Chapter 6

Organisation culture and committees

Organisational departments and functions

Research and development (R & D)Product research

Create new product (eg. Transistion glass, electric cars)

Developing existing one (pendrive 8g, pentium 4 core)

Research and development (R & D)Process research

Look at how goods/services are produced

Look at:

Processes – eg make sure hygient in food production (incorporating ISO 22000).

Productivity – faster and cheaper

Planning – plan shortest way to produce

Quality mgmt – better quality (eg. Employ ISO)

R & D work hand in hand with Marketing

Develop products base on customers’ needs. Customers’ needs information is gather by Marketing. Eg Marketing info says that women customers want skinny jeans and shorts. So Levi’s designs and produces such items for the customers.

R & D can change product spec to increase prices (one of the marketing mix) eg i-phone 4 to i-phone 4s, myvi 1.3 to myvi 1.5.

PurchasingPurchasing mix

Quantity – what size and timing of PO. Safety stock is important, also don’t hold too many inventory (maintain inventory level).

Price-Consider best value.

Quality-Must consult production and marketing the level of quality.

Delivery-lead time. Is supplier reliable?

Purchasing affects profit Best value for money – buy most quantity, best quality

and on time delivery for the company

Meet quality targets – buy materials that fit to produce quality goods required by the customers

Optimises material purchased so that do not keep to much to avoid holding cost.

Production Input – plant facilities (building, elec, water,

machines, photo copier), material and labour.

Process – scheduling for production, assign workers to do the job, control reject, maintain quality, avoid wastage etc..

Output – Finished products or services

What decision made by prod?Long term

What equipment and processes to use? Forklift, 2nd handmachines, stamping machines, printing process, assemblyprocess, packing process, cutting process.

Job design and methods? Job rotation, automation, manualmethods.

Factory location and layout? Ulu Tiram or Pasir Gudang,layout – where is the location for assembly, printing, store.

How many workers needed and what type of skills?Printers, general workers, production engineers.

What decision made by prod?Short term

Production and control – how much to produce for storageand for delivery.

Quality management – in-coming, in-process, out-going,type of test (drop test, heat test, uv test)

Maintenance – change of parts, servicing

Labour control and supervision – how many full time andpart time workers, work overtime, who to supervise.

Inventory control – safety stock, how much raw material,how much to produce for WIP (work in progress).

Production related to what dept?

Product design – refer to R & D. Product specification.

Job design – refer to human resource. To rotate workers, permanent job.

Quality spec required by customer – refer to Sales

Manage workforce eg discipline, termination, salary –refer to HR.

Acquiring resource eg buy new machines, plant, equipments such as computers, hand jack, forklift, stackers – refer finance dept

Service operation Is an activity of benefit to other people, intangible (not

material) and does not result in ownership.

Eg. Health care, restaurant, tourism, education and banking.

Service operation Nature of service

Intangible – not material.

Inseparable – Service produced and consumed at the same time. Eg. Dental treatment. Dr apply treatment and you receive it at the same time.

Variability – quality of service is subjective depending on customers.

Ownership –customer do not own services. They the given the right to use it.

Dimensions of service operation (what is needed) Tangibles – company outlook must reflect the image. Eg Bali spa must reflect

the setting

Reliability – Get it right the first time for repeat business.

Responsiveness – willing to handle customer queries.

Communication – Talk to customer with care. Eg front office, receptionist,

Credibility – Orgn should be seen as honest, trusted and acting for the interest of customers.

Security – Keep information and conversation with customer P and C.

Competence – Staff understanding the product and customers’ needs.

Courtesy - Staff must be competent (polite, respectful and friendly)

Understanding customers’ needs – Staff need to meet customer needs rather than try to sell products.

Access – Minimise queues

Marketing Models of marketing (marketing activities)

1. Sales support – reactive activities such as telesales, answering enquiries, collect customers data, exhibition.

2. Marketing communication – proactive activities such as promotion of orgn and product to create awareness, road show, giving pamplets.

3. Operational marketing – marketing activities such as market research, brand management and customer relationship.

4. Strategic marketing – making the product more competitive egpromote product so it stand out better than the competitors, introduce special formula, change packaging.

Marketing Mix (4 Ps) Marketing mix is the set of controllable variables and

their levels that an organisation uses to influence the target market.

Product, Place, Promotion and Price

Product What being sold. Can be product or services.

Core product – product essential feature. Eg credit card limit of RM15000, fly Silkair to Bangkok.

Augmented product – additional benefits for core product. Eg credit card offer insurance coverage, free flow of liquor drink.

Product class – various type of product such as cars, watch and shoes.

Product form –Product class variations such as car with 5 door, SUV, Limo or a watch with date, stopwatch, alarm.

Brand or make – Such as Nissan, Ford and Toyota, Seiko, Citizen, Titus.

Place Outlet – Where products are sold. Can have

intermediaries (middle man) of direct distribution (own shops, on-line)

Logistics – Management to warehouse, storage and transportation.

Promotion Communication so public knows about the product or service.

Promotion is to influence behaviour of customers thru:

1. Awareness of product

2. Interest in the product

3. Desire to buy

4. Action – actually buying it

How to promote product?

Advertisement

Sales promotion – buy 2, free 1, price reduction, collect points.

Direct selling – multi level marketing, sell from shops

Public relation – get publicity eg send fresh bottle water for tsunami victims (help in crisis management).

Price Product sold at a price with profit.

Price issues concern basic price, discount, credit terms and interest free credit.

Types of pricing

Penetration pricing – low price so people buy. Product is still new.

Skimming – Price that gives the highest profit

Cost plus pricing – cost per unit and include mark-up

Perceived quality pricing – high price is set to reflect image of high quality eg watches, bags

Going rate pricing – prices set to match competitors

Loss leaders – one product may be sold at a loss with the expectation that customers will then go on and buy other more profitable products eg buy a fridge and get a dvdplayer for free.

Captive product pricing – customers must buy two products. The first is cheap to attract customers but the second is expensive.

For service industries, 3 more Ps People – deliver the service (eg smiling or surly staff)

Processes – how service is delivered (need to queu up)

Physical evident (eg come with very decorative and glossy brochure or well design outlet)

Market segmentation Market segmentation – market divided base on needs/preference of

customers on the products/services eg gender, race, places (city/kampung), different salary.

Mass marketing – one product suits everyone. Don’t care about market segmentation eg lightings, drinking water, panadol.

Targeted marketing – product target specific segment eg i-phone for youngster, viva for lowel income.

Differentiated marketing – target few segments with different marketing mix eg toyota for middle income, lexus for higher income, swatch for youngster and tag huer for older people, coke for general and diet coke for health conscious people.

Administration Administration functions are carried out at head office

as much as possible (centralised)

Administration (cont)Advantages Disdvantages

Consistency – same account codes. Use same data in info.

Better security/control – only one dept handles all.

Head office – Better position to know what’s happening.

Economies of scale – can order more and cheaper (eg centralised order of uniform for all subsidiaries).

Single location – better chance of career path for admin dept only.

Local office or branch has to wait.

Reliance on head office –local offices not self-sufficient, too dependent.

Impact across the whole orgn if something goes wrong eg payroll system down affect all subsidiaries.

Finance function Role of finance dept

Raising money

Recording and controlling

Provide info so managers can make decision

Reporting- eg tax dept, shareholders on divident.

Financial Mgmt vs Mgmt of FinanceFinancial Mgmt Mgmt of Finance

Investment decision

Financial decision (how to pay investment eg loan, cash)

Dividend decisions

Operating decisions that affect profit (eg cost reduction, price increase)

Handling of cash

Invoices

PO

Any other recordings.

Sources of finance (where to raise money)

Capital market – KLSE

Money market – bill of exchange or cert of deposits (mortgage invoice to bank)

Retained earnings – extra from profit

Bank borrowings – loan, leasing

Gov sources – grants, tax reliefs

Venture capital

International money and capital markets –international bonds and borrowings.

Financial accounting Recording financial transaction

Maintain records of transactions, assets and liabilities to show profit and lost. (basically to show the health of the company)

Information to be reported to shareholders after auditing.

Treasury Mgmt Cash budgeting – how much to spend on daily, weekly,

mthly or yearly basis.

Bank overdraft – borrowings from banks

Repaying – pay interest to loans.

Cash flow compare to budget

Cashier’s duties – payment to suppliers, salary and banking charges.

Foreign currency dealings – buy sell of foreign currency.

Advise how to raise fund – from share issue or by a loan.

Working capital Account receivables – Money pays to company

Account payable – Money owes to others

Inventory – Stock in the company

Management accounting Providing info to management to assist in planning,

decision making and control.

Planning – budget for resource allocation and forecast results.

Decision making – make assessment on expenditure and cash flow

Control – measure performance, how operations cost affects profits, costing.

How finance relates to other dept Accounts payable – how much and when to pay

suppliers thru purchasing dept

Accounts receivable – send invoice and collect payment thru sales dept

Create aging list for debt collectors

Liase with management accounting staff for closing inventory (check stock and valuation of stocks)

Human resource Concerns with most effective use of human resources.

Deals with organisation, staffing , motivation, employee relations and employee services.

Objectives of HR Develop an effective human component that respond

effectively to change.

Obtain and develop human resources. Use and motivate them effectively.

Create and maintain co-operative climate.

Meet organisation’s social and legal responsibilities.

Why HRM Important? Increase productivity – develop and train workers

Enhance group learning – multi tasking

Reduce staff turnover – employee job satisfaction (but if economic is bad, company may want to down size)

Encourage initiative - motivation

Human Resource Cycle Selection – Recruit the right person for the right job.

Appraisal – Enable workers to achieve organisational targets.

Training and development – Ensure skills is appropriate and increase potentials of workers.

Reward system – Motivate and keep workers happy.

Performance – Achieved by the above 4 components.

Performance = f(motivation+ASK+Orgn Environment)

What is HR Planning? Acquisition – Get people

Utilisation – How to use them.

Improvement – Get them to perform to the best of their abilities.

Return of investment in HR – Better attendance, better quality goods/services, more ideas from workers, less rejects, etc..

Organisational culture

What is culture? Hostede- ‘The collective programming of the mind

which distinguishes the members of one category of people from another’.

Schein – ‘the set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about and reacts to its environment’.

Ways of behaving and understanding that are shared by a group of people.

Examples what constitute culture Women vs men

Social class (working class, business men)

Occupation

Ethnic group (Malay, Chinese and Indian)

Religion

Region (different countries)

Elements of culture Observable behaviour

Underlying values and beliefs which give meaning to the obeservable elements

Hidden assumptions, which unconsciously shape values and beliefs.

Three determinants of culture (Schein) contSchein argues that the first leaders of a company create the culture of an organisation. Once the culture exists, the attributes/criteria for the later leaders are determined by the culture.

1st level (observable elements)

Behaviour-personal/interpersonal behaviour

Artefacts – expression thru materials (office design, dress code)

Attitudes-collective behaviour (manners, ceremonies (lion dance), business formalities (business thru golf, dinner)

2nd level

Values and beliefs that give the behaviour and attitude meanings eg. Google office design is open concept and fun imply openness, or mission statement ‘to be the very best’ implies excellence.

• 3rd level

Assumption of unspoken rules. It is not conscious and it is like already ‘programme’ in the thinking and behaving eg. Everyone goes back at 9pm.

Manifestation of culture How formal/informal the organisational is

Communication : are sr managers approachable?

Office layout: open or close concept

Type of people employed: friendly or business like

Symbols, corporate myth (Donald Trump, must wear coat for all managers and exec)

Management style (relax or serious)

Level of freedom for subordinates (encourage new ideas?)

Attitudes to quality, risk, customer and technology.

What shapes/influences organisation culture? Founder-the way the founder manages the company.

Founder as role model.

Organisation’s history – which era the organisation was founded eg. 70s and 80s conservative ways of managing, 2000 onwards more flexible due to competition and globalisation.

Leadership and mgmt style – autocratic or democratic.

Organisation’s environment-nations (Mexican/Chinese), regions (city/village/Japan/UK), business types (army/government/tourism/manufacturing)

4 types of culture (Harrison)4 Greek deities (Handy)1. Power culture/Club culture (Zeus)

Power and influence from a central source (owner/director/founder)

Formality limited

Few rules and regulation

Can adapt to changes quickly

Power and influence of central source weaker when organisation gets bigger

Suited for small organsation

Work on own initiative with personal contact not on formal liaison

4 types of culture (Harrison)2. Role culture/bureaucracy (Apollo)

Based on logic and rationality

Formal structure

With rules and regulations

Individual perform their job to the full

Never overstep the boundary, keep to their dept

Very good at their job (become expert)

Works well in stable environment, big organisation and predictable work

4 types of culture (Harrison)3. Task culture (Athena)

Completing projects and solving problems

No clear leader

Get job done

Important person is the person who can accomplish tasks

Performance judged by results

Expensive culture because high cost to employ capable people (specialisation)

Costly if make mistakes in the tasks

4 types of culture (Harrison)4. Person culture (Dionysus)

To serve the interest of the individual

Very rare

Depend on the talent of individual

People who manage the organisation decides for the management and not the owner that delegates authority to.

Also named as ‘ existential culture’.

Contingency approach (it all depends) It all depends-several cultures may exist in an

organisation since organisation has many different departments.

Finance dept-task culture because the nature of work must be accurate and precised.

HR dept – power culture because it deals with discipline.

Handy’s model matched with Anthony’s classification Strategic mgmt = power culture

Tactical mgmt = task culture

Operational mgmt = role culture

National culture Different countries have different cultures that

influence business and management style.

Asian culture treat bosses as superior and should not argue with them. Carrying out bosses intructions are considered respectful.

Western culture emphasize on individuals’ freedom and expressions.

Hofstede model – 4 dimensions1. Power distance (the level of power distribution)

High PD (centralisation)-Asian, Latin, Eastern (Middle East).

Low PD (decentralisation)-Europe, US, Australia.

2. Uncertainty avoidance security, order, control vs ambiquity, uncertainty, change

High UA-(Latin, Eastern, Germany, Japan) wants control, procedures, law, task structure

Low UA-(Europe, US, Australia) wants flexibility, creativity, generalist, less rigid.

Hofstede model - cont3. Individualism personal (I) or collective (We)

High Individualism – Europe, US, Australia

Low Individualism (collectivism)-Latin, China, Asian

4. Masculinity – based on inclination to gender

High Masculinity – Japan, Germany, UK. Based on competition, can make decision, material success.

Low Masculinity (Feminine)-Europe. Female values important.

Committees Exist within organisation.

Can be just executives level or joint consultation between employees and employer.

Purpose of committees Creating new ideas – more people to brainstorm.

Better communication – Everyone exchanges ideas.

Better participation - committees are democratic in nature. Everyone can participate.

Combining abilities – combining different skills.

Coordination- members from different depts. So, better coordination between depts eg. Creating master budget.

Making recommendation-Different people give various recommendations that can be applied by depts.

Quality of Committee chair Immediate ruling on dispute/doubt. So he requires to

have sound knowledge (not on motion) of relevant issues, make decision, communication skills, tactful, courteous.

Seen as impartial (not bias)

Discretionary on strict observance of correct procedure.

Punctual and always present (should not have replacement/representative).

Quality of Committee secretary Fixing the date and time of meeting

Choosing and preparing location of meeting.

Preparing and issuing various documents eg minutes, memo.

Assist chairman, making notes.

Preparing minutes after meeting, acting on and communicating decisions.

Types of committees Executive committees – top level that has power to govern or

administer.

Standing committees – permanent basis. Deals with routine business on weekly or monthly basis. Can be for prodution, marketing or QC depts.

Ad hoc committees-to tackle a particular task only. Eg a particular rejects or quality problem, a particular machine problem.

Sub-committees –a committee created by the main committee to relief some of the routine job eg. Fire fighting sub-com from the EHS committee.

Joint committees- Form by two or more committees eg between employees and employer.

Management committees – executives from a number of levels (conduct management meeting on the monthly basis).

Advantages of committees Consolidation of power and authority – decision is

made by more than one person, therefore has more power.

Can delegate power and authority to a smaller group.

It is a group decision. So, individual is not responsible. It is a group responsibility.

Delay – a committee take more time to decide because they need to discuss and everyone must agree to decision. Eg an domestic enquiry panel needs time to decide to terminate or give warning to a worker.

Disadvantages of committees The bigger the size of committees, the slower decision is made.

Therefore, slower action taken.

Time consuming because many people and expensive cost need to pay salary for so many people.

Takes time to decide.

Committees takes time of managers, managers may not able to do more important tasks.

Incorrect or ineffective decision made because some managers are not expert. Eg cost reduction committee where HR Manager has no knowledge about cost reduction.

Individuals are not responsible if results of decision is bad because decision is made by group.

How committees can be successful Write down the areas of authority, time limit of a project/assignment

and the purpose so that everyone is clear.

Chairman must have leadership to coordinate and motivate members.

Committee cannot be too large.

Members must have knowledge, skill and experience.

Write down minutes of meeting and circulate to members by Secretary.

When made decision, must have quorum (minimum attendance) of over 50% of members.

Benefit from the committee must more than the cost.

Committees must be given time to decide so that all members are consulted. Maybe sub-committee is need to carry out some assignments.