Principles of

Business
Internal Organizational
Environment
FUNCTIONAL AREAS OF
BUSINESS

Departments in a business organization are structured according to
certain functions. The departments of various organizations will differ
depending on the type of business. Below are four main functions
that tend to be general to most organizations.
Production
The production department is responsible for transforming raw
materials into finished products. They are also responsible for quality
control to ensure that required standards are met.
Finance/Accounts
The accounts department makes and receives all payments on behalf
of the business and records all financial transactions
Marketing
This department creates awareness for the firm products and
motivates consumers to buy. They also carry out market research to
identify customers needs
Human Resources/Personnel
The human resource department recruits and selects staff for the
business organization. They are also responsible for staff training
and welfare.

FUNCTIONS OF
MANAGEMENT
Planning
All managers must plan, that is, setting out steps for
the attainment of future organizational objectives. It
involves formulating the policies and programs for the
firm.
Organizing
Organization reduces cost, time, chaos and
conflicts. Managers must obtain all the necessary
tools, machinery and personnel for each task and
arrange all tasks so that they are done in the most
efficient manner.
Directing
Managers must guide subordinates by giving them
instructions to perform the tasks assigned.

FUNCTIONS OF
MANAGEMENT
Delegating
Delegating duties involves giving others (e.g.
supervisors) the authority to have specific tasks
completed through the management of others.
Therefore, supervisors will ensure that workers
complete tasks assigned. Delegation reduces the
workload of the manager.
Controlling
Managers must continually measure the activities of
subordinates, ensuring that all activities conform to
plan.
Coordinating
Managers must bring together all the various
organizational tasks so that the organization may
function harmoniously.
Motivating
Managers must inspire workers to perform their tasks
well.

RESPONSIBILITIES OF
MANAGEMENT
Management must be aware of their responsibilities to the various
groups that they interact with for the successful running of the business.
1. To the owners of the business (this also includes shareholders)
Managers are expected to ensure efficiency in all areas of the business.
2. To employees Managers must pay adequate wages and provide
good working conditions.
3. To customers Managers must ensure that products are of good
quality and are reasonably priced.
4. To the society Managers must find ways to reduce harmful air
pollution and the discharge of harmful waste created by the production
process into rivers and seas.
5. To the government Management should adhere to various
government legislation and regulation.

ORGANIZATIONAL CHARTS
An organizational chart is a diagram of the organization of an enterprise.
Its pyramid shape illustrates the hierarchy system that exists in the
organization. The most senior position in the organization is placed by
itself at the apex. The pyramid gets wider towards the bottom depicting
the greater number of workers at its base.
Those who have the power to issue commands have authority in an
organization. In the organization chart above the sales manager has the
authority in the Sales department. All persons with the same level of
authority are placed at the same level on the chart. For example the
sales manager and the accounts manager have the same level of
authority in their various departments.
Responsibility is the capacity to accept duties and to carry out their
tasks. Both sales supervisors are responsible to the sales manager.
The chart shows the following:
-each persons position
-the number of levels of managers
-to whom each employee is responsible (reports) to
-the span of or (area) of control for senior staff members.

TYPES OF ORGANIZATIONAL
CHARTS
Line or Direct
The line organizational chart depicts a straight line of command. Authority is said
to flow downwards only in the line organization. The line organizational structure
is found in schools or in the military.
Functional Organizational Chart
The Functional organization chart is a diagram of an organization that is
arranged by its functions. For example, there is a manager in charge of
marketing, and another in charge of production. This type of organization has an
advantage over the Line as experts are appointed to run each department. All
managers report to the General Manager.
The Functional organizational chart combines the straight line of command of the
line organization with horizontal dotted diagonal lines representing functional
authority. The dotted diagonal lines in the figure above show the authority that
the Human Resource Manager has over other departments. The Human
Resource Manager is allowed authority in these department over human
resource matters only e.g. to hire and fire workers. He therefore cannot give
directives on production or marketing matters.

TYPES OF ORGANIZATIONAL
CHARTS
TYPES OF ORGANIZATIONAL
CHARTS
Line and Staff Organizational Chart
The Line and Staff organizational chart combines the line and functional
organization with the addition of staff personnel. Staff workers assist and
advise line workers. Staff workers include consultants, advisors,
company lawyers, executive secretary, auxiliary workers etc. Staff
officers do not have authority, that is, the power to delegate tasks to
subordinates in the organization. Their main role is to advise and assist
line officers. This is why there are no vertical lines connecting staff
officers to any other member of staff on the chart. They are therefore,
placed at the side directly below the line officer whom they assist or
advise.
Committee Organizational Chart
Committees are advisory bodies. They are usually appointed to advise
organizations. Examples of committees include; parent teachers
associations and student councils which are committees within a school
organization. Committees usually delegate certain duties to sub-
committees. For example, an executive committee may appoint a
finance committee to advise it on financial matters. Note that an element
of the line organization exists in the committee organization as all sub-
committees are responsible to the executive committee.

TYPES OF ORGANIZATIONAL
CHARTS CHARACTERISTICS OF A GOOD
LEADER
A leader is someone who has been given authority over a
group of individuals. His job is to motivate the group to
achieve the goals set out for it. Leadership is therefore
about influencing or inspiring an organized group towards
the accomplishment of goals. Below are the characteristics
of a good leader.
Integrity
It is important for a leader to posses this quality as it makes
them trustworthy. They are perceived as honest and
therefore command the respect of their subordinates.
Good communication skills
Leaders should be able to communicate effectively with
persons at all levels of the organization. Manager must pass
down directives as well as listen to workers opinions
complaints and ideas. This will foster good working relations
among leader and followers. CHARACTERISTICS OF A GOOD
LEADER
Intelligent
This is a very important characteristic for leaders. It
refers to being rational and having good judgment when
making decisions. Leaders are decision makers and
therefore need to be intelligent. This characteristic also
refers to shrewdness and therefore describes someone
who is smart, perceptive and wise.
Devoted and Committed
A leader must be a role model for others. He/she
should therefore believe in the goals of the group and
motivate others to achieve it. His/her continuous hard
work will portray dedication and loyalty to duty.

LEADERSHIP STYLES
Autocratic
This type of leader makes all decisions and asks members
only to be obedient in following orders. He will give
detailed instructions and closely supervise subordinates.
Advantage
Time is not wasted consulting with others to reach a
decision.
Disadvantage
Workers must comply with directives given by the leader
and therefore the organization will not benefit from workers
initiative and innovative ideas
LEADERSHIP STYLES
Democratic
A democratic leader allows the participation of subordinates in
decision making. The leader asks for progress reports at intervals
instead of continuous close supervision.
Advantage
Discussion between management and workers leads an improved
relationship.
Disadvantage
The variety of opinions to consider may slow down the decision
making process.
Laissez-Faire
This type of leader will give minimum directives and allow maximum
freedom for workers to make decisions about completing their tasks.
Advantage
The firm will benefit from the initiative and innovation of workers.
Disadvantage
It may lead to chaos in the organization. This type of style can only be
used with persons that are very self- motivated and disciplined.
SOURCES OF CONFLICT WITHIN AN
ORGANIZATION
Unfair treatment of workers
Unfair dismissal
Discrimination
Health related issues
The need for protective clothing
Poor ventilation
Harmful fumes from chemicals

Wages and fringe benefits
Nonpayment of allowances
Underpayment

METHODS USED TO GAIN AN UPPER HAND
DURING PERIODS OF CONFLICT
Methods used by employees during conflicts
Workers organize themselves to collectively deal with conflicts. This is done
through the trade union. A Trade Union is an organization of persons
employed in an industry who have joined together in order to improve their
wages and working conditions.
Methods used by Trade Unions
1. Strikes 2. Sick-out 3. Work-to-rule 4. Go slow 5. Picketing
Methods used by employers during conflicts
Union busting
Union busting is the prevention by management of the formation of a trade
union within its organization. The employer may explicitly state this to
workers or covertly discourage its formation.
Lock out
A lockout refers to the refusal by an employer to allow workers into the
business place during an industrial dispute. This is a means of coercing
workers to comply with management.
Scab labour
This is a derogatory term used to refer to workers hired to replace workers
on strike.

STRATEGIES USED TO RESOLVE CONFLICTS
Collective Bargaining
Collective bargaining is the process whereby the union representative
on behalf of the employees and management, negotiate the terms of
their agreement which are incorporated in the employees contract of
employment. It is a means to reach an agreement between trade
unions and employers.
The Role/Function of the Trade Union
1. To ensure better wages and working conditions for workers 2. To
protect workers against arbitrary disciplinary actions.
3. To deal with grievances in accordance with the grievance
procedures
The Grievance Procedure
A grievance is a complaint of a worker. A worker will have a
complaint when:
a. he is treated unfairly. (e.g. cases of discrimination) b. his health
or safety is threatened (e.g. chemicals and dust at work etc) c.
there is a violation of the collective agreement or work rules. (e.g.
if employers have not abided by the agreement between
management and the trade union.)

STRATEGIES USED TO RESOLVE CONFLICTS
The grievance procedure is a set of steps which employees can
use to solve any grievance that may arise.
STEP 1 - The employee discusses the complaint with his or
her supervisor. If the complaint is not satisfactorily dealt with by
the supervisor the employee may take the matter further.
STEP 2 - The employee will discuss the matter with the head
of department.
STEP 3 - The employee, along with the union delegate, will
discuss the matter with top management.
STEP 4 - If the grievance still exists, the union official will seek
conciliation or mediation from the Ministry of Labour or any
independent body, i.e. the friendly intervention of these bodies
into the dispute for the purpose of adjusting the differences.
STEP 5 - The matter is sent to arbitration, i.e. before the court
where the judge will make the final decision. Therefore both
parties; employer and employee must accept the judges
decision.

GUIDELINES: GOOD MANAGEMENT & STAFF
RELATIONS
Good management worker relationship is important for
efficiency, productivity and the retention of staff.
Communication
Managers should not only give directives but encourage
feedback from workers. Regular scheduled meetings should
allow workers the opportunity to voice their concerns and views.
Some managers have an open door policy making them
available to all employees.
Motivation
Money is not a motivator for everyone and therefore managers
must find ways of encouraging workers to give their best
performance. Other forms of motivation include recognition for a
job well done. High performing employees can be motivated by
promotion, and being named employee of the month. Allowing
employees to be creative and bringing their innovative ideas to
goods and services is also a motivator.
GUIDELINES: GOOD MANAGEMENT & STAFF
RELATIONS
Fairness
It is very important to handle all workers fairly without
showing favoritism. If workers perceive that they are not
being fairly treated or that there is favoritism conflicts may
arise among workers and well as between management
and workers.
Compassionate
Managers must show care when dealing with workers
daily. Workers are not machines and cannot be treated as
such. Managers should try to understand each worker and
their various issues. Workers may have challenges with
illnesses, family, financial etc. which may affect their
performance on the job.

ROLE OF TEAMWORK
Many firms adopt a teamwork approach to complete tasks more
efficiently. For example a major Caribbean airline encourages
its workers to work as a team to achieve the main task of having
each flight leave on time. Workers therefore move to various
positions if needed, to have each flight leave on time.
Benefits of Teamwork
1. It improves the working relationship among workers
2. It increases communication
3. Skills and knowledge are passed on through the interaction
4. It satisfies the social needs of workers
Groups are formed naturally by persons with similar interest,
common goals and similar past experiences in an organization.
The establishment of various clubs, work socials and outings
will encourage greater interaction among workers, better
relationships and a teamwork approach to completing tasks.

STRATEGIES FOR EFFECTIVE COMMUNICATION
Communication is defined as a two-way process which involves
the conveying of information from (sender) to (receiver). The
need for effective communication is very important when
dealing with the human factor from recruitment to retirement in
the organization.
For communication to be effective there must be feedback.
Means of Communication
1. Oral This includes all types of spoken communication, e.g.
interviews and meetings.
2. Written This includes all things that are written, e.g. reports
and letters.
3. Visual This includes all things which can be seen, e.g.,
posters and films.
The primary objective of communication in any organization is
to get work done.

STRATEGIES FOR EFFECTIVE COMMUNICATION
Types of communication
Formal Communication -These are official methods approved by
management.
These includes meetings, announcement on notices boards, memoranda,
messages over public address systems, interviews, performance appraisals,
company magazines. etc.
Informal Communication -These are unofficial methods of communication.
These include: rumors and the grapevine, secret signs and gestures as well
as casual conversation between employees.
Barriers to Communication
1. Distortion of messages e.g. rumors or the grapevine can easily distort
messages.
2. Inappropriate forms of transmission e.g. a notice of a formal meeting must
be conveyed in writing and not by word of mouth. If this type of meeting is
not conveyed in writing it may seem casual and unimportant.
3. Physical barriers e.g. faulty telephone connections, defects in mechanical
or electronic equipment, and poor postal services.

MANAGEMENT INFORMATION SYSTEM
Managers need information to assist them in making important timely
decisions and predictions for future plans. Management information
system is a computer based business information system designed to
produce information needed for the successful management of a
department or business (Before MIS managers had to rely on
manually prepared reports at intervals). However, with increased
global competition firms must be more proactive in the market place.
Information must therefore be at the managers disposal at any point
in time when needed.
The manager of a retail store may require at any point in time
information on sales volume for particular items so that decisions on
future purchases can be made. A computer programme is then
designed to meet the specifications of the report which the manager
will need. The format and the content of each report required will be
used to design the programme. The manager will then be able to
receive the information required by requesting the specific report. The
necessary data will be retrieved from the data base, processed and
automatically presented in the format specified.

MANAGEMENT INFORMATION SYSTEM
Benefits
MIS is very cost effective as it reduces the need for labour to compile
and analyze data. Once information enters a companys database,
MIS will compile and analyze the data to give managers meaningful
information to make decisions. Data e.g. items sold or stock entering
the stock room will be inputted by the various department staff. MIS
will have required reports available in a much shorter time than
manual preparation of reports.
MIS is a decision support system used to analyze business activities.
MIS at anytime can provide information required for decision making.
This can be used to assess present performance and therefore assist
managers to improve the companys performance so that the firm is
more competitive.
Challenges
Although very beneficial and is therefore desirable for businesses
MIS is an expensive venture and small firms will be challenged to set
up this system. In addition to the set up cost for MIS business will
have to consider the continuous maintenance costs. The cost of
training present employees to interact with the new system must also
be factored in to the total cost.

PERSONAL NEEDS SATISFIED THROUGH EMPLOYMENT
Managers must be aware of the various needs of workers. If
these needs are adequately satisfied through work, then
workers will be motivated to improve performance.
Basic Needs
Employment is very important for the economic survival of
individuals. If employees receive adequate pay then these
needs will be satisfied. Some employees may also receive
allowances and fringe benefits. Once the basic needs of
survival (food, clothing and shelter) are met, employees will be
aware of higher level needs.
Security Needs
A job should not only provide adequate pay to satisfy basic
needs but it should also give workers security. This need can be
satisfied through the provision of health benefits, insurance and
pensions.

PERSONAL NEEDS SATISFIED THROUGH EMPLOYMENT
Social Needs
The employee spends on average eight hours each day at
work. We are social beings and therefore need human
interaction. This need can be satisfied by the
establishment of after work activities and through a
teamwork approach to accomplishing tasks.
Self-Esteem Needs
Managers can satisfy this need through promotion and
ways of recognizing those who have performed well.
Self-actualizing Needs
This need is satisfied by giving subordinates opportunities
to create and pursue innovative ideas so that they can
realize their capacities to the fullest.