Chapter 36 Review

Organisational Structure

How organisations work

Organisations are entities, comprising of a range of human and technological resources, which are managed, organised and coordinated to accomplish goals.

The three fundamental resources of any organisation are:

  • People
  • Organisation
  • Technology

The success of an organisation is determined by how well it manages and controls these three resources (the pillars of an organisation). These three resources have the following components:

People / Organisation / Technology
Career / Strategy / Hardware
Education / Policy / Software
Training / Mission Statement / Telecommunications
Employee Attitudes / Culture / Information Systems
Employee Participation / Management
Employee Monitoring / Bureaucracy
Work Environment / Competition
Environment

Ingredients for success:

A survey commissioned by the DTI (Department of Trade and Industry) in 1997 came to the following conclusion about most successful companies within the UK:

Winning UK Companies:

  • Are led by visionary, enthusiastic champions of change.
  • Unlock the potential of their people
  • Creating a culture in which employees are genuinely empowered and focused on the customer.
  • Investing in people through good communications, teamwork and training,
  • Flattening and inverting the organisational pyramid.
  • Know their customers
  • Constantly learning from others
  • Welcoming the challenge of demanding customers to drive innovation and competitiveness.
  • Constantly introduce new, differentiated products and services.
  • By deep knowledge of their competitors
  • Encouraging innovation to successfully exploit new ideas.
  • Focusing on core businesses complemented by strategic alliances.
  • Exceed their customer's expectations with new products and services.

Focus on people

Successful companies view people as a key resource rather than simply as a cost. Competition may copy the product but it cannot copy the people. This is why managements tasks include making people fulfil their full potential.

“Motivated staff will be ten times more productive than unmotivated staff”

In most situations it is the employees who customers meet and often judge the company based on these judgements.

Training is seen as a key component in supporting employees. There is a clear recognition that training is needed in order to remain competitive, with training being classed as a competitive weapon.

Focus on organisation

Businesses organisations have four internal functions, which they must manage and control:

  • The production group produces the goods of services
  • The Sales and Marketing group sells the product.
  • The Personnel / Human Resources group hires and trains workers.
  • The Finance and Accounting group seeks funds to pay for all these activities and keeps track of the accounts.

Traditionally an organisation is structured in a pyramid fashion. The new pyramid:

”Five years ago the corporate structure was like a pyramid with very steep sides, in fact one could say a stalactite. Now it is more like a plate of peas. The number of levels in an organisation is cut to as few as possible. In some instances there are only three levels within the organisation: Directors, managers and people.”

Turning the pyramid upside down emphasises that customers, markets and competition are crucial to business success with employees on the front line.

External Pressures on an Organisation

Surrounding the organisation is an environment of customers, competitors, government regulators and other interested parties, all of which have an influence on how the business is run and what policy decisions are made.

Examples of there influences are:

Customers: Saturating markets.

Government: Tax, VAT, National insurance etc.

Competition: Prices, similar goods, better good etc.

Environment: September 11, Petrol Crisis, Foot & Mouth.

Remember Diagram 36.4 on page 199.

Focus on technology:

Technology is the third pillar to an organisation’s success.

Organisations and information systems:

Most organisations are hierarchical; they are arranged in ascending order of power, pay and privilege. The three major levels in an organisation are production workers, information workers and management workers.

Each level in an organisation has its unique class of information system:

  • Data or transaction processing systems server the needs of production workers who must deal with thousands or even millions of transactions with customers and suppliers:
  • Knowledge work systems serve the needs of clerical and professional people to process and create information and knowledge.
  • Management information systems serve management’s needs to control and plan the organisation.

Production workers  Data processing / Transaction processing systems

Information workers  Knowledge work systems

Managers  MIS

Organisations then, do not have just one information system; they may have hundreds.

Data Processing Systems

A data processing system is also known as a transaction processing system. Examples of such transactions are withdrawals at banks, appointments with a doctor and buying an item from a supermarket.

Transactions are all events that are recorded when goods or services are bought, sold, distributed or dealt with in some manner.

The two kinds of transaction systems are:

  • Batch systems – whereby transactions are collected over a period of time and processed together.
  • On-line systems where data is processed as soon as it is collected.

When it is not urgent to process transactions for up-to-date information then a batch system is suitable. An example would be The TV Licensing Authority who may collect requests for TV licences in batches of 50 – 100.

An airline reservation system however requires up-to-date information to ensure a seat is not double booked. This system would need to be online. This system is also known as Pseudo Real Time. The word pseudo is used because it indicates that the update takes place effectively but not absolutely immediately. A delay of a couple of seconds is usually acceptable.

Knowledge work systems:

Information workers are generally of two types: office clerical workers and sales personnel, and behind the scenes professionals such as accountants, lawyers, doctors and engineers.

Knowledge work systems are used by information workers to help deal with problems requiring knowledge or technical expertise.

Word processing, databases, spreadsheets and intranets for example all fall into this category. In addition the combination of hardware and software enables groups of people to find out information, communicate or work together as a team even if there is geographic separation. Networks, web browsers, email and video conferencing facilities are examples of this.

MIS

Management information systems are designed to help managers’ monitor and control organisational performance and plan for the future. MIS are covered in greater depth in the following review (chapter 37 review)