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Organization and Management
Principles of Business
Topic Two

Previous - The Nature of Business

Internal Organization Environment

An organization's internal environment is composed of the elements within the organization, including current employees, management, and especially corporate culture, which defines employee behavior. An organization's mission statement is key to the internal environment as it describes what the organization stands for and why it exists. It explains the overall purpose of the organization and includes the attributes that distinguish it from other organizations of its type.

Organizational chart

The formal structure of an organization is the hierarchical arrangement of tasks and people. This structure determines how information flows within the organization, which departments are responsible for which activities, and where the decision‐making power rests. The formal structure is displayed in an organizational chart which is a pictorial display of the official lines of authority and communication within an organization.

Functions of Management

There are five functions of management and leadership which are: planning, organizing, staffing, coordinating and controlling. These functions separate the management process from other business functions such as marketing, accounting and finance.

Planning - Planning is the function of management that involves setting objectives and determining a course of action for achieving these objectives. Planning requires that managers be aware of environmental conditions facing their business. In planning, managers must set objectives, which are statements of what needs to be achieved and when.

Organizing - The organizing function of leadership controls the overall structure of the company. The organizational structure is the foundation of a company; without this structure, the day-to-day operation of the business becomes difficult. Organizing involves designating tasks and responsibilities to employees with the specific skill sets needed to complete the tasks. It involves the developing the organizational structure and chain of command within the company. An organizational chart is a diagram that shows a reporting or relationship hierarchy.

Staffing - The staffing function of management controls all recruitment and personnel needs of the organization. The main purpose of staffing is to hire the right people for the right jobs to achieve the objectives of the organization.

Coordinating/Directing - The coordinating function of leadership controls all the organizing, planning and staffing activities of the company and ensures all activities function together for the good of the organization. Coordinating typically takes place in meetings with the department heads of the company to ensure all departments are on the same page in terms of objectives and goals. Supervision, motivating, leadership, and communication are all involved in the directing function.

Controlling - Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include (1) establishing performance standards, (2) comparing actual performance against standards, and (3) taking corrective action when necessary.

Responsibilities of Management to Stakeholders

Businesses must be aware of their responsibilities to the various groups that they interact with for the successful operation of the business.

Shareholders/Owners - A business owes its very existence to its shareholders because these shareholders supply capital so that the business can pursue its objectives. The business will be required to conduct its operations in such a manner where it will earn the highest possible return on its investments.

Employees - Management has the responsibility to ensure fair treatment of employees. It is the responsibility as a business owner to create a working climate that fosters respect and fair treatment of every employee.

Customers - Management must ensure that products are of good quality and are reasonably priced.

Society - Management must find ways to reduce harmful air pollution and the discharge of harmful waste created by the production process into rivers and seas.

Government - Management should adhere to various government legislation and regulation.

Suppliers and Partners - It is critical that the business have a very good relationship with its suppliers.


Leadership is the ability of a company's management to set and achieve challenging goals, take quick and decisive action, outperform the competition, and inspire others to perform well.

Leadership Styles

A leadership style refers to a leader's characteristic behaviors when directing, motivating, guiding, and managing groups of people. The following are the most prominent leadership frameworks and styles that have been identified.

Authoritarian Leadership (Autocratic) - Authoritarian leaders, also known as autocratic leaders, provide clear expectations for what needs to be done, when it should be done, and how it should be done. This style of leadership is strongly focused on both command by the leader and control of the followers.

Democratic - Democratic leaders offer guidance to group members, but they also participate in the group and allow input from other group members. Participative leaders encourage group members to participate and make followers feel like they are an important part of the process.

Laissez-Faire - Laissez-Faire is a leadership style where leaders offer little or no guidance to group members and leave decision-making up to group members.

Paternalistic - Paternalistic leadership style is one where dominant males are employed who has power and control over subordinate staff that are expected to be loyal and obedient

Bureaucratic leadership - Bureaucratic leadership models are most often implemented in highly regulated or administrative environments, where adherence to the rules and a defined hierarchy are important. These leaders ensure people follow the rules and carry out tasks by the rules.

Charismatic leadership - The charismatic leadership style relies on the charm and persuasiveness of the leader. Charismatic leaders are driven by their convictions and commitment to their cause. Charismatic leadership is rooted in the personal and behavioural characteristics of the leader.

Methods used by Trade Unions to Assist Workers

There are methods used by trade unions to attempt to assist workers which are as follows:

Sick-out – this is when a large number of union members call in sick on the same day. In a sense, they have not broken any rules, because they just use sick leave that was allotted to them.

Work to Rule - this is an industrial action where workers do not withdraw their labour but instead remain on the job but slow down the operations.

Go slow – this is a form of industrial action in which work or progress is deliberately delayed or slowed down.

Striking – strikes and demonstrations are normally the last resorts that trade unions use to achieve their objectives. Striking and demonstrating are used by labour unions when all civil means of getting employers to grant their demands could not work.

Methods used by Employers during Conflicts

To counter the actions of trade unions and employees, businesses react in particular ways which are as follows:

Union busting – this refers to a series of tactics used by management to prevent workers from grouping to form a trade union.

Lock out - the temporary closing of a business or the refusal by an employer to allow employees to come to work until they accept the employer's terms.

Strikebreaker (sometimes derogatorily called a scab or knobstick) is a person who works despite an ongoing strike.


Next - Establishing a new Business