Business at work

function in a number of day-to-day activities.

. recruiting employees – both internally and externally

. training new and existing employees

. paying salaries

. dealing with disciplinary matters and grievances

. overseeing industrial relations, by seeking to avoid disputes and

maintain harmonious relations and constant production

. developing and monitoring an employee appraisal system designed to

assess performance, set targets for achievement and identify any

training needs

Figure 1.5: Developing a human resources plan

The marketing function.

The marketing department carries out a wide range of functions on behalf of

the business. Essentially marketing is communications. The marketing

department communicates with a number of groups inside and outside the

business as it carries out its tasks.

Marketing activities:

. keeping customers satisfied

. discovering the needs of customers and advising the production

function accordingly

. carrying the responsibility for ensuring the effective distribution of

products to wholesalers and retailers

. liasing with marketing agencies to provide the necessary expertise

(small firms)

. if the firm is an export, the marketing department may have contact

with government agencies.

Marketing provides the organisation with information about its customers

and its markets. Effective marketing can offer businesses a number of

benefits:

. early warning of changes in consumer tastes and fashions through

regular market research

. knowledge about competitors and information regarding competitors’

product

. the means to present the company in a positive light through public

relations activities

. allowing the firm to improve the quality of its products by

coordinating and analysing customer complaints

. providing a catalyst for growth by forging relationships with

distributors, retailers and customers in new markets

. supplying consumers with the products they want and giving high levels

of customer satisfaction, which might permit a business to charge

higher prices thereby increasing its profitability.

The administration function.

The scope of the administration department varies enormously between

organisations. In a small business the administration function might

incorporate a number of the functions like finance , personnel and

marketing. However, larger organisations are more likely to operate a

specialist administration department.

A typical administration department has a number of functions:

. Administration department carries out organisation’s IT system.

. Clerical and support service. Information processing, data processing,

filing and reception services can be provided to all areas of the

organisation.

. Security and maintenance. These services are essential to the smooth

running of the business and to the effective operation of other

business functions such as production in particular.

. In some businesses, the administration function takes responsibility

for important public relations activities such as customer services.

The research and development function.

The nature of research and development (R&D) varies enormously between

businesses. Traditionally, the term research and development is taken to

refer to scientific research undertaken by firms producing manufactured

goods, high technology products or pharmaceuticals. However, R&D is equally

important to firms providing services.

By investigating in research and development a business seeks to maintain

competitiveness against its rivals. Competitiveness measures a business’s

performance in comparison with rival firms in the same market. A highly

competitive firm has some advantage over other businesses. This competitive

edge can take a number of forms:

. lower prices

. more advanced and sophisticated products

. a better image with consumers

. a good reputation for advise and after-sales service

. reliability in terms of operation and delivery dates

Types of research:

. basic research

. applied research

. development

The prime function of R&D is to develop new products that can give the firm

a competitive edge in the market. This necessary involves the R&D

department in close liaison with staff in market research, design and

production.

Function 1.6: The nature of business activity

Functional areas of Tesco plc.

The diagram above shows the key functional areas or departments of Tesco,

as one of the leading retailers in the U.K. It is currently the leading

supermarket chain in Britain, with a higher market share than its leading

rivals, Asda-Wallmart, Sainsbury’s and Safeway.

I have explained earlier the key functional areas of a typical business

and Tesco, as the diagram shows, displays this type of structure. For

example, the Company Secretary, Rowley Ager is responsible for Pensions,

the Company Secretariat (the administrative staff), the Treasury, Taxation,

Site Facilities, Transport and all aspects of Consumer Law.

The Finance Department, directed by Andrew Higginson, is responsible for

all aspects of finance and audit, and also for European affairs. These

functions are shown in Figure 1.3 in my introductory section. I have no

detailed information on Finance within Tesco other than financial data

available from the Company Accounts and from the Tesco and Bized

websites……… and these are more relevant to a detailed finance study of

Tesco as a company, a topic to be studied in a later Unit.

The Marketing Department, directed by Tim Mason, is responsible for all

aspects of marketing , Customer Service, Advertising, Market Research,

Clubcard, Estates and Metros. Since the early 1990s Tesco marketing

strategy has been to become the best in terms of price, quality and

service. Objectives are set, and ways found of meeting them, in all aspects

of company’s operation.

The Retail Department, directed by Michael Wemms, is responsible for all

retail operations and express stores.

Tesco first ventured into foreign markets when it acquired stores in Irish

Republic in 1978, but these were sold in 1986. The 1990s produced a much

better climate for European expansion. Now Tesco operates 80 stores in

Central Europe, and 16 stores in two Far East countries trading both under

the Tesco and subsidiary fascias. The 13 Tesco stores in the Czech Republic

and Slovakia, 29 stores including 5 supermarkets in Hungary, 31 stores in

Poland. Also Tesco plan to open 12 hypermarkets in Thailand and in South

Korea over the next three years.

The Human Resources Department within Tesco is responsible for many

thousands of employees across the whole spectrum of the organisation. Tesco

employs 154,000 people in the UK and 27,000 in Ireland and Europe. It does

not appear on the organisation chart, which I obtained from Tesco, because

this function is somewhat complex and shared between the main headquarters

at Cheshunt. Hertfordshire, and the many stores operated by Tesco around

the country. For example, there are two Tesco superstores in Leicester, at

Hamilton and Beaumont Leys, both of which have a Human Resources officer in

charge of personnel administration.

The Commercial Department, directed by John Gildersleeve, responsible for

all commercial operations and technical services.

The Distribution Department, directed by Philip Clarke, responsible for

Supply Chain and all distribution operations. Distribution Director

responsible for products delivery, logistics and transport. Its purpose is

to ensure that Tesco stores have the right products delivered against

agreed delivery schedules and in good condition, enabling the stores to

provide a consistently high level of customer service. Tesco products are

sent to stores from distribution centres around the country. Tesco runs 13

centres and a further six centres are run for Tesco by contractors. A

typical centre covers 300,000 square feet and handles some 50 million units

a year. The centres work around the clock, seven days a week, providing

2,500 deliveries daily, amounting to 19 million cases per week. Tesco

employs 6,800 people in distribution (excluding the staff at the contractor-

run centres), and has about 1,000 tractor units and 2,000 trailers in its

national vehicle fleet.

The Operations department, directed by David Potts, responsible for

operations of Tesco stores in Northen Ireland & the Republic of Ireland. In

May 1997, Tesco completed an agreement with Associated British Foods to

purchase all their supermarkets in the north and south of Ireland. The

purchase price was Ј641 million, giving Tesco a further 110 food stores and

a leading position as a food retailer on both sides of the Irish border.

I have considered each of the major functions of Tesco separately. However,

it is the effective interaction of business functions that is essential to

the success of an organisation in attaining its objectives.

As an example, Tesco has recently introduced a customer-oriented website on

the Internet. Company has developed within this service facility a direct

order system via E-mail – called “Tesco Direct”. Customers can order

their produce/product for home delivery.

There are now many thousands of such deliveries but these all depend upon

the successful interaction of the major business functions outlined

earlier.

In other word, -

. Marketing - responding to the initial enquiry, receiving and

processing an order, distributing the product to customer.

. Administration – adding the customers details to the IT system,

passing on details to other departments within the business.

. Finance – investigating the financial status of the customer, offering

credit terms if appropriate, invoicing for payment.

. Distribution – receiving details of order and meeting the customer’s

demands, liasing with marketing over delivery dates, rescheduling

other production as required.

. Human resources – at a store or warehouse level – ensuring sufficient

employees are available to meet the delivery requirements of the

order, arranging overtime payments if necessary.

Hence these functions help meet the objectives successfully. All Tesco’s

organisation structure works as links of a chain, if one link falls down,

all the organisation will experience difficulty. For example, most

important department of Tesco, I consider, is Distribution department. If

this department fails, products will not be delivered to the store, so

customers will go to another store. Tesco’s success is built on the good

work of each department.

E4

Organisational structure

In many small firms, the owner may have a very hands-on approach and may be

responsible for getting customers, hiring any extra labour and acquiring

other inputs and taking all financial decisions. As organisations grow,

however, their structure takes on a greater significance and those at the

top have to pay more attention to its formal structure and presentation.

The various business functions will show an increasing degree of

specialisation as an organisation expands and people will be employed to

manage and take decisions in specialist areas.

In general, an organisational structure sets out:

1. Major roles and job titles, showing who is in control of the business

as a whole and who manages its major business functions within

departments.

2. The level of seniority of people holding different positions and their

respective positions in the organisation’s overall hierarchy.

3. The working relationships between individuals, identifying

relationships in terms of superiors and their subordinates and

indicating who has authority to take certain kinds of decisions and

who are responsible for carrying out the work arising from those

decisions.

4. The extent to which decision making is concentrated in the hands of

people at or near the top of the organisation or handed down to those

at lower levels of management.

5. The broad channels through which information is communicated

throughout the organisation, indicating the route by which

instructions flow down the hierarchy and how information flows back up

the hierarchy.

Organisational charts

Organisational charts are representations of the job titles and the formal

patterns of authority and responsibility in an organisation.

Business may produce organisational charts for several reasons. First, it

is important that a company reviews its organisational structure on a

regular basis to take account of any changes in the business environment.

A formal organisational chart helps the company to identify where changes

need to be made and to decide the relationship between any new sections or

departments and the rest of the organisation. Business also produce

organisational charts because they allow a company to review its structure

and to identify areas where cost saving changes and improvements can be

made. Organisational charts are useful when changes take place in the

company. It can be updated to take account of any informal developments in

its structure that have been good for the company. A revised organisational

chart is particularly useful for informing people about the new structure

of the company after mergers or take-overs.

The organisational chart can also be used during an induction period to

give new employees a useful overview of the company and their own position

within the structure in terms of their authority and the managers to whom

they are responsible. Although an organisational chart has several uses, it

should not be taken as giving an exact description of how the organisation

actually operates. It does not give the exact nature of job

responsibilities or indicate what levels of cooperation may be necessary

between departments.

Function 1.7: Line authority in a production department.

Chain of command - is the line of command flowing down from the top to the

bottom of an organisation. It passes down the management hierarchy, from

director and senior management levels to those in middle and junior

management positions and eventually to employees in supervisory jobs who,

for example may have authority over assembly line workers or staff

providing services to the organisation’s customers. Organisations with a

long chain of command - with a hierarchy made up of many levels of

management - are said to have tall organisational structures.

Span of control - refers to the number of subordinates a manager is

responsible for and has authority over. Organisations with a long chain of

command will tend to have narrow spans of control. Organisations with a

short chain of command tend to have wider spans of control. This produces a

flat organisational structure because it has a hierarchy with fewer levels

of management.

Flat organisational structures: are generally desirable, there is a limit

to the number of subordinates who can be placed under one superior. Even

very experienced managers who have the qualities and personalities that

promote loyalty and hard work can only be responsible for so many

employees.

Tall organisational structure : some organisations have many levels and

grades of staff with a tree-like management structure and strong patterns

of vertical communication. This means that there are many different grades

of staff between people lower down the organisation and the person at the

top. Tall organisations suffer from problems with bureaucracy, as

information needs to be directed through the correct channels before

appropriate action is taken.

The main features of such a structure are as follows:

6. At each level there are several staff responsible to a person at the

next level up. The process is repeated until the top of the

organisation is reached.

7. In a limited company the person at the top is the Managing Director

who is ultimately responsible for the whole organisation.

8. As the levels within the organisation are ascended, the number of

people at each level decreases and this gives the organisation a

pyramidal structure.

In an organisation with flat structure there are fewer levels or grades of

staff and much more emphasis on communication across the organisation. This

is more likely to be the structure of a small business where everyone knows

each other and works together more as a team.

In some situations, however, a relatively wide span of control may be

acceptable if:

9. The potential disadvantages of a wide span are outweighed by the costs

of employing the extra managers needed to produce narrower spans of

control.

10. Junior employees are engaged mainly in routine work and as a result

the manager is required to make relatively few decisions.

11. Managers are willing to reduce the pressure on their own time by

delegating more decision making and they can identify staff who are

likely to respond well to the extra responsibility.

12. An effective range of financial and non-financial motivational factors

produces a committed group of people who need very little supervision.

13. The group within the span are highly skilled or talented and are given

a great deal of scope to be creative and imaginative in their work.

Line structure

In a line structure, a company is usually organised into functional

departments, each headed by a senior manager, below whom there is a chain

of command. This indicates that there is a line of authority and

responsibility as one goes down the structure.

Each person in the line has authority over those below, while being

responsible for making sure that the work handed down to them from their

immediate manager is completed. This applies even if the subordinate does

not personally undertake the actual work.

Advantages:

14. It is hierarchical structure which is simple to understand - staff

know precisely where they are in the structure, who can allocate work

to them and to whom they are responsible.

15. Managers have a clear understanding of the roles of people when

allocating work and spend less time monitoring work because

subordinates are not distracted or confused by instructions from other

sources.

16. A well-established line authority makes it possible for work to be

delegated further down the line - this can be valuable when superior

is seeking to widen the experience subordinates and develop their

management or supervisory skills.

Disadvantages:

17. It can involve a very long chain of command - instructions may take a

considerable time to filter from the top and impact on production,

which can be an important drawback if the organisation operates in a

rapidly changing market.

18. The flow of information back up a long chain to management may be a

lengthy process, causing a considerable delay before problems are

identified and tackled.

19. Individuals might only respond to requests from the superior, creating

inflexibility in the organisation which may be totally unnecessary if

co-operation with other managers does not effect working relations

with their superior.

Line and staff structure

A line and staff structure combines both a line authority and what is known

as staff authority. The term staff authority refers to those staff, usually

at a relatively senior level, whose are of work often involves dealing with

different departments. Someone with the relevant staff authority can

provide services and advises to those in the line of authority of other

departments. Managers with staff authority do not have the power to control

or give instructions, but rather the authority to deal with different

departments and to offer advice or support services in relation to problems

or exploiting new opportunities. However, since those with staff authority

are appointed because of their expertise, experience and good personal

skills, their advice, though not binding, is likely to be very persuasive.

Advantages:

20. Staff authority enables the expertise and experience of specialists to

be utilised more fully across the organisation.

21. By having access to all areas of the company, managers with staff

authority, communications between departments are at director level,

and so any inter-departmental communication has to pass up the chain

of command in one department to director level and then down the other

before it reaches the appropriate level.

22. Staff authority prevents individual departments from being too inward

looking - departments remain aware of their interdependence and their

role in seeking to achieve the organisation’s objectives.

Disadvantages:

There is a risk that staff authority may diminish the authority of

individuals in the line management, particularly if those with staff

functions acquire informal power and authority.

Matrix structure

In a matrix structure, a senior manager heads a division or team of

specialists drawn from different departments. These specialists are also

located in departments where they are part of a line authority; they are

therefore subject to two sources of authority.

In a matrix structure the simple chain of command found in a line structure

is replaced by a very large number of reporting relationships as

individuals report to managers in more than one department or function.

A matrix structure may be used for just some of an organisation’s

activities or it may cover the whole work of the organisation. It is often

used for organising and managing project teams, where people with

specialist skills, perhaps from different levels in the hierarchy, are

brought together to solve complex and urgent problems. Project teams may be

created to deal with issues which arise every now and again or they may be

an ongoing feature of the organisational structure.

Some aspects of marketing, however, may be handled by an ongoing project

team drawn from other departments, although the membership of the group may

change as different marketing issues arise.

Advantages:

23. It promotes increased co-ordination between departments because it

cuts across departmental boundaries - it encourages greater

flexibility and creativity, produced by the cross-fertilisation of

knowledge and skills.

24. It allows for the involvement of relatively junior staff, giving them

valuable experience in a wider field for the expression and

application of their particular skills.

25. Staff lower down a line structure can also gain valuable management

development in a project team, preparing them for promotion to higher

management positions.

26. The involvement of specialists from different areas reduces the risk

of resources

being wasted on projects with no future - in non-matrix structures an idea

originating

in, say, the marketing department may be pursued for a long time before it

comes to the attention of production which might find that it is

simply not practical.

Disadvantages:

. The existence of a matrix structure and project teams can lead to

confusion as individuals are involved in a large number of different

relationships creating a complex pattern of authority and

responsibility.

. A line manager may resent a subordinate receiving instructions from

managers based on other departments, especially if they are at a lower

level of management.

. This also raises questions as to who has priority over the

subordinate’s time and what information arising out of the work of the

project team should also be reported through the line authority. This

can be a potential source of conflict and relations may also be

strained if the subordinate suffers from divided loyalty.

Centralised structure

Organisations are centralised when the majority of decisions are taken by a

few people at the top of the organisation and little decision making is

delegated to those further down the organisational structure.

Even if many important decisions are delegated to subordinates, some

aspects of the business are always likely to remain totally under central

control. In general, senior managers or a centralised department takes

responsibilities for: major financial issues, wages and salaries, manpower

planning and personnel records, purchasing.

Advantages:

27. Senior management have more control of the business, eg budgets.

28. Procedures, such as ordering and purchasing, can be standardised

throughout the organisation, leading to economies of scale and lower

costs.

29. Senior managers should be more experienced and skilful in making

decisions. In theory, centralised decisions by senior people should be

of better quality than decentralised decisions made by others less

experienced.

30. In times of crisis, a business may need strong leadership by a central

group of senior managers.

31. Communication may improve if there are fewer decision makers.

Decentralised structure

Complete decentralisation would mean subordinates would have all the

authority to take decisions. It is unlikely that any business operates in

either of these ways. Even if authority is delegated to a subordinate, it

is usual for the manager to retain responsibility.

Some delegation is necessary in all firms because of the limits to the

amount of work senior managers can carry out. Tasks that might be delegated

include staff selection, quality control, customer relations and purchasing

and stock control. A greater degree of decentralisation - over and above

the minimum which is essential - has a number of advantages.

Advantages:

32. It empowers and motivates workers.

33. It reduces the stress and burdens of senior management. It also frees

time for managers to concentrate on more important tasks.

34. It provides subordinates with greater job satisfaction by giving them

more say in decision-making, which affects their work.

35. Subordinates may have a better knowledge of ‘local’ conditions

affecting their area of work. This should allow them to make more

informed, well-judged choices.

36. Delegation should allow greater flexibility and a quicker response to

changes. If problems do not have to be referred to senior managers,

decision-making will be quicker. Since decisions are quicker, they are

easier to change in the light of unforeseen circumstances which may

arise.

37. By allowing delegated authority, management at middle and junior

levels are groomed to take-over higher positions. They are given the

experience of decision making when carrying out delegated tasks.

Delegation is therefore important for management development.

Delayered structure

Delayering involves a business reducing its staff. The cuts are directed at

particular levels of a business, such as managerial posts. Delayering

involves removing some of these layers. This gives a flatter structure.

Delayering is likely to play a major role in a policy of decentralisation

as the removal of management layers allows authority for decision making to

be shifted to a lower level in the organisation.

Advantages:

. The savings made from laying off expensive managers. It may also lead

to better communication and a better motivated staff if they are

empowered and allowed to make their own decisions.

. However, remaining managers may become demoralised after delayering.

Also staff may become overburdened as they have to do more work. Fewer

layers may also mean less chance of promotion.

Management style

Management style refers to the approach that an organisation takes in

setting objectives for its employees and the way it manages relations

between superiors and subordinates.

Management or leadership styles can be categorised as:

Autocratic: A manager that adopts an autocratic management style takes

entire responsibility for decisions and, having set objectives and

allocated tasks to employees, expects them to be carried out exactly as

specified. Employees are told exactly what, how and when work must be

started and finished. It is the kind of management style often associated

with a corporate culture centred almost exclusively around production.

Power is focused at the top, and the centralised decision making is geared

to getting the goods out of the factory and to customers. Little regard is

paid to any non-monetary needs of employees; they are not consulted or

involved in decision making.

Democratic: A democratic management style seeks to involve employees in the

decision-making process, either by consulting them directly or through

their representatives. This approach reflects a corporate culture which is

more human resource centred and recognises the organisational benefits from

meeting its employees’ non-monetary needs - such as a need for job

satisfaction and a sense of belonging. A consultative approach is

particularly important if an organisation is planning to change product

design or working conditions, methods and practices.

Laissez-faire style: This style gives people complete freedom to organise

and carry out their work. It is a very person centred approach. A laissez-

faire approach may still impose some constraints, such as completion dates

for certain key tasks or the earliest and latest arrival times for a

flexible hours working day. There is no formal structure for decision

making as decisions are taken by a variety of processes depending upon the

nature of the problem, the opportunity to be explored and the individuals

involved.

Consultative style: Leaders consult with others before decision are made.

There will be a group influence in the final decision, even though it is

made by the leader.

As diagram above shows, Tesco has many levels of staff: directors on the

top, and step by step to employees on the bottom, therefore I can think

that Tesco is a hieratical organisation, where each individual knows who he

must report to. Communication in a complex organisation such as Tesco will

be dependent on the organisational structure, but this will be discussed

later in my section on “Communication”.

I can see that Tesco has a centralised and decentralised form of

organisation because people on the top, who control the company, take the

majority of decisions and also the company’s Head office is centralised at

Cheshunt in Hertfordshire.

Tesco is very big organisation and has very many stores in different places

– this fact shows that Tesco is a decentralised organisation, with much

decision-making delegated on a regional and individual store level.

From the information I have managed to access I believe/consider that Tesco

has a very good democratic and consultative management style. It is a very

successful firm, as seen earlier, it is now the U.K. market leader with

positive leadership from above and a notable corporate culture.

The directors present their annual report to shareholders on the affairs of

the Group together with the audited consolidated financial statements of

the Group for the 52 weeks.

The principal activity of the Group is the operation of food stores and

associated activities in the UK, Republic of Ireland, France, Czech

Republic, Slovakia, Hungary, Poland and Thailand. A review of the business

is contained in the Annual Review which is published separately and,

together with this document, comprises the full Tesco PLC Annual report

Accounts.

Culture

Culture in organisations is often described as the set of values, beliefs

and attitudes of both employees and management that helps to influence

decision-making and ultimately behaviour within them. Each organisation has

a unique culture. This is what makes studying business behaviour so

fascinating. The business culture helps to determine how things get done in

firms and defines, quite simply, how the company works. The fact that

organisations are themselves organic, composed of workers constantly

interacting with each other and their environment, suggests that the

culture in firms is not static and constant – the way firms operate can

change, either intentionally through management action or more likely

through natural evolution.

Corporate culture

Corporate culture is a set of values and beliefs that are shared by people

and groups in an organisation. A simple way of explaining corporate culture

might be to say that it is the ‘way that things are done in a business’.

The corporate culture of a business can influence decision-making. It also

encourages low level managers to behave like entrepreneurs. Business

leaders are able to create a corporate culture to achieve a corporate

objectives and strategy of the company. It is important that the corporate

culture of a business is understood by all the people that work in the

organisation. It is usually transmitted to new members and reinforced

informally, by stores, symbols and socialisation, and more formally through

training.

Advantages of a strong corporate culture.

. It provides a sense of identity for employees. They feel part of the

business. This may allow workers to be flexible when the company

needs to change or is having difficulties.

. Workers identify with other employees. This may help with aspects of

the business such as team work.

. It increases the commitment of employees to the company. This may

prevent problems such as high labour turnover or industrial relations

problems .

. It motivates workers in their jobs. This may lead to increased

productivity.

. It allows employees to understand what is going on around them. This

can prevent misunderstanding in operations or instructions passed to

them.

. It helps to reinforce the values of the organisation and senior

management.

. It acts as a control device for management. This can help when

setting company strategy.

Figure 1.8: Types of business culture.

Culture, presented within Tesco plc.

Tesco has achieved its position as Britain’s leading food retailer by

offering excellent value and service to its customers. Underlying its

business success is a commitment to upholding certain values, working

principles and culture within the organisation, and to seek continuous

improvement in its ethical performance. As a measure of its achievement to

date, in 1997 the company came top in the Christian Aid league table for

ethical commitment.

Customers.

Tesco must serve its customers by providing the goods they want and the

service they expect. By meeting customer needs better than its competitors

do, Tesco earns profits and creates value for its shareholders.

Customer service is at the heart of Tesco business culture. The base line

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