Introductory Personnel Management N4
1.4 Conclusion
This module comprehensively looked at our economy and the place of 1
organisations within the economy in South Africa. It started off by explaining
various concepts and their application to personnel management, including the
following: economy, organisations, private vs public sector, financial institutions
and government agencies, employer vs. employee, customer vs consumer,
suppliers, managers vs owners and the public.
It further investigated the organisation in the economy, by looking at the needs
of consumers, the role of production, factors of production and the production
process.
The entrepreneur and the functions in an organisation was also discussed in
great detail. The last unit covered the role of management in the organisation,
including their responsibilities, their tasks and managerial decision-making.
1.5 Module Summary
See Figure 001. Module 1 – Structure
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Module 1: Economics and management
Homework Assessment 1
(a) Identify whether the following statements are true or false by making a
cross in the relevant box:
Statement True False
1. Eskom and other government owned companies
fall under the Private Industry.
2. The retail store that buys bulk stock from a
factory is called a consumer.
3. The public refers to all the stakeholders in
the external environment that surrounds the
organisation.
4. Suppliers provide organisations with all the
resources they need to produce products and
service.
5. The owner will never be the manager of an
organisation.
(5 x 2) [10]
(b) Define the following concepts as clearly as possible:
1. Customer (2)
2. Consumer (2)
3. Employee (2)
4. Employer (2)
5. Owner (2)
6. Entrepreneur (2)
7. Private Sector (2)
8. Economy (2)
9. Decision-making (2)
10. Management. (2)
[20]
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Introductory Personnel Management N4
(c) Read the questions carefully and then answer them as comprehensively
as you can:
1. Differentiate between the Private and Public sector, with
examples. (6) 1
2. Name and explain two different financial institutions in
South Africa. (4)
3. Explain Government agencies in your own words.
Give examples. (5)
4. Differentiate between Customers and Consumers,
with examples. (6)
5. Discuss the needs and wants of consumers as a factor to consider
in the production of goods and services in an organisation. (10)
6. Explain the factors of production with examples. (12)
7. What is the role of production in organisations? (3)
8. Clearly discuss the production process in your own words. (10)
9. List and explain three functions in an organisation. (6)
10. Discuss the three levels of management in an organisation. (6)
11. What are the main responsibilities of managers in an
organisation? (10)
12. Discuss the management decision-making process in your
own words (14)
13. Differentiate between the different management tasks. (8)
[100]
Total: [130]
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Module 2: The Enterprise as an organisation
2 The enterprise as an
organisation
Learning objectives
After studying this module, students should be able to:
•• Define and use subject terminology such as the following correctly:
Resources, Markets, Prices, Profit, Demand, Supply, Competition
•• Differentiate briefly between the following forms of ownership:
♦♦ Sole proprietor
♦♦ Partnership
♦♦ Company
♦♦ Corporation
♦♦ Franchise
•• Describe the aims of an organisation in a pragmatic manner.
•• Explain the role of entrepreneurship in activating the activities of an
enterprise.
•• Explain the role of people in activating the enterprise.
•• Define the concept technology in the workplace and activities in the
workplace.
•• Describe the effect of technological change on the human being as
employee.
•• Discuss the importance of technology in activating the enterprise.
•• Explain the concepts: inputs, outputs and transformations in business
systems in a pragmatic manner.
•• Explain the transformation process referring to the difference
between products and services.
•• Explain what organisation structure means in the effective functioning
of an enterprise by referring to line organisation and functional
organisation.
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Introductory Personnel Management N4
•• Explain briefly the influence of the external environment on the
organisation.
•• Explain the meaning of division of labour in a pragmatic manner.
•• Describe the meaning of specialisation of tasks as a result of division
of labour in the workplace.
•• List the advantages and disadvantages of specialisation in practice.
•• Describe what is meant by authority and effective delegation of tasks
referring also to span of control.
This module is structured in the following way:
Unit 2.1 Introduction to Unit 2.2 Activating the Unit 2.3 Organisational Unit 2.4 Organisational 2
enterprises enterprise structures design
•Concepts and terms •Entrepreneurship •Line structures •Division of Labour
•Forms of •People •Functional structures •Specialisation
owernership •Technology •Influence of external •Authority and
•Aims of organisation •Process environment delegation
Figure 003. Module 2 – Structure
In Module 1 we learned that the organisation is a group of people who form a
`business, club, or enterprise together in order to achieve a particular aim. This
aim is to be profitable and to be successful in the market in which it operates.
Organisations combines the factors of production (natural resources, capital,
labour and entrepreneurship) and transforms
it into a sellable output (product or service). Producing the right product and
service at the right time, will ensure that the organisation achieves its goal of
profitability. Module 2 focuses on the enterprise as an organisation.
This module covers other very
important aspects of the enterprise
as an organisation, including
organisational concepts and terms,
forms of ownership, the activation
of the enterprise, organisational
structures and organisational design.
As an aspiring human resources manager, and possibly business entrepreneur,
it is vital that you understand enterprises and their function in the market,
including types of ownership, design and structure – all of which has a direct
impact on personnel. Human resources play a big part in the functioning of an
organisation.
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Module 2: The Enterprise as an organisation
Remember
Without people to do the work, there will not be an organisation. Without
workers, there will not be productivity. Without workers, the organisation
will not be able to achieve its aim of profitability.
Human resources managers therefore have a great responsibility towards the
organisation and its workers. In order to support the business in achieving
its objectives and the workers to achieve their goals, the human resources
department must be knowledgeable of organisational structures, design and its
place in the economy.
Group activity 2 A
In your groups, think about and discuss the following questions:
(a) Why do you think it is important for human resources managers to be
aware of and have knowledge of the organisation as an enterprise in the
economy?
(b) What do you think will be the impact of a Human resources Manager in
the workplace that does not understand the business or its impact on
the workers?
(c) What is your opinion on the role of human resources in organisations?
(d) How would you go about ensuring that you have proper knowledge
and understanding of the business world before you are employed as a
human resources professional in the future?
2.1 Introduction to enterprises
An enterprise is another word for ‘business’ or ‘company’ and therefore closely
links to the concept of organisations. In trying to understand the enterprise as
an organisation and its impact on workers and the economy of this country, it is
vital to first have a clear grasp on the concepts and ideas related to enterprises.
These concepts and ideas form part of the giant jigsaw puzzle we are building
in this subject, which also forms the basis of the rest of this textbook.
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Introductory Personnel Management N4 2
2.1.1 Terms and concepts
The following concepts will be discussed in this section:
1. Resources
Definition
Resources is defined as ‘all the individual things organisations need, have
or can use to produce products and services to increase profitability’.
‘Resources’ is another term for the production factors organisations used to
produce goods and services in the organisation. These production factors, as
we learned in Module 1, include the following:
•• Natural resources, such as water, electricity, sugar, flour, meat, wood, etc.
•• Capital, such as machinery and equipment, as well as money, loans and
bonds.
•• Labour, such as the workers, supervisors and managers needed to
produce these products.
•• Entrepreneurship, the skills and creative ideas of the owner of the
organisation.
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Module 2: The Enterprise as an organisation
The factors of production, or resources in combination, are seen as the inputs
into the production system, which are then transformed into the products
and services bought by consumers and customers to fulfil a need or want.
The needs and wants of consumers and customers alike are unlimited, which
means that it does not end. As one need or want is satisfied, another one
will appear, making it increasingly difficult for organisations to keep up. The
resources to meet these needs and wants, however, are limited, sometimes
even scarce.
Some resources, such as wheat and mealies, are limited or in short supply due
to droughts in South Africa. Other resources, like funds, water and electricity
are scarce, due to a lack thereof in the market. South Africa has a shortage or
scarcity of skilled workers, workers with the required skills, qualifications and
experience needed to do the job. This leads to a shortage in entrepreneurs,
who more often than not, provide job opportunities to citizens and meet
consumer needs and wants. The availability of resources within organisations
therefore has a massive impact on the production of goods and services.
Example: Sarah owns a home-based baker in Linden, Johannesburg
where she produces fresh breads, confectionary and other baked
goods for the people in her community. She buys most of her raw
materials(natural resources) from a local supplier and faithfully pays her
water and electricity bill every month. She also employs a few young
women (labour), who she trains on the job with her and therefore
produce more goods to sell.
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Introductory Personnel Management N4 2
Sarah is however, faced with a few challenges due to load shedding
during the day, her bakery cannot produce any products to sell. She is
need of electricity (natural resources) in order for her blenders and
ovens to work. She also does not have the
funds available to buy a generator (capital).
South Africa is also experiencing extreme
droughts, which makes water a scarce
resource. Strict water restrictions have been
implemented in a her area, which adversely
effects her access to water. (Her) supplier is
also experiencing difficulties supplying sugar
(natural resources) due to workers striking
for higher wages (labour). Sarah thus has no electricity for long periods
of time, limited amounts of water, and has to source sugar at higher
price from other suppliers. This has a major impact on her business.
Group activity 2 B
Based on the example above, answer the following questions in your
groups:
(a) What resources does Sarah need to make her business successful and
profitable? Be specific.
(b) What do you think will happen if these resources suddenly become
difficult to find?
(c) What do you think will happen to her business with prolonged load
shedding and water restrictions? Explain your answer.
(d) What is the impact of these challenges on Sarah’s employees?
(e) How does the supplier’s inability to supply Sarah’s bakery with sugar
impact her business?
(f) Does the supplier also experience a shortage of resources? Explain.
(g) What can Sarah do to manage these challenges in an effective way to still
ensure that her business is profitable and that her employees remain
employed?
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Module 2: The Enterprise as an organisation
2. Markets
Definition
Markets are defined as ‘a set up where two or more parties engage in the
exchange of goods, services and information’.
A market is a place where two or more parties (the buyer and the seller) come
together to buy and sell products and services that are needed. A organisation,
that produces the products and service, is seen as the seller and the customer
who buys and consumes this product, is the buyer. An exchange takes place
between the buyer and the seller: The buyer gives a certain amount of money
to the seller and gets the products or services of his choice in return.
In order for a market to be competitive, there needs to be more than one
buyer and seller. With many different sellers, buyers can choose what they
buy, when they buy it and from whom. Buyers will normally focus on products
that fall within their price range – Therefore the product market is very price
sensitive. Organisations, or sellers, must ensure that they produce the right
product, at the right time, at the right price that will meet the needs and wants
of consumers and ensure that it remains profitable and competitive in the
market.
Table 006. Summary of the different types of markets
Type of market Description
Physical market
• Where buyers and sellers can physically meet to
exchange products and services for money.
• Example: Shopping malls, retail stores or spaza
shops.
Virtual market • Where buyers purchase products and services via
the Internet.
• Buyers and sellers do not physically meet.
• Third parties are normally involved (Delivery
companies).
• Example: Takealot.com, Ebay.com or Any other
online shop.
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Auction market Introductory Personnel Management N4
• The sellers sells his goods or services to the buyer
with the highest bid.
• This can take place in a virtual or physical space.
• Example: Bidorbuy.co.za (Virtual) or SA Auction
Group (Physical).
Market for • Where raw materials are sold to organisations to be
intermediate goods used in the production of other goods and services.
• Includes various farms, factories, and service 2
providers.
• Example: Sipho’s maize farm, Eskom, Janet’s
Packaging
Black market • Where illegal goods, like drugs or weapons, are sold
Knowledge market to buyers.
• Takes place in ‘the dark’, hidden from any form of
law enforcement.
• Example: Illegal drug sales, prostitution, copied CD’s/
DVD’s/Movies, human organs or exotic animals.
• Involves the exchange of information and knowledge
based products
• Sellers exchange their knowledge and experience for
money from the buyers.
• Example: Quora or Aardvark online platforms
Financial market • Where the exchange of liquid assets (money) is dealt
with
• Buyers buy stocks, shares, assets and other debts.
• Example: Stock markets, JSE, Banks
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Module 2: The Enterprise as an organisation
3. Prices
Definition
Prices is defined as ‘the amount of money that a consumer has to pay for a
specific product or service’.
Determining the price of goods and services is a very important decision every
organisation must make. They need to keep the costs of production, labour and
raw material in mind as well as the price sensitivity of consumers in
determining the price of a product or service. Most people in South Africa are
on a tight budget, which makes them more price sensitive. Consumers will
consider the cost of products against their available money, and then decide
which product or service they can afford to buy. This decision is linked to their
needs and wants.
If organisations make the price of
their products and services too
high, consumers will either not
buy the product at all, or they
will consider another brand of
product from the organisation’s
direct competition. If the price of a
product or service is too low, many consumers might buy the product, but the
organisation itself will not be profitable. There thus has to be a fine balance
between meeting consumers at their price point and ensuring the profitability
of the organisation. At the same time, organisations need to be up to date with
the products and services of their competitors to ensure that their product or
service remains profitable.
Example: Zinzi is a young mother who earns a small income working
as a domestic worker. Not only does she have to feed a baby and pay
for her accommodation and meals, but she also needs to support her
younger sibling and boyfriend, who is not currently employed.
At the end of the month, Zinzi decides to go to Pick ‘n Pay to buy a few
things for her family. She carefully looks at all the products on the shelf
and compares prices of similar products to see which she will be able to
afford. After she added a few essentials to her basket, including nappies,
maize meal, sugar, shampoo, she walks to the coffee aisle for a small
tin of coffee is too expensive, compared to the one she chose, which is
currently on promotion.
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Introductory Personnel Management N4 2
The above example is a clear reason why organisations must focus on
determine the right price for the products and services. In order to sell their
products and services, the price of products and services must be within
reach of the consumer and not too expensive, compared to competitors.
Organisations must keep the following rules in mind when determining the
price of products:
•• The price of products and services must cover the total costs of producing
the products and business profits.
•• If organisations want to lower prices, they need to lower costs of
production first.
•• Organisations must review product and service prices regularly to ensure
that they remain competitive.
•• Prices must be established at an affordable price point to assure sales.
•• Before setting the price of a product, organisations must be aware of the
costs of running your business.
Individual activity 2 A
Answer the following questions in your Workbook:
(a) Why, do you think most consumers are so sensitive to the price of
products?
(b) How would you prioritise your shopping bill if you only had a limited
amount of money to spend?
(c) Why must organisations pay attention to the price level of their products
and services?
(d) What roles does competitors play in the determination of prices for
goods and services?
(e) What can organisations do to ensure that consumers buy there product
off the shelves?
(f) What impact does the price of goods and services have on the personnel
in the organisation?
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Module 2: The Enterprise as an organisation
4. Profits
Definition
Profits are defined as ‘the money than an organisation makes by selling
their products and services, after covering the costs involved in producing
these products and services.’
Organisations and entrepreneurs have one main aim: They want to be
profitable. They want to make as much profit as they possible could, without
setting selling prices too high. Through the proper combination of resources
and cost-effective transformation of these inputs, organisations should try and
keep their costs as low as possible, in order to sell as much as possible
products, leading to higher levels of profit.
Organisations can determine their profit by adding up the costs of production, raw
materials, electricity and labour (expenses)
and subtracting it from their total turnover
(money made from the sales of their
products or services). If the difference is
positive, that would be the organisation’s
profit. If the difference is negative, when
the costs are higher than the sales income,
the organisation is making a loss, and is
therefore not profitable.
Remember
Organisations will not be able to make a profit, if their prices are too high.
With prices that are too high, consumers can’t afford to buy it and will then
settle for a competitor’s product or service.
When an organisation makes a profit, entrepreneurs will see it as a return on
their investment at the start-up phase at the organisation. He invested a lot
of time, money and effort into the business and when he makes a profit, he
knows his business is a success.
Example: Siya wants to buy his own car to travel from home to college
every day. In order to do that, he needs extra money. Siya decides to
make and sell bunny chows amongst his fellow students on campus.
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Introductory Personnel Management N4
His grandma gave him for his birthday, and he decides to invest this
into his new business.
He buys bread, mutton, spices, potatoes and packaging material, at a
cost of R100, to produce 20 bunny chows in one day. Siya sells all 20
bunny chows in one day. His total income equates to R200.
He then subtracts the costs of making the bunny chows, as follows:
Sales income: R200
Costs: - R100
Profit: R100
Siya therefore made R100 profit on his very first day.
2
Individual activity 2 B
Based on the example above, answer the following questions:
(a) What would you do, if you were Siya, with the R100 profit he made on
his first day?
(b) Calculate the profit Siya would make if he sold 30 bunny chows.
(c) How many bunny chows must Siya sell if he wants to make a R1 000
profit, just enough to cover the deposit on his new car?
(d) What would happen if Siya made 50 bunny chows to sell, but because of
students sitting for exams, only sells 30 bunny chows?
(e) How do you think could Siya increase his profits in order to buy his car
sooner?
5. Demand and supply
Definition
Demand is defined as ‘the desire or need of customers for goods or
services which they want to buy or use.’
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Module 2: The Enterprise as an organisation
Definition
Supply is defined as ‘the amount of goods and services made available by
the employer to the consumer to buy and use.’
The demand and supply of products and services are an inherent part of any
organisation; it has a big impact on organisational decision-making. Based on
the total number of products and services produced (supply), organisations try
and meet the needs and wants of consumers (demand).
If the demand for a product is higher than
the supply, meaning consumers want more
of a product than is made available by the
organisation, it could lead to an increase in
product price. It could also lead to consumers
moving from one brand to another, because
it is available to them to buy. Organisations
can then produce more products and services
(increase their supply) in order to sell more
products, to make a higher profit and meet the needs of consumers.
Organisations must be careful, however, not to provide too much products
and services in the market, leading to an oversupply. This means that more
products and services are available in the market than a need exists with
consumers. This could have a detrimental effect on prices, which can drop
substantially in order to get consumers to buy more products. If there is an
oversupply of goods and services, compared to the demand from consumers,
organisations will struggle to make a profit.
Example: During hot summer months, the demand for ice cream and
cool drinks is high. Organisations therefore have to supply enough ice
cream and cold drinks to satisfy the need and wants of consumers. If
there is a shortage of supply, therefore a shortage of ice cream and cold
drink of a specific organisation, consumers will settle for another brand
of ice cream or cold drink that is available.
Organisations must aim to find a perfect balance between the demand
and supply of their products and services in order to remain profitable and
competitive in the market.
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Introductory Personnel Management N4
6. Competition
Definition
Competition is defined as ‘a situation in which organisations compete with
each other for market share and sales from consumers.’
In South Africa’s free-market system, organisations are in direct competition 2
with each other, especially if they are producing similar products or services.
All organisations have the same goal: to be productive and profitable. And they
will do whatever it takes to achieve maximum market share, maximum sales
and therefore maximum profits.
In order to remain competitive,
organisations will try and keep their costs
and product prices as low as possible
to ensure higher sales volumes from
consumers and customers. As already
discussed, consumers decide which
products to buy and at what price,
keeping quality, services and availability of a product or service in mind.
Sometimes organisations will have special promotions or discount offers in an
attempt to get consumers to buy more of their product, leading to increased
sales and increased profits. If consumers buy more products and services from
an organisation, their market share could increase substantially, making them a
competitive force in the market.
Organisations must also be up to date with what their competitors are doing
and where they are heading in the market, in order to ensure and maintain
their competitiveness in the market.
Example: MTN and VodaCom are two direct competitors in the cellular
and telecommunication industry in South Africa. Both organisations
compete for the loyalty and support of customers and consumers, who
take out contracts, buy airtime or handsets, increasing profitability and
market share in South Africa.
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Module 2: The Enterprise as an organisation
2.1.2 Forms or types of business ownership
When entrepreneurs get an idea for a business opportunity based on the needs
and wants of consumers, they need to decide which type of organisation they
are going to create. They therefore need to decide on the type of ownership or
structure they are going to enforce in the organisation. There are various forms
of ownership available to entrepreneurs to choose from, which can be divided
into two main groups.
Depending on the main aim of the entrepreneur, whether it is to make a profit
or not, they need to make a choice as to the type of organisation they are
going to create. Non-profit organisations are organisations that are not aimed
at making a profit, but focus on charitable work or helping others, whereas a
profit organisation aims to make the most profit they could possibly make.
Table 007. Forms or types of ownership aimed at making the most profit
Form of ownership Description
Sole proprietor • This is a one-man business, where a single person runs
the business in his own name or under a trade name.
• The owner raises the capital to start the business and is
the one that gets the idea for the business.
• The owner is involved with the management of the
business.
• The owner gets all the profits and income raised by the
business.
• He is also responsible for all the legal claims, debts and
losses the business might incur.
• The business has no independent legal personality apart
from its owner.
• This is normally a smaller business, like a gift shop, hair
dresser or coffee shop owned and managed by a private
individual.
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Introductory Personnel Management N4
Form of ownership Description
General partnership • It is a business where more than one person decides to
enter into a business venture together.
• Most individuals prefer into this type of organisation with
someone, as it divides the work, time and financial input
required from partners.
• Because more people are involved, it is easier to raise
the capital needed to fund business expenses and costs,
compared to a sole proprietor.
• A partnership is started with two or more individuals
going into contract with each other, where legal liabilities,
profit sharing, control and authority over the business is
confirmed and agreed upon.
• A partnership has no independent legal personality This 2
means that if one partner does something wrong, all
partners are responsible for financial losses.
• Because there is more than one person involved, it could
lead to a lot of misunderstandings, conflict and problems.
Where buyers purchase products and services via the
Internet.
Company • A company is owned by its shareholders.
• Shareholders elect a board of directors from themselves
to be involved with the operational side of the business.
• The shareholders buy shares in the company and their
profits depend on the value of the shares and how well
the company is performing.
• The capital obtained from trading shares, or by public
investment, is used to finance company activities.
• Shareholders get feedback on company performance on
an annual basis at annual or general meetings, where
important decisions for the business are also made.
• The company has a legal personality – the shareholders
can therefore not be held responsible for any claims
against the company as an entity.
• There are two types of companies: private companies and
public companies.
• Members of the public can acquire shares in a Public
Company, but not in a Private Company.
• Private companies are identified by the (PTY) Ltd
following the company name.
• Public Companies only have Ltd behind their names.
• A company must be registered according to the
Companies Act.
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Module 2: The Enterprise as an organisation
Form of ownership Description
Close corporation • This is seen as a ‘loose’ venture between no more than
ten individuals, known as members.
• Members must make a contribution in order to become
involved in the Closed Corporation.
• It has an independent legal personality, which means that
individual members cannot be held responsible for the
business’s debts or failures.
• Members must also enter into contract with each other,
just like with partnerships.
• It is closed, in that owners are also controllers and
managers of the CC.
• Each members share or involvement in the corporation is
expressed as a percentage of the CC.
• The profit of the CC is shared based on the percentage
ownership or shares members have.
Franchise • A franchise is a privately owned business that has
purchased the rights to use a well-known brand name
and identity from the franchisor.
• The owner of the franchise has certain obligations toward
the franchisor, like maintaining brand standards and
paying brand royalties.
• In return, the franchisor provides training and permanent
fixtures for the store, so that all stores, even though they
are separately owned, look and act the same.
• Examples of franchises across South Africa, include
Steers, McDonalds, Spur and Panarotti’s.
Individual activity 2 C
Match the type of ownership in column A with a description Column B.
Column A Column B
Sole Proprietor A. This is seen as a loose venture between no more than ten
individuals, known as members.
Partnership B. The owner has certain obligations like maintaining brand
standards and paying brand royalties.
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Introductory Personnel Management N4
Company C. The owner raises the capital to start the business and is
the one that gets the idea for the business.
Closed
Corporation D. Is started with two or more individuals going into
contract with each other, where legal liabilities, profit
Franchise sharing, control and authority over the business is
confirmed and agreed upon.
E. Shareholders elect a board of directors from themselves
to be involved with the operational side of the business.
2.1.3 Aims of organisations 2
Every business has its own set of aims that they want to achieve. Depending
on the nature of the organisation, its aims and objectives will be decided upon
accordingly. However, there are certain aims and objectives that overlap across
organisations.
Definition
Business Aims is defined as ‘the goals and objectives the organisation
wants to achieve within a specific time frame. It is also where the business
wants to go in the future’.
The aim of any business is a statement of its
purpose and where it wants to go in the future.
Business objectives, on the other hand, are stated,
measurable targets of how to achieve these
business aims. The main aim of any organisation is
to make a profit. All other activities are secondary
and related to this main purpose. These activities
are all centred on achieving the organisation’s
bull’s-eye: Maximum Profit!
It is very important for organisations to determine their aims and objectives
right at the start of the venture. These aims and objectives will set the direction
and course of the organisation going ahead into the future; it is therefore long-
term. Short term aims and objectives will direct day-to-day activities within
organisational departments.
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Module 2: The Enterprise as an organisation
Table 008. Main aims of organisations
Aim Description
Profitability • Organisations have the main aim of making profits for its
owners, shareholders and investors. If the organisation
is not making a profit, it won’t be successful at all. Most
organisations want to be successful and in order to be
successful, they need to make a profit.
Growth • Organisations need to grow and develop, based on the
needs of consumers, market trends and competitor
innovations. They need to grow with technology and
business strategies to ensure that the organisation remains
profitable, competitive and successful.
Market share • Every organisation will have a certain % of the market in
which they are active, depending on the sales, profitability
and innovation. The higher the market share, the stronger
the brand and the more competitive the organisation. .
Social • Organisations have a responsibility towards the external
responsibility environment in which it exists. Through job creation,
sponsors and charity donations, many organisations can
focus on their social responsibility, increase sales and
improve profitability and growth of the organisation.
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Aim Description
Employee • Employees are the heartbeat of any organisation. Without
attitude, employees who are productive, have the right attitudes and
performance have sound wellbeing, no organisation will be successful or
and wellbeing profitable. Organisation need employees to ensure that the
organisation survives.
Product quality • In order to increase sales, organisations must ensure that
their products and services are of the best quality possible.
Consumers compare products and will always choose the
better quality product, which will benefit the organisation
through growth, sales and overall profitability.
Service delivery • Service delivery is key in a service orientated organisation, 2
such as restaurants. Without good service, customers won’t
return to the organisation or make use of their services
again. This could have a detrimental effect on the success of
the organisation.
Group activity 2 C
Divide into groups of four or five to work on this practical activity:
Your group wants to start their own small business in your local area,
covering a specific product or service in demand. Design a poster covering
all the below elements, and present it to the rest of the class. Remember –
keep all your preparation in your workbook.
(a) Give a creative name to your business.
(b) What product and service would you like to deliver to the market? Why?
(c) What resources do you need for your business? Are any of these
resources scarce or limited?
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(d) In which market will your business operate? Explain your answer.
(e) Allocate a price to your product or service, keeping the costs of
production factors in mind.
(f) Calculate whether you would be able to make a profit, if you have
regular, loyal customers.
(g) Explain how you will address demand and supply issues in your business.
(h) Who would be your direct competition in the market? How will you keep
updated with what your competitors are doing?
(i) Which form of ownership will your group decide upon for your business?
Why?
(j) Write down at least five specific aims for your new business.
(k) Now present your poster to the rest of the classroom.
2.2 Activating the enterprises
Activating the enterprise covers all the activities of an organisation that
deals with the work that has to be done in order to achieve the goals and
objectives of the organisation. It entails the combination and transformation
of production factors within the organisation, to ensure a sellable output is
produced that would increase the profitability and success of the organisation.
It also includes the correct use of the following elements to sustain production,
increase productivity and ensure future success of the organisation:
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2.2.1 Entrepreneurship needed to activate the enterprise
Definition
Entrepreneurship is defined as ‘the development of a business from
the ground up and includes coming up with an idea and turning it into a
profitable business’.
Entrepreneurs play a very important role in the 2
start-up and activation of a new enterprise.
Not only do they come up with the business
idea or concept, but they also develop the
business into a profitable and competitive
force in the market. Entrepreneurship further
entails recognising the right opportunity and
finding the right combination of resources
(production factors), to pursue the
opportunity, create jobs in the economy and
become a profitable business.
Table 009. Roles of an entrepreneur
Role Description
Entrepreneur as • An entrepreneur should have the foresight and willingness to
a risk-taker assume risk of the business and take the steps necessary to
make a profit or deal with business losses when applicable.
Entrepreneur
as a business • Entrepreneurs invest a lot of time, money and effort in the
manager new business venture, without a guarantee of success.
• The entrepreneur is forward-looking, risk-taking and alert.
• Entrepreneurs are seen as producers, where they combine
the production factors effectively, to produce certain
products and services.
• An entrepreneur aims to make a profit, where costs of
production is less compared to sales income.
• Entrepreneurs must therefore manage the business, its
production factors and its sales to ensure that the business is
and remains profitable and competitive in the market.
• They must plan the activities of the business to ensure that it
grows in the market.
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Role Description
Entrepreneur as
a leader • Entrepreneurs must be natural leaders of people, who can
choose workers wisely and also exercise general control over
Entrepreneur as day-to-day activities, preserve order and maintain unity.
a change agent
• Not everyone has the ability to be a leader or to inspire
Entrepreneur as others to follow their leadership, vision and mission in the
an innovator organisation.
• Entrepreneurs are required to deal with change in the
internal and external environment of the business over the
short and long term.
• They are responsible for the coordination that restores the
business and the economy to a new equilibrium position.
• Change must be embraced to ensure that the organisation
remains profitable, competitive and value-adding to the
economy of a country.
• Entrepreneurs come up with the idea or concept for a
business.
• They are therefore the creative minds behind the success of
any business and must continue to ensure that the business
stays ahead of the competition through innovation and
creative products and services.
Successful entrepreneurs have the following very important characteristics:
•• They have passion and are highly motivated.
•• They embrace risk and always move
toward the future.
•• They believe in themselves, work
hard and are dedicated to their
business.
•• They are flexible and can adapt
easily to changing circumstances.
•• They understand their products
and/or services inside out, as well
as the market in which it operates.
•• They can manage their money, finances and costs.
•• They can plan the day-to-day and longer term activities of the business.
•• They can network with other professionals and businesses within the
market.
•• They can communicate well, within and outside the organisation.
•• They inspire their employees to follow their vision, leadership and goals.
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Individual activity 2 D
Answer the following questions in your workbook:
(a) What is entrepreneurship?
(b) Why is entrepreneurship important in a country?
(c) Discuss the roles of an entrepreneur in your own words.
(d) Name the characteristics of successful entrepreneurs.
(e) In your opinion, which one of the above roles is most important to have?
Why?
(f) Do you think an entrepreneur can be a leader and a manager at the
same time? Explain your answer.
2.2.2 People needed to activate the enterprise
Definition
Employees are defined as ‘the people appointed by an organisation to
perform certain duties, using their time, skills and knowledge, in exchange
for a salary or a wage’.
No organisation can be successful without the help of people. Entrepreneurs
and business owners need people to perform the day-to-day activities
necessary to produce products and services that they will sell to consumers in
order to make a profit. They therefore appoint
managers and employees to perform these
duties, in exchange for a salary or a wage. It is
clear that no organisation can exist without the
help, input and hard work of people.
People are the most important production factor
a business owner can utilise. Not only do they
give their time, effort, skills and knowledge
into the workplace, but also their personalities,
ideas, relationships, attitudes and cultures. This
makes employees a challenge to manage – they
are all different and respond to different management and leadership styles.
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People are also easily influenced by their external environment, which could
have an impact on their productivity. Entrepreneurs and business owners must
keep this in mind, when managing employees in the workplace.
Example: Amy works at a local restaurant as a part-time waiter. She
desperately tries to earn enough income to put food on the table. She
struggles to find a more permanent job, because she does not have her
Grade 12 certificate yet and does not have the funds available to enrol
at her local college to complete her studies.
Over the weekend, her child got
sick from drinking water from the
river, leading to continuous
diarrhoea and a few sleepless nights.
On Monday morning, Amy didn’t
hear her alarm go off and was
there late for work. Due to the lack
of sleep and overall fatigue, Amy
made a lot of mistakes with meal
orders, causing complaints and dissatisfaction from customers. Amy’s
manager called her in at the end of her shift to reprimand her and gave
her, her first verbal warning for the late-coming and negligence. Amy is
feeling disappointed, discouraged and demotivated.
From the above example, it is evident that no matter what happens in the
employee’s personal life, it will have an impact on the organisation, its
productivity and profitability. Human resources managers must understand
human behaviour, how they think and why they
do what they do, in order to effectively manage
workers in the organisation. They must portray
empathy to employee circumstances, as they
are the organisation’s most important asset, and
if their workers are unhappy or demotivated, it
will have a ripple effect on the activities inside
the workplace. Employees will be required to work in teams, on their own and
sometimes under a lot or pressure, to meet the demands of the job and the
overall aims and objectives of the organisation, while at the same time, dealing
with personal issues and circumstances at home.
The following aspects must be kept in mind during the management of people
in the workplace:
•• Employees require continuous training and development to keep up with
changes in their jobs.
•• Employee performance must be measured regularly, to ensure that the
organisation remains profitable and successful.
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•• Employee salary and wages must be up to date and competitive in the
market, to ensure that they are happy and satisfied on the job.
•• Employees’ wellbeing must be taken
care off – Medical services, breaks,
meals and rest periods must be made
available, based on relevant legislation
and company policies.
•• Disciplinary measures must be adopted
to address poor performance and
misconduct of employees.
•• The recruitment and selection of the
right workers with the right skills for the right positions at the right time
must get appropriate attention in the workplace.
Individual activity 2 E
Answer the following questions in your workbook:
(a) Why are people important in an organisation?
(b) Define the term: Employee.
(c) Why is it sometimes difficult to manage people in the workplace?
(d) Give an example of a situation an employee is in that could impact his or
her performance and success on the job.
(e) Which areas must be kept in mind when managing employees in the
workplace?
(f) Why does an employee’s personal life have such an impact on his or her
work performance? Explain your answer.
2.2.3 Technology needed to activate the enterprise
Definition
Technology is defined as ‘the application of scientific knowledge for
practical purpose, like developing machinery and devices to be used within
the organisation’.
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Module 2: The Enterprise as an organisation
Technology is a vital part of the production process in the modern organisation.
The days of labour-intensive production in manufacturing organisations are
long gone. Entrepreneurs and business owners
are starting to move away from the volatile
labour market to capital intensive production
through machines, equipment and computerised
technology. Organisations are doing their best to
remain competitive in the market and to stay
ahead of competitors when it comes to
technological developments, which could have a
major impact on the productivity and profitability of the business. Change is
inevitable when it comes to technology. Changes in technology sometimes
happen overnight. Organisations must keep this in mind, in the activation of
their business enterprise.
Example: In the early nineteenth century, the telephone was seen as
an advanced form of technological communication. After this ground
breaking invention, the fax machine saw the light. Then the start of
mobile phones and the internet. Today we have smart phones with
internet capabilities, built-in cameras, video calling, apps and access to
the World Wide Web at your fingertips.
Another example is the introduction of personal desktop computers,
which was introduced in the early 1980’s. What was seen as a luxury
then, is a necessity today. Everything around us is computerised. Today
we have laptops, tablets and smart phones, which completely replaced
the need for the use of personal desktop-based computers.
Most organisations today use technology to
improve production and profitability in the
workplace. Through the use of computers,
machinery and specialised equipment, many
organisations become more advanced,
competitive and effective. With the introduction
of new technology, jobs and the working
environment also changes, which could put
pressure on workers to keep up with a more
complicated or sophisticated system. Workers
will thus need more training to keep up with
technology and continue to be productive in the workplace. Technology could
also be a huge distraction for workers, especially if they visit social media
platforms, games and other applications of interest to them. This could cost the
organisation many hours of productivity, which is wasted on non-work related
activities.
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One the positive side, technology enables organisations to communicate with
other businesses from across the world in a relatively short period of time.
Through e-mails, Skype video calling, online networking platforms like LinkedIn,
or social media, such as Facebook and Twitter, entrepreneurs and business
owners can communicate and keep in touch with other entrepreneurs in the
market, and what they are doing. This allows organisations to remain current
and ahead of the rest of the market when it comes to innovation, productivity
and profitability.
The effect of technological changes on employees
In understanding the effect of technological changes on employees, consider
the following example:
Example: Although he does not have his own personal computer at 2
home, Ayanda tries his best to stay updated when it comes to the use if
computers. He is grateful for the computer training he had at college
level, which prepared him for his new job as a HR intern. He is
comfortable using Windows 7 and all the related office programmes,
which makes him a excited for his new role. On his first day in his new
job, Ayanda came to the shocking realisation that this organisation
makes use of windows 10, which is a completely different operating
system than what he is used to. This causes
him to really struggle with his duties and
getting the job done. At the end of day one,
Ayanda is demotivated and feels like a
failure, because he is not able to efficiently
use the computer system at work.
Most people do not like change. They get Source: http://thebaffler.com/salvos/
comfortable with the systems, processes and of-flying-cars-and-the-declining-rate-
procedures within the organisation and when of-profit
things change, they question the reason for the
change and mostly resist the proposed changes.
Employees may feel threatened by the change,
especially when it comes to technological
changes.
Definition
Technological change is defined as ‘any changes that might take place
through the introduction or improvement of computers, machinery and
equipment in the organisation’.
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Module 2: The Enterprise as an organisation
Technological change is necessary for the survival, growth and continued
success of an organisation, therefore the benefits of these changes far surpass
the threat it holds for employees. Most employees do not see it that way. Some
employees may feel threatened by the introduction of new technology because
they fear being replaced by a machine and losing their jobs. Other employees
might feel that they have just become comfortable with a computer, machine
or piece of equipment and
resist the need for an
upgrade or change.
Introducing new
technology in the
workplace might also
require extra training and
development initiatives,
which is not only an extra
cost for the organisation,
but also a frustration for employees. Whatever the reason for resisting the
change, it may lead to employees feeling stressed, frustrated, anxious or
demotivated.
Example: Sipho is 58 years old and works as an operator at the local
factory producing cereals. Sipho does not know how to read and write
properly, and English is not his first language. He has been employed
by the organisation for more than 30 years and he is proud to be an
employee at the factory.
One day the factory HR manager told the workforce that they will no
longer be receiving paper payslips and that they will need to update
their information and download their own payslips from an electronic
system, called SAP. Sipho was very upset about this, not only does
he not know how to use a computer, but he also does not see the
need to change, as he’s used to receiving a paper payslip from the
HR administrator. He is also not interested in the proposed training
initiative, as he feels he is old.
Whatever the change, and the reason behind the change, organisations must
manage it properly and pay particular attention to the effect it may have on
their employees. Employees need to understand the reasoning behind the
change and they need to feel that they are involved in the decision-making
process. Technological change does not have to be a hurdle in the growth
process of an organisation and it should not hold any threat to employees. It
can be a way to open doors to new opportunities for both organisations and
employees, creating more jobs, upskilling more employees and improving the
overall productivity of an organisation.
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Source: http://www.cdha.nshealth.ca/media-centre/2012-02/opinion-digital-vision-health-care
Group activity 2 D
Discuss the following questions in your groups:
(a) Give a few examples of technology that could be present in an
organisation.
(b) Why is the use of technology so important for organisations?
(c) How can technology be used to activate the enterprise?
(d) Why do organisations have to stay updated with the changes in
technology?
(e) What is the impact of technological changes on employees?
(f) Why do you think will most employees resist the implementation of new
technology in the workplace?
(g) What can an organisation do to prepare their employees for technological
changes?
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2.2.4 Processes needed to activate the enterprise
In Module 1 you learned that the main aim of organisations is to make a profit.
In order to make a profit, organisations need to pay attention to the inputs
(resources) they use and the processes they use to convert the inputs into
outputs. This notion is explained through the IPO Model:
The IPO Model talks about three main elements in the production process:
•• Input – The factors of production needed to produce the product is
brought into the organisations.
•• Processing – The factors of products that were brought into the
organisation must now be converted into a product through the use of
various systems and processes inside the organisation.
•• Output – The final product is produced after the inputs were converted in
the processing phase.
The production factors (Natural Resources, Capital,
Labour and Entrepreneurship) needed to produce the
product or service will go through a transformation
process during the processing stage of production.
It is vital for entrepreneurs to pay close attention to
the transformation of these production factors to
ensure that the right products and services in the right
quantities and of the right quality are produced. The
entrepreneur or manager of the business must ensure
that this process is done as efficiently and speedily
as possible, and that the production factors are used
and transformed in the appropriate manner, to ensure
maximum sales, maximum profitability and overall
success of an organisation.
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The transformation process of products and services are similar, yet differs
slightly in the outcome. Consumers buy a product to
use or consume based on a need or want, and they
rent or purchase a service for something they cannot
or do not want to perform themselves. Where raw
materials and other production factors are transformed
during the production process into a tangible product
that a consumer can buy, take home and use. A service
is focused more on the delivery of something on behalf
of a consumer or customer.
Example: If you want to produce a beaded
necklace to sell to your friends at college, you will
follow the following process: Inputs (beads, strings,
and clasps), processing (using tools and creativity
to design and put together your necklace) and
output (a finished necklace ready to be sold to
your client).
If you want to deliver a service, like washing someone’s car, you
will follow the following process: Inputs (water, soaps, rags, polish),
processing (you advertise your business, a customer brings his car, you
wash the car, dry it, clean it inside and polish the wheels) and output (a
happy client with a squeaky clean car).
Group activity 2 E
Divide into groups of four to five and follow the following instructions:
(a) Take a sheet of flipchart paper (It must be quite big).
(b) Decide on one product and one service that is quite in demand in your
community.
(c) Draw the production process for both the product and the service on
your flipchart sheet.
(d) Identify all the inputs, how the products and service are transformed,
and what the output is going to be.
(e) Make use of pictures, drawings and colour to make your sheet as
attention-grabbing as possible.
Present your sheets to the rest of the class.
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2.3 Organisational structures
Organisations need structure to ensure that the production factors and systems
are implemented as effectively as possible in the production process. Managing
labour through these structures will ensure increased productivity and
profitability of the organisation. What is an organisational structure?
Definition
An organisational structure is defined as ‘the typical hierarchical
arrangement of lines of authority, communications, rights and duties of an
organisation’.
The structure of an organisation will determine how the roles, power and
responsibilities are assigned,
controlled and coordinated. It
will also determine how
information will flow between
the various levels of
management. It is therefore
something that entrepreneurs
and business owners should not
take lightly. The type of structure
chosen depends on the
organisation’s objectives and its
strategy and is normally
illustrated in the form of an organogram or organisational chart.
Table 010. Advantages and disadvantages of organisational charts
Advantages Disadvantages
• There are clear reporting lines where • Informal communication channels
employees are sure as to who they are not indicated.
report to and who reports to them.
• Assists new employees to understand • It is difficult to maintain
where they fit into the organisation and update, therefore many
and helps them to get familiar with organisational charts are outdated.
their colleagues’ roles.
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• It helps to manage the workload of • It is time-consuming and expensive
managers as they have subordinates to create, update and maintain.
to whom they can delegate certain
tasks and roles.
• It makes planning for the future easier,
as resources can more accurately be
allocated.
Entrepreneurs and business owners have various options when it comes to 2
structuring their organisations, depending on their business strategy (where
they are heading with their business) and their resources (availability of
production factors). Organisations can be structured in the following ways:
•• By function, for example: operations, marketing, finance, human
resources, etc.
•• By reporting and communication lines, for example: managerial levels.
•• By geographical location and region.
•• By product or brand, for example: Books, Smarties, Weetbix or milk.
•• In work teams, for example: client/customer groups.
For the purpose of this module, only two types of structures will be dealt with:
2.3.1 Line structures
Definition
A line structure is defined as ‘a business structure with clear lines of
reporting, authority and communication from various managerial levels’.
The line structure is one of the simplest, easy
to understand and most used structures in
organisations today. It has only direct, vertical
relationship between different levels in the
organisation, running from the highest
position in the organisation, to the lowest.
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It also shows a clear reporting line, making it very clear how information and
instructions flow within the workplace. Direct authority will follow the chain of
command, that is, it will be exercised by a manager over his or her subordinates
(those employees reporting to him or her), where the flow of authority and
communication is always downwards, from the manager to the employees.
Table 011. Advantages and disadvantages of line organisational structures
Advantages Disadvantages
• Tends to simplify and clarify • The system does not provide for experts
authority, responsibility and like accountants and human resources
accountability relationships. managers.
• It promotes fast decision-making • It may overload certain key positions and
and flexibility. managers.
• It is simple to understand, to • It is an ineffective structure for large
manage and to control. organisations.
• It simplifies the communication
process.
• It is cost-effective to implement
and maintain.
This type of organisational structure is best suited to the needs of smaller
organisations, where it is possible for each manager to have direct authority
and control over all his subordinates. Each manager in a line structure is
fully responsible for his subordinates and everything that happens in his
department.
A typical line structure is illustrated in the figure below. Each block represents
a position in the organisation. Notice the clear reporting lines, indicated by the
connection lines between the blocks.
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2.3.2 Functional structures
Definition
A functional structure is defined as ‘a business structure divided into
different business functions, such as Information Technology, Finance,
Production and Purchasing’.
A functional organisational structure is another hierarchical type of 2
structure where employees are grouped based on their area of expertise or
specialisation. Employees in each function are supervised and managed by a
functional manager, who has the necessary expertise in the same field. This
manager will be able to effectively utilise the skills of his subordinates, which
ultimately contributes to the achievement of organisational objectives.
Employees are structured and
classified according to the
function they perform in the
organisation. The organisational
chart clearly shows who is in
charge and then illustrate each function under the President, CEO or Director
of the organisation. Communication flows from Top Management to each
functional or department head, who then communicates further to the
employees in their respective functions. All authority over budget allocations,
resource allocations and decision-making, lies with the respective functional
managers.
Table 012. Advantages and disadvantages of functional organisational structures
Advantages Disadvantages
• Employees are grouped based • Employees may become bored as a
on their knowledge and skills, result of monotonous, repetitive type
which lead to higher levels of work and become lazy.
performance.
• If performance appraisal systems are
• Employees are skilled and not managed appropriately, conflicts
efficient because they are may arise.
experienced in the work they do.
• The costs of high skilled employees with
• Employee roles and relevant experience is much higher.
responsibilities are fixed, which
facilitates easy simplification of
accountability.
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• The hierarchy is clear and • Departments have a self-centred
employees do not have to report mentality and operate as silos.
to multiple managers.
• Interdepartmental communication is
• There is no duplication of work not good, which leads to decreased
because each department flexibility and innovation in the
and employee has a fixed job organisation.
responsibility.
• The structure is rigid and slow to adapt
• Employees have a clear growth to changes.
plan.
• Decision-making takes longer in a
• Communication and cooperation functional structure.
is improved.
This type of structure is suitable for larger organisations which have
ongoing operations and produces some standard products or goods, such
as manufacturing and production industries. A typical functional structure is
illustrated in the figure below:
Group activity 2 F
Divide into groups of between 3 and 4, and following these instructions:
(a) Draw an organisational chart for your local college.
(b) Indicate all the positions and where each falls in the structure.
(c) Does your college follow a line or functional structure? Explain your
answer.
(d) In your opinion, which structure is the best to use in a medium sized
organisation? Explain your answer.
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2.3.3 Influence of external environment
In Module 1 we learned about the external environment and the impact it has
on the organisation. No organisation functions in isolation; it is continuously
influenced by the internal and external environment and continuously exerts
influence on the internal and external business environment.
Definition
The external environment is defined as ‘those factors outside the
organisation that affect the company’s ability to function’.
Some of the external factors that may have an influence on the organisation,
can be controlled or manipulated by the public relations or marketing
departments of the organisation, while other factors may demand the
organisation to make some adjustments. These factors or components must be
monitored closely, in order to predict any changes that may or may not happen
in the market.
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Table 013. The five most important components in the external environment
Component Description
Government • Government regulations in product development, packaging
and the shipping of products can play a significant role in the
cost of production and the organisation’s ability to expand
into new markets.
• If new regulations are enforced, like how your product must
be packaged for shipping, it could add costs to the product
and decrease profits.
• When organisations want import and export products, they
must also follow government regulations.
Economy • Organisations must continuously monitor the economy and
learn how to react to changes that may affect the business.
• Economic factors may affect how organisations market
products, how much money is spent on business growth and
the kind of targets markets being pursued.
Customers • Customers are the one external component that can be
influenced through marketing, advertising and the release of
corporate information.
• Customers must be influenced to buy the organisations
product or service.
• Market research must be done to determine what customers
want and need and how the organisation can meet these
needs and wants timeously.
Competition • An organisation’s competitors have a direct effect on how it
does business and how the target market’s needs are being
addressed.
• Organisations can either decide to venture into new markets
with very few competitors, or they can decide to enter a
market to compete with stronger brands and businesses for a
share of the market.
• The success and failure of competitors determines an
organisation’s marketing planning.
Public Opinion • Any kind of organisational scandal can hurt the organisations
image, its brand and overall sales and profitability. The
perception of the public can hurt sales negatively, or it can
boost it to increase sales and profits.
• Organisations can influence the public opinion through
the use of a public relations department, who will release
strategic information and defuse potential issues before they
begin to spread.
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Individual activity 2 F
Answer the following questions in your workbook:
(a) What is the impact of the external environment on the organisation?
(b) Can an organisation also have an impact on the external environment in
which it operates? Explain your answer.
(c) Discuss the components in the external environment and how it impacts
the organisation.
(d) What can an organisation do to limit the impact of the external
environment on the organisation?
2.4 Organisational design
Organisational design is another important
concept that aspiring HR Practitioners must be
aware of. It plays an integral part of the
management of employees in any organisation
and should be the focus of management and the
human resources department within the
business.
Definition
Organisational design is defined as ‘a step-by-step methodology which
identifies dysfunctional aspects of work flow, procedures, structures and
systems, realigns them to fit current business realities and then develops
plans to implement the new changes’.
The process of Organisational Design focuses on the improvement of
both the technical and people side of the business. This process leads to a
more effective organisation design, significantly improved business results
and employees who are empowered and committed to the business. The
trademark of the design process is seen as a comprehensive and holistic
approach to the improvement of the organisation that touches all elements of
organisational life.
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Module 2: The Enterprise as an organisation
If this process is managed and implemented correctly, organisations can
achieve the following:
•• Excellent customer services
•• Increased profitability
•• Reduced operating costs
•• Improved efficiency and cycle time
•• A culture of committed and engaged employees
•• A clear strategy for managing and growing the organisation
Through Organisational Design, people are
integrated with the core business processes,
technology and systems. The form of the
organisation must match the purpose and
strategy of the business, meet the challenges
posed by business realities and increase the
likelihood of successful collective efforts. As an organisation’s growth is
influenced more and more by the external environment, structures and systems
must be updated to remain profitable, competitive and successful in the market.
2.4.1 Division of labour
Definition
Organisational Design is defined as ‘a step-by-step methodology which
identifies dysfunctional aspects of work flow, procedures, structures and
systems, realigns them to fit current business realities and then develops
plans to implement the new changes’.
The division of labour is an economic concept that explains the division of
production processes into different stages
to enable workers to focus more on specific
tasks. Instead of one employee taking care
of the whole process individually, the job is
split into smaller parts, with different
employees taking care of each individual
part. The belief is that if workers can
concentrate on one small aspect of the job
as part of the production process, the
overall efficiency of the organisation can be
improved. If division of labour is implemented effectively, it could lead to
increased productivity, lower unit prices and higher profits.
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Introductory Personnel Management N4
Example: In a factory that produces that produces clothing, one
employee will cut fabric based on specific patterns, the second employee
stitches and machines the material together, a third attaches the
buttons to the garments and a fourth will fold and pack the complete
product to be shipped.
Table 014. Different forms of division of labour at the disposal of the organisation 2
Forms Description
Simple division • When production is split into different parts and many
of labour workers come together to complete the work
• The contribution of each worker to the process cannot be
determined
• Example: When someone carries a huge log of wood, it is
difficult to assign exactly how much labour the person has
contributed to the process.
Complex division • When production is split into different parts and each part
of labour is performed by different workers who are specialised in it.
• Example: In a shoe factory, one worker makes the upper
portion, another the soles, one stitches and another
polishes. Shoes are manufactured in this process.
Occupational • When the production of a commodity becomes the
division of occupation of the worker
labour
• The production of different goods has created different
occupations.
• Example: The work of farmers, cobblers, carpenters,
weavers and blacksmiths is known as occupational division
of labour.
Geographical • Sometimes, the production of goods is concentrated in a
division of particular place, location or country.
labour
• When workers or factories that specialise in the
production of a particular product are found at a particular
location.
• That place may be the most suitable geographically for the
production of that product.
• Example: The Northern Cape and Western Cape produces
grapes, whereas Limpopo focuses on potatoes.
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Module 2: The Enterprise as an organisation
Source: http://www.econoception.org/2015/02/5-mol-miracle-capitalism/
Table 015. Advantages and disadvantages of the division of labour
Advantages Disadvantages
• Workers need less training as • The job can become very boring and
they only have to master a small repetitive. This could lead to low
number of tasks. morale in employees.
• It is faster to use one particular • If workers lose the motivation to
tool and do one job. concentrate and do a careless job
because they are bored, mistakes may
• No time is wasted with a workers happen.
dropping a tool and then picking
up another, every time they needs • An assembly line could come to
to move onto a new item. a complete standstill if there is a
blockage or stoppage at one specific
• There is no need to move around point in the production line.
the factory; the work can be
brought to the worker. • Because more than one worker is part
of a production line, none of them can
• Workers can concentrate on those be held responsible for the produced
jobs which best suit their skills. products.
• Workers can become multi-skilled • Division of labour leads to mass
if job rotation is performed production, this sometimes also
together with division of labour. decreases product quality.
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Introductory Personnel Management N4
2.4.2 Specialisation
Definition 2
Organisational design is defined as ‘a step-by-step methodology which
identifies dysfunctional aspects of work flow, procedures, structures and
systems, realigns them to fit current business realities and then develops
plans to implement the new changes’.
Specialisation of work is very similar to division of labour, with the only
difference in the level of expertise individual employees on the line has. Work
is still divided into smaller parts and still given to groups of different
employees, but this time, these employees are specialists in their field. When
the job of the worker is more specialised, requiring a highly trained and skilled
worker, a worker who focuses on only one aspect of the job can delivery work
of a higher quality and greater volume.
Each individual employee is trained explicitly
on how to best perform one small, specific
task. Over time, the employee becomes
extremely skilful and effective at performing
the specific task. This allows these employees
to become an expert in their position to
some degree.
Work specialisation is therefore especially
valuable in manufacturing organisations which make use of assembly lines
where an individual employee completes one repetitive step in the production
process of the product. When these steps in the production process are divided
among individual employees, it becomes less complex. Work specialisation
helps organisations to become more effective and productive in their day-to-
day production activities.
Example: McDonalds have specialised in the kitchens, with specific
employees focusing on the production of specific food products. One
employee makes the fries, the other focuses on the Big Mac Burgers and
another on being a cashier and taking orders. Each individual is trained
in how to make the specific product or how to deliver that specific
services and therefore becomes a specialist at his or her job.
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Module 2: The Enterprise as an organisation
Table 016. Advantages and disadvantages of specialisation in the workplace
Advantages Disadvantages
• Workers are highly skilled in a • The worker can become bored with
specific area of work. repetition.
• It saves time, because the worker • Boredom may lead to job dissatisfaction.
is focusing on only one task, not
on several. • The repetition may require high
concentration levels that are difficult to
• When one person performs one maintain.
activity, there will be greater
uniformity in the product.
• Fewer skills are needed per • It may lead to unemployment when a
person, which will save time on worker that is specialised in one aspect of
training costs. the job cannot find a new job in his skills
set.
• Workers can concentrate on those • Division of labour leads to mass
jobs which best suit their skills. production, this sometimes also
decreases product quality.
• There is accuracy in production • It creates independence where each
due to the fact that every worker worker has a portion of the skills,
will engage in a particular aspect compared to the holistic set of skills
of the process. required for the whole job.
• It reduces costs of production.
• It increases efficiency in the
workplace.
Individual activity 2 G
Answer the following questions in your workbook:
(a) Define division of labour in your own words.
(b) Define specialisation in your own words.
(c) Explain the difference between division of labour and specialisation.
(d) What is the benefit of division of labour and specialisation for the
organisation?
(e) What is the benefit of division of labour and specialisation for the
employee?
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Introductory Personnel Management N4 2
(f) Using a table discuss the different forms of division of labour.
(g) Give an example of division of labour and specialisation from your local
community.
2.4.3 Authority and delegation
As part of the design and the structure of the
organisation, certain managers are appointed to
oversee, manage, control and discipline
employees that report directly to them. This is a
very important part of the organisation, as the lack
of management, authority and control could lead
to lowered productivity and decreased
profitability.
Definition
Authority is defined as ‘the power of a manager to give orders or make
decisions; the power to direct and control individual employees in the
organisation’.
Most managers in the organisation have the authority to manage and control
workers in the organisation, purely based on their position in the business.
Authority is a personal and positional quality by which employees recognise
and respect a manager in the workplace. It allows managers to give certain
duties and responsibilities to subordinates reporting to them, with the
expectation that these employees will fulfil these duties to the best of their
abilities. If subordinates do not comply
with these duties, managers also have the
authority to discipline them according to
internal disciplinary procedures.
As part of the authority of managers, https://www.andertoons.com/authority/
they have to make certain decisions, plan, cartoon/7262/im-done-exuding-authority-from-
organize, and control workers during the here-on-out-im-announcing-it
day-to-day activities in the workplace.
They are ultimately responsible and
accountable for the success of the
department they are managing.
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Module 2: The Enterprise as an organisation
Managers can also transfer some of their authority to subordinates, so that
they can carry out certain tasks on behalf of the manager. This is called
delegation.
Definition
Delegation is defined as ‘the act by a manager to give control, authority, a
job or a duty to a specific employee’.
Managers do not always have the time to do all the tasks that are expected
of them. They need their teams to support the activities in their respective
departments. Managers can lighten their own load by delegating some of the
less important tasks to their subordinates.
Delegation is a great way to ensure that more tasks get done in a shorter
period of time and that team capacity is improved. It has a further benefit of
developing those employees who are being delegated to, for higher or more
complex positions in the organisations.
If managers work on their own, there is a limited amount of work that they
can do, regardless of how hard they work. There are limited hours to work
during the day and there are only so many people they can help in these hours.
Because the number of people managers can help per day is limited, their
success in the organisation is also limited. One of the most common ways for
managers to overcome this limitation, is for them to delegate some of their
work to their subordinates. If they delegate well, managers can quickly build
a strong, productive and successful team of people who are well able to meet
the demands of stakeholders. Delegation is therefore a very important skill for
managers in the workplace.
‘Even ‘Super You’ needs help and support. There is no shame in asking for
assistance. Push aside the pride and show respect for the talent others
can bring to the table.
And remember that there is no such thing as a single-handed success:
when you include and acknowledge all those in your corner, you propel
yourself, your teammates and your supporters to greater heights’
- Author Unknown
92
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