Capital is represented by the machines and tools, without which there would be no production. In a Walker’s crisps factory, this would be represented in the plant and equipment, such as the automated production line. This is the physical capital of the firm (which would be financed by financial capital — often money borrowed from banks to purchase the physical capital).
Energy is provided by some of the raw materials — the fossil fuels, gas, steam and solar power that make the machines work and that provide heat and light for the factory.
Materials are needed to make any product. In a crisps factory these might include the potato (or potato substitute materials) and the flavourings, as well as the packaging material.
Information is the know-how (all the accumulated experience of members of an organisation) that provides a driving force behind the enterprise. For example, there would be an accumulated wisdom of recipes and marketing ideas.
It is helpful to view a business as a system or, more specifically, as an overall system that can be viewed as a series of subsystems. A system processes inputs to produce output. For example, at McDonalds the ingredients and other inputs are processed by the production system to produce crisps.
The production process takes place within defined boundaries, which are usually fairly obvious. The inputs flow into this system. Some of the resources used will be current resources. for example, potatoes (or potato substitute), additives, salt, energy, etc. What actually goes into the production process will be ‘filtered’ to ensure only desirable inputs are accepted. For example, quality control ensures no fragments of glass enter the production system. Current resources then ‘combine’ with elements (or fixed assets), such as machinery and buildings, and flow from one element to another element across links between the elements. For example, the potatoes for chips flow from the ingredient mixing element, through rollers and into heating ovens.
While a traditional manufacturing company will place a great deal of emphasis on production’ a modern service organisation will place more emphasis on ‘consumer service’ or ‘marketing’. An organisation such as the civil service will have its major functions focusing on administration, whereas an accountancy firm will focus on finance as well as administration.
The chief accountant is responsible for supervising the accounts and finance department. The accounts section must keep a detailed record of all money paid in and out and present the final balance sheet, sources and use of funds, profit and loss account, and other financial records at regular intervals. Modern accounts are stored on computer files, and accounting procedures are greatly simplified by the use of specialised software.
- The finance and accounts department:
The financial accounting function is responsible for keeping records of financial events as they occur. Accounts need to be kept of all moneys paid to or by a company, and records must be kept of all debtor and creditor transactions. The payment of wages will also require calculations involving deductions for national insurance, pensions and other factors.
As well as keeping day-to-day records, the financial accounting function will also be responsible for producing periodic records such as the annual accounts and figures for discussion at meetings of directors.
The management accounting function has the responsibility for nudging the company in certain directions, based on analysis of figures for the present and predictions for the future. Management accounts will break down figures, to extract information about a company’s present performance and about what sorts of improvements can be made in the future. Using systems of budgetary control, it will set targets for achievement and limits for spending for the various parts of the business.
Within the finance and accounts department, other subfunctions (i.e. functions within functions) might include a cashier’s department and a wages department. The cashier’s department will be concerned with handling all cash transactions, as well as cheque and other payments through bank accounts. These records will be kept in a cash book or computerised system.
The wages department will be responsible for supervising the payroll (calculating and paying wages). The data for these calculations might be generated by a works department or other department responsible for recording the amount of work carried out by employees.
In a manufacturing company, the production function may be split into five main subfunctions:
The production and planning department will set standards and targets for each section of the production process. The quantity and quality of products coming off a production line will be closely monitored.
The production director of a company is responsible for making sure raw materials are processed into finished goods effectively. He or she must make sure work is carried out to an appropriate standard, and must supervise procedures for enabling work to be carried out smoothly.
Production management is often referred to as ‘operations management’. You can imagine that, in the modern workplace, many operations are no longer concerned with old-fashioned manufacturing. Many modern operations are concerned with dealing with customers in service organisations (e.g. greeting people as they enter a supermarket, dealing with customer queries over the telephone in telephone banking and insurance, etc.). It is therefore far more sensible to talk about operations management when referring to the function of making sure that the core (central)
A comparator compares the outputs with a pre-established value and, if the outputs do not meet this value, the inputs or processes are adjusted. For example, a production schedule will be established setting out the expected quantity and quality of products coming off the line.
The purchasing department will be responsible for providing the materials, components and equipment required to keep the production process running smoothly.
The stores department will be responsible for stocking all the necessary tools, spares, raw materials and equipment required to service the manufacturing process.
- Design and technical support department:
The design and technical support department will be responsible for researching new products or modifications to existing ones. It will be responsible for estimating costs of producing in different quantities and by using different methods. It will be responsible for the design and trialling of new product processes and product types. It will be responsible for the development of prototypes through to the final product. The technical support department may also be responsible for work study and suggestions as to how working practices can be improved.
The works department will be concerned with the actual manufacture of a product. This will also involve the maintenance of a production line and other necessary repairs. The works department may also be involved with quality control and inspection.
The human resource management or personnel function of an organisation covers a variety of activities. The term ‘human resource management’ has largely replaced the old-fashioned word ‘personnel’, which was used in the past.
The types of work covered in the human resource function might include the following:
- A policy-making role — establishing major policies that cover the place and importance of people in the organisation.
- A welfare role, concerned with looking after people at work and their needs.
- A supporting role, concerned with helping other functional managers to develop their work (e.g. helping the production manager to appoint and train new production line workers, etc.).
- A bargaining and negotiating role, concerned with acting as an intermediary between different groups and interests (e.g. between trade unions and management).
- An administrative role, concerned with the payment of wages, the supervision and implementation of health and safety laws, etc.
- An educational and development role (e.g. concerned with helping in the education and development of the workforce).
All large organisations depend on an administrative spine. Dealing with enquiries, communicating messages and producing documents for the workforce are all examples of administrative tasks.
Administrators are very important because they service the work of the organisation. Problems arise when the administrators clog up the arteries of an organisation with administrative work that moves the organisation away from its central objectives. The term used to describe such a situation is ‘red tape’ or bureaucracy.
Many large firms have a central office that is responsible for controlling key aspects of the firm’s paperwork. This department might handle the filing of materials, the company’s mail, word processing and data handling facilities (such as the creation and maintenance of databases). The modern office focuses on the management of work through information technology and communications systems.
In many companies, each department will have its own clerical and support staff. However, it is common practice to have an office services manager with the responsibility for co-ordinating office services and for offering expert advice to departmental managers.
The work of the office manager will include the following areas. To:
- Take responsibility for and to organise training of administrative staff.
- Advise departments about office layout, office equipment, working practices and staff development.
- Co-ordinate the supply of office equipment and stationery.
- Study and analyse administrative practice within the organisation in order to develop an overall strategy for administration.
- Ensure the standardisation of administrative work, the layout of documents, letters, etc.
- Provide and maintain a communications system within a company, including phones, mailing systems, computer hardware and other data processing facilities.
- Report to, and provide statistics for, the company board about the effectiveness of existing administrative practice.
In most companies a large proportion of the staff work directly with, or have access to, computer terminals. Information and communications technology (ICT) refers to the large and developing body of technologies and techniques by which information is obtained, processed and disseminated. The term, therefore, embraces computing, telecommunications and other developments. These three areas, which were initially distinct, are now seen to be part of a single process. The role of the information and communications technology function is to promote effective exploitation of ICT and to provide the guidance, support and co-ordination necessary to accomplish this objective.
- Research and development:
In any well-run company, research and development (R&D) has strictly commercial functions to further the company’s business aims by creating new and better products, improving operational processes and developing new ones, and providing expert advice to the rest of the company and to customers. Without a flow of new improved products and processes, no company can hope to remain successful.
- Effectively combining the functions:
It is essential the functional areas of an organisation are combined effectively if the organtsation is to meet its objectives. From time to time you hear of organisations in which the functional managers have been pulling in different directions. In these situations, each function may have developed its own values and culture (way of doing things) that are at odds with what the overall organisation is trying to achieve. For example, the marketing department may have been trying to persuade the organisation to become involved in developing ‘risky’ new product areas, while the ‘financial controllers’ have been restricting funds to activities where there isn’t a clear financial case for spending money.
Often the public relations function of a company will complain that the accountants are stopping them from carrying out activities because there is no clear flow of revenue that can be attributed to a PR campaign (e.g. a company initiative to support education, perhaps by providing teaching materials for the classroom).
The best way of getting the various functions of an organisation to pupil in the same direction is to create a clear set of company objectives that can then be translated down into functional objectives, so that each of the functions is driven by the organisation’s objectives.
Nowadays, many of these corporate objectives are concerned with such issues as:
- Giving the customer what he or she wants each and every time.
- Getting quality right each and every time.
- Valuing everyone in the organisation, and treating them as internal customers, etc.
With a clear set of objectives like the above, it is likely that everyone in the organisation like McDonalds will pull together, and functions will work in a co-ordinated way.
- Integrating the functions:
In modern organisation, there is far more integration of functions than ever before. The prime drivers of this change have been the emphasis on serving the customer and the use and application of information and communications technology. The use of ICT in an organisation makes it possible for functional areas to share the same information, and to work collaboratively using this pool of information, and information-creating and -handling capacity. For example, client databases can be used for accounting purposes (e.g. handling and processing customer accounts), marketing purposes (e.g. researching the needs of customers) or administrative purposes (handling the paperwork related to customers, etc.).
Increasingly, we have seen the redesign of business processes (i.e. business activities) so that these processes are focused on meeting the customer needs. Very often this has involved the creation of work cells (cellular working) made up of a number of people from a number of functions who work together in carrying out one specific process involved in meeting customer requirements. Functions are thus integrated to concentrate on a particular process.
