Chapter 7

Organisation & Management

Functional Areas
Introduction to the functional areas
 A functional area is a group of workers with similar skills and expertise
who carries out a specific organisational role
o The four most common functional areas include human resources,
finance, marketing, and production
 Businesses often split their work in this way to improve efficiency
with specialists capable of working at a high standard on specific tasks
 These business functions are sometimes outsourced to specialist service
providers
o This can reduce costs and ensure access to advice from
specialists who may be expensive to employ directly
Functional areas

The four main functional areas carry out key specialist tasks in a business`-
Operations
 The operations function is centred on creating the product or delivering
the service that the business offers to customers, including
o Ensuring the quality of output
o Sourcing and purchasing raw materials and components
 o Managing the design and testing of new products
o Inventory management
Marketing
 Marketing focuses on understanding the needs and wants of both
existing and potential customers, including
o Researching the market to plan products that meet
consumer demand
o Organising their distribution
o Persuading customers to purchase a company’s goods or services
o Determining pricing tactics that attract and retain customers
Finance
 The finance department is tasked with managing the organisation’s
money, including
o Recording all incoming and outgoing financial transactions
o Collecting debts owed to the business
o Ensuring that bills and salaries are paid on time
o Setting and maintaining budgets
o Conducting financial forecasting
o Managing banking operations
o Preparing the annual financial report
Human resources
 The human resources (HR) function is responsible for managing the
workforce within an organisation and ensuring employee welfare,
including
o Recruitment and selection
o Training and development
o Maintaining healthy industrial relations
o Ensuring compliance with health and safety regulations
Examiner Tips and Tricks: Don’t just name the main functional areas
(marketing, finance, HR, operations) – explain how they interrelate. For
example, marketing decisions affect operations and finance
Hierarchical Structures
Organisational charts
 An organisational chart is a visual representation of the reporting
relationships, roles and responsibilities of employees in an organisation
o Businesses must determine what the best structure is for them so
as to effectively implement ideas and achieve their objectives
 They should consider how the structure may affect
the management and effectiveness of
operations and communications
 A well-designed organisational structure helps to promote
clarity, efficiency and accountability
An organisational chart

This organisation chart shows a traditional hierarchy where workers are answerable to the
supervisor or manager who has authority over them in the structure
Chain of command
 The chain of command is the formal line of authority that flows
downward from the top management to lower-level employees
o It defines who reports to whom and who is responsible for making
decisions
 o The chain of command helps to establish a clear communication
channel and helps to maintain accountability within the
organisation
Span of control
 Span of control refers to the number of employees that
a manager or supervisor can effectively manage
 It is based on the principle that a manager can only effectively manage a
limited number of employees
o A narrower span of control means that there are more layers of
management
o A wider span of control means that there are fewer layers of
management
Tall and flat structures
 The chain of command and span of control are closely linked
o A long chain of command usually results in a narrow span of
control
 This is known as a tall organisational structure
o A short chain of command usually results in a wide span of control
 This is known as a flat organisational structure
Characteristics of tall structures
 Multiple levels of management
 A long chain of command and narrow span of control
 Common in large organisations with complex operations
o E.g. government agencies and universities
A tall structure
A tall structure has a long chain of command and narrow span of control
Evaluating tall structures
Advantages Disadvantages
 Provides a clear hierarchy of  Can create communication
authority and defined roles and barriers between upper and
responsibilities lower levels of the hierarchy
 Promotes specialisation and  Decision-making can be slow as
expertise within each department information must pass through
or function multiple layers of management
Characteristics of flat structures
 Fewer levels of management
 A short chain of command and wide span of control
 Common in small organisations or start-ups
o E.g. technology start-ups and small businesses
A flat structure
A flat structure has a short chain of command and wide span of control
Evaluating flat structures
Advantages Disadvantages
 Can lead to a lack of clear
 Promotes a culture hierarchy
of collaboration and open  May require employees to take
communication on multiple roles and
 Decision-making can be faster responsibilities leading
and more efficient to burnout and feeling
overwhelmed
Examiner Tips and Tricks: Be clear on the difference between a tall and
a flat structure – exam questions often test this through their impact on
communication, control, and decision-making

Flexible Working
Introduction to flexible working
 Working arrangements have changed significantly in recent years
o Many UK workers have some say in where and when they carry
out their work
  Home working has become increasingly popular since the
Covid-19 pandemic, with around 40% of workers enjoying
some ability to work from home
 Around 60% of workers have some flexibility in how there
hours of work are arranged, including 4-day working weeks
and flexitime
o Whilst most workers are employed on permanent contracts,
employers frequently make use of a range of flexible
arrangements
 In 2023, more than 1 million UK workers were employed
on zero hours contracts
 A further 900,000 workers were employed indirectly
through agencies
Home working
 Advances in communications technology have enabled a larger
proportion of workers than ever before to work from home
o Employees use tools such as email, instant
messaging, collaborative software, scheduling
apps and videoconferencing to carry out work remotely
Advantages and disadvantages of home working
Advantages Disadvantages
 The cost of equipping workers
 Smaller or fewer premises
with technology and other
may be required, reducing
necessities to work remotely
costs
may be significant
 High-quality workers may
 There may be less opportunity
For the be attracted from a wide
for collaboration between
business geographical area
workers, reducing innovation
 Workers may be more
 Careful monitoring will be
productive if they work in
required to ensure remote
isolation, away from
workers remain focused on
distractions
tasks
For the  Commuting costs, such as  Staff may feel isolated from
 train fares, are eliminated
colleagues
 Stress reduced as a result
 Household costs such as
of not having to travel to
electricity and heating may
work
employee increase
 Some flexibility may be
 A healthy division between
possible, allowing workers
work and home life may be
to manage other
difficult to manage
commitments
Flexible hours
 Flexible hours are a way of working that gives employees more control
over when they work
 Instead of working the same set hours every day, staff may have more
choice in how they complete their weekly hours
Types of flexible hours
1. Flexitime
 Employees can arrange their working hours around their personal needs
and responsibilities
 There are usually some core hours when they must be at work (e.g.
10am–2pm), and they can choose when to complete the rest of their
hours (e.g. start early or finish late)
o E.g. A parent may choose to start at 7am and finish by 3pm to pick
up their children from school
2. Compressed Working Weeks
 Employees work the same total number of hours, but over fewer days
 For example, someone may work four longer days instead of five shorter
ones and take Fridays off
Advantages and disadvantages of flexible hours
Advantages Disadvantages
For the  Increases employee  Harder to organise meetings
business motivation and and teamwork if people are
productivity as workers working different hours
feel trusted  More difficult to monitor staff
  Can
reduce absenteeism, and ensure tasks are
lateness, and staff completed on time
turnover  May not be suitable for all
 May attract a wider types of jobs, such as
range of skilled customer service roles
applicants
 Helps balance work with
 May feel isolated if not
personal life, such as
working at the same time as
childcare or studying
others
 Reduces stress and
For the  Can be harder to separate
improves job
employee work time and personal time
satisfaction
 Some employees may struggle
 Gives more control over
to stay motivated without
working schedule and
fixed hours
daily routine
Full-time and part-time working
 A full-time contract of employment requires an employee to work the
total number of hours considered by the company to be full-time in a
week
 Full-time employees work more hours in a company than part-time
employees
o In the UK, full-time employees are classified as those who work 35
hours a week or more
o At Save My Exams, a full-time employee works 40 hours each
week
 Employees who work part-time may only work two or three days a week
o Part-time employment may be more flexible and can be adjusted
subject to employee availability and employer requirements
 Part-time employees at the US company Costco work
between 24 and 40 hours per week
 The choice between full-time and part-time contracts depends on the
specific needs of both employers and employees
 o Employers often value the commitment of full-time staff but also
the flexibility of part-time workers
o Employees may prioritise a stable income or a good work-life
balance
Benefits of full-time and part-time employment contracts
Contract Benefits for employers Benefits for employees
 Full-time employees
are typically more
 Full-time employment provides
committed and invested
a steady income and financial
in the business's success
stability
 Employers can rely on full-
 Full-time employees often
time staff to work a
Full- receive benefits
standard number of hours
time like pension plans and paid time
per week
off
 Scheduling
 Full-time employees often have
and coordinating work
more opportunities for career
among full-time
development
employees is
straightforward
 Part-time employees
allow for flexibility in
staffing, as part-time
 Part-time work offers more
hours can be changed
flexibility and work-life balance
according to business
needs  It is an excellent option for
Part- students, parents, or those with
 Part-time employees
time other commitments
often cost less in terms of
wages and benefits  Employees can hold multiple
part-time jobs to increase their
 Part-time workers are
income and experience
often a good source of
candidates for internal
recruitment
Examiner Tips and Tricks
Don’t just describe flexible working – focus on its advantages and
disadvantages for both employers and employees, as examiners expect you to
consider both perspectives

Functions of Management
The main functions of management
 The responsibilities of managers are similar, no matter the organisation
in which they work
o In schools
 Headteachers organise the school's overall curriculum and
staffing
 Heads of department manage teaching staff and subject
course planning
 Pastoral managers focus on pupil behaviour and reward
systems
 Site managers oversee the safety and maintenance of
buildings and equipment
Manager roles

Managers roles commonly include planning, organising, commanding and controlling

1. Planning
 Setting targets or aims for the organisation or department to achieve
which provide a clear sense of purpose and direction
  Managers also plan and budget for resources required to achieve targets
o The number of people required
o Finance and capital resources needed
2. Organising
 Once targets have been set, managers should then organise
resources including
o Allocate tasks and delegate responsibility to employees
o Make changes to ways of working to improve efficiency
3. Commanding
 Managers need to guide, lead and supervise employees in the tasks they
do
o Make sure staff meet deadlines and achieve individual or team
targets
o Provide feedback and direct staff to tasks
4. Controlling
 Evaluate the performance of employees and teams
 Investigate reasons for missed targets and implement changes
 Manage budgets and report to senior leaders
 Ensure effective coordination between departments to achieve the
organisation’s aims
5. Coordinating
 Encourage groups of workers to communicate with each other and work
towards the same goal
 Ensure all of the required resources are available to ensure objectives
are met
Examiner Tips and Tricks: A common mistake is to list these management
functions (planning, organising, coordinating, commanding, controlling)
without showing their links. In exams, show how they connect – e.g. planning
decisions must be controlled and reviewed later
Delegation
 Delegation is where responsibility for specific tasks is given
to subordinates by managers
 o Delegation usually involves transferring authority from manager to
subordinate
o For example, the Human Resources Director of a large
company delegates authority for recruitment and training to the
HR Manager
The advantages of delegation
Advantages for managers Advantages for workers
 Delegation allows workers
 Allows managers to concentrate on to feel empowered in decision-
important tasks making.
o Managers do not have the o This can motivate, as staff
time to do complete every are trusted to perform a job
task themselves well
 Helps managers to measure the  Provides a form of training as
performance of their staff, as they workers learn on the job, increasing
can judge how well subordinates job opportunities to progress
carry out these tasks within the organisation
 Can help to reduce errors if  Makes employees work more
managers delegate interesting and rewarding
o

 Some managers are reluctant to delegate, as they lose some control over
decision-making
o Managers may need support to be able to balance trust and
control to delegate appropriate tasks
o Autocratic leaders may not be willing to give authority to others
o Some managers may feel threatened by highly skilled subordinates
seeking promotion

Leadership Styles
Introduction to leadership styles
  Leadership is about having a vision, sharing that vision with others
and providing direction
 Leadership is necessary in many different contexts
o A leader in sport could be the captain of a national football or
basketball team
o A political leader could be a president, prime minister of leader of
a political group
 Leaders can inspire and motivate others to work towards a common goal
o This contributes to the meeting of aims and objectives and
supports the development of a motivated workforce
Leadership styles
 Leadership styles reflect the behaviours and attitudes of a leader
towards their team members and influence the organisational culture,
productivity and performance of a business
 A successful leader will be able to use a variety of leadership
styles, depending on the situation, to achieve the best results for their
business
Different leadership styles

Most leaders operate using an autocratic, democratic or laissez-faire leadership style

Autocratic leadership
 An autocratic leader holds absolute power and authority within a
business
 o Leaders set the direction and goals of the business and make
decisions without seeking input or agreement from others
o Opinions, ideas or expertise of team members are not generally
considered
o Decisions are generally not open for discussion or debate
o Strict obedience and compliance is expected from subordinates
o Communication in business is mainly one-way: downward or 'top-
down'
Evaluating autocratic leadership
Advantages Disadvantages
 Reduced employee morale as
 Autocratic leaders can make swift workers have no input into
decisions without the need for decision-making
lengthy discussions o Lack of input from team
o Speeds up decision-making members limits ideas
o Can be crucial in emergency for problem-solving
situations and innovation
 Coordination and efficiency may be  Limited creativity, as employees are
improved as roles and tasks are required to follow strict
clearly stated instructions and are closely
monitored
Democratic leadership
 Democratic leaders actively involve employees in the decision-making
process and encourage discussion, though they have the final say
o Consultation, collaboration, delegation and teamwork are
common features
o It is most effective in organisations with skilled and experienced
employees
o It works well in creative industries when managers give workers
responsibility to work on projects together and manage their own
time
 James Parker, the ex CEO of Southwestern Airlines, is well-known for his
democratic style of leadership
 o In his book Do the Right Thing he states “I’ve always tried to
expect the best of people and to trust them, and I have almost
never been disappointed. Part of trusting people is empowering
them to make decisions”
Evaluating democratic leadership
Advantages Disadvantages
 Decision-making can be time-
consuming as consensus or
 Encouraging participation from
majority agreement is sought
employees in decision-making
o Competitive advantage may
processes
be lost as decisions take
o Can lead to higher levels
longer than rivals
of employee
o Making compromises may
engagement and job
cause further delays
satisfaction
 Conflicts and disagreements may
 Individuals feel valued
arise when different views are
and empowered when their
sought
opinions and ideas are considered
o Resolving conflicts can be
 Encourages innovation within a
challenging and time-
business
consuming
o Employees are more likely
o Leaders need to
to share ideas and think
possess strong conflict
creatively when they have a
resolution skills to ensure
say in decision-making
that disagreements do not
escalate
Laissez-faire leadership
 Laissez-faire leaders play a minimal role in managing subordinates or
business teams
o Leaders provide little guidance, direction or supervision to
employees
o Employees have significant autonomy and freedom in making
decisions and completing tasks
 o Laissez-faire leadership is most appropriate where leaders are
working with a highly skilled and self-motivated team that requires
minimal supervision
o Communication may suffer in this type of organisation, as clear
direction is not given
Evaluating laissez-faire leadership
Advantages Disadvantages
 Laissez-faire leadership  Some employees may struggle with
can encourage creativity and decision-making
innovation within the business o This can lead
o Employees have the freedom to inefficiency and a lack of
to explore ideas and make coordination within the team
decisions independently o Productivity may fall as
o This allows for diverse individuals struggle to
perspectives and fresh prioritise tasks or make
approaches to problem- informed decisions
solving  Without clear guidelines or
 Employees standards, there is a risk of
are empowered because they have inconsistency in the quality of
autonomy and ownership over output
their work o Different employees may
o Team members feel trusted have varying approaches
and valued o This may lead to a lack
o This enhances job of cohesion and
satisfaction, motivation, and potential conflicts in the
a sense of responsibility team
Examiner Tips and Tricks: Watch out for oversimplifying – for example,
assuming autocratic is always “bad” and democratic always “good.” Strong
answers recognise that each style can be effective depending on the business
context
Recommending an appropriate leadership style
 The choice of leadership style can be influenced by a range of factors
 o Business circumstances, including the nature and size of the
business
o Aims and objectives to be achieved
o Personality, experience and skills of the leader
 In particular, the skills and abilities of the workforce and the nature of
the competitive business environment will impact upon the style of
leadership adopted
Appropriate leadership styles

The leadership style adopted will depend on the skills of workers and the environment in which a business operates

Choosing the most appropriate style

 When a business faces a crisis situation and its workers are
unskilled, autocratic leadership is likely to be most appropriate
o However, if the workers are highly skilled, a democratic approach
would be more effective
 When a business operates in a stable environment and its workers are
unskilled, a democratic approach is likely to be most appropriate
o However, if the workers are highly skilled, a laissez-faire approach
would be more effective
  When a business operates in a high-growth or challenging environment
and its workers are unskilled, an autocratic approach is likely to be most
appropriate
o However, if the workers are highly skilled, a democratic approach
would be more effective
Case Study
Changing Leadership at Tech Nex

Tech Nex is a Dutch technology company that produces smart home devices.
For years, it operated in a stable market with little competition. The manager,
Anup Khan, used an autocratic leadership style, making decisions himself and
closely supervising staff. Most employees were inexperienced and needed clear
guidance
As the market changed, new competitors entered with cheaper, more
innovative products. At the same time, Tech Nex trained its workforce and
hired more experienced, skilled staff
The issue
Anup Khan realised that his leadership style was no longer effective. Staff
wanted more freedom to share ideas and make decisions. Motivation dropped,
and some employees left to join rivals
The response
In response, Anup Khan moved to a democratic leadership style. He
encouraged team input, gave more independence to project groups, and
listened to staff feedback
The outcome
The change improved motivation and teamwork. TechNex became more
innovative and responded quickly to market changes. Anup Khan’s flexible
leadership helped the company stay competitive in a fast-moving industry
Examiner Tips and Tricks
Exam questions often ask you to recommend an appropriate leadership style
for a business or to elaborate on the advantages or disadvantages of a
particular style
Often the choice of style depends upon the current situation of the business.
Leaders may not be autocratic all of the time, but at certain times it may be the
best approach

Reducing the Size of the Workforce

Reasons for downsizing
 Workforce planning is the process of determining the human resource
needs for the foreseeable future, in terms of the number and skills of
employees required
o When expanding, a business often requires more employees
o However, on some occasions they need to downsize the workforce
(reduce the number of employees)
Reasons for downsizing

Reducing business size can be caused by a range of factors including business relocation, falling demand and
automation through the introduction of technology

1. Lower demand
 Is likely to reduce the volume of output a business needs to
produce
 Fewer workers are required to produce a reduced level of output
2. Integration with other businesses
 Mergers or takeovers could mean that some workers' roles are
duplicated so some staff will no longer be required
3. The need to lower costs
  Businesses that are struggling to survive look to reduce their most
significant costs which, in many cases, is salaries and wages
4. Business closure
 Will mean that only a few workers will be required to
legally dissolve the organisation
5. Automation
 involves more machinery being used in the business
 Workers' jobs are replaced, with remaining workers focused on
operating machinery
6. Retrenchment
 Is likely to mean that fewer resources of all types are required,
including employees
7. Business relocation
 may allow a business to reorganise its operations, requiring fewer
employees
Redundancy
 Redundancy is where a job role is no longer needed by a business and a
worker is dismissed, usually with compensation
o The legal process for selecting workers for redundancy must be
very clear and fair
The factors used to determine who is made redundant

Worker Lateness or Length of time Workers with

productivity absence data employed essential skills
 Long-
 Skilled
 Productive  Reliable standing
workers
workers are workers are employees
could be
most likely less likely to are usually
transferred
to remain be made more
to other
employed redundant expensive to
roles
replace
 Some workers are happy to be made redundant
 o This may be because they have another job they can go to, they
want to retire early or they want to start their own business
o Some businesses offer a good redundancy 'pay out' which is
attractive to workers
Examiner Tips and Tricks
Don’t confuse redundancy with dismissal – redundancy happens when a job no
longer exists, not because of poor performance. Mixing these up is a common
error
Recommending redundancies
 HR managers often have to make difficult decisions about who should be
made redundant
Case Study
Redundancy at Eco Glow Ltd
Eco Glow Ltd is a small Finnish business that makes and sells eco-friendly
lighting products. Due to rising costs and falling sales, the manager has decided
that one worker must be made redundant to save money
The manager is considering three employees from the assembly department
Each worker will be assessed based on their productivity, attendance, time at
the business and whether they have skills useful for other roles in the company
Who is most suitable for redundancy?
 Based on these factors, Lena is the most suitable for redundancy
o She has fewer years at the company than Ravi and lacks the
specialist skills that Tomas has
o Her attendance has also been less reliable, and her productivity is
not strong enough to justify keeping her over the others

The Role of Trade Unions

What trade unions do
 A trade union is an organisation that represents the interests of its
workers in negotiations with a firm’s management or owners
o A trade union's main aim is to protect and advance the interests of
its members in the workplace
o Most trade unions are independent of any employer but try
to develop close working relationships with employers
The functions of trade unions
Function Description
Protect employee  Trade unions make sure workers are treated fairly
rights and that employers follow the law
Negotiate pay and  They talk to employers on behalf of workers to agree
conditions on wages, working hours and holidays
 If there is a disagreement (e.g. over pay
Support during
cuts, discrimination or unfair treatment), the union
disputes
represents and supports the employees
 Trade unions help members understand their rights
Give legal advice
and may offer legal help in case of problems at work
 Some unions offer training courses or workshops to
Provide training
help workers improve their skills or learn about their
and education
rights
 Unions push for safe working conditions and may
Improve health
work with employers to reduce risks in the
and safety
workplace
  Trade unions are usually formed by the members of specific industries
o Airline pilots have a pilots' union
o Rail and sea workers have a rail and maritime union
o E.g. The NEA is the USA's largest professional employee
organisation, representing public school teachers and other
support personnel at colleges and universities
 Workers pay a monthly fee to join a trade union
o The fee is called a subscription
o Membership ends when the member stops paying this fee
Benefits to employees of being a trade union member
 Almost 23% of UK employees in permanent positions belonged to a
trade union in 2022
o Poland has the lowest level of trade union membership in the EU
o Around 70% of workers in Scandinavian countries are trade union
members
 Public sector industries tend to have the highest membership density
 Women are more likely than men to belong to a trade union
 Trade union members generally receive higher pay than non-union
members
 Large trade unions are able to influence government decisions in favour
of workers
Evaluation of trade union membership
Advantages for employees Disadvantages for employees
 Workers benefit from collective  Union decisions may not reflect
bargaining, meaning they do not everyone’s views, but members are
have to negotiate alone still expected to support them
 Union members often receive  Union fees must be paid, reducing
higher pay, better working discretionary income
conditions and non-wage benefits  Should a strike be called,
such as breaks and holiday rights employees are not paid, creating
 Trade unions offer free legal advice, stress and tension between
support during disputes and job workers and management
  Workers who choose not to
take industrial action may face
training to help workers
pressure or intimidation from
others.
Examiner Tips and Tricks
Avoid one-sided answers – in exams, show how trade unions can
benefit employees (e.g. protection, better pay) but may also create challenges
for employers (e.g. strikes, higher costs)