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Organisational Functions


In order to produce and sell products organisations carry out 6 functions

In effective organisations each of the functions will work together so that the whole of the organisation are aiming towards the same objectives.

Factors of Production Diagram
The diagram above shows six key organisational functions


To achieve common objectives, communication across the various functions is key. The starting point for communication is the creation of a clear set of company objectives which each function is aware of. These objectives then need to be further broken down into specific objectives for each function.

Regular reviews of:

should ensure that the whole company is pulling in the same direction.

Factors Of Production

Organisations utilise labour, capital, energy, materials and information to produce products.

Labour is the mental and physical effort of employees and can take a variety of forms including filing, lifting, data processing, decision making, and line management. In fact labour is any effort/task an employee undertakes in order to produce the product or service.

Capital is the machines and tools needed to produce the product or service. This physical capital is purchased through financial capital such as loans, sale of shares in the organisation and use of profit generated by the organisation.

Energy is provided through the use of gas, electricity, solar power and steam. Energy is needed to heat and light up the premises, make the machinery work and to ensure that the organisation is a comfortable place for the employees to work in.

Materials in their raw form are needed to produce the product or service. For example a restaurant will need ingredients to make the food that they serve to their customers.

Information is the knowledge and expertise needed to produce the end product. For example a restaurant will need to know what ingredients are necessary for each dish, what quantity of ingredient to use, how to mix each ingredient and how long (if at all) to cook each dish.

NB Factors of production have also been classified into land, labour, capital and enterprise. In this type of classification natural resources such as water, coal and farm land are grouped together as land. Whilst enterprise, are all the factors which bring together land, labour and capital to produce the end product.

Finance Function

The financial section of the organisation will keep manual/electronic records of money received and paid out by the organisation. This information will then be used to produce various financial statements for tax purposes and to comply with legal requirements. The information will also be used to produce management accounts to enable senior managers to plan and review business strategy.

The finance department or unit may also be responsible for administering employee expenses and salaries. For payment of wages the finance department will need to take into account statutory deductions such as tax, and employee contributions such as pension or loan repayments.

Human Resources Function

Human resources' main responsibilities are the recruitment, selection, training and development of staff in line with corporate procedures and legal requirements. This will involve developing staff to maximise their potential in a manner that furthers the organisation's objectives. Human Resources may also create policies that balance organisational needs with those of the employee. They will interpret employee welfare legislation and advise the organisation about complying with human resources legislation.

Sales and Marketing Function

The marketing department will research customer needs to develop strategy and product to satisfy that customer need. In its research, the marketing department will investigate the market they are aiming at; the type of consumer making up the market (age, background sex etc) and the preferences of the consumer within that market. The marketing department will then need to marry consumer preferences with producing a product that is profitable. Once the product has been designed by the production department marketing will then need to package, advertise, and promote the product. Sales are responsible for persuading the consumer to purchase the end product, manufactured through marketing’s research. The Sales Department’s selling strategy could involve mail shots, travelling sales representatives, telephone sales and devising the sales interview.

Administrative (or Facilities Management) Function

This involves dealing with all administrative tasks including mail handling, dealing with enquiries/complaints, catering, and computer services. They will also produce documents (e.g. forms, stationary, and newsletters) for the organisation and maintain the organisation’s premises and equipment.

This function although not always recognised as vital, is the glue that holds the organisation together. Without an administrative department, customer complaints would not be resolved, customer orders may not be processed, and the workforce may not have the tools they need to complete their tasks.

Research and Development Function

The aim of research and development is to improve existing products, create new and better products, improve production methods, and create effective processes. This will enable the organisation to reduce costs, increase profitability and remain ahead of the competition. As not all research will lead to new/improved products/processes companies will need to allocate a specific portion of their budget to research and development activities.


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