UNDERSTANDING BUSINESS ORGANISATIONS WITH REFERENCE TO MANAGEMENT THEORIES Topic 2.2: (HSC topic 1) BUSINESS MANAGEMENT AND CHANGE Stage 6 Business Studies 2010

AGENDA  Classical-scientific  management as planning, organising and controlling  hierarchical organisational structure based on division of labour  autocratic leadership style  Behavioural  management as leading, motivating, communicating  flat organisational structure, teams  participative/democratic leadership style

AGENDA  Political  uses of power and influence, management as negotiating and bargaining  structure as coalitions  stakeholder view  Strengths and weaknesses of the classical, behavioural and political approaches  Systems/contingency  adapting management and organisational approaches to circumstances

CLASSICAL SCIENTIFIC THEORY Key Person  Frederick Taylor  Do it once  Do it well  Train people properly in this method  Give them the right tools to do the job well Key Points Improve efficiency Decrease costs Increase profits AKA “The Principles of Scientific Management”

Classical Scientific Cont. Setting goals Creating a strategy Planning Designing a framework Who, What, Where, When, How Organising Measuring what is happening vs what is planned to happen Controlling Three key functions of management:

ORGANISATION STRUCTURE Pyramid StructureDivision of labour Rigid chain of command Small span of control Hierarchical organisation structure Based on division of labour Autocratic style of management - theory was developed at a time when workers did as they were told.

BEHAVIOURAL THEORY Democratic Participative High degree of employee participation Non voting Flat Organisational structure Higher productivity if less supervision Wider span of control Remove layers of management Team Structure Leading, Motivating, Communicating Direct peopleCommunicate Resolve conflict

POLITICAL THEORY Possible Power Stakeholders GovernmentUnions State of economy Worker skill demand “MY WAY OR THE HIGHWAY” Managers having the right to tell employees what to do is wrong

Political Power Cont.- Power & Influence Legitimate Accepted Dependent on role of position Expert Expert knowledge Specialist skills Referent People who have personality traits / desirable characteristics admired by others Reward e.g. to grant salary levels, bonuses, promotions etc Coercive Forcing others to do what they don’t want to. Covered though unfair dismissal legislation

Political cont. – Negotiating and Bargaining  Bargaining  To negotiate the terms of an agreement, as to sell or exchange.  To arrive at an agreement.  An agreement between parties fixing obligations that each promises to carry out.  An agreement establishing the terms of a sale or exchange of goods or services: finally reached a bargain with the antique dealer over the lamp.  Property acquired or services rendered a a result of such an agreement. Negotiation Negotiation is one of the most common approaches used to make decisions and manage disputes. It is also the major building block for many other alternative dispute resolution procedures It involves dealings among persons, which are intended to result in an agreement, and commitment to a course of action: between two parties (bilateral); or among several parties (multilateral).

Political cont. – Structure as coalitions An alliance between different groups of people working together to achieve common goals Goals may include: Increased power Rewards

Political cont. – Stakeholder view  Employees  Rewards  Managers  Competitive through efficiency and cost cutting  Suppliers  Stability and bills paid on time  Investors  ROI (Return on Investment) Political view held that stakeholders held different views on what they wanted from the business

STRENGTHS & WEAKNESSES – CLASSICAL SCIENTIFIC STRENGTHS Focus on competitiveness Focus on productivity – division of labour, training, rewarding of employees Focus on efficient structure of business – clearly defined chain of command

SYSTEMS THEORY A business = A system Inputs = raw materials, labour etc are transformed into finished products Process is important Reducing cost through process = gaining competitive advantage Product = Good Quality = Increased Market Share First theory to stress relationships in business. Focuses on links that includes the external business environment Key Relationships

Systems Theory – another view

CONTINGENCY THEORY  A contingency is a future event or circumstance that is possible but cannot be predicted e.g.  Complete power failure to a building  Fire burns down the main factory  Influenza epidemic wipes out 60% of work force in a matter of weeks  Cars will replace horses No universal or best way of running the business A business organisation must fit with the environment that it is situated within : Structure and style should fit with tasks undertaken by the business Example – leading troops into war and managing a hospital – the same style cannot apply as different actions are required

Contingency Cont – Adapting Management and Organisational Approaches  Example: Large businesses who USE HIERARCHICAL ORGANISATIONAL STRUCTURES AND AUTOCRATIC LEADERSHIP STYLES Slow to react to change Henry Ford and the Model T