PRINCIPLES OF BUSINESS

SECTION 2- INTERNAL ORGANIZATION

NAME__________________________________________________________

GRADE_________________________________________________________

OBJECTIVES

i. describe the functions of management

ii. outline the responsibilities of management

iii. construct simple organisational charts

iv. interpret simple organisational charts

v. outline the essential characteristics of a good leader

vi. discuss the different leadership styles

vii. identify potential sources of conflict within an organisation;

viii. outline strategies used by employers and employees to gain an upper hand
during periods of conflict

ix. describe strategies for the resolution of conflict within an organisation

x. establish guidelines for the conduct of good management and staff relations in the
workplace;

xi. identify strategies for motivating employees in a business

xii. evaluate the role of teamwork in the success of an organisation

xiii. outline strategies for effective communication within an organisation

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 INTERNAL ORGANIZATIONSAL ENVIRONMENT
2.`1 FUNCTIONS OF MANAGEMENT

 Management is bringing together all the human resources and non-human resources in
an effort to meet the organization's goals.
 The functions of management are designed to create an environment in which the
goals of the organization can be pursued in an efficient manner. These include:

Planning

 This is concerned with setting goals for the future of the organization, deciding the
direction the business should take and the resources needed.
Organizing

 This involves bringing together the factors of production: land, labour, capital and
enterprise.
 It also means planning who is going to do a particular task and who is going to
supervise the job

Directing

 This involves giving instructions and getting people to work in an efficient and
effective manner.

Controlling

 This function involves monitoring the employee’s activities to determine if the

organization has achieved its target and make corrections if necessary.

Co-ordinating

 This function involves making all the resources in a business work efficiently to avoid
confusion and duplication of activities between departments.

Delegating

 This involves assigning a task to subordinates so that the manager can have more time
to devote to more important issues.

Motivating

 This is a process where workers are inspired to do their best and take responsibility for
their own work.

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FUNCTIONAL AREAS OF A BUSINESS (this section is brought over from section 1)
 Functional areas of a business refer to how the organization is structured for efficient
operation. This means that the activities of the business are grouped accordingly to
the nature of what is required.

 A small business will be managed by one person however, a large business will be
managed by more than one persons with specific skills.

 Functional areas of a business include: marketing, production, personnel, finance

and research and development.

Production

 This department is responsible for converting raw materials into goods and services
needed by customers to satisfy their needs and wants.
 The functions include: buying raw materials, ensuring high quality production,
storing material and finish products.

Marketing

 This department is responsible for finding out what customers want and how this
can be promoted and sold.
 The functions include: pricing the product, promotion and advertising, distribution
and selling and market research.

Personnel/Human Resource

 This department is responsible for recruiting the right person with the expertise to
carry out the job, it is responsible for the employee’s welfare.
 The functions include: recruitment of staff, staff training, disciplining of workers,
prepare sick- leave and pension schemes.

Finance

 This department is responsible for managing the finances and cash flow of the
business.
 The functions include: keeping up-to-date accounts, keeping cash flow records,
keeping within the budget and obtaining new finances.

Research and Development

 This department is responsible for seeking to improve its product or service in order
to maintain its competitive edge.
 The functions include: redesigning or rebranding, financial research, and conducting a
feasibility study

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2.2 RESPONSIBILITIES OF MANAGEMENT

 Businesses have a duty to demonstrate that they care about their stakeholders such as:
owners, employees, society, customers and the government.


Management Responsibility to Owners

 To maximize efficient use of resources to reduce wastage

 To earn profit to pay dividends to shareholders
 To keep owners informed through annual reports

Management Responsibility to Employees

 To pay fair wages

 To provide good working conditions
 To offer training courses to develop workers

Management Responsibility to the Society

 To provide stable employment

 To avoid damages to the environment
 To sponsor special social/cultural events

Management Responsibility to Customers

 To charge fair prices

 To provide quality products
 To offer pre-sales and after-sales services

Management Responsibility to Government

 To observe all legal laws

 To pay all necessary taxes
 To provide all information required by government

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2.3 CONSTRUCTING SIMPLE ORGANIZATIONAL CHARTS

Organizational Charts

 An organizational chart is a diagram of the organizational structure showing

different management and employee positions in a business.

It also shows:
i. the levels of authority and the span of control
ii. the department the manager is responsible for
iii. a formal relationship in the organization

2.4 Interpretation of the Chart

 The most senior position is placed by itself with no other position at that level
 All positions with the same level of authority but different departments are placed on
the same level
 Span of control – the number of subordinates reporting directly to the manager. It can
be narrow or wide
 Chain of command-the route through which authority is passed down from the chief
executive

Types of Organizational Charts

Functional

 The functional structure is designed according to the functional areas of a business

such as production, marketing, finance. In this structure, the staff of the production
department reports to the production manager. [Example on page 82 – POB textbook]

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 Line Organization

 Authority flows from the top-most person in the organization to the person in the
lowest rung. In these organizations a supervisor exercises direct control over a
subordinate. [Example on page 80 – POB textbook]

Line and Staff

 The line manager has ultimate authority in a firm and the staff managers assist
them in carrying out certain activities in the organization.

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2.5 ESSENTIAL CHARACTERISTICS OF A GOOD LEADER

 A leader is someone who influences and directs workers towards achieving the
goals of the organization. The main characteristics of a leader are:

 Must have the ability to communicate with clarity - so that workers can
understand what is being said and not misinterpret the information
 Must be willing to listen - this will enable the leader to solve conflicts and problems
 Must be a critical thinker and be able to solve problems- being able to look at
alternatives before making a decision
 Must be able to motivate others to be self-driven- this enables workers to
accomplish a task quickly
 Must be creative- be able to come up with new ideas
 Must have self- confidence - this allows the workers to have confidence in their
leader resulting in their willingness to follow his/her instructions
 Honesty, flexibility, focus, trustworthiness, and ability to make intelligent
decisions.

2.6 DIFFERENT LEADERSHIP STYLES

 Leadership styles refer to the way in which a manager makes decisions and deals with
his/her staff. Leadership styles include - Autocratic, Democratic and Laisser-faire

Autocratic

 One who takes decisions alone with no discussion, the workers are not involved in
the decision-making process. It is best suited for military service, army, and the police
force

Advantages

 Makes quick decisions without the need to consult others so no time is wasted
 Supervises workers closely, this will eliminate the tendency for workers to ‘slack off
’resulting in increased productivity
 Takes full control of the organization and get persons to carry out the required task

Disadvantages

 The leader is a poor motivator- this demotivate workers who want to contribute and
accept responsibility
 This leadership style does not contribute to team building since the leader is detached
 This leadership style leads to resentment and frustration among workers who cannot
pursue the goals of the organization

Democratic

 One who engages in discussion with workers before taking a decision, this
involvement can lead to better decisions
 It is best suited for small organizations where the organization’s goals require a major
commitment from the staff

Advantages

 Worker involvement is encouraged, this can lead to better decisions

 It facilitates a two-way communication which allows feedback from workers
 Job enrichment is more likely to be achieved because attention is given to workers
through involving them in decision making

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 Disadvantages

 Consultation with staff can be time-consuming since the views of many persons have to
be considered
 On occasions where quick decisions have to be made, this leadership style might not be
the best

Laisser-faire

 One who leaves colleague to get on with their work, such as tertiary institutions where
teachers are expected to facilitate students’ education.

Advantages

 Little if any management supervision is required, this provides job enrichment

 It encourages horizontal communication, this encourages the staff to be innovative

Disadvantages

 Delay in decision making due to numerous discussions and deliberations

 Laisser-faire approach by supervisors may be interpreted as a lack of care for the
workers

2.7 SOURCES OF INTERNAL CONFLICT IN AN ORGANIZATION

 There are some factors that can lead to dissatisfaction and conflict between
management and workers, which management should guard against or be prepared to
handle. These include:

 Levels of worker’s pay

 Working conditions e.g. working long hours, inadequate ventilation, poor lighting
Inadequate equipment/machinery
 Unfair treatment of employees e.g. unfair dismissal
 Competition between employees regarding performance/promotions
 Leadership style not suitable for employees
 Breakdown in communication leading to a misunderstanding between employer and
employee

NB: generally when there is a conflict in an organization there is a decrease in morale,

increase in absenteeism and decrease in productivity.

2.8 Strategies Used by Employers and Employees to Gain an Upper Hand During
Periods of Conflict

Employer’s Strategy to Settle Disputes

 Negotiations – are used to reach a settlement between the employer and employee
 Public relations- this is using the media to gain public support for the employer’s
position
 Threats of redundancies- this is where the employer puts pressure on the union to reach
a settlement
 Change of contract – this is where the employer may change or issue a new contract
when old ones are due for renewal if the worker takes part in industrial actions
 Closure – the business or factory will be closed to solve the conflict leading to
redundancy and loss of profit to the owner
 Lockouts – these are short-term closures of the business to prevent employees from
working and being paid
 Employment of other workers – a firm may employ other workers to break the strike

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 Employees Strategy to Settle Disputes

 Go slow- a form of industrial action where worker’s work at a minimum pace, they
may lose their bonus pay.
 Work to rule - workers refuse to work outside of the precise terms of their employment.
 Overtime bans – employees refuse to work more than contracted number of hours.
 Strike actions – workers totally withdraw their labour for a period of time leading to
production stoppage.
 Picketing – demonstration by workers to gain support for their case.

2.9 Strategies for the Resolution of Conflict Within an Organisation

 A grievance is an issue or dispute that workers take to their employer.

The following grievance procedure is taken to resolve a conflict:

1. Workers report the grievance to the trade union

2. The union delegate organizes collective bargaining to resolve conflict with

Supervisors

3. If unresolved with the supervisors, then the union delegate will seek to resolve the
conflict with the top manager

4. If unresolved with top managers, then the matter is reported to the Labour Minister
for mediation or conciliation

5. If the matter is still unresolved, then the Industrial Disputes Tribunal [IDT], the
chief arbitration body is bought in to solve the problem

6. IDT hears the case from both parties and makes a rule or judgment on it

Strategies

 Collective bargaining- done by trade union representative where they

negotiate with the manager/supervisors to resolve a conflict.

 Mediation or conciliation – where the trade union delegate takes the

issue to the Ministry of Labour this is a 3rd party brought in to solve the
conflict.

 Arbitration – where the trade union takes the case to Industrial

Disputes Tribunal [IDT] who makes the final ruling on the case.

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 Role of Trade Unions

 A Trade Union assist workers in dealing with a conflict that arises in the workshop
between management and themselves, they help to settle disputes between workers
and management.

Purpose of Trade Unions

 To represent the worker's interest

 To negotiate on behalf of workers for better wage and salaries, fringe benefit, and
improved working condition
 To settle disputes between management and workers
 To educate their members about their rights and responsibilities

Key Terms

 Trade Union- is a mediatory body that helps to settle disputes between workers and
management

 Collective bargaining – negotiations between a representative of workers and employers

 Shop Stewart – a union representative

 Industrial actions – measure taken by the workforce or trade union to put pressure on
management to settle an industrial dispute in favour of employees

 Conciliation/Mediation – the use of a third party in an industrial dispute to encourage

both employer and union to discuss an acceptable compromise

 Arbitration – resolving an industrial dispute by using an independent third party to judge

and recommend a solution

 Grievance procedure- the agreed process of attempting to resolve an industrial dispute

between employers and employers

2.10 Guidelines for the Conduct of Good Management and Staff Relations in the
Workplace

Management should:

 maintain good communication – managers should provide feedback to workers

to maintain effective communication.
 provide good working conditions such as: adequate ventilation, good lighting
and appropriate tools and furniture to motivate workers to work efficiently
 motivate workers in the form of praise/acknowledgement and providing
incentives to improve employer/employee relationships.
 adapt good leadership styles to provide a sense of direction and motivate the
staff to work towards the company’s goal

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2.11 Strategies for Motivating Employees in a Business

 Employees in the workplace can be motivated both financially and non-

financially.

Financial Methods

 Providing a high income for workers will enable them to have a higher
standard of living, that is, they will be able to afford a nicer house and car,
better food, better clothes and more exotic holidays.
 Examples of financial methods- higher wages/salaries, performance
related pay, financial fringe benefits.

Non-Financial Methods

 Job satisfaction is a high motivator, this is where the worker enjoys and love
their job, the employee feels that the job they are doing is something they
really want to do.
 Examples of non-financial strategies – job rotation, empowerment and
training, provide good working conditions, employee of the month
awards, applaud employees for work done.

2.12 VALUE OF TEAMWORK IN AN ORGANIZATION

Teamwork

Team- work involves grouping workers together to work cooperatively to achieve

the same goal.

Advantages

 Team members can share ideas, so inexperienced workers can learn from
working with more experienced workers
 Fosters the participative approach, this gives a feeling of belonging
 Improves morale - group interaction and participation can motivate workers

Disadvantages

 Personality clashes may exist between team members

 More time is needed to make decisions and solve conflicts as more people are
involved
 Some persons may prefer to work as an individual and not as a team resulting
in some members doing all the work

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2.13 Strategies for Effective Communication

 Effective communication in an organization is achieved by operating a two -

way flow of information: downward from management to inform workers
and upward from employees in the form of feedback.

(i) Downward Methods

 Main methods of downward communications are written and oral.

 Written Communication is transmitted via; letters, memorandums,

reports, minutes in a meeting, bulletins and notice boards, emails etc.

 Oral Communication involves face to face conversations, meetings,

interviews, telephone calls, public address systems and so on.

(ii) Upward Methods

 Upward communication can be collected via direct or indirect methods

 Direct- this is where the manager may talk to the worker on an

individual basis.

 Indirect- this can be done through suggestion schemes, appraisal

systems and so on.

Review Questions #1 (CSEC May/June 2018)

a) (i) Define the term organizational chart. (2 marks)

(ii)State TWO rules that should be followed when constructing an organizational
chart. (2 marks)

b) Construct a simple organizational chart showing THREE levels and THREE

positions for a small private limited company. (4 marks)

c) List THREE duties of a personnel or human resource manager. (3 marks)

d) (i) Suggest THREE potential causes of conflict within an organization.(3 marks)

(ii) Explain the strategies that could be used to resolve conflict within an
organization. (6 marks)

Total 20 marks]

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Review Question #2 (CSEC May /June - 2017)

a) State TWO activities performed by each of the following managers

(i) Marketing (2 marks)

(ii) Production (2 marks)

(ii) Distinguish between ‘finance’ and ‘human resource’ areas of business. (4 marks)

b) Describe EACH of the following functions of management

(i) Delegating (2 marks)

(ii) Motivating (2 marks)

(iii) Controlling (2 marks)

c) Explain ONE way in which management fulfills its responsibility to EACH of the

following groups of persons:

(i) Customers (3 marks)

(ii) Employees (3 marks)

[Total 20 marks]

Review Question #3 (CSEC May /June - 2021)

3 a) Identify FOUR potential source of conflict within the workplace. ( 4 marks)

b) List FOUR actions that employees may take to gain the upper hand during periods of
conflict. (4 marks)

c) Describe each of the following conflicts that may be used in the resolution of conflict
within the workplace.

(i) Grievance Procedure( 2 marks)

(ii) Mediation ( 2marks)
(iii) Arbitration ( 2marks)

d) Explain TWO strategies that may be adopted by management to build good relationships
between management and staff in the workplace. ( 6 marks)

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