1. Handout 4: Types of organisation
PowerPoint presentation
Unit 226 (B&A 38): Understand employer organisations
Handout 4: Types of organisation

2. Types of organisation
Private – organisations that exist to make a profit, eg retailers, and are owned by shareholders, which may number from one to thousands. Companies whose shares may be bought by the public are identified by the letters plc after the name. Public – organisations funded by public money (ie taxes), which include hospitals, schools, etc. Non-profitmaking (the community and voluntary sector) – charitable organisations such as Oxfam.
Organisations sit in one of three sections depending on their function.
There are major differences between these three groups or sectors, mainly in the areas of their purposes, the way they are run, how they are financed and what they do with their profits or surpluses of cash.

3. Private sector organisations
Purpose
To make a profit for its shareholders.
Source of finance
Profits from sales; shareholder investment.
Method of finance
Increasing sales and lowering operating costs
Destination of profits/surplus
Pays shareholders’ dividend and then invested into the business with a view to making more money.
Example organisations
Marks & Spencer, British Airways, BUPA.

4. Types of private sector organisation
sole trader
partnerships
private limited company
public limited companies.
These organisations’ motivation is to increase profit, attract new customers and build on existing relationships, eg retail. They vary enormously in size, from the sole trader to the multi-national.
Sole trader – one person owning the organisation and taking personal liability for debts and profits. Examples are window cleaners, painters and decorators, local builders.
Partnerships – two or more people run the organisation, taking joint personal liability for debts and profits.
Limited companies – these consist of a minimum of two shareholders and must be formally registered. Whilst, they are subject to comply with more legislation, their advantage to the owners is that their personal liability for debts is limited to their shareholding.
There are two types of limited company:
private limited company – are owned by a fixed number of shareholders, who provide the finance for the operation in exchange for their corresponding share in the profits. These companies carry the abbreviation Ltd after the name.
public limited companies – shares may be bought by the public on the Stock Exchange. These companies, because of their public nature, are subject to more stringent financial reporting and auditing requirements and are identified by the letters plc after the name.

5. Public sector organisations
Purpose
To provide a good value service to the public.
Source of finance
Public taxation.
Method of finance
Meeting targets within a budget.
Destination of profits/surplus
Goes back to central government.
Example organisations
NHS, government departments, state schools.

6. Types of public sector organisations
NHS Health organisations – hospitals, doctors’ surgeries, clinics
state education organisations – schools, colleges
local authorities (councils), eg London Borough of Ealing
government departments, eg Department for Health
executive agencies that operate as separate organisations, eg The Met Office and HM Land Registry are both executive agencies within the Department of Business, Innovation and Skills (BIS)
non-ministerial departments, eg the Foods Standards Agency
non-Departmental Public Bodies (NDPB) – quangos – eg The Health and Safety Executive.

7. Voluntary sector organisations
Purpose
To provide free services for those in need.
Source of finance
Donations.
Method of finance
Appeals, fund-raising activities, charity shops.
Destination of profits/surplus
Spent on supporting the organisation’s main aim.
Example organisations
Greenpeace, Save the Children, RSPCA.
Sometimes referred to as the Third Sector, this comprises charity organisations such as Oxfam, whose principal aim is to raise aid for their stated cause or voluntary organisations such as the Voluntary Services Organisation, which works in partnership with many public sector organisations, including the NHS.
Voluntary organisations may enter into contracts with public bodies to provide services or they may work with them more informally, referring clients to public services, taking referrals from public bodies or sharing information with them.
Other types of organisations in this sector operate under a charitable status where money is not raised for a cause, but rather invested back into the operation, eg City and Guilds.

8. Factors affecting the way organisations operate
Within the sectors, the way organisations operate will differ greatly depending on their
purpose
size
customers.