Internal Business Environment

• Roles of Management


  • Leadership Theories
  • Working in Teams
  • Managing Change
  • Equality & Diversity
• Role of the Manager


  Managers are given responsibility for achieving their objectives and are held accountable for their actions. Their responsibilities include developing appropriate organisational structures, specifying objectives, deploying resources and evaluating performance. Managers are required to make decisions in all the areas for which they are responsible. Managers are given authority over those below them in the chain of command.
• Schools of Management


  • Classic schools of management - Fayol Administrative Management
  • Scientific Management - Frederick Taylor
  • Bureaucratic Management - Max Weber
  • Human Relations - Elton Mayo
• Classic School of Management/ Classical Management Theory

  • The formal aspects of the organisation
  • The importance of a manager's job
  • Superiors are seen to have greater wisdom and must be obeyed at all times by subordinates
  • A formal hierarchical organisational structure
  • The division of effective labour to improve effectiveness
• The classical school of management was based on the assumption that an organisation can be viewed as a machine which could be made more efficient if universal principles could be applied. This theory ignored the effect of external factors on the organisation.
• Classical School of Management

  • Fayol
  • Mintzberg
  • Weber
  • Taylor
• Human Relations


  • Mayo
• Neo Human Relations


  • McGregor
• Henri Fayol


  A French engineer who made one of the largest contributions to the classical school of management. He was one of the first people to work out what managers do and what they should do.
• Fayol's 5 primary functions of management

  • Planning
  • Organising
  • Commanding
  • Coordinating
  • Controlling
• Fayol's principles were adopted by later followers and some argue that they are still relevant to modern day management.
• References to unity of command, centralisation and division of labour are descriptive of the kind of formal organisation that has come to be known as "bureaucracy"
• Max Weber


  A German sociologist who studied the processes and features of bureaucracy. His theory emphasised an impersonal approach to running a firm, where rules, authority and power were central to effective management.
• Max Weber Proposed


  • A formal system of rules and regulations
  • Division of labour
  • A hierarchical structure where one level of jobs is subject to control by the next higher level
  • A detailed authority structure
  • Appointment to offices are made on grounds of technical competence
  • Expert training for workers
  • Life long career commitment
• His theory stressed strict rules and a firm distribution of power
• Max Weber's Bureaucratic Management Theory


  • Hierarchical Management Structure
  • Division of Labour
  • Formal Selection Process
  • Career Orientation
  • Formal Rules
  • Impersonality
• Frederick Taylor


  Drawn to the idea of efficiency. Believed that applying scientific principles to management would reduce inefficiency.
• Taylor's Scientific Management Theory Aims

  • Efficiency - to increase output per worker you maximise the rate of pay
  • Standardisation - Create consistent job performance by dividing tasks up into small, specified tasks
  • Discipline - Business should use a hierarchic authoritative system
• Taylor's scientific management theory emphasises the importance of managers in planning and organising tasks
• To improve productivity, manager's must: devise how to do the task - time and motion study, develop the techniques and resources to do so and finally motivate the workers using low wages and high incentives for exceeding targets - carrot and stick approach
• Application of Taylor's Scientific Management Today


  • Employee motivation not simply driven by money - social and psychological needs
  • Many organisations delegate responsibility
  • Organisations like McDonalds use Scientific Management principles
  • Organisations that are mechanised may use these principles as well
  • Target setting - a Taylor principle popular in modern organisations
• Positive Points of Classical School Theory

  • Money will always have a positive effect on motivation
  • Piece rate schemes will reward workers
  • Hierarchical structured means that there are many promotion routes
  • High level of supervision means less chance of slacking by workers
  • Leadership style is autocratic so decision making tends to be quick
• Negative Points of Classical School Theory


  • Demotivating for workers - treated like machines
  • Division of labour leads to boring and repetitive work
  • Assumes workers are only interested in financial rewards as their source of motivation
  • Autocratic leadership style can be intimidating and stressful for workers
  • Lack of flexibility may result in high staff turnover and absenteeism
• Human Relations School


  A new way of looking at management, which arose as a reaction to the classical school approach. It focused on the value of social factors and human interaction.
• Elton Mayo


  An Australian industrial psychologist, and one of the founders of the human relations movement. He conducted the Hawthorne Studies.
• The Hawthorne Studies found that individual workers cannot be treated in isolation, but must be seen as members of a group. Monetary incentives and good working conditions are less important to the individual than the need to belong in a group. Informal or unofficial groups formed at work have a strong influence on the behaviour of those workers in the group. Managers must be aware of these 'social needs' and cater for them to ensure that employees collaborate with the official organisation rather than work against it.
• The 'Hawthorne effect' refers to a phenomenon whereby workers improve and adapt their behaviour in response to a change in the working conditions set by management.
• The human relations movement emphasised the importance of communication between management and employees in promoting high levels of output.
• Usefulness of Human Relations Movement


  • Useful in industries where initiative is important and valued e.g. design firms.
  • Promotes the use of team working so useful in jobs where collaborative tasks are encouraged.
  • Elements used in fast changing industries where work is difficult to measure eg teaching and nursing
  • Led to the development of HR departments to support workers
• Contingency Theory


  This is based on the assumption that there is no best way to manage organisations as some previous theorists advocated. It believes that structures and methods of the operation depend on the circumstances and the situation in which the organisation is currently operating.
• Factors (Variables/Contingencies) that Contingency Theory Considers

  • Size and type of business
  • Technology available
  • Staff available
  • Skills of staff
  • Finance available
  • Management experience
  • Market environment
  • Information available
• Contingency theory argues that organisation should try to create the best fit between people, tasks and the environment.
• Relevance of Contingency Theory Today


  • Leadership Style - organisations must ensure they match suitable managers to relevant areas of work. Managers must be flexible
  • Organisation Structure - most organisations today use a mixture of structures eg RBS use centralised and decentralised. Flat management structures promote less employee supervision.
  • Staff skill - inexperienced or new workers may require a more directed approach. Experienced employees may enjoy being left alone to do their jobs and feeling empowered.
  • Nature of Work - manufacturing work will be suited to scientific management whereas service sectors may want more delegated decision making to take place. Businesses that have roles split across different types of work will need flexibility.
  • External Environment - economic conditions and global online competition means management styles must adapt accordingly. Rapidly changing markets and multinational styles of business require adaptive approaches. Additionally, the increasing prevalence of PESTEC factors mean managers need to be able to use initiative and adjust business approaches.
  • Manager Ability - contingency theory assumes that managers have the skills and competency to adapt their approaches
  • Staff Awareness/Comfort - in the modern world employees are more aware of the consequences of decisions and potential impacts on them. Contingency approaches could promote uncertainty and confusion unless it's implemented correctly.
• Leadership Theories


  • Style
  • Trait
  • Contingency
• Leader


  Innovates, handles change, focuses on vision, people and relationships, inspires others, has followers
• Manager


  Administrates, follows procedures, controls, focuses on systems and structures, has subordinates
• Leadership Styles - Style Theory


  • Autocratic
  • Democratic - Persuasive/Consultative
  • Laissez Faire
• Factors Affecting the Leadership Style


  • Size and type of business
  • Technology available
  • Staff available
  • Skills of staff
  • Finance available
  • Management experience
  • Market environment
  • Information available
• Team


  A number of people who are working towards the same goal. Teams can be formal or informal. Teams can also be temporary or permanent.
• Benefits of Team Working

  • Greater pool of ideas
  • Can use a range of expertise
  • Are capable of handling large amounts of information
  • Help to support and motivate individual workers
  • Will help develop employee skills
  • Will improve employee relations