1 - Types of Organisation - CIPD

1/22/2020 Types of organisation | CIPD
Types of organisation
Site: AVADO Learning Platform

5CHR - Business issues and the contexts of Human
Course:
Resources - December 2019
Book: Types of organisation
Printed
Simone Segatto
by:
Date: Wednesday, 22 January 2020, 4:18 PM
https://campus.avadolearning.com/mod/book/tool/print/index.php?id=219640 1/26
Table of contents
Introduction
Ownership and control
Organisation size
Organisation age and product life cycle
Organisational structures
Your organisation
Introduction
As an HR professional, it is important that you know what
type of organisation you work for. How your organisation
operates will affect how HR operates in your workplace. There
are many ways to classify an organisation but the system you
use will depend on exactly what it is that you are trying to
understand.
03:00
In this activity, we’ll look at how variations in the following

can impact the HR function:

Organisation size
Organisation age and product life-cycle
Organisations are often first divided by organisational

ownership and control. Three main sectors typically exist
today – the private sector, the public sector and the
‘voluntary’ or ‘third’ sector. These sectors are represented in
other areas of the world and, in some, strategies to increase
the presence of one sector over another are political and
economic strategies. An example is Saudi Arabia, where there
has been a focus on the oil industry which now leaves them
more vulnerable. Look at the table below for a summary of the
main differences.
Sector Ownership/control Main Examp

functions
Private Owners or Produces Tesco;

sector shareholders goods and Amazon
services to Volkswa
make a Vodafon
profit HSBC;
Unileve
Public Central or local Supplies NHS; Ab

sector government, on services on Dhabi
behalf of the public behalf of the Investm
state for the Authori
benefit of state
the public schools
civil ser
oil indu
Indian
health
service
Voluntary Members or trustees Meets the CIPD;

sector needs of its Oxfam;
members Scouts;
(clubs or sporting
professions), clubs; tr
and/or unions;
beneficiaries some
(charities) museum
and gall
Summary of similarities in all sectors:
Spend Produce a Employ

money product or staff
Need service Require
income Have management
consumers services.
Since the 1970s the three sectors have become less distinct in
many countries. Some private and third sector organisations
provide vital services, such as welfare or waste collection,
which have been outsourced from the public sector. Some
private businesses supply natural monopolies, such as water
or rail transport. Some public sector and voluntary bodies
have commercial arms (such as BBC Worldwide and CIPD

Enterprises) which compete with the private sector.
Outsourcing companies, such as Serco, Capita or G4S, operate
a range of contracts providing former public services, from
running welfare schemes to managing prisons.
Public services could be divided into two types:
Public enterprises
Generate revenue and often charge a fee for use. These are
more likely to be privatised or delivered through a public-
private partnership
Tax-funded public services

Core services provided by the state, such as most health
and education services. These were more likely to be
provided by the state.
- Maltby (2003) Institute for Public Policy Research
Successive governments have continued to privatise public

services. As well as public enterprises, core public services are
now often delivered by private companies. For example, in
2013 the UK Government sold the Royal Mail to private
investors. Prevailing wisdom since the 1980s suggests public
services should either be provided by the private sector or by
the public sector but using private sector principles.
According to this approach, public services should be,

decentralised, contracted-out, competitive, and focused on
targets, efficiency and outcomes.
How does ownership/control affect HR?
Traditionally, the balance between focusing on the needs of

the business and the needs of the employees varied by sector.
Public and voluntary sector organisations were expected to
focus more on people, while the private sector was expected to
focus more on profits. Today, this distinction is much more
blurred. Austerity means public and voluntary sector
organisations have put greater focus on cost control. Private
businesses increasingly recognise employees as stakeholders
with investments in knowledge, skills and engagement.
Differences in the delivery of HR in different sectors can

include:
Austerity putting pressure on public sector budgets,

meaning HR functions need to focus on costs
HR practices in public sector organisations being more
rigid, bureaucratic, and process-orientated
HR functions in the private sector having a more
strategic focus, and more autonomy
The basic functions of HR remain the same and an HR

function in any organisation needs to manage:
Service delivery and information

Organisation design
Organisation development
Resourcing and talent planning

Learning and development
Performance and reward
Employee engagement
Employee relations
Insights, strategy and solutions
Further reading
Some organisations opt for an alternative organisational

model in which employees own the majority of shares in a
private business, whether directly or through a trust.
Employee ownership has become more popular as a model
in some countries, particularly in manufacturing and in
professional and business services. The Employee
Ownership Association (EOA) says employee-owned
organisations now contribute £30bn to the UK economy
each year, or around 4 per cent of GDP.
The employee-ownership model presents some unique

challenges for HR. Instead of dealing with employees on
behalf of the owners, they are working on behalf of all
employees to achieve the business’s goals. The structure,
decision-making process and reward/profit-share system
will vary significantly. As a result, HR professionals in
employee-owned businesses need to be very clear about
the operating model and show a high degree of
adaptability.
To learn more about employee ownership, visit:

http://employeeownership.co.uk/what-is-employee-
ownership/
Organisation size
As well as ownership, we can classify organisations by size,
from micro businesses to multinational corporations.
Commercial enterprises with over 500 employees and
considered ‘large’. Small to medium-sized enterprises (SMEs),
are defined by the European Commission as:
Micro-enterprises, with fewer than 10 employees

Small enterprises, with between 10 and 99 employees
Medium-sized enterprises, with 100–499 employees
What does organisation size mean for HR delivery?
Smaller organisations tend to have a flatter organisation

structure, more flexible approaches, and fewer
management layers. This presents HR professionals with a
different set of challenges from larger organisations, which
tend to have more defined strategies and policies, a more
bureaucratic style, and a more hierarchical structure. In the
same way, larger organisations are more likely to divide the
HR department into specialist functions. This means
separate HR practitioners, or even separate departments,
take responsibility for functions such as learning and
development, reward or recruitment. Smaller companies
are more likely to employ generalists to cover the whole HR

function. In the smallest organisations, HR may be
managed by an owner rather than an HR professional.
Organisation reach
Organisation reach is linked to organisation size, but is not an
exact correlation. For example, a relatively small employer in
an industry such as logistics could have a national or even a
global reach. An organisation’s reach is the number of
locations it covers. Using the retail sector as an example,
organisations can be:
Local
An independent local grocer
National
A grocery chain. Such as Waitrose, which operates only in
the UK
Multi-national
A hypermarket chain which operates in a few countries.
Global
An online grocery service disrupting the food retail sector
worldwide. Such as, Amazon Fresh.
What does organisation reach mean for HR

delivery?
Organisations with large reach are likely to operate in

many locations and countries. This adds complexity to HR
delivery. HR professionals must consider:
Whether a global HR approach is appropriate

Local workforce and labour market
Local employment law and customs.
Organisational evolution
We can consider how organisations evolve and grow using the

three organisation types:
Static organisations
Static organisations have fixed practices and a fixed size.
These organisations have no variables. Time doesn't

change them significantly. They persist until some new
organisation occupies their niche.
Dynamic organisations
Dynamic organisations have fixed practices but a variable

size.
These organisations vary in size over time, but their

underlying practices don't change much. They go through a
single life cycle, growing rapidly as they occupy their niche,
then declining as competitors implement better practices
and replace them.
Adaptive organisations
Adaptive organisations have variable practices and variable

size.
These organisations have numerous life cycles, creating

new products, services, and processes. They hold on to
clients and displace dynamic and static organisations in
economic competition. They will motivate employees to
adapt by fairly sharing the wealth that each innovation
creates.
- White, http://www.gdrc.org/ngo/org-type.html (accessed

22.8.17)
Organisation age and product life cycle

We can define organisations by their age, or maturity. Using
this criteria, organisations can be:
Start-ups in their first phase of life, usually with few

employees or resources and sometimes little more than
an idea and a business plan
Immature organisations, which have passed beyond the
start-up stage but are still scaling their operations,
building their systems and setting their goals as an
organisation
Mature organisations, where systems are established,
the organisation is performing to a plan and focus is on
sustaining performance or expanding into new areas.
What does organisation age mean for HR delivery?

In a start-up, recruitment and pay setting is often done
directly by an owner or founder and there may well be no
formal HR role. As organisations reach immaturity, the focus
of HR will be partly on recruitment and partly on establishing
systems, structure and procedures. This may still be on a
consultation basis and it may be that the organisation will not,
at this stage, have created a formal HR role. As the
organisation grows, the HR focus will shift to talent
development, engagement and reward structure.
In a mature organisation, policies, structures and systems will

already be established. HR will be looking at a strategic
approach, long-term planning and the day-to-day
performance of the organisation.
Hockey sticks and unicorns

Some organisations are exceptional and can reach large
market shares very rapidly. Websites and apps have provided
a much quicker route to market or method of delivering a
product or service to a customer.
Although the online world means an organisation can

suddenly ‘take off’, these businesses remain the exception.
Start-ups which suddenly take off and grow exponentially are
described as following a hockey stick projection. This is
because the organisation’s growth chart shows an initial
shallow line or curve, like the blade of a hockey stick. It then
shoots up near vertically, representing exponential growth in
a very short time, and looking like the handle of a hockey
stick.
Start-up companies worth over $1bn are known as ‘unicorns’,

a term coined because they are ‘extremely rare and magical’.
The best-known examples are online services such as AirBnB,
Uber, Snapchat and Pinterest. This reflects the fact that online
models have made fast-growing start-ups much more
common in the past decade.
For HR delivery in one of these exceptional organisations, the

main focus is on flexibility. A company can come to dominate
the market while still barely into immaturity, so the focus is
on rapidly developing a strategy and putting systems in place.
This will help shape the principles of the organisation while it
is still in its infancy, mitigate the chaos and give structure to a
rapidly expanding workforce.
Ethical approach
Some organisations, particularly start-ups, define themselves
by their ethical approach. For example, organisations
following the GameChangers’ approach set their objective to
‘maximize benefit to people and the planet’, rather than to
maximise profits. Instructions for organisations following the
GameChangers’ approach are:
Prioritise initiatives that help meet your mission

Treat people like human beings; empower employees
and have a positive impact on all stakeholders
Minimise your environmental footprint because it’s the
right thing to do.
These instructions are instilled as core values to the

organisation, and the HR function in these organisations
would need to ensure its systems and policies live up to these
Bureaucratic
Organisations adopting this approach have three main
characteristics:
Specialisation
Workers are recruited with specific skills to carry out
specific functions. The organisation is structured into
rigid departments, with little movement and sometime
little communication between them. This is known as
smokestack management
Hierarchy
The structure is hierarchical with rigid levels of
authority and only those higher in the hierarchy can
give instructions to those lower down
Impersonal rationality
This means that power is based on logical rules and
belongs to the office, not the office-holder. This is
designed to prevent corruption and nepotism.
Strengths:
Job security
A defined career path for workers
A guarantee of fair treatment
Weaknesses:
Complex rules can confuse employees and clients

Rigid adherence to rules can produce a ‘jobsworth’
mentality
Bureaucracy based on rigid rules is inflexible if
circumstances change.
Functional
Functional organisations are often bureaucratic in style. If
departments do not work well together this can make the
organisation too rigid. Organisations need to build links
between functions, either through matrix teams or some other
form of network. This type of organisation is organised
around traditional management functions, such as in the
diagram below:
Divisional
Large organisations sometimes divide their business by

product, market or location. Each division takes operational
decisions in its area, while strategic decisions, such as
investment and target-setting, are taken by central

headquarters. The divisional structure is particularly common
among multinational businesses and is more flexible than a
pure bureaucracy, but each division can still become
bureaucratised. A typical divisional organisation might be
structured as below:
Matrix
These organisations are structured around finite projects with
no permanent staff apart from project managers and
administrative support. Functions such as finance and
marketing still exist in a matrix organisation and specialists
from these functions are assigned to the separate projects.
Specialists report to the project manager for their team while
they are engaged on the task, but function managers are
responsible for the overall management of the employees in
terms of recruitment, development and appraisals.
Strengths:
Communication, motivation and job satisfaction are

improved
Use of resources becomes more flexible.
Weaknesses:
It may take longer to make decisions as authority is

more diffuse
Functional managers may feel threatened.
Network
These organisations encourage functions or divisions to share

knowledge by forming links. One way to do this is through
communities of practice. These are informal networks of
people in the organisation with common interests, who
mainly communicate online.
Process
Process-based organisations try to move away from vertical

hierarchies and focus on the horizontal processes that exist
across the whole organisation. For example, a focus on quality
cuts through organisational units to ensure quality is built
into an organisation’s products and services. Within this

structure, process teams from a range of functions work
together to ensure work flows smoothly between functions.
Virtual
Employees in virtual organisations communicate online

rather than in person. Virtual organisations replace physical
assets such as buildings and machinery with computer
networks. They are often boundary-less and the network can
include suppliers (through partnership sourcing), and
customers (through customer relationship management).
Strategic alliance
A strategic alliance is any medium to long-term co-operative

relationship involving joint working between firms. They are
also known as partnerships or joint ventures. The average US
corporation is involved in more than 30 alliances, but 60 per
cent have been outright failures. Failures of this sort of
partnership are mainly caused by; communication problems,
culture clashes, and divergent strategic interests.
Flexible
These organisations (as defined by Atkinson) may take on a

number of forms. A group of core workers carry out the main
activities of the organisation. Additional staff are then
employed on a temporary basis as required. Numbers of

workers can change quickly depending on activity levels or
projects. Flexibility can take different forms:
Functional Numerical Financial

flexibility: flexibility: flexibility –
organisation can numbers of flexible pay
quickly redeploy employees can be system can
multi-skilled quickly increased change rates to
workers between or decreased as reflect labour
tasks required market supply
and demand
Your organisation
You should now feel able to differentiate between types of
organisation and explain the impact of organisation type on
the HR function. Now is a good time to make some notes in
preparation for your assessment activity.
ACTION: What type of organisation do you work for?
Briefly describe how the following factors impact the HR

function in your organisation. (Alternatively, you could
apply this to an organisation you use to work for, or one
you hope to work for.)

Organisation size
Organisation age and product life-cycle
Next activity
By completing this activity, you should feel able to

differentiate between types of organisation, and explain the
impact of organisation type on the HR function.. The next
activity will enable you to explain how organisations create
value through a product or service.

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1/22/2020 Types of organisation | CIPD

Site: AVADO Learning Platform

In this activity, we’ll look at how variations in the following

Ownership and control

Ownership and control

Organisations are often first divided by organisational

Sector Ownership/control Main Examp

Private Owners or Produces Tesco;

Public Central or local Supplies NHS; Ab

Voluntary Members or trustees Meets the CIPD;

Summary of similarities in all sectors:

Spend Produce a Employ

have commercial arms (such as BBC Worldwide and CIPD

Public services could be divided into two types:

Tax-funded public services

- Maltby (2003) Institute for Public Policy Research

Successive governments have continued to privatise public

According to this approach, public services should be,

How does ownership/control affect HR?

Traditionally, the balance between focusing on the needs of

Differences in the delivery of HR in different sectors can

Austerity putting pressure on public sector budgets,

The basic functions of HR remain the same and an HR

Service delivery and information

Resourcing and talent planning

Some organisations opt for an alternative organisational

The employee-ownership model presents some unique

To learn more about employee ownership, visit:

Micro-enterprises, with fewer than 10 employees

What does organisation size mean for HR delivery?

Smaller organisations tend to have a flatter organisation

are more likely to employ generalists to cover the whole HR

What does organisation reach mean for HR

Organisations with large reach are likely to operate in

Whether a global HR approach is appropriate

We can consider how organisations evolve and grow using the

Static organisations have fixed practices and a fixed size.

These organisations have no variables. Time doesn't

Dynamic organisations have fixed practices but a variable

These organisations vary in size over time, but their

Adaptive organisations have variable practices and variable

These organisations have numerous life cycles, creating

- White, http://www.gdrc.org/ngo/org-type.html (accessed

Organisation age and product life cycle

Start-ups in their first phase of life, usually with few

What does organisation age mean for HR delivery?

In a mature organisation, policies, structures and systems will

Hockey sticks and unicorns

Although the online world means an organisation can

Start-up companies worth over $1bn are known as ‘unicorns’,

For HR delivery in one of these exceptional organisations, the

Prioritise initiatives that help meet your mission

These instructions are instilled as core values to the

Complex rules can confuse employees and clients

Large organisations sometimes divide their business by

investment and target-setting, are taken by central

Communication, motivation and job satisfaction are

It may take longer to make decisions as authority is

These organisations encourage functions or divisions to share

Process-based organisations try to move away from vertical

into an organisation’s products and services. Within this

Employees in virtual organisations communicate online