HRM7006 People &

Organisations
Barbara Barnes: September 2019
Lecture 2
In this session:

 Business Classification
 Business Sectors
 Legal UK business entitities
 The growth of SME’s in our economies
 Types of Business structures
Typical Business Sectors
 Primary:
 Agriculture & animal husbandry, Forestry, Fishing, Mining
and Mineral Extraction
 Secondary:
Production of goods, manufacturing, craft or bespoke
products, building and construction.
 Tertiary:
 Services – banking, finance and insurance, trade and retail,
transportation, education, health, culture.
In which sector do I fit?
UK Business Classifications

 Public Sector

 Funded by whom?

 Owned by whom?
UK Business Classifications
 Private Sector
Multiple forms of ownership, e.g.
 Public Limited Company – plc
 Private Limited Company – Ltd
 Sole Trader
 Limited liability partnership
 Franchise
 Charity or not-for-profit organisation
UK Business Classifications

Third Sector Examples:

 Owned by whom?  Charities
 Not-for-profit
 Where does profit organisations
or surplus go?  Co-operative societies
 Voluntary organisations
Throughout the world, across so-called developed
and developing nations, one specific type of
organisation is at the forefront of economic activity
– the small business.

In 2018 there were 5.7 million private sector

businesses in the UK- from 3.5 million in 2000.
Small or micro-business 2018/19
 5.66 million of these are Small businesses – accounting
for over 99.% of all private sector business in the UK.  Up by 63%
since 2000.
 96% of these small businesses employ less than 10 people.

 SMEs employ 16.2 million people accounting for 60% of all private

sector employment in the UK.

 Combined annual turnover of SMEs was £4.262 billion - 59% of all
private sector turnover in the UK.
Not just in the uk!
Around the world, the small and medium-sized enterprise
(SME) sector is a vital engine of innovation and job
creation.

Understanding the real challenges and opportunities

shaping the future of SMEs, then, is a matter of the
highest importance.
Stats from around the world…
 USA: as at 2018….30.2 million SME’s – 99.9% of business.

 China: predicted at 38.82 million

 Europe: 23 million – again 99% of private business

 India: 51 million

But note that different countries have a different measure of ‘small’ by

measure of employees.
The 21st Century Business Environment

 What are the key factors in the external business environment?

 How can these impact upon organisational effectiveness?

 Likelihood: High, medium, low
 Consequence: Severe, moderate, limited
So how much did you learn so far?

 Please use your laptop, tablet or mobile phone……

 https://
create.kahoot.it/share/business-classifications/bc5f297b-f988-4db4-ba28-d9a36212a3
33

 Let’s see how we get on.

MBA7000
People and Organisations
Organisation and Structure
 Introduction

 Organisations have different structures

 Structures have a bearing on employee attitudes and behaviour

 1900-mid-1930; the classical theories of organisation began to

emerge: Frederick Taylor, Henri Fayol, Max Weber, and Mary Parker
Follett
Organisational Structure

"Organisation is more than boxes on a chart: it is a pattern of

interactions and co-ordination that links the technology,
tasks and human components of the organisation to ensure
that the organisation accomplishes its purpose”

Robert Duncan (1979)*

* "What's the Right Organization Structure?" Organizational

Dynamics, winter1979, P.59
What Is Organisational Structure?
 Organisational Structure
 How job tasks are formally divided, grouped, and coordinated

 Key Elements:

1. Work specialisation
2. Departmentalisation
3. Chain of command
4. Span of control
5. Centralisation and decentralisation
6. Formalisation
 Work Specialisation: Economies and Diseconomies

 Specialisation can reach a point of diminishing returns

 Then job enlargement gives greater efficiencies than does

specialisation
 Scientific Management
 Taylorism: rational use of resources ( directly developed by Gantt
and concurrently by Gilbreth)

 Focus on the individual and not the group

 Develop a science for each aspect of work

 Select each worker individually according to abilities and efficiency

 Match the job with the worker

 Management and workers must co-operate

 BSW: Taylor’s Changes
(Case Study in Principles of Scientific Management)

Old Plan New Plan

 500 yard labourers  140 yard labourers

 16 tonnes per day  59 tonnes per day

 $1.15 per worker earnings  $1.88 per worker earnings

 $0.072 cost per tonne  $0.033 cost per tonne

What do you think Taylor
was trying to achieve?
What factors did Taylor fail to consider?
What kinds of organisations might use
Scientific Management today?
 Factory floor
 Call centres
 Clothes shops
 Hotels
 Universities?
 Hospitals?
 Banks?
 1. Work Specialisation
 The degree to which tasks in the organisation are subdivided
into separate jobs
 Division of Labour
 Makes efficient use of employee skills
 Increases employee skills through repetition
 Less between-job downtime increases productivity
 Specialised training is more efficient
 Allows use of specialised equipment

 Can create greater economies and efficiencies – but not

always…
 2. Departmentalisation
 The basis by which jobs are grouped together

Function

Product

Geography

Process

Customer
 3. Chain of Command

 Authority
 The rights inherent in a managerial position to give orders
and to expect the orders to be obeyed
 Chain of Command
 The unbroken line of authority that extends from the top of t
he
organisation
to the lowest echelon and clarifies who reports to whom
 Unity of Command
 A subordinate should have only one superior to whom he or
she is directly responsible
 4. Span of Control

The number of subordinates a manager can efficiently and effectively direct

 Wider spans of management increase organisational

efficiency

 Narrow span drawbacks:

 Expense of additional layers of management

 Increased complexity of vertical communication

 Encouragement of overly tight supervision and discouragement of

employee autonomy
Contrasting Spans of Control
 5. Centralisation and Decentralisation

 Centralisation
The degree to which decision making is
concentrated at a single point in the
organisation

 Decentralisation
The degree to which decision making is
spread throughout the organisation
 6. Formalisation
 The degree to which jobs within the organisation are standardised

 High formalisation
 Minimum worker discretion in how to get the job done

 Many rules and procedures to follow

 Low formalisation
 Job behaviours are non-programmed

 Employees have maximum discretion

 Common Organisational Designs: Simple Structure

 Simple Structure
A structure characterised by:
 low degree of departmentalisation,
wide spans of control,
authority centralised in a single person,
little formalisation
 Centralised Structure

Centralised, functionally departmentalised structure in a manufacturing organisation;

bringing together of operations such as buying materials, production and assembly,
distribution and retailing under the control of one enterprise.
 Multidivisional structure

Multidivisional structure; division are created to look after all aspects of

production of a particular product, that is, from purchasing materials through
manufacturing and distribution
Common Organisational Designs: Bureaucracy
 Bureaucracy

 A structure of highly routine tasks achieved through

specialisation,

 very formalised rules and regulations,

 tasks that are grouped into functional departments,

 centralised authority,

 narrow spans of control,

 decision making that follows the chain of command

 An Assessment of Bureaucracies

Strengths Weaknesses

 Functional economies of scale  Subunit conflicts with

 Minimum duplication of organisational goals

personnel and equipment  Obsessive concern with rules

 Enhanced communication and regulations

 Centralised decision making  Lack of employee discretion

to deal with problems
 Common Organisational Designs: Matrix
 Matrix Structure

 A structure that creates dual lines of authority and combines functional and product

departmentalisation

 Key Elements

 Gains the advantages of functional and product departmentalisation while avoiding their

weaknesses

 Facilitates coordination of complex and interdependent activities

 Breaks down unity-of-command concept

Advantages and Disadvantages of a Matrix Structure

Potential advantages: Potential disadvantages:

 Flexibility in both the use of people and  Weakening of accountability

material resources through duality of command

 Relatively easy to expand to take on  Possibility of role conflict among

other projects members because of duality of
command
 Encouragement of
interdisciplinary/functional  Matrix members may lose their
co-operation career paths in the mainstream

 Excellent training ground

Adapted from Stoner et al (1985); Robbins and
Barnwell (1989) in Linstead et al 2009.
 Other Design Options:
Virtual Organisation

 A small, core organisation

that outsources its major business functions

 Highly centralised with little or no

departmentalisation
Provides maximum flexibility while concentrating

on what the organisation does best

Reduced control over key parts of the business
Other Design Options: Boundary-less Organisation

 An organisation that seeks to eliminate the chain of

command, have limitless spans of control, and replace

departments with empowered teams

 Teams

 Eliminate vertical (hierarchical) and horizontal (departmental)

internal boundaries

Breakdown external barriers to customers and suppliers

Two Extreme Models of Organisational
Design

Hierarchical Responsible
Structure Autonomy
 Comparing Organisational Design

A comparison of mechanistic and organic systems of management

Source: Based on Burns and Stalker (1961) in Brooks, 2009.