Stakeholders of Business Organisation

Stakeholder simply means people who have interest in an organization and people whom without their support the organization cease to exist as it is very important to note that organization by definition means a social arrangement of a group of people coming together to pursue collective goal and control their own performance with boundary separating them from external environment. However in this blog, we would not dwell on the idea of organization too much but rather just use whatever we learn to explain what stakeholder is about.

Before we dwell into the details, let us now see the different catgory of stakeholder in a business organization.
1.External stakeholder
2.Connected stakeholder
3.Internal stakeholder

Now to explain it in my own understanding, external stakeholder means people who have the least but NOT no interest in the organization. Eg. tax authority, public, pressure group. While these people may affect the decision making of the company, their influence over the decision making process is very much limited and are likely to have diverse objectives. These are people that the organization must be aware about but just take them lightly provided they(pressure groups,NGO) joint forces and come together to make a statement should then the organization take heed of them. Connected stakeholders such as customer, suppliers, bankers and shareholders whom are people with fair amount of interest in the organization and that the organization should be fully aware of their desire and opinion about the organization as they pose direct influence in the decision making process of the organization but only short of being in control in the running and actual decision making process of the organization. Lastly internal organization who have direct interest and whose action can directly affect the organization in strategic planning as well as operational part of the organization. Another way of looking at categorizing stakeholder is to split them into primary and secondary stakeholder where primary stakeholder are internal and connected stakeholders while secondary stakeholders are external stakeholder. I will not be dealing further into the examples of various group of stakeholders according to their category as it is found in the textbook but just to summarise this part is that stakeholders are categorized in accordance with their degree of interest which leads to the degree of influence over a business organization.

Now that i'm done with the part above, lets deal with stakeholder conflict. Well the world isnt perfect and not everyone is satisfied. But priority setting comes into the picture based on Mendelow who suggest that stakeholders may be positioned on a matrix as shown in BPP textbook page 80. To make thing easier to understand rather than figuring out the matrix,just remember that by deriving Mendelow's statement, they are four groups of stakeholder (not to be mistaken with the above part as we are deriving Mendelow statement) which are mainly:
1.Key player group
2.Kept satisfied group
3.Kept informed group
4. Unimportant group.
Pls take note that these arent official term but can be found in BPP textbook


Key player group like large customer are likely to affect the decision making process which ultimately affect the direction of the organization. kept satisfied group are people who are to be treated with care and their degree of interest and influence are just one step below the key player group. Kept informed group are people who are unlikely to affect the strategy of organization but whose view are still quite important as it will affect the other stakeholders while lastly the unimportant group are stakeholders who can be ignored or minimal effort required to satisfy them . It is important to note that as time goes by and strategy changes, the stakeholder categorized by the 4 main parts can change as it is fluid. However each group has three choices which are loyalty to the organization, exiting from the organization or voicing out opinion. Ultimately the stakeholders can affect the location, channel of info, limitation of choices, embodiment of culture, determination of successful implementation of the strategy of the organization and affect the degree of reliance of the organization on various group of stakeholders.

The interaction between different stakeholders and how conflict arises may be visualized through 4 main groups
1. Employer and employee
2.Customer and shareholder
3.Manager and shareholder
4.General Public and shareholder.

Employer may have conflicting interest with employee because the employer demand much from the employee without having to give too much incentives while the employee would expect otherwise
Customer would have conflicting interest with the shareholder because they want product with the best economic value while shareholder wants to maximise profit and revenue from product sold
Manager may have conflicting interest with the shareholder because they may want to do things their way and to enjoy certain degree of autonomy away from the influence of the shareholder while the shareholder only wants result (return over capital investment) and may intervene in managerial activity to increase control causing displeasure to the management team
General public have certain expectation of organization fulfilling their corporate responsibility while shareholders put great emphasis on generation of revenue and little emphasis on corporate responsibility which may cause the reduction in profit of organization and ultimately less return on their capital investment.

In conclusion, there should be a right balance between different group of stakeholders .
(article done by Harry Chew)

Chapter 3: Organisational Culture in Business

- In this chapter, we'll learn about 3 main subtopic which is the general understanding of organisational culture, factors that form up the culture of a organisation, and then we'll study more specifically about the research made by scholars and writers on culture.

- Firstly, culture can be understands as the collective programming of mind, a fixed and unique way of thinking. It is an unseen habit, shared by a group of people.

- As for organisational culture, it is the shared beliefs, habits, ways of doing certain task, and attitudes that shape the norms of a organisation.

- So what forms up the culture of a organisation? The few determinants of culture includes history, size(big size firm usually do things in a very formal way, and vice versa), purpose(profit-oriented firm will focus on more results, and vice versa), technology, leaders and owners(founder will run the business based on his habit, which will becomes the culture of the company afterward), operating environment, and location.

- Edgar Schein agrees that the leaders of a company or firm plays an important role in forming a organisation's culture, but he describes these determinants in a detailed way by dividing it into 3 levels that exist within an organisation's culture.

- The first level: The observable. Which divides into behavior(norms of personal), artefacts(interior design and architecture), and attitude(patterns of collective behavior).

- Another aspect that we must understand is the espoused value/express value, it is basically known as choose-to-follow value, which is also the values that follow the artefacts. It generally describe the meaning to the artefacts(the reason behind the interior design/pattern of the firm).

-Next, we came to the second level, the values and beliefs, which decides the behaviors and attitudes, or rather, the culture of the firm.

- The third level, assumptions, that lies beneath the second level, values and beliefs. It is the foundation ideas(unspoken rules) that is recognised and accepted by the culture, which controls the ways of thinking and behaving of a organisation.

-According to Schein, the easy way to distinguish the first and the two other level is that the first level is the 'explicit' element of the culture while both second and third level cannot be seen and exist at an unconscious level.

- Charles Handy in his book "Gods on Management" suggested that organisations could be categorized into four types, each differentiated by their structures, processes and management methods.

- Power Culture, which represented by the Greek god Zeus. For this type of culture, their source of power is from one individual, either the founder or the owner himself. Organisations that adopt this culture usually do not do things in a very formal way, and the decision making of the company are usually centralised. Power culture are also known as club culture.- Zeus, the head of all gods, or rather known by the god of thunder.


- Apollo is the god of the Role Culture. These organisations are dominated by rules and procedures and they do things in very formal way. And another important thing that we must know is that, the role culture organisations are always efficient in stable and predictable environments. Generally, Role Culture and bureaucracy are alike.- Apollo, the god of harmony and order, also the god of music and light.


- Athena is the goddess of the Task Culture. Similar to the concept of matrix structure in a organisation, Task Culture is a project based culture and their performance is often judge by results.- Athena the warrior goddess.


- Person Culture, or Existential is shaped by the interests of individuals. Unlike the three other culture, this culture serve the interests of the individuals within it and put them as the top priority. The Greek God of Person Culture is Dionysus.


- Dionysus, the god of fertility and wine.


- Hofstede came up with five cultural dimensions of international perspectives on organisation culture based on his study of IBM employees across the world.

- Individualism vs. Collectivism. Individualism are also known as high individualism and it focus on doing work individually(alone, without the necessary of cooperation with others), vice versa, the collectivism, which also can be called low individualism are more cohesive compared to high individualism.

- Masculinity vs. Femininity. Masculine values of assertiveness, decisiveness and material success are dominant. While Feminine values of modesty, tenderness, consensus, focus on relationships and quality of working life are less highly regarded, and confined to women. Femininity or low masculinity minimise gender roles.

- Confucianism vs. Dynamism. Confucianism culture emphasize the harmony and tolerance that exist within the organisation while dynamism are a kind of result-oriented culture.

- Power Distance refers to the equality of power in society. High power distance accepts greater centralisation and vice versa.

- Uncertainty Avoidance is the extent which security, order and control are preferred to uncertainty and change. High Uncertainty Avoidance respects control, certainty and ritual, they have greater tolerance for ambiguity and uncertainty. While low Uncertainty Avoidance have respect flexibility and creativity.

- There goes the understanding of H&P of ACCA F1 Chapter 3. Thx for reading n hope u enjoy it. =)

Formal n Informal Organization

Formal Organization

 

A formal organization is an organization that has a fixed set of rules where every worker knows exactly they are supposed to do in order to achieve the goals and objectives of the organization. The word formal describes that the organization has a well organized structure. A formal organization ensures that the rules and regulations are well defined so that individuals follow accordingly. It informs individuals of their tasks in brief and also makes sure that the individuals realise their boundaries. Most importantly, the main purpose of a formal organization is to ensure their workers are being monitored strictly so that they are able to concentrate on their work and make sure they coordinate well with other employees so that they are able to achieve the goals and objectives of the organization.

 

 

Reasons for the existence of the formal organization:

 

• In a formal organization an individual is briefed on exactly what he/she is supposed to do. This helps both the individual as well as the organization because since an individual's main objective is to achieve his/her goals it also makes it easier for the organization to accomplish its goals.
  
• The role of each worker, the responsibility of doing a task and the accountability of the workers in the organization is well defined. Hence this not only makes it easier for the employees to coordinate with each other but helps them coordinate effectively in different activities of the organization.
  
• A formal organization allows workers to specialise in what they do best. This helps in job satisfaction as the worker likes his work and knows what he is doing than and therefore specialisation may prevent inefficiency by a worker who does not specialise in what he does.
  
• A formal organization creates group cohesiveness which is the force of bringing group members close together.
  

 

 

Overall a formal organization is an organization that has a fixed set of rules or more like formal rules which workers have to follow so that they are able to ensure that an organizations goals and objectives are accomplished. But these formal rules tend to deviate and become more personal for example an individual will start and concentrate in achieving his/her own goals or have a different desire or even maybe behave in a not so organized way. Therefore this changes from formal to informal, so basically there is an informal organization in every formal organization. Formal organizations are typically understood to be systems of coordinated and controlled activities that arise when work is embedded in complex networks of technical relations and boundary-spanning exchanges

 

    
 

 

 

Informal Organization

 

An informal organization exists because it interconnects or unites the relationship or bond between groups of individuals, which means that group members interact with each other and discuss about matters other than work. For example a worker who is a Chelsea fan may discuss about a match with a co-worker who is also a Chelsea fan. This basically has nothing to do with work but enables workers to create a friendly environment and this interaction can help improve coordination and communication within workers. An informal organization has no proper structure or a fixed set of rules. It is something that is not planned but develops randomly. It exists alongside a formal organization but since it's informal it mainly develops due to personal relationships, social networks, and common interest. An informal organization also helps boost the motivation levels of workers. For example a worker might be really bored or stressed with work and a small break which involves the interaction between a co-worker about their common interests may actually relieve the stress of the worker and may even take away the boredom which enables a worker to get back to his with a fresh start.

 

 

The positive impact of the informal organisation on the business

 

• Complements the formal organization
  

  Formal plans, policies, procedures, and standards cannot solve every problem in a dynamic organization; therefore, informal systems must blend with formal ones to get work done. Informal relations in the organization prevent the organization from the self-destruction that would result from literal obedience to the formal rules, regulations, and procedures. No business organization could function merely by everyone following the "letter of the law" with respect to written rules and procedures. Faculty, staff, and informal groups must cooperate in abiding the law, to effectuate an organized, sensibly run enterprise.
  

• Speeding up processes
  

  Managers are less concerned on checking on workers when they know the informal organization is cooperating with them. This encourages delegation, decentralization, and greater worker support of the manager, which suggests a probable improvement in performance and overall productivity. When a manager acknowledges that workers are conscientiously working on their group projects, there are likely to be fewer tests and prompt checks on workers as to how they are doing their jobs. This eases the manager load and saves time on occasional checks which might even distract the workers confidence and rather promotes a better relation-ship between both parties.
  

• Improves communication among members
  

  The informal group develops a communication channel or system (i.e., grapevine) to keep its members informed about what management actions will affect them in various ways. This also allows workers to interact with each other which will help in revealing themselves and rather feeling more comfortable. This also encourages workers to step forward in giving ideas which might benefit the management in ways they are not aware of.
  

 

 

 

 

The negative impact of informal organisation:

 

• Rumours
  

  The grapevine dispenses truth and rumor with equal vengeance. Ill-informed employees communicate unverified and untrue information that can create a devastating effect on employees. This can undermine morale, establish bad attitudes, and often result in deviant or, even violent behavior.
  

• May cause Inefficiency
  

• Resistance to change
  

  Perpetuation of values and lifestyle causes informal groups to become overly protective of their "culture" and therefore resist change.
  

Span of control and Scalar Chain

What is Span of control and Scalar Chain?

Through my understanding, a span of control is the number to worker who report directly to a manager. The more workers under one manager, the wider the span of control. A wider span of control therefore forms a FLAT organisation. We will discuss more about FLAT organization later

Scalar Chain is the number of level of the management, for example the first level on the management is director, then manager, assistant manager, then only junior worker. the example has 4 level in the scalar chain

Tall and Flat organisation

A tall organisation has many level of management. The chart below shows the tall organisation structure. It has a narrow span of control.

We can see that, each leader only has one staff under him, the order can be directly send directly throughout the level. The staff will has incentive to work hard since there is less competition among themselves to get promotion, but it may also happen in opposite way. A tall organization may cause inefficiency when the works pass through too may hands.

A flat organisation

This type of organization structure is the opposite tall organization, it has wider span of control just like the chart below

There is less level of management in this structure. The cost involve in administration is low. Worker in this organisation may have closer relationship with their superior. The top level management may able to know bottom level staff well, and assign them to the task which is best for the staff.

Centralisation and decentralisation

What is Centralisation?

In the class, Mr Bill had used a good example to explain about what is centralisation. He used a kid n his parent as a example. When the kid goes for outting, he has to report everything to his parent. Every time he goes out, he must be back home before 11pm, if not he will be punished. The control of parent over their son is call centralisation. In a centralised organisation, the upper level of an organisation is just like the parent for the kid, the lower level just like the son, they have little chance to make their own decision.

Decentralisation is totally different from centralisation. We can use PARENT AND SON example also but in the other way round. The lower levels of an organisation have more chances to make their own decision just like the parent give more freedom to their son.

Types Of Organisation Structure

Different organizations will have different structures. For example most organisations will have a marketing department responsible for market research and marketing planning. A customer services department will look after customer requirements. A human resources department will be responsible for recruitment and selection of new employees, employee motivation and a range of other people focused activities. In addition there will be a number of cross-functional areas such as administration and Information Technology departments that service the functional areas of the company. These departments will provide back up support and training.

Organizations are structured in different ways:

1. by function
2. by regional area

3. by product e.g. marketing manager crisps, marketing manager drinks

Different Types of Organisation Structure

Entrepreneurial Structure

· This structure is usually for the small business. The owner is the manager and the decision maker. The owner has control over all the aspects of the business and its employees.

FUNTIONAL STRUCTURE

Department in this organisation will be grouped by their function, for example production, sales, marketing, finance and so on.

Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible.

Product/Divisional/Departmental Structure

In this structure, it divided the organization according to the type of work, region, product and so on. Large organization may break down into Rail, water, road and building division

For example each division has a general manager which have below them an entirely separate management structure for production, accounting, human resources and marketing. One general manager exists for Proton cars and another for Proton heavy vehicles, for example. Therefore people are grouped into separate self-contained divisions.

Matrix Structure

In this structure, professionals with a variety expertise are brought together to work on a projects. They report to a number of managers of different projects. It is to share knowledge and personnel to maximize effectiveness.

This type of structure help to decrease the number of people need to be hired since workers are shared between different projects. Time can be saved as those workers share information as they work on different projects. Theoretically, this results in a better product at a lower cost.

Since professionals work on more than one project at a time, they can keep each other informed about progress in other areas of the company. Company will become stronger when different department are working against each other

There are also limitations for this structure.

In-fighting can occur as managers compete for the time and attention of workers that they share.

If a Matrix Structure gets too big, it can be difficult to manage effectively.

Compare to the functional managers, project manager in Matrix Structure may have limited power on the project itself only, whereas the functional manager control over their resources and project areas too. Below is the Matrix Structure chart.

Let take some example to have a clearly understand on Matrix Structure. An employee in marketing department has assigned to product Y. Now he has to report to his product manager and his department manager also.

What is Organizational Structure?

By definition, an organizational structure is a mainly hierarchical concept of subordination of entities that collaborate and contribute to serve one common aim.

An organisation can be structured into many different ways and styles, depending on the goal and objective such as matrix structure, entrepreneurial structure, functional structure and so on. We will discuss the different types of organisation structure later on.

Why does an organisation need a structure?

As we discuss in the class with Mr Bill, I managed to understand why an organisation need a structure.

By my understanding, an organisation structure allocates of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. It help individual cooperate systematically to achieve their objective or goal.

Besides that, an effective organizational structure help facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units.

Every organisation made up of more than one person will need some form of organisational structure. An organisational structure shows the way in which the chain of command works within the organisation. For example:

n The Managing Director has the major responsibility for running of the company, including setting company targets and keeping an eye on all departments.

n The Distribution Manager is responsible for controlling the movement of goods in and out of the warehouse, supervising drivers and overseeing the transport of goods to and from the firm.

n The Production Manager is responsible for keeping a continuous supply of work flowing to all production staff and also for organizing manpower to meet the customers' orders.

The chart below is the organization chart for the SUNWAY COLLEGE