Principles Of Business - Internal Organization PDF

PRINCIPLES OF BUSINESS SECTION 2- INTERNAL ORGANIZATION NAME__________________________________________________________ GRADE_________________________________________________________ OBJECTIVES i. describe the functions of management ii. outline the responsibilities o...

PRINCIPLES OF BUSINESS SECTION 2- INTERNAL ORGANIZATION NAME__________________________________________________________ GRADE_________________________________________________________ OBJECTIVES i. describe the functions of management ii. outline the responsibilities of management iii. construct simple organisational charts iv. interpret simple organisational charts v. outline the essential characteristics of a good leader vi. discuss the different leadership styles vii. identify potential sources of conflict within an organisation; viii. outline strategies used by employers and employees to gain an upper hand during periods of conflict ix. describe strategies for the resolution of conflict within an organisation x. establish guidelines for the conduct of good management and staff relations in the workplace; xi. identify strategies for motivating employees in a business xii. evaluate the role of teamwork in the success of an organisation xiii. outline strategies for effective communication within an organisation 1|Page  INTERNAL ORGANIZATIONSAL ENVIRONMENT 2.`1 FUNCTIONS OF MANAGEMENT  Management is bringing together all the human resources and non-human resources in an effort to meet the organization's goals.  The functions of management are designed to create an environment in which the goals of the organization can be pursued in an efficient manner. These include: Planning  This is concerned with setting goals for the future of the organization, deciding the direction the business should take and the resources needed. Organizing  This involves bringing together the factors of production: land, labour, capital and enterprise.  It also means planning who is going to do a particular task and who is going to supervise the job Directing  This involves giving instructions and getting people to work in an efficient and effective manner. Controlling  This function involves monitoring the employee’s activities to determine if the organization has achieved its target and make corrections if necessary. Co-ordinating  This function involves making all the resources in a business work efficiently to avoid confusion and duplication of activities between departments. Delegating  This involves assigning a task to subordinates so that the manager can have more time to devote to more important issues. Motivating  This is a process where workers are inspired to do their best and take responsibility for their own work. 2|Page FUNCTIONAL AREAS OF A BUSINESS (this section is brought over from section 1)  Functional areas of a business refer to how the organization is structured for efficient operation. This means that the activities of the business are grouped accordingly to the nature of what is required.  A small business will be managed by one person however, a large business will be managed by more than one persons with specific skills.  Functional areas of a business include: marketing, production, personnel, finance and research and development. Production  This department is responsible for converting raw materials into goods and services needed by customers to satisfy their needs and wants.  The functions include: buying raw materials, ensuring high quality production, storing material and finish products. Marketing  This department is responsible for finding out what customers want and how this can be promoted and sold.  The functions include: pricing the product, promotion and advertising, distribution and selling and market research. Personnel/Human Resource  This department is responsible for recruiting the right person with the expertise to carry out the job, it is responsible for the employee’s welfare.  The functions include: recruitment of staff, staff training, disciplining of workers, prepare sick- leave and pension schemes. Finance  This department is responsible for managing the finances and cash flow of the business.  The functions include: keeping up-to-date accounts, keeping cash flow records, keeping within the budget and obtaining new finances. Research and Development  This department is responsible for seeking to improve its product or service in order to maintain its competitive edge.  The functions include: redesigning or rebranding, financial research, and conducting a feasibility study 3|Page 2.2 RESPONSIBILITIES OF MANAGEMENT  Businesses have a duty to demonstrate that they care about their stakeholders such as: owners, employees, society, customers and the government.  Management Responsibility to Owners  To maximize efficient use of resources to reduce wastage  To earn profit to pay dividends to shareholders  To keep owners informed through annual reports Management Responsibility to Employees  To pay fair wages  To provide good working conditions  To offer training courses to develop workers Management Responsibility to the Society  To provide stable employment  To avoid damages to the environment  To sponsor special social/cultural events Management Responsibility to Customers  To charge fair prices  To provide quality products  To offer pre-sales and after-sales services Management Responsibility to Government  To observe all legal laws  To pay all necessary taxes  To provide all information required by government 4|Page 2.3 CONSTRUCTING SIMPLE ORGANIZATIONAL CHARTS Organizational Charts  An organizational chart is a diagram of the organizational structure showing different management and employee positions in a business. It also shows: i. the levels of authority and the span of control ii. the department the manager is responsible for iii. a formal relationship in the organization 2.4 Interpretation of the Chart  The most senior position is placed by itself with no other position at that level  All positions with the same level of authority but different departments are placed on the same level  Span of control – the number of subordinates reporting directly to the manager. It can be narrow or wide  Chain of command-the route through which authority is passed down from the chief executive Types of Organizational Charts Functional  The functional structure is designed according to the functional areas of a business such as production, marketing, finance. In this structure, the staff of the production department reports to the production manager. [Example on page 82 – POB textbook] 5|Page  Line Organization  Authority flows from the top-most person in the organization to the person in the lowest rung. In these organizations a supervisor exercises direct control over a subordinate. [Example on page 80 – POB textbook] Line and Staff  The line manager has ultimate authority in a firm and the staff managers assist them in carrying out certain activities in the organization. 6|Page 2.5 ESSENTIAL CHARACTERISTICS OF A GOOD LEADER  A leader is someone who influences and directs workers towards achieving the goals of the organization. The main characteristics of a leader are:  Must have the ability to communicate with clarity - so that workers can understand what is being said and not misinterpret the information  Must be willing to listen - this will enable the leader to solve conflicts and problems  Must be a critical thinker and be able to solve problems- being able to look at alternatives before making a decision  Must be able to motivate others to be self-driven- this enables workers to accomplish a task quickly  Must be creative- be able to come up with new ideas  Must have self- confidence - this allows the workers to have confidence in their leader resulting in their willingness to follow his/her instructions  Honesty, flexibility, focus, trustworthiness, and ability to make intelligent decisions. 2.6 DIFFERENT LEADERSHIP STYLES  Leadership styles refer to the way in which a manager makes decisions and deals with his/her staff. Leadership styles include - Autocratic, Democratic and Laisser-faire Autocratic  One who takes decisions alone with no discussion, the workers are not involved in the decision-making process. It is best suited for military service, army, and the police force Advantages  Makes quick decisions without the need to consult others so no time is wasted  Supervises workers closely, this will eliminate the tendency for workers to ‘slack off ’resulting in increased productivity  Takes full control of the organization and get persons to carry out the required task Disadvantages  The leader is a poor motivator- this demotivate workers who want to contribute and accept responsibility  This leadership style does not contribute to team building since the leader is detached  This leadership style leads to resentment and frustration among workers who cannot pursue the goals of the organization Democratic  One who engages in discussion with workers before taking a decision, this involvement can lead to better decisions  It is best suited for small organizations where the organization’s goals require a major commitment from the staff Advantages  Worker involvement is encouraged, this can lead to better decisions  It facilitates a two-way communication which allows feedback from workers  Job enrichment is more likely to be achieved because attention is given to workers through involving them in decision making 7|Page  Disadvantages  Consultation with staff can be time-consuming since the views of many persons have to be considered  On occasions where quick decisions have to be made, this leadership style might not be the best Laisser-faire  One who leaves colleague to get on with their work, such as tertiary institutions where teachers are expected to facilitate students’ education. Advantages  Little if any management supervision is required, this provides job enrichment  It encourages horizontal communication, this encourages the staff to be innovative Disadvantages  Delay in decision making due to numerous discussions and deliberations  Laisser-faire approach by supervisors may be interpreted as a lack of care for the workers 2.7 SOURCES OF INTERNAL CONFLICT IN AN ORGANIZATION  There are some factors that can lead to dissatisfaction and conflict between management and workers, which management should guard against or be prepared to handle. These include:  Levels of worker’s pay  Working conditions e.g. working long hours, inadequate ventilation, poor lighting Inadequate equipment/machinery  Unfair treatment of employees e.g. unfair dismissal  Competition between employees regarding performance/promotions  Leadership style not suitable for employees  Breakdown in communication leading to a misunderstanding between employer and employee NB: generally when there is a conflict in an organization there is a decrease in morale, increase in absenteeism and decrease in productivity. 2.8 Strategies Used by Employers and Employees to Gain an Upper Hand During Periods of Conflict Employer’s Strategy to Settle Disputes  Negotiations – are used to reach a settlement between the employer and employee  Public relations- this is using the media to gain public support for the employer’s position  Threats of redundancies- this is where the employer puts pressure on the union to reach a settlement  Change of contract – this is where the employer may change or issue a new contract when old ones are due for renewal if the worker takes part in industrial actions  Closure – the business or factory will be closed to solve the conflict leading to redundancy and loss of profit to the owner  Lockouts – these are short-term closures of the business to prevent employees from working and being paid  Employment of other workers – a firm may employ other workers to break the strike 8|Page  Employees Strategy to Settle Disputes  Go slow- a form of industrial action where worker’s work at a minimum pace, they may lose their bonus pay.  Work to rule - workers refuse to work outside of the precise terms of their employment.  Overtime bans – employees refuse to work more than contracted number of hours.  Strike actions – workers totally withdraw their labour for a period of time leading to production stoppage.  Picketing – demonstration by workers to gain support for their case. 2.9 Strategies for the Resolution of Conflict Within an Organisation  A grievance is an issue or dispute that workers take to their employer. The following grievance procedure is taken to resolve a conflict: 1. Workers report the grievance to the trade union 2. The union delegate organizes collective bargaining to resolve conflict with Supervisors 3. If unresolved with the supervisors, then the union delegate will seek to resolve the conflict with the top manager 4. If unresolved with top managers, then the matter is reported to the Labour Minister for mediation or conciliation 5. If the matter is still unresolved, then the Industrial Disputes Tribunal [IDT], the chief arbitration body is bought in to solve the problem 6. IDT hears the case from both parties and makes a rule or judgment on it Strategies  Collective bargaining- done by trade union representative where they negotiate with the manager/supervisors to resolve a conflict.  Mediation or conciliation – where the trade union delegate takes the issue to the Ministry of Labour this is a 3rd party brought in to solve the conflict.  Arbitration – where the trade union takes the case to Industrial Disputes Tribunal [IDT] who makes final ruling on the case. 9|Page  Role of Trade Unions  A Trade Union assist workers in dealing with a conflict that arises in the workshop between management and themselves, they help to settle disputes between workers and management. Purpose of Trade Unions  To represent the worker's interest  To negotiate on behalf of workers for better wage and salaries, fringe benefit, and improved working condition  To settle disputes between management and workers  To educate their members about their rights and responsibilities Key Terms  Trade Union- is a mediatory body that helps to settle disputes between workers and management  Collective bargaining – negotiations between a representative of workers and employers  Shop Stewart – a union representative  Industrial actions – measure taken by the workforce or trade union to put pressure on management to settle an industrial dispute in favour of employees  Conciliation/Mediation – the use of a third party in an industrial dispute to encourage both employer and union to discuss an acceptable compromise  Arbitration – resolving an industrial dispute by using an independent third party to judge and recommend a solution  Grievance procedure- the agreed process of attempting to resolve an industrial dispute between employers and employers 2.10 Guidelines for the Conduct of Good Management and Staff Relations in the Workplace Management should:  provide and maintain good communication, this should involve feedback from employees to management often referred to as two-way communication  provide good working conditions such as: adequate ventilation, good lighting and appropriate tools and furniture to motivate workers to work efficiently  motivate workers in the form of praise/acknowledgement and providing incentives to improve employer/employee relationships  adapt good leadership styles to provide a sense of direction as this will motivate the staff to work towards the company’s goal 10 | P a g e 2.11 Strategies for Motivating Employees in a Business  Employees in the workplace can be motivated both financially and non- financially. Financial Methods  Providing a high income for workers will enable them to have a higher standard of living, that is, they will be able to afford a nicer house and car, better food, better clothes and more exotic holidays.  Examples of financial methods- higher wages/salaries, performance related pay, financial fringe benefits. Non-Financial Methods  Job satisfaction is a high motivator, this is where the worker enjoys and love their job, the employee feels that the job they are doing is something they really want to do.  Examples of non-financial strategies – job rotation, empowerment and training, provide good working conditions, employee of the month awards, applaud employees for work done. 2.12 VALUE OF TEAMWORK IN AN ORGANIZATION Teamwork Team- work involves grouping workers together to work cooperatively to achieve the same goal. Advantages  Team members can share ideas, so inexperienced workers can learn from working with more experienced workers  Fosters the participative approach, this gives a feeling of belonging  Improves morale - group interaction and participation can motivate workers Disadvantages  Personality clashes may exist between team members  More time is needed to make decisions and solve conflicts as more people are involved  Some persons may prefer to work as an individual and not as a team resulting in some members doing all the work 11 | P a g e 2.13 Strategies for Effective Communication  Effective communication begins with the transmission of a message from sender to a receiver using a channel of communication Communication may be  Upward – from employees to management  Downward -from management to employees  Horizontal - between managers or between employee at the same level Communication channels may be :  Formal – the message is communicated for the sole purpose of conducting company business  Informal – this channel is used by employees, friends or social groups to transmit personal messages or opinions. Communication Methods There are many different ways of sending a message;  Written Communication -is transmitted via letters, memorandums, reports, minutes, bulletins and notices, emails, newsletter  Oral /Verbal Communication -involves face to face conversations, meetings, interviews, telephone calls, seminars, webinars, video chats, video conference, public address systems  Visual communication - include sending videos, charts, pictures, drawings, billboards Questions #1 (CSEC May/June 2018) a) (i) Define the term organizational chart. (2 marks) (ii) State TWO rules that should be followed when constructing an organizational chart. (2 marks) b) Construct a simple organizational chart showing THREE levels and THREE positions for a small private limited company. (4 marks) c) List THREE duties of a personnel or human resource manager. (3 marks) (i) Suggest THREE potential causes of conflict within an organization.(3 marks) (ii) Explain the strategies that could be used to resolve conflict within an organization. (6 marks) Total 20 marks] 12 | P a g e  Question #2 (CSEC May /June - 2017) a) State TWO activities performed by each of the following managers (i) Marketing (2 marks) (ii) Production (2 marks) (ii) Distinguish between ‘finance’ and ‘human resource’ areas of business. (4 marks) b) Describe EACH of the following functions of management (i) Delegating (2 marks) (ii) Motivating (2 marks) (iii) Controlling (2 marks) c) Explain ONE way in which management fulfills its responsibility to EACH of the following groups of persons: (i) Customers (3 marks) (ii) Employees (3 marks) [Total 20 marks] Review Question #3 (CSEC May /June - 2021) 3 a) Identify FOUR potential source of conflict within the workplace. ( 4 marks) b) List FOUR actions that employees may take to gain the upper hand during periods of conflict. (4 marks) c) Describe each of the following conflicts that may be used in the resolution of conflict within the workplace. (i) Grievance Procedure( 2 marks) (ii) Mediation ( 2marks) (iii) Arbitration ( 2marks) d) Explain TWO strategies that may be adopted by management to build good relationships between management and staff in the workplace. ( 6 marks) 13 | P a g e