We return to the basic input-output model in the Boddy textbook which I would like you to review and fully understand.We also want you to be aware of the different types and legal forms of business organisation to be able to define their particular benefits and drawbacks.We expect you to understand the various roles that managers adopt and link this to your own experience to become more consciously aware of how managers influence to achieve results.Within the model we expect you to be able to understand the various takes and contexts within which we manage.
What we’ve got here is our business organisation represented by the circle in the middle. On the left into our organisation come Inputs such as people, finance and materials. Within the organisation we transform these resources using different processes to create Outputs such as goods and services. What do we do within this process and why do we do it? What is it we create? Look at the last sentence on p7 of the core text to get the answer.And all this goes on within an external environment influenced by such things as politics, economics, laws and social norms.We then sell our outputs within markets and get feedback from these markets and our customers. This may make us change our inputs, transformation process or outputs in line with new customer or market requirements. This is called using market feedback. Modern supply chains in supermarkets such as Tesco rely on accurate and spedy market feedback captured at point of sale.
Do you remember that I introduced this model, that you can find in the core text, in the introductory presentation to the module. I asked the question:What do we do within this model and why do we do it?What is that we create?I directed you to find the answer within the first chapter of the key text on p7. Did you find it?The answer was add value. When we combine our input resources using a transformation process the output is of greater value than the sum of the inputs. You may have said that the objective was to make profit. You wouldn’t be too far wrong in that answer. But it ignores the processes that take place in the not-for-profit sector – these processes still add value.We can break down our inputs into tangible resources (physical assets such as people, materials and machines) and intangible resources (things like information, reputation and knowledge).Looking at the transformation process – there are many different types of process. For example a Nissan automobile plant will be highly automated with significant investment in in machinery (fixed capital). On the other hand a social work service would be less systematised and highly client-focused. In the social work case the significance of the people and their ‘ways of working’ are highly important. The skills, procedures and systems that they use send how they use them are defined as competencies. In the automobile plant the capital investment in the machinery and how it controls the process will be more important than the staff competencies.
We can classify business organisations by a number of different dimensions:Size:this is fairly straightforward. It is usually measured by number of employees. Small companies employing less than 100 employees accounts for around 98% of businesses in the UK, whilst large businesses are only about 0.3% of that total number of businesses. If we looked at turnover that would be a different story. You can find out more about the situation for Ugandan business in the Ugandan Bureau of Statistics website via the hyperlink. In UK Tesco Plc was UK’s largest business by turnover. What is the equivalent in Uganda?Type: at an industry level we classify into primary industry (using direct natural resources such as farming and mining; secondary (manufacturing, construction, energy) and tertiary (service industries). Sector: private or publicLegal status: the different legal ways that you can set up a business.
Sole Trader: this is the simplest form of business. It is owned by one individual but it may in some cases employ other people. It is the most popular form of business organisation in the UK with around 80% of businesses. It has the advantage of being easy to set up, but the disadvantage of having unlimited personal liability for the debts of the businessPartnership: like the sole trader the business does not have a legal personality of its own and hence there is unlimited personal liability both personally and jointly It come into being when two or more people establish a business. Benefits include more sharing of responsibilities and tasks, ability to specialise and increased finance. Downsides can be disagreements between partners and the unlimited personal liability.Private Limited Companies: in law a limited company has a legal identity in its own right (it’s distinct form the people that own it).This means that property and assets are owned by the company not the individuals. The company will be owned by the members (shareholders) and the individual's liability is limited to the amount invested in the business. A private limited company must have a minimum of 2 shareholders and its shared cannot be offered to the public. Most private companies are SMEs, although there are some notable exceptions to this rule. Can you find an example of a large private company? Companies can also be limited by Guarantee. The Companies Act (1961) provide the regulations for private and public limited companies in Uganda. Public Limited Companies: these have an authorised share capital and have the right to sell shares to the public. They require to have a certificate from the Registrar of Companies and a memorandum which states it to be a public company. A Plc is required to make its accounts available for public inspection.Co-operatives: the worlds largest is the UK Co-operative Group which in 2011 employed 120,000 people, had 5.5m members and around 4,800 retail outlets. The Uganda Co-operative Alliance was formed in 1961 to act as an apex body of the co-operative movement in Uganda
These approaches to business organisation fall on top of the existing legal structures. They are ways of carrying out a business venture that reduces some of the risks faced by the entrepreneur. Franchising: this had grown significantly in recent years. In this the franchisor sells the right to the franchisee to market its product or service. The parties could due any of the legal forms already discussed. The most prevalent franchises are the fast food outlets, the first Kentucky Fried Chicken franchise in East Africa started in Nairobi in 2011. The franchisor helps with a package containing all the elements to start-up the business and ongoing fees are paid form royalties, training etc.Licensing: usually used when a firm in one country authorises a firm in another country to use it intellectual property (patents, copyrights, trade-names, know-how) in return for royalty payments.Joint Venture: popular with international companies (e.g. oil and gas joint ventures between Ugandan/EU/US private companies and other countries’ national oil and gas state-owned companies).
The range of public sector organisations noted in this slide will be familiar to most of you and require little explanation.
Public corporations: these are run like private businesses but are owned by the state. They are incorporated by an Act of Parliament. Prominent examples in Uganda include the Uganda Printing and Publishing Corporation and National Water. The banking crisis has seen the effective nationalisation of various banks in the UK which were seen as ‘too large to fail’ from the point of view of the damage to the economy, these include Royal Bank of Scotland, Lloyds Group and Northern Rock. Other countries have considerably different attitudes and have much larger public sectors than the UK. Governments influence publicly owned corporations by financing and owning them; reviewing their operations; running these organisations through a board of management appointed by the Secretary of State; agreeing strategic objectives, investments, and reorganisations. Nationalised Industry: due to the economic liberalisation policies implemented by the Ugandan government beginning in the late 1980s, the Uganda Development Corporation (UDC) was wound up in 1998, before being re-established in 2008. It is responsible for facilitating the industrial and economic development of Uganda and forms an investment arm of the Ugandan Government, working alongside the Uganda Development Bank (UDB).Privatised State Industries: the Ugandan government followed the trend that had been happening in the UK by embarking on a privatisation policy in 1991. Privatisation is where state-owned corporations are sold into the private sector.Golden Share : Governments often influence privatised corporations through the existence of a golden share in a privatised state industry which effectively gives the government a veto in certain vital areas of decision making.
The are significant implications when you make a choice of a legal form of business. The sorts of variables are noted on this slide.You need to review this based on the additional topic notes and the textbook.In general terms the forms at the sole trader/partnership end have upsides of simplicity to set up and operate but downsides related to personal liability. Private and public liability companies limit liability but the formalities and regulations are greater, particularly in a Plc. Along with the formalities , the costs are thus significantly greater if you do a start-up in this form.
As businesses expand and grow there is the opportunity and need for specialisation of management tasks. Specialisation allows the growth of expertise and the ability to be more efficient. The outline in this slide is relatively self-explanatory I have included line managers in the section functional managers as this is the way it is treated in the core text. It could be argued, however, that line managers are just a lower level of general manager. Project managers are these that essentially manage a team to a specific outcome, usually across different disciplines and functions. In most businesses this is for a short-term objective. But there are certain industries that are regularly managed on a project basis such as construction and many oil and gas projects.
The idea of a management hierarchy will be familiar to you all. At the bottom of the hierarchy there is more direct operational work and as we work up the hierarchy there is more ‘managerial’ work, including the supervision of others and at even higher stages the management of others. At lower levels the managers are mainly concerned with the internal environment, whilst at the higher level the external environment is more of a concern.
Informational rolesIn these roles Mintzbeg sees managers dealing with seeking out, receiving and disseminating information.Interpersonal rolesInterpersonal roles arise from a manager’s authority within an organisation. These include figurehead, leadership and liaison roles.Decisional rolesThese roles relate to the important managerial role of decision-making. They range form the more creative entrepreneurial decisions, to problem-solvers, negotiators and the most common resource-allocator role.
PlanningThis includes forecasting future needs, planning and scheduling resources to meet these needs and developing performance objectives. We shall deal with this within a later theme and you will develop a Business Plan as one of your coursework assignments.OrganisingThis includes the creation of a structure for the organisation. The organisational task links with the learning that you will do in Human Resource Management (HRM), but it also involves organisational issues such as Information Systems and the management of change.LeadingThis includes influencing people, generating commitment and motivation and communicating throughout the organisation. All of these will be directed at the planning, organisation and controlling.ControllingThis deals with monitoring progress against the plan and taking corrective action where necessary. Control can be against operational performance measures. Management accounts and monitoring costs against budgets is a fundamental control task.
ObjectivesThis is where we want to get to or what we want to achieveFinanceWe require financial resources to undertake our transformation process. We require fixed capital in our machinery and working capital to deal with the amount of money we need to run the business until our customers pay us. We need to buy materials up front and pay wages weekly or monthly. PeopleWe require people to apply their knowledge and skills to the transformation process.Business ProcessesThere are a range of different processes types such as mass production, batch production, jobbing and service processes such as mass services, service shops and professional services. StructureThis is how we organise the business and divide up the work. TechnologyThis includes such differences as large or small scale production, the extent that we automate and the use of such things as Computer Aided Design (CAD).PowerHow we arrange the span of control and distribute responsibility for decisions.CultureThis relates to beliefs, underlying values and cultural norms. It may influence the things we do and how we do them.
Critical thinking is an important part of management and it is the approach that we use in Management Education. We may not always have to justify our decisions at work, but in an academic degree we have to justify our assertions and conclusions. In academic work we do this by citing references from informed sources in support and not just providing out own opinions.
The process of critical thinking has two stages – analysis and synthesis.Analysis means looking at something in a systematic way. It involves identifying and challenging assumptions. In other words not just accepting ‘we always did it that way’, but questioning things that no longer seem valid and challenging these approaches.Critical thinkers are aware that ideas and methods that work in one context will not necessarily transfer successfully to another.Critical thinkers can imagine alternative actions and explore whether alternative solutions might work better.Critical thinking also recognise and alert others to limitations ad look for evidence for approaches used or theories propounded.So we must have a systematic way of examining the management of business organisations. Anyone can take an engine apart, but it takes a skilled engineer to put it together properly so that it works better. So having done systematic analysis we should due better able to come to valid conclusions – this is what we call synthesise. In Management we call it effective decision-making.
These chapters in the core text and the supplementary text will assist in deepening your understanding of this topic. The core text also provides a number of short case examples of the ideas in practice. In the core text, look at the Review Questions – can you answer them?As modern managers we want to become ‘reflective practitioners’. This means in relating what you have just learned to your own experience. Look at the section in the core text about critical reflection.There are more resources in www.pearsoned.co.uk/mymanagementlab
Learning Objectives• To understand the input-output model and the internal andexternal environments of a business organisation;• To be aware of the different types and legal forms ofbusiness organisation and their benefits and drawbacks• To understand the various roles within management• To understand the management tasks of planning,organising, leading and controlling and how these can beachieved through the various dimensions of internal andexternal context.
The Input-output Model Add Value TransformationInput Output Process Create Waste
Classifying Businesses• Size – Small, medium, large• Type of Industry – Primary, secondary, tertiary• Sector – Private, public• Legal Status – Sole trader, partnership, limited company For information and statistics about Ugandan Business follow this link to the Ugandan Bureau of Statistics website( if you based in another country search for an equivalent site): http://www.ubos.org
Legal Forms of Business – Private Sector• Sole Trader• Partnership• Limited Companies – Private (Ltd) – Public (Plc)• Co-operative Societies - Uganda Co-operative Alliance - http://www.uca.co.ug
Franchising, Licensing and Joint Ventures• Franchising: – is an arrangement where one party (the franchiser) sells the right to another party (the franchisee) to market its product or service; – Franchise Expo: http://www.franchiseexpo.co.uk/ – The Franchise Business: http://www.franchisebusiness.co.uk/ – Franchise Direct (Ugandan Franchises): http://www.franchisedirect.com/internationalfranchises/uganda/217/ – The UK Franchise Directory: http://www.theukfranchisedirectory.net/match/franchises.php?gclid=CKKD5- 2WuqYCFYUe4Qoden-FHA• Licensing: – is a firm in one country (the licensor) that authorises a firm in another country (the licensee) to use its intellectual property (e.g. patents, copyrights, trade names, know-how) usually in return for royalty payments.• Joint Venture: – is a jointly owned and independently incorporated business venture involving more than one organisation; – ranges from two companies joining together in the same domestic market, to joint private/public sector ventures between participants from different countries.
Public Sector OrganisationsPublic sector organisations:• Central government departments (e.g. departments in charge of pension, education, healthcare, defence, transport, etc.);• Local authorities;• Non-departmental public bodies or quangos (e.g. Uganda Wildlife Authority);• Central government trading organisations (e.g. Posta Uganda) http://www.ugapost.co.ug/• Public corporations (e.g. Uganda Printing and Publishing Corporation http://www.uppc.co.ug/• Public Service Commission (Uganda): http://psc.go.ug/• Ministry of Public Service (Uganda): http://www.publicservice.go.ug/
Public Corporations• Public corporations: – Are statutory bodies, incorporated (predominantly) by a special Act of Parliament; – They have a separate legal identity from the individuals who own them and run them. – They are governed by the government department which oversees its operations.• Nationalised Industry: – Private companies taken into state ownership• Privatised state industries: – Are those industries that were turned into public limited companies. Examples in Uganda included Ugandan Airlines privatisation which was not a success and National Insurance Corporation (NIC)• Golden share: – Government influence in public corporations,
Legal Structures - implications• Implications in private sector: – The degree of personal control over operational and strategic business decisions; – The degree of personal liabilities; – The degree of power and/or autonomy in decision making; – The cost of establishing the business; – The legal requirements concerning the provision of public information; – The taxation position; – Commercial needs, including access to capital; – Business continuity.
Functional Specialisation in Management• Company Managers – Chief Executive Officers (CEO); Managing Director; Proprietor• General Managers – Subsidiary; Division• Functional Managers – Line Managers (branch; team; department) – Staff Managers (HR; Accounts; Safety: Purchasing )• Project Managers – Cross-functional teams
Management Hierarchies• Operators• Supervisors• First Line Managers• Middle Managers• Senior Managers• Directors
Critical ThinkingCritical thinking……‘involves our recognising the assumptions underlying our beliefs and behaviours. It means we can give justifications for our ideas and actions. Most, important, perhaps it means we try to judge the rationality of these justification…..by comparing them to a range of varying interpretations and perspectives’SOURCE: Brookfield (1987) in Boddy (2011), p26.
Process of Critical Thinking• ANALYSIS• Identifying and challenging assumptions• Recognising the importance of context• Imagining and exploring alternatives• Seeing limitations• SYNTHESIS• Making conclusions• Decision-making
Recommended TextsBODDY, D (2011) Management – an introduction (5th Edition) Harlow:Prentice Hall Chapter 1WORTHINGTON, I and BRITTON, B (2009) The Business Environment (6th Edition) Harlow:Prentice Hall Chapters 10, 11, 12