierarchy
Relatively widespan of control
Relatively narrow
span of control
Tall Organization
Flat Organization
Span of Control
is simply the
number of
people who can
report to a
single manager
inside of the
hierarchy.
TALL VS. FLAT STRUCTURES
FLAT STUCTURE
Close control
Better coordination
Fewer mistakes due to closesupervision
Good for staff desiringdetailed guidance
As levels in the hierarchyincrease, communication getsdifficult.
More time being taken toimplement decisions.
TALL STRUCTURE
Loose control
Difficulty in coordination
More mistakes due to loosesupervision
Good for staff requiringgreater independence
challenge and responsibility Results in quick
communications, fast decisionmaking but can lead tooverworked managers
Centralization
The practice of minimal delegation of
authority by senior management
Decision-making authority is held at the core
of the company, e.g. at head office.
Tend to be found within tall, bureaucratic
structures or command and control
structures.
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Centralization advantages
Include:
Control over core resources
Coordinated and uniform decision making
Quick reaction to strategic requirements
Uniform, controllable standards
Easier to develop culture
Centralization disadvantages
Include:
Management overload
Local (e.g. not head office) conditions and
requirements may not be fully understood by
central management.
One-size may not fit all
Slower reaction times to local issues
May encourage revolts at local levels
Discourages local initiative
Decentralization
The delegation of the freedom to make
decisions
Concerns the degree to which authority to act
can be dispersed throughout an organisation.
Requires autonomous business units or divisions
and a flat structure management mentality. Advantages and disadvantages are basically the
mirror to centralization
Decentralization
Advantages Disadvantages
Senior management free to
concentrate on strategy
Loss of control by senior
management
Better local decisions due to local
expertise
Poor decisions made by
inexperienced managers
Better motivation due to increased
training and career path
Training costs
Quicker responses/flexibility, due to
smaller chain of command
Duplication of roles within the
organizations
Frees Strategic apex Dysfunctional d ecision making
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Anthonys Triangle
OPERATIONAL
TACTICAL
STRATEGIC
Anthonys hierarchy
Strategic = long-term, external, wholebusiness, PEST, SWOT, Carried out by seniormanagers, 3 to 5 years implications
Tactical = short to medium-term, internal andexternal, divisions, functional, managers andsupervisors, mobilizing resources andinnovating
Operational = short-term, internal, day-to-day,supervisors and workers
The formal and informal organization
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The informal organisation
This organization evolves over time and is a
network of relationships that exist within an
organization
These relationships could be as result of
common interest or friendship
No predefined layout or structure
The informal organisation
Formal = company policies, rules, internal
controls and job descriptions.
Informal = reality of day-to-day interactions
between managers and employees.
Together = best way of achieving.
Why it exist?
Personal relationships arise between
individuals
A group of individuals may share common
interests E.g. Football, Politics and so form an
informal organization
Workers find new ways of doing things which
save them time
The informal organisation
Advantages include:
Innovation and achievement beyond restrictions
of formal rules
Employee commitment: Higher motivation, job
satisfaction, involvement and ownership
Speed: Better communication
Responsiveness: easy to adapt as directness and
flexibility of such organization helps in times of
rapid environmental changes
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The informal organisation
Disadvantages include:
Potential clash between formal and informal ways
Can be used to increase opposition to change
Gossip and rumor can be unproductive
Managers duties to minimize problems
Meeting employees needs as far as possible
via formal organization: providing information,encouragement and social interaction
Exploiting the dynamics of informalorganization
Involving managers themselves in the informalstructure, so that they support informationsharing, the breaking down of unhelpful rulesand so on