Functional Areas of Business

1. Functional Areas of Business

2. PRODUCTION DEPARTMENT: transforms raw material into a product for sale. • Purchasing raw materials and estimating costs • Scheduling the production process • Making the product • Controlling the production process • Maintaining an adequate inventory system • Establishing quality control procedures • Warehousing of finished goods • Keeping production records

3. MARKETING & SALES: identifies anticipates and satisfies customers’ wants profitably. • Market research • Designing the product • Pricing • Publicity • Sales promotion • Distribution of the product • After sales services, repairs and refunds. • Preparing sales statistics and forecasts.

4. ACCOUNTING & FINANCE: prepares all financial statements. • Producing the final accounts of the business, e.g. Balance sheet. • Making all payments on behalf of the company and receiving all monies due to the company. • Advising management on all financial matters e.g. Availability of capital to purchase new equipment or to pay higher wages. • Budgeting and forecasting. • Raising funds for the business. • Monitoring cash flow. • Setting financial procedures for all areas of the business.

5. HUMAN RESOURCE/PERSONNEL: looks after employees’ welfare • Recruitment of staff • Training of staff • Promotion of workers • Maintaining good industrial climate • Welfare of workers e.g. Sick leave, holiday, pension, wages. • Disciplining of workers, including dismissal. • Maintaining staff employment records • Ensuring that the legal rights of employees and employers are upheld. • Social role e.g. Canteen, healthy and clean environment, credit union, cultural groups

6. CENTRAL ADMINISTRATION • Clerical duties • Organising for the cleaning and maintenance of the work area • Putting security measures in place • Ordering stationary and supplies • Handling mail, packages, fax messages etc. • Providing support for electronic communication and transactions

7. RESEARCH AND DEVELOPMENT: conducts relevant research. • Keep abreast of what is happening in the market • Develop new products or services, or redesign existing ones. • Consumer research • Financial research • Pilot projects • Feasibility studies

8. ORGANISATIONAL CHARTS

9. ORGANISATIONAL STRUCTURE : who’s in charge here? An organizational structure is a design of an organisation which indicates formal relationships between its personnel and the functions they perform in relation to each other. Organizational charts are used to show these relationships visually. They help workers to see how they fit into the organisation, and the levels of authority.

10. Complexity and flexibility • A small business may not need a complicated hierarchy, but the larger the business, the more complex the organisational structure becomes. The levels of hierarchy increase, and becomes bureaucratic, inflexible, top heavy and resistant to change. Removing some of the management levels brings flexibility.

11. Formal and informal relationships • Formal relationships are shown by the organisational chart, derived from the org. Structure. They show clearly defined relationships, procedures, and purpose between individuals in an organisation. They show authority, responsibility, and channels of communication. • Informal relationships are unofficial relationships formed by voluntary groups of people in the organisation, for the satisfaction of social needs.

12. Organisational relationships • Line relationships: line managers are directly responsible for achieving the business’ goals. • Staff relationships: staff managers perform a supportive role by giving advice to the line manager, but not directly responsible for the work done. • Functional relationships: a specific manager is responsible for a specific function within a number of departments e.g. Cost accountant responsible for costing in all departments.

13. FOUR TYPES OF ORGANIZATIONAL STRUCTURE (based on the types of relationships)

14. Line organisational structure: • This type of structure shows authority in descending order, from top to bottom. The person to whom you report is called your line manager. He or she is ultimately responsible for the task but delegates duties to others, in order to take advantages of each person’s strengths. • Popular in small and medium sized businesses.

15. EXAMPLES OF LINE STRUCTURE:

16. Entrepreneurial (sole trader) Chain of command Span of control

17. Larger company Chain of command Span of control

18. Staff organisational structure: • This is created to assist the line organisation, and is made up of specialist and support staff. The staff advisor has no direct authority over line workers in a department, but can be empowered to manage or supervise workers from another department. • An example is a research department specially created to assist the production department in improving its product.

19. Staff organisational structure

20. Functional organisational structure: This occurs when the organisation is divided into the functional areas of a business – production, marketing, human resource etc.

21. Examples of a functional structure:

22. Simple functional structure:

23. Functional structure in a company wit more than one product:

24. Functional structure in a company with more than one geographical area or market segment

25. Committee organisational structure: • Committees generally have a structure. A committee is a group of persons delegated by a higher authority to achieve an objective. • An ad hoc committee is appointed to achieve one task and is disbanded when the task is complete, e.g. a planning committee, or a task force (people from different departments come together to solve a problem). • A standing committee is permanent, and meets at regular individuals.

26. Example of a committee organisational structure:

27. Concepts to understand • Authority: the right or power to command. • Responsibility: the obligation to perform a task efficiently. • Delegation : entrusting subordinates with different aspects of a task. • Accountability: the person who delegates authority remains answerable to his superior for what he has delegated.

28. Concepts (continued) • Chain of command: the direction of authority in a business (who reports to whom). • Hierarchy: the layers of authority. • Lines of communication: the standards and protocol associated with the way in which information moves through the organisation. • Span of control: the number of people a person is responsible for.

29. Factors influencing the span of control: • Complexity of the task • Self-discipline of the workers • Method of communication • Frequency of supervision • Capability of the manager

30. Span of control continued • Wide span of control – responsibility for a large amount of subordinates. • Narrow span of control – responsibility for a small number of subordinates.