SECTION 2: INTERNAL ORGANISATIONAL ENVIRONMENT

OBJECTIVES
 Describe the functions of management
 Outline the responsibilities of management
 Construct simple organizational chart

FUNCTIONS OF MANAGEMENT
Management is the art of combining resources in order to meet the goals and
objectives of the organization. Functions of management include
i. Planning
ii. Organizing
iii. Controlling
iv. Coordinating
v. Delegating
vi. Motivating

 Planning
This is concerned with establishing short term and long term goals and objectives
for the firm, determining the resources and tasks that are necessary to achieve
those goals. The planning process begins with formulating policies from the
overall STRATEGIC plan of the business(long term vision).Managers often utilize
the acronym SMART to help create meaningful goals.

S – Specific
M- Measurable
A- Attainable
R- Relevant
T-Time-based
  Organizing
After establishing clear goals for the business, management is responsible for
ensuring that all the necessary resources or factors of production, and that they
are effectively combined in order to achieve the goals of the company. It includes
assigning duties, establishing schedule and providing raw material. It also means
making sure that everything is in the right place at the right time.

 Controlling
Controlling involves monitoring employee performance against the standards of
performance that have been set in order to determine whether the organization
is on target to achieve its overall goals and objectives. If actual performance does
not measure up to the desired level of performance, then management is
required to use that information to take the necessary steps to address the
problem.

 Directing
This involves giving instructions to employees and getting people to perform their
tasks.

 Coordinating
This involves making sure all the resources in the business work together
efficiently. This avoids confusion and duplication of activities between
departments.

 Delegating
This involves distributing or sharing the workload across the organization from
top management down to middle and junior managers, supervisors and floor
employees.
  Motivating
This entails creating an environment in which employees feel enthusiastic about
their jobs and therefore accomplish their assigned tasks to the highest standard
possible. Providing employees with good working conditions, attractive salaries or
bonuses, recognition through award schemes and opportunities for promotion
and career development are some ways organization can motivate staff.

RESPONSIBILITIES OF MANAGEMENT
 Responsibility to owners or shareholders
i. Maximise profit
ii. Provide accurate financial reports
iii. Make recommendations to the owners on how to increase growth
iv. Manage the resources of the firm efficiently
v. Ensure that the business operates within the laws of the country

 Responsibility to employees
i. Fair wages
ii. Good working conditions
iii. Treat staff fairly and with respect
iv. Maintain clear and proper channels of communication
v. Provide necessary equipment for work to be done efficiently

 Responsibility to customers
i. Provide goods and services of good quality and at reasonable prices
ii. Provide information on products sold
iii. Provide good after sales support (warranty, repair service, delivery services)
  Responsibility to society
i. Adhere to the environmental laws and regulations of the land (pollution)
ii. Preserve local culture and tradition

 Responsibility to government
i. To pay taxes when due
ii. To absorb the laws of the country
iii. To adhere to all government regulations regarding the conduct of business
operations
iv. Make the necessary statutory deductions from employee salaries (National
Insurance and income tax)
 Organizational Structure
This is the relationship between the personnel in an organization and
the functions they perform according to the objectives of the
organization.
An organizational chart is a pictorial representation of the structure of
the organization. It shows lines of authority or chain of command and
the span of control of managers.
The chain of command refers to the flow of authority from the top
management down to floor-level staff.
The span of control refers to the number of employees who report
directly to a particular manager or supervisor. The span of control may
be described as narrow or wide. A narrow span of control exist where a
manager is directly responsible for only a few members of staff. A wide
span of control exists where a manager is directly responsible for a
large number of subordinates.
Organisational charts reflect the varied relationships that exist within a
firm. These relationships include
 Line relationships
 Line and staff relationships
 Functional relationships
Line relationships
Line relationships results in a very ‘tall’ structure where every employee
reports directly to one individual. There is a clear line relationship as
authority flows down in one straight line at every stage of the
hierarchy.
Advantages
1. Very simple and easy to follow
2. The lines of authority are clearly defined
3. There is unity of command i.e. each employee know clearly whom
they are to report to
Disadvantages
1. The structure may be too tall which may hinder communication
between top management and floor level employees
2. Has limited flexibility when working across departments.
Diagram showing the Line organizational structure

OWNER

GENERAL MANAGER

ASSISTANT GENERAL MANAGER

FLOOR SUPERVISOR

FLOOR EMPLOYEES
The Line and Staff Organisational Structure
This structure employs specialists to give assistance and advice to line
managers. These support function managers and staff are organized
into small departments or teams .These are different to the staff in the
main departments of Production, Sales, Marketing etc. For e.g
Information Technology manager, Legal advisor, Chief security officer.

Advantage
1. Line managers will receive technical advice from these support
function managers
Disadvantages
1. More complex and difficult to understand than the line structure
2. There is no unity of command since line managers may become
confused as they receive advice from both support function
managers and top management.

The Functional Organisational structure

This is where a business is organized according to the functional areas
(departments) that exist within the business. These include production,
marketing, finance and personnel.

Advantages
1. There is specialization which help to increase productivity
2. Relatively simple to understand
Disadvantage
1. Communication problems may exist if departments are not
integrated leading to conflict.

LIMITATIONS OF ORGANISATIONAL CHARTS

1. They may become very complex and difficult to understand as the
business grows
2. They do not reflect informal relationships (voluntary groups which
stems from workers’ need for social interaction.
3. Organizational charts do not reveal the leadership style used by
management
 Leadership
Leadership refers to the ability to motivate or influence others to give their best in
order to achieve a goal or objective.

Characteristics of a good leader

 Trustworthy
 Honest
 Flexible
 Ability to make intelligent decisions
 Respectful
 Focused

Leadership Styles
Managers have different personalities and values which play a large role in
influencing their approach to governing or managing a business. Some other
factors that influence the type of leadership employed include:
 The nature of the task at hand
 The attitude of the employees
 The level of skills or qualifications of employees

The most commonly used leadership styles employed by managers include:

 Authoritarian or autocratic leadership
 Democratic or Participative leadership
 Laissez-faire or free rein leadership
 AUTOCRATIC LEADERSHIP
This type of leadership is where all decisions are made by the leader. There is no
consultation with subordinates (workers).Managers gives orders and feedback from
subordinates are not desired.

Advantages
1. Decisions are made quickly as there is no consultation with subordinates
2. There is a clear chain of command; employees are not confused as to who
they have to report to
3. New employees can be provided with clear directives to follow so that the
goals of the firm can be achieved

Disadvantages
1. Employees may lack a sense of belonging within the firm as they are not
involved in the decision making process
2. Employees may become resentful (angry) towards the manager and may
retaliate by not giving their best on the job
3. Worker creativity and innovation may be stifled as their ideas are not
sourced and utilized by the leader.
 DEMOCRATIC/PARTICIPATIVE LEADERSHIP
This type of leadership encourage employees to participate in the decision making
process. Authority is often delegated and a two-way flow of communication takes
place in the organization.

Advantages
1. Employees may feel a greater sense of belonging within the firm as they are
actively involved in the decision making process.
2. Team work is encouraged which could lead to more efficiency in the
business
3. Provides a means for the development of worker creativity and innovation as
their ideas are sourced by the leader.

Disadvantages
1. The decision making process may be slow
2. Employees may influence decisions that are more in line with their personal
preferences and skills, rather than the goals of the organization as a whole.
 LAISSEZ FAIRE /FREE REIN LEADERSHIP
This exists where employees are largely left to make decisions on their own. The
leader is hardly involved in the decision making process. Employees work with
little to no supervision. Managers trusts that employees have the discipline and
skills to carry out their tasks efficiently without a high level of supervision.

Advantages
1. Employees may feel a greater sense of belonging and accountability as
they are largely left to make decisions on their own.
2. Teamwork may be encouraged since workers may find it best to rely on
each other’s input to complete task due to lack of guidance from leader.
3. Employees are allowed to develop their creativity and innovativeness by
being allowed to implement their own ideas.

Disadvantages
1. The decision making process may be slow
2. With little supervision or input from the leader, the employees may make
decisions based on their personal preferences rather than the goals of the
organization
3. Workers may become unproductive on the job
 INTERNAL POTENTIAL SOURCES OF CONFLICT

Conflict means disagreements and disagreements between managers and

employees can cause serious problems for a business if they are not settled or
resolved quickly. The most common cause of conflict in an organization are:

 Level of pay- management may want to keep pay as low as possible but
workers may feel that their hard work should be rewarded with a higher
salary.
 Working conditions- physical working conditions may be very poor for
workers to perform efficiently. Issues such as pensions and holidays for
workers may also become an issue that lead to conflict.
 Business change (e.g. relocation or new technology)- Whereas
management may see change as being necessary for the business to
remain competitive, workers may see change as having the potential to
lead to a loss of jobs and requiring training in order to increase flexibility.
 Lack of promotional opportunities
 Poor communication channels between management and employees
 Lack of equality (favoritism) in the organization
EMPLOYER STRATEGIES TO DEAL WITH CONFLICT

 Negotiations- this can be done between the trade union for workers and
the employers in order to reach a compromise solution. A trade union is an
organization that operates on behalf of workers in order to achieve higher
pay and better working conditions(for e.g. Teachers Union and Public
Service Union)

 Public relations-this is using the media to try to gain public support for the
employer’s position in the dispute.

 Threat of redundancies-these threats are designed to put pressure on

trade unions to agree to a settlement of the dispute. Redundancy is a form
of dismissal from your job. It happens when employers need to reduce their
workforce. If you're being made redundant, you might be eligible for
certain rights, including: redundancy pay, a notice period.

 Change of contracts-employers may change the terms and conditions of

employment which could result in longer working hours
 Closure-closing the business altogether which would lead to redundancy for
all the workers. This happens only in extreme cases
 Lockouts- this is short term closure of the business to prevent employees
from working and being paid .Workers can then put pressure on their
unions to accept a settlement for the dispute.
 Employment of other workers to break the strike- these workers are often
referred to as SCAB workers or BLACKLEGS. These are meant to be
 unpleasant names to suggest that these workers will not be popular with
the workers on strike.

EMPLOYEE STRATEGIES TO DEAL WITH CONFLICT

Employers normally join a trade union to negotiate on their behalf to reach a

settlement that will satisfy both the workers and the employer .This process is
called collective bargaining .If the talking and negotiating fail to reach a
settlement to the dispute then the union and workers can take the following
actions:

 Go slow – workers do their jobs at a minimum pace .This is effective

especially at busy times in the year
 Work-to-rule – this is where employees refuse to do any work outside of
the precise terms of the employment contract. This may result in no
overtime work.
 Strike action- this is an extreme form of industrial action where employees
totally withdraw their labor for a period of time.
 Picketing- demonstrations by workers to gain support for their case (use of
placards).
CONFLICT RESOLUTION (Grievance procedure)

This process of conflict resolutions usually involves the help of outside agencies
which in most cases involves the trade union (refer to previous definition).This
process of attempting to solve a dispute is known as a grievance procedure. A
trade union usually has a shop steward who is a union representative whose main
duty is to attend to the concerns of the workers.

When an industrial dispute cannot be resolved by negotiations between union

representatives and employers, the government provides a mechanism to
overcome the conflict. This approach is based on mediation and arbitration.

MEDIATION (CONCILIATION)

The use of a third party in an industrial dispute to encourage both employer and
the union to discuss an acceptable compromise solution. A mediator has no legal
power to force acceptance of his/her decision but relies on persuasion to reach
an agreement. In most cases the mediator is the Ministry of Labour.

ARBITRATION

Arbitration is an alternative means of settling a dispute by impartial persons

without proceeding to a court trial. The arbitration process usually involves a
hearing where the parties present their cases and the arbitrator makes a
ruling .Each party in the conflict MUST accept the arbitrator’s decision.

GUIDELINES FOR ESTABLISHING GOOD RELATIONS BETWEEN MANAGERS AND

EMPLOYEES.

A healthy relationship between managers and employees can be achieved in the

following ways:

1. Establish good lines of communication with workers by enabling frequent

two-way communication allowing both parties the opportunity to discuss
issues of common interest.

2. Provide improved working conditions for both employers and employees

3. Implement actions that can motivate workers to give their best. These
measures can be a combination of financial (bonuses, perks, higher pay) as
well as non-financial (job enrichment and recognition).

4. Practice good leadership by adapting a leadership style that is appropriate

for the workers being managed and the nature of the work being done.
5. Treat each other with respect and mutual understanding. Workers and
employers needs to understand each other’s needs and ambitions and they
should work together to try to attain them.
 TEAMWORK
Teamwork exists where a group of individuals come together to work towards a
common goal or objective. It is important that management encourages
teamwork as the success of the business depends on the ability of individuals to
work together.

ADVANTAGES
1. Builds a sense of togetherness and belonging which motivates employees
to give their best effort.
2. There is shared responsibility so individuals may feel less burdened on the
job
3. Better decisions may be made through group discussions
4. The quality of output may improve significantly through group effort
5. Employees are provided with the opportunity to learn from each
other(shared learning)
6. There is the possibility of specialization to take place

DISADVANTAGES
1. There may be distractions from idle team members
2. Conflicts may arise within and between teams due to different views of
members
3. The decision making process may be quite slow
4. Some team members may not pull their weight, which results in others
being unfairly burdened and the overall efficiency of the business will
suffer.
 COMMUNICATION
Communication may be defined as the transmission of a message from a sender
to a receiver using a given channel of communication. Communication is effective
where the receiver is able to decode the message accurately and provide accurate
feedback.

CHANNELS OF COMMUNICATION
Communication channels may be perceived as formal or informal. A formal
communication channel is typically used to transmit messages across an
organization for the sole purpose of conducting company business. An informal
channel of communication, on the other hand is typically used by employees,
friends or social groups to transmit gossip, personal messages or opinions.
The main channels of communication include:
1. Oral communication – telephone, interviews, radio, meetings ,conferences,
seminars
2. Written communication-letters, memorandum, newsletter, reports, notices
3. Visual communication- charts, graphs, signs ,signals, billboards
4. Electronic- teleconferencing, videoconference, radio, television, email

Communication within an organization may be:

 Upward: flowing from employees to management
 Downward: flowing from management to employees
 Horizontal: flowing across of managers or employees who are at the same
level on the organizational chart.
BARRIERS TO COMMUNICATION
These are anything that lead to communication being ineffective. These include:
1. Language barriers –the message may be written in a language the reader
does not understand .This can include the use of jargon
2. Emotional interference
3. Information overload- too much information is transmitted at once which
may leave the receiver confused
4. Difference in perception-persons may interpret things differently based on
their own perception which can lead to conflict.
5. Selecting the wrong channel of communication

STRATEGIES FOR EFFECTIVE COMMUNICATION

 Select the appropriate channel and means of communication
 Source feedback from the receiver and respond accordingly
 Listen carefully to the receiver’s feedback
 Be concise. Avoid information overload
 Create a culture where individuals feel free to share their views or ideas

Practice questions

1. ‘We Market For You’ is a business that provides marketing services to the
public. The business is headed by a general manager. There are also two
supervisors, one for marketing and one for finance.
There is one administrative assistant who assists the general manager and
the two supervisors.

2. Construct an organizational chart to show the line relationship among the

following three employees in a business: manager, supervisor of mail
delivery, and supervisor of mail sorting.
 3. Surfing Sands ltd was established five years ago. The private limited
company has a managing director and three departmental managers; surfing
coach, sales and personnel and finance respectively. The surfing coach has
four assistants. Two accountant clerks worked with the finance manager and
a secretary and sales clerk report to the sales and personnel manager. Draw
the organizational chart

4. 2018 question
Construct a simple line organizational chart showing THREE levels and
THREE positions for a small private limited company.

5. An employee of Luta's Auto Repairs, a sole proprietorship, remarked that the

remuneration package and incentives were good, but the leadership style of
the owner was rather domineering. The only reason he continued to work
there was to satisfy his basic physiological needs.

(a) List THREE characteristics of a sole proprietorship. (3 marks)

(b) Explain what is meant by the following:

(i) Remuneration package

(ii) Incentives ( 4 marks)

(c) Identify the leadership style exhibited by the sole proprietor in the
scenario above, giving a reason for your answer. (3
marks)

(d) Outline TWO other leadership styles used by managers. (4 marks)

(e) List TWO examples of basic physiological needs. ( 2 marks)

6. Mr. Mando is a very stern and serious leader. His orders are obeyed without
question. Many employees are afraid of him but some think he is a good leader.

(a) List FOUR characteristics of a good leader. (4 marks)

(b) Identify the type of leadership style that is being practiced by Mr.
Mando, giving ONE reason for your answer. (3 marks)

(c) Outline ONE way in which Mr. Mando's style of leadership can affect his
organization

(i) Positively

(ii) Negatively ( 4 marks)

(d) Describe TWO leadership styles, other than the one identified in (b)
above. (6
marks)

(c) Recommend an appropriate leadership style for a large secondary school,

giving ONE reason for your answer. (3 marks)

6. Tasty Fruit Ltd is a manufacturer of several types of fruit juices. Without

consultation, Mr. Albert, the General manager took a decision that with
immediate effect, all breaks would be reduced from 15 minutes to 5 minutes.
He claimed that the change became necessary to enable the factory to
process a larger amount of juices daily
a. What type of leadership Mr. Albert appear to be practicing?
b. Name TWO other leadership styles.
c. Describe ONE of the leadership styles you named in (b)
d. Identify TWO situations that can result from the action taken by Mr.
Albert.
e. State 5 qualities of a good manager
f. Give an example to show how lack of one of the qualities you
mentioned in part (e) can affect the operation of the factory.