The Business Setup

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The Business Setup Powered By Docstoc
“Ifyou don’t know where your
 business is going, any road will
 get you there.”
    What is a Mission Statement?

     A Mission Statement is a statement which
    defines the identity of the company, its main
                 purpose and aims.

Why is it important?
•    Informs and explains the business to others
•    Keeps the employees focused on the
     company’s core values and objectives
•    ……so all decisions are taken in that
      Mission Statements
Click on each logo to see company’s mission statement

                                                        look under FAQs
                        Translating Objectives into Plans
                                                                                Who defines the mission, goals and

                                  Mission – the organization’s reason for

                                                                                          Board of Directors
                               The Mission Statement– a stated definition of
                                           the business scope                            Senior Management

                               Strategic Goals/Objectives – long terms goals
                               defining where the company as a whole wants
                                                                                          Top Management
    Internal Goals and Plans

                                             to be in the future

                                Strategic Plans – actions the company will
                                  implement to meet strategic goals e.g.
                                          allocation of resources
                                                                                         Middle Management

                                Tactical Plans – short term plans designed to
                               help execute strategic plans on a department /
                                                  unit level
                                                                                          Operations level
                                 Operational goals / plans – plans to guide
                                  departments on a daily or weekly basis
   Converting Roles into a Hierarchy
Who defines the mission, goals and

      Board of Directors

     Senior Management

       Top Management

     Middle Management

       Operations level
“A business that makes nothing but
 money is a poor kind of business.”

                  Henry Ford (Ford Motor Company)
The Need to Organize People into a
The reasons:
 To setup a formal structure how the company’s

  goals and objectives are converted into plans
 To define formal responsibilities of tasks assigned
  to individual and department
 To define formal reporting relationships

 To ensure co-ordination of employees across

 Allocate resources
The Objectives of a Business
 Making SMART Objectives
Objectives are set to give direction and define targets for
companies. So they have to be
 S – specific i.e. well understood

 M – measurable i.e. give them a unit of measure

 A – attainable i.e. can the objective be reached with my

  current resources?
 R – realistic i.e. how possible is it to actually achieve this
  objective? Am I being too optimistic?
 T – timed i.e. set a time limit by when the objective should
  be reached
The Downside of Objectives/Goals
How are Objectives reached? –
Executing the Plans
Organization Structure
The formal arrangement of jobs
within an organization

Organization Design
A process involving decisions
 Span on control
 Chain of command
 Authority

 Responsibility

 Departmentalization
    Span of Control

The number of people reporting to the same supervisor.
Narrow spans = tall structures      Wider spans – narrow structures
(structures – levels)

In what environment is a wide span favoured?
   • Staff is highly skilled requiring little supervision
   • Tasks, duties, responsibilities and objectives are clearly defined
     and understood
   • Support systems are clearly in place and efficient
   • Work is routine
   • Employees are located at the same place
  Chain of Command

The unbroken line of authority.
It indicates -
    • Unity of command – an individual reports to one supervisor
    • Scalar principle – the defined line of authority showing
      authority and responsibility so that everyone knows to whom to
    • It defines all successive levels of management all the way up
    • The more levels there are, the taller is the structure
    • Centralised authority is a characteristic of tall structures
Authority and Responsibility

Authority                        Responsibility
   It is vested in a position      The duty to carry out a
    and not in the person            task
   It flows vertically top-        It is commensurate to the
    down                             authority given
   It is accepted by               You cannot give someone
    subordinates because             a lot of responsibility but
    they believe that                little authority
    managers have a
    legitimate right to issue
Some points to think about!

         Which span enhances creativity, innovation
          and initiative? Why?
         Which industries / companies prefer wider
          spans? Why?
         What are the implications on creativity when
          authority is centralised?
         What are the implications of tall structures on
          creativity and employee motivation?
         Which kind of structure enhances
   Delegation and Empowerment
The transfer of authority and responsibility to lower
Advantage – the organisation is more productive because staff is
empowered to make and take decisions on their own. However in
practice it is only effective if:
 A leader believes that empowerment does not decrease his
 Employees are prepared and willing to assume new
 People have to feel internally and not externally committed,
    i.e. they have to feel they are in control of the whole project
    and not bound by excessive control or bureaucracy
Barriers/Fears to Delegating

     I like to have
     things done my

        My staff will resent the
        additional work.
Different Organization Structures

      1.   Functional
      2.   Divisional
      3.   Matrix
      4.   Team         Contemporary
      5.   Virtual
Functional Organization Structure
                  Departmentalisation by function e.g.
                  Operations, Marketing, etc

                  • Specialization by focusing on
                     particular activities only
                  • Less duplication of work

                  • Since managers focus on
                    departmental goals they may lose
                    sight of the organization’s overall
                  • Little appreciation of the work done
                    by other departments
Divisional Organization Structure
                  Set up in separate business units or
                  divisions e.g. regional, product, etc

                  • Since managers are responsible for
                     their division, they are more goal and
                     result oriented
                  • Divisions react faster to changes in
                     the environment

                  • Little autonomy because everything is
                    controlled by the parent company
                  • Duplication of activities and resources
Matrix Organization Structure
                  Functional and staff personnel are
                  assigned to both a basic functional area
                  and to a divisional / product

                  • Better integration between divisional
                     staff and corporate staff
                  • Easier to co-ordinate organizational
                     activities and implementation of
                     corporate policies
                  • Since corporate staff in directly
                     involved, decision making is faster

                  • Structure is quite complex to manage
Team-based Organization Structure
                 People from different functions are
                 brought together to work in groups or
                 self-managed, empowered teams.
                 Applicable only in organizations which
                 are project based.

                 • Team focuses on one project at a time
                 • Structure is more goal oriented

                 • Teams need to be managed well to
                   be successful
Virtual/Network Organization
                 The people/business units making up the structure
                 are not located at the same place and may not
                 necessarily be part of the same organization. The
                 developments in IT and easiness of communication
                 are making this structure more feasible.

                 • It removes all barriers especially of time and
                 • Arrangements are loose and goal oriented
                 • It is more flexible in terms of tapping the best
                     technology, expertise and knowledge available
                 • Greater flexibility in reacting to market

                 • This structure is only successful if all those
                   involved are fully committed not to their own
                   goals but the overall goal of the organization.
What’s in a name –
Who is Responsible for What?
              o Board of Directors –They define the aims and objectives of
                 the business, and devise strategies to reach them.
              o Chairman – He is chosen as the head of the Board of
              o CEO – He is the direct link between Board of Directors and
                 Management. He sees to the overall control of the
                 Management Team.
              o Managers –The role of managers is to plan, organize, lead,
                 control and see that they have the required staff needed to
                 carry out the plan. They are responsible for changing
                 strategies into clearer and more specific objectives and for
                 designing policies, procedures and rules so that aims and
                 objectives are easily reached.
              o Executives – They implement policies, and carry out
                 procedures according to the rules and policies of the
Change Management
Apple Changes its name!!
“It is not the strongest of the
 species that survive, nor the most
 intelligent, but the one most
 responsive to change”

                          Charles Darwin
 Change – the Key to Survival
The environment in which organizations operate is made up of 5 factors
– the SLEPT environment

   Social – the social structure and social classes; people’s spending
    power; wants and needs
   Legal – the laws of the country
   Economic – the economic strength of the country; recession or
   Political – the political agenda of the government in office
   Technological - New technology, and obsolete technology

Companies should be aware of the influence of these factors on its
operations; and also be able to predict and identify changes in
these factors and adapt to them.
The Three Categories of Change

 Structure – hierarchies, responsibilities,
 Process – the way things get done e.g.

  decision-taking process; methods; work
 People – attitudes, expectations and

 Implementing Changes

1. Unfreeze – identify areas
   to be changed, prepare,
   inform, consult
2. Change – put your plan in
   action, implement the
3. Refreeze – make changes
   permanent making sure
   everyone is committed
Resistance to Change

 Resistance to change is triggered off by:
  Fear of loss of power and control

  Fear of loss of income and job security

  Fear of the unknown

  Fear of not being able to cope

  Disruptions to normal routines and procedures

  Misconceptions about what the change will bring

Reducing Resistance
   Educate and communicate
   Negotiate
   Encourage participation
   Manipulate
   Convince and persuade
   Force

As an Employee:
 Accept to be retrained
 Will I benefit from the change?
 Can any disadvantages be
 Accept that you have to be flexible

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