Risk Management

STUDY UNIT SIX

LEARNING OBJECTIVES
After having worked through this study unit, students are expected to:

• Appreciate the concepts in managing risk
• Show an understanding of the strategies involved in controlling risk

6.0    THE MANAGEMENT OF RISK
6.1      An Introduction to Risk Management
In every activity there is an element of risk and the successful manager is the one who can look ahead, foresee the risks and eliminate or reduce their effects. Risks are no longer confined to the ‘sharp end’, the shop floor, but all parts of the organisation have roles to play in reducing or eliminating them. Indeed, the Robens’ Committee recognised the vital role of management in engendering the right attitudes to, and developing high standards of, health and safety throughout the organisation.
A number of specialised techniques have been developed to enable risks to be identified, assessed and either avoided or reduced but there are other factors related to the culture of the organisation and the interrelationship of those who inhabit it that have a significant role to play. An understanding of those techniques and the roles and responsibilities of individuals and groups is a necessary prerequisite for high levels of safety performance.
The components of risk involve acceptance of its existence; understanding the hazard, the consequences, the likelihood of a hazard causing injury or damage; the perception of the risk and the tolerance of the risk by individuals or by a group.
It is not surprising therefore that the definitions of risk can be complex. The Royal Society Study Group report offers the following definition:
RISK is the probability that a particular adverse event occurs during a stated period of time, or results from a particular challenge.
The report continues with associated definitions:
HAZARD is seen as the situation that in particular circumstances could lead to harm, where HARM is the loss to a human being (or to the human population) consequent on damage and DAMAGE is the loss of inherent quality suffered by an entity (physical or biological).
RISK ASSESSMENT is the general term used to describe the study of decisions subject to uncertain consequences.
RISK ESTIMATION is the first subdivision of Risk Assessment and includes the identification of outcomes, the estimation of the magnitude of the associated consequences of these outcomes, and the estimation of the probabilities of these outcomes.
RISK EVALUATION is the second subdivision of Risk Assessment and is the complex process of determining the significance or value of the identified hazards and estimated risks to those concerned with or affected by the decision.
RISK MANAGEMENT is the making of decisions concerning risks and their subsequent implementation and flows from Risk Estimation and Risk Evaluation.
The above definitions and the tenor of the report are based on an approach to the subject of risk from the standpoint of the natural scientist. The view of the social scientist places greater emphasis on the perception of risk by individuals and the public at large, especially when overlaid by media involvement. Most managers do not have the time to consider what some will view as the esoteric components of risk. The Health and Safety Executive offer the following definition of hazard and risk:
HAZARD means anything that can cause harm (e.g. chemicals, electricity, working from ladders, etc);
RISK is the chance, high or low, that somebody will be harmed by the hazard.
The assessment of risk can range from a profound intellectual exercise or a day-to-day practical activity.

6.2      The Components of Risk
6.2.1   Hazard
The definition of ‘hazard’ presented above has two elements. The first is that a hazard has within it the ability to harm a person. The second is that the existence of a hazard does not mean that harm will arise – a hazard only has to have the potential to harm. Identifying hazards is an ongoing process. There are everyday hazards associated with living – e.g. using gas as a fuel to cook food. There are unusual hazards that most people encounter only rarely – e.g. undergoing surgery.
There are hazards that will cause immediate harm if they are encountered. These are termed acute hazards and are usually recognisable to most people so there is rarely a need for them to be explained. For example, most people will understand that being struck by a moving vehicle will result in immediate harm. Other hazards may affect us but we do not experience immediate harm. An example is exposure to asbestos fibres, which may be inhaled many times over many years before harm is caused to the body. These are termed chronic hazards. Some hazards can be both acute and chronic. Radiation in small repeated doses can cause chronic harm in the form of cancers. However, a large single dose can cause acute harm in the form of burns and poisoning.
Some hazards are caused by workplace exposure. Other hazards arise from a combination of workplace exposure and personal lifestyle. Two examples illustrate this point. Stress may arise at work (and usually does to some extent) and be quite tolerable to an individual. However, combine that with stress from the individual’s personal life (such as undergoing a divorce or bereavement) and harm to health can easily arise. The other example is musculo-skeletal injury, such as carpal tunnel syndrome, which may be experienced by a VDU operator using a keyboard all day. Combine the workplace activity with a hobby of surfing the net and it easy to see that this additional exposure increases the risk of wrist injury. In both these examples it is not easy to determine which of these activities are the causative factors and what their contributions are to the resulting harm. An activity that is not a hazard because it does not cause harm can become one under different circumstances.
Recognising hazards is not always straightforward or easy. If a checklist of hazards is used, it should be reviewed periodically, preferably by different people so that there is a chance that what one reviewer misses another will identify.

6.2.2   Consequence
The harm that arises from a hazard is the consequence of it. It is important to identify the possible consequences before embarking on a hazard control strategy. The more serious the consequence the greater the need to control the hazard. If a hazard will result in serious injury or death then control of it becomes urgent. Hence there is an emphasis on guarding machines because they have sufficient energy to cause immediate serious harm to the machine operator. Where the consequence is likely to be a minor injury then a warning notice may suffice. For example, when a spill occurs in a supermarket, it is mopped up leaving the floor wet and slippery for a short period. A notice warning shoppers of the hazard is considered adequate. However, a shopper may slip on the damp floor, strike her head on a shelf, and suffer serious injury. Consequences are not possible to predict with certainty.
Compliance with recommended standards does not confer immunity from risk. Where exposure limits are applied to an employee’s exposure to toxic chemicals, the values in official lists of exposure limits are commonly interpreted as being safe levels, i.e. harm will only occur when there is exposure above the stated level. However, careful reading of the supporting information with the lists will reveal that the exposure level has been set at a point where most people most of the time will not be harmed. Clearly some people may be harmed. If it is known that a particular employee may be susceptible to a particular substance in use then preventative action must follow. The law recognises that below the listed exposure levels an amorphous group of employees does not need to be protected but where particular individual susceptibilities are known the employees must be protected. A good example is the case of a pregnant woman. Before pregnancy the body may not be harmed at all by exposure to low levels of a chemical agent. Once pregnant, however, the foetus may be harmed by the same level of exposure that would not harm the adult woman or any others in the group.
A further factor to consider under consequence is who may be harmed. It is not necessarily those who are immediately exposed to the hazard who are the only ones likely to be affected. For example, legionella is a form of virulent pneumonia. The virus causing it multiplies in warm water and causes harm when it enters the lungs, usually in the form of an aerosol. It can be fatal to people whose immune suppression system is depressed. The breeding grounds of legionella are cooling towers, air conditioning systems, showerheads in centrally heated hotel rooms, etc. The consequences of poor maintenance of these systems are the release into the atmosphere of contaminated aerosol vapours that affect not only the relatively healthy employees but also neighbours and passers-by and, in particular, people whose immune system is depressed. Deciding what the consequences are likely to be and who may be affected by the hazards is not as straightforward as it might appear. It requires lateral thinking.

6.2.3.  Likelihood
An important element of risk is the likelihood or probability that the hazard will cause injury. In its simplest form, probability can be considered as high, medium or low and for the majority of risk assessments this should prove adequate. The valuation of probability is subjective with the risk assessor drawing on his knowledge and experience to decide whether a risk should be rated high, medium or low.
These ratings can be given a numerical value that when combined with similar numerical values given to the likely worst injury can give an indicative ranking or ‘risk rating’. Elegant techniques such as Fault Tree Analysis5 can be applied which list all the elements and sub-elements which contribute to an incident. By placing against each element the probability of its occurrence a very detailed and accurate assessment of the likelihood of a hazard or fault causing harm can be made.

6.2.4.  Perception
Understanding risk can assist in providing an insight into the factors that contribute to it. A rational analysis should be sufficient to convince everyone about the risk and hence the control measures that are needed.
This may not be the case. Newby comments that despite a huge increase in road traffic since the 1930s, the risk of an accident occurring involving pedestrians has been reduced by a factor of four. That argument does nothing to alter the response of a mother whose child has been injured in a road accident. Her perception of risk is decisive and the quantified assessment does not sway her or the immediate community. Visitors to an old established factory site keenly felt the risk from large trucks using the internal roads that were designed for the horse and cart. Employees were used to the risk and only occasionally voiced concern. They were more concerned about risks arising from hazards in the workplace. Their perception of the risk was dulled by their familiarity with it and the more immediate personal risks they faced elsewhere. Different groups have a different perspective.
People, as individuals and as groups, act in accordance with their own perception of the risk. Risk assessment and risk management processes will only be successful in reducing injury if there is widespread involvement of those who are potentially affected by the hazard. The safety professional may be the person who provides technical data and an initial ranking of risk. It is for a larger group to decide the appropriate responses.

6.3      Strategies to Control Risk
The management of risk is a strategic approach to health and safety that organisations must adopt in order to control the hazards that employees, contractors, community residents and others are exposed to. It requires more than just a focus on the hazard itself. The control of hazards requires organisational and administrative processes in order to be effective. Those processes need to be in place to influence the behaviours of directors, managers, supervisors and employees so that harm does not occur. They should also be bound together by a policy and their effectiveness established by measurement, review and audit. A structure to accommodate these processes is necessary if the risksfrom hazards are to be controlled. Its success is demonstrated when the hazard has been eliminated. Elimination is the first step in the risk control hierarchy.

6.3.1   Risk Control Hierarchy
A risk control hierarchy is a structured approach whereby for each hazard a set of action options is considered. The action that should be adopted is the one that gives the greatest degree of protection, not only to the operator but also to others who may be exposed to the hazard. The options in order of decreasing effectiveness are:
1. Elimination by the removal of the hazard itself to ensure that injury or damage will not occur. Many injuries occur each year from manually handling objects. By changing the work method and employing mechanical handling, the hazards from manual handling are eliminated. Boxes of product being moved from one storage location to another do not add value to the business but do add injuries and costs. Removing, simplifying and streamlining handling operations can eliminate potential injury causing hazards.
2. Substitution is sometimes possible by utilising a less hazardous material instead of a more hazardous one. An example is in the replacement of benzene (MEL 3 ppm) that is a proven human carcinogen by toluene (MEL 50 ppm) which is in many cases as good a solvent. This option requires a good understanding of the hazardous properties of both materials to ensure that new or additional hazards are not introduced into the workplace by the replacement material.
3. Reduction in the risk faced can be achieved by reducing the quantity of materials held in the workplace. This was recognised in the HFL Regulations that allow only sufficient flammable materials for the day or shift to be kept in the work area.
4. Personal protection is the final option in the risk control hierarchy. This requires the issue to the exposed employee of equipment that will protect him only and may consist of a facemask, eye protection, safety shoes, bad weather clothing, etc. It must be seen as a last option after all the other options have been investigated and proved not feasible.
The employee must be told of the hazards faced, be trained in the control measure in place and in the proper use of the equipment. Checks should be carried out periodically to ensure there is compliance with the rules associated with the use of protective equipment. The purchase of PPE may be a cheap option, but the infrastructure necessary to ensure that it is properly used and maintained may be onerous.
The risk control hierarchy should be applied to every identified hazard. The risk control method chosen need not be just one of the options but can be a combination of two or more. Consideration should also be given to the ease of use of the chosen control method and to the ease with which it can be defeated. For example, eliminating a hazard altogether is an option that nobody can defeat. By contrast, asking an employee to avoid harm by wearing a dust mask is a control measure that is easy to defeat – it is simply taken off when conditions become unbearably hot. The usefulness of the risk control hierarchy is enhanced when it is a part of a comprehensive risk management process, that is, when it forms part of an established management process.

6.3.2   Principles of the Management of Risk
Risk management may be defined as the eradication or minimisation of the adverse effects of the pure risks to which an organisation is exposed. Pure risks can only result in a loss to the organisation, whereas with speculative risks, either gain or loss may result.
An example of a pure – or static – risk concerns a build-up of combustible material in the corner of a large distribution warehouse. If a source of ignition is present in the vicinity, then the risk of fire spread is greatly enhanced by the build-up of combustible material, thus posing the threat of a large loss of stock caused by fire. There will also be consequential loss resulting from the fire to consider, e.g. loss of profit on goods in stock; loss of market share etc.
An example of a speculative – or dynamic – risk concerns commodity purchasing. A company – speculating to accumulate – buys in quantities of a key raw material at price £x/tonne, as the price is favourable, hoping that a cost saving will be made, as the price is likely to increase in the future. The speculative risk may result in gain or loss, as the price of the raw material could continue to fall, after the purchase price has been agreed with the supplier. Alternatively, the price may rise to £(x + y)/tonne, thus achieving the anticipated saving.
It should be borne in mind that the division between ‘pure’ and ‘speculative’ risks is not absolute. For example, the speculative risk of operating a machine without an adequate guard has a number of pure risks associated with it – injury; death; prohibition notices; prosecution; fines; loss of profit etc.
The principles of a risk management programme are: risk identification, risk evaluation and risk control. (These three principles have been enshrined in recent health and safety legislation – e.g. Lead, Asbestos, COSHH, Noise, Manual Handling and Display Screen Equipment – and have brought risk management strategies and legislative compliance together.)

6.3.4.  Risk management – role and process

The role of risk management in industry and commerce is to:

1. consider the impact of certain risky events on the performance of the organisation;
2. devise alternative strategies for controlling these risks and/or their impact on the organisation; and
3. relate these alternative strategies to the general decision framework used by the organisation.

The process of risk management involves: identification, evaluation and control.
Risk identification may be achieved by a multiplicity of techniques, including physical inspections, management and worker discussions, safety audits, job safety analysis, and Hazop studies. The study of past accidents can also identify areas of high risk.
Risk evaluation (or measurement) may be based on economic, social or legal considerations.
Economic considerations should include the financial impact on the organisation of the uninsured cost of accidents, the effect on insurance premiums, and the overall effect on the profitability of the organization and the possible loss of production following the issue of Improvement and Prohibition Notices.
Social and humanitarian considerations should include the general well-being of employees, the interaction with the general public who either live near the organisation’s premises or come into contact with the organisation’s operations – e.g. transportation, nuisance noise, effluent discharges etc. – and the consumers of the organisation’s products or services, who ultimately keep the organisation in business.
Legal considerations should include possible constraints from compliance with health and safety legislation, codes of practice, guidance notes and accepted standards, plus other relevant legislation concerning fire prevention, pollution, and product liability.
The probability and frequency of each occurrence and the severity of the outcome – including an estimation of the maximum potential loss – will also need to be incorporated into any meaningful evaluation.

6.4      Risk control strategies
Risk control strategies may be classified into four main areas: risk avoidance, risk retention, risk transfer and risk reduction.

1. Risk avoidance

This strategy involves a conscious decision on the part of the organisation to avoid completely a particular risk by discontinuing the operation producing the risk and it presupposes that the risk has been identified and evaluated.
For example, a decision may be made, subject to employees’ agreement, to pay all wages by cheque or credit transfer, thus obviating the need to have large amounts of cash on the premises and the inherent risk of a wages snatch.
Another example of a risk avoidance strategy – from the health and safety field – would be the decision to replace a hazardous chemical by one with less or no risk potential.

2. Risk retention

The risk is retained in the organisation where any consequent loss is financed by the company. There are two aspects to consider under this heading: risk retention with knowledge, and risk retention without knowledge.
(a) With knowledge
This covers the case where a conscious decision is made to meet any resulting loss from within the organisation’s financial resources. Decisions on which risks to retain can only be made once all the risks have been identified and effectively evaluated.
(b) Without knowledge
Risk retention without knowledge usually results from lack of knowledge of the existence of a risk or an omission to insure against it, and this often arises because the risks have not been either identified or fully evaluated.

3. Risk transfer

Risk transfer refers to the legal assignment of the costs of certain potential losses from one party to another. The most common way of effecting such transfer is by insurance. Under an insurance policy, the insurer (insurance company) undertakes to compensate the insured (organisation) against losses resulting from the occurrence of an event specified in the insurance policy (e.g. fire, accident etc.).
The introduction of clauses into sales agreements whereby another party accepts responsibility for the costs of a particular loss is an alternative risk transfer strategy.

4. Risk reduction

The principles of risk reduction rely on the reduction of risk within the organisation by the implementation of a loss control programme, whose basic aim is to protect the company’s assets from wastage caused by accidental loss.

The collection of data on as many loss producing accidents as possible provides information on which an effective programme of remedial action can be based. This process will involve the investigation, reporting and recording of accidents that result in either injury or disease to an individual, damage to property, plant, equipment, materials, or the product; or those near-misses wherealthough there has been no injury, disease or damage, the risk potential was high.
The second stage of the development towards risk reduction is achieved by bringing together all areas where losses arise from accidents – whether fire, security, pollution, product liability, business interruption etc. – and co-ordinating action with the aim of reducing the loss. This risk reduction strategy is synonymous with loss control.

6.5      Loss control
Loss control (or risk reduction) may be defined as a management system designed to reduce or eliminate all aspects of accidental loss that lead to a wastage of an organisation’s assets. Those assets include manpower, materials, machinery, methods, manufactured goods and money.
As the emphasis on the economic argument increased, the technique of loss control has become more closely allied to financial matters, and in particular insurance.
The bringing together of insurance (risk transfer) and loss control (risk reduction) was the final stage in the development of the new discipline of risk management. Loss control is based mainly on the economic approach to accident prevention, and loss control management is essentially the application of sound management techniques to the identification, evaluation and economic control of losses within a business. Loss control is synonymous with risk reduction, so the practical techniques associated with each stage of the process – i.e. identification, evaluation and control
– are closely related.
Loss control management involves the following:

1. The identification of risk exposure.
2. The measurement and analysis of exposures.
3. The determination of exposures that will respond to treatment by existing or available loss control techniques or activities.
4. The selection of appropriate loss control action based on effectiveness and economic feasibility.
5. The managing of the loss control programme implementation in the most effective manner subject to economic constraints.

The component parts of a loss control programme may be considered in terms of protecting one or more of the organisation’s assets from accidental loss, and will generally include: injury prevention (safety); damage control; fire prevention; security; industrial health and hygiene; pollution; product liability; and business interruption. In practice, these areas – from injury prevention to business interruption
– require being co-ordinated within one senior management function (possibly risk management) in order to ensure a rational and concerted approach to the problem of eliminating or reducing the costly accidental losses that can occur within an organisation.

6.6      Degrees of hazard
An awareness of the differing degrees of hazard to people will enable appropriate control measures to be developed and implemented.

Immediate physical danger can manifest itself through very short-term injury accidents – e.g. hand amputation in a power press; person falling from a height. The result of immediate physical danger – if it goes uncontrolled – will inevitably be immediate physical injury. The enforcing agencies use the phrase ‘risk of imminent danger’ or ‘risk of serious personal injury’ in connection with the issuing of prohibition notices – a legal control measure designed to reduce the risk of immediate physical danger.
Long-term physical danger is more cumulative or chronic than acute or short term. Cumulative back strain caused by poor kinetic handling techniques is an example of long-term physical injury.

Immediate chemical danger may be caused by strong acids and alkalis being poorly stored and handled, thus leading to a risk of skin contact and corrosive burns – i.e. immediate chemical injury.
Long-term chemical danger is again chronic or cumulative – e.g. lead poisoning or exposure to asbestos fibres. The result is some form of occupational disease – i.e. long-term chemical injury.

Immediate biological danger may be caused by the presence of contagious diseases or via genetic manipulation. The result is again some form of occupation disease or illness.
Long-term biological danger is usually cumulative in nature, for example noise-induced occupational deafness.

Immediate psychological danger is linked to short-term trauma – e.g. a disaster at home or work; social problems – domestic illness etc. This may result in a loss of concentration, abruptness with work colleagues, and other short-term stress-related symptoms.
Long-term psychological danger may be linked to fears connected with fear of failure, unemployment/job security, or lack of career direction and motivation. The symptoms are similar to those described above, but often only become apparent over a longer timescale.

SELF-EVALUATION QUESTION:

Q1.      Discuss the components of risk
Q2.      Describe the hierarchy of risk control

STUDY UNIT SEVEN

LEARNING OBJECTIVES
After having worked through this study unit, students are expected to:

• Appreciate the concepts in organisation and administration of risk management

• Show an understanding of the organisation structure models

7.0       RISK MANAGEMENT: ORGANIZATION AND ADMINISTRATION FOR SAFETY
The identification and control of hazards does not occur in a vacuum. The methods and techniques of risk assessment may be well understood but they will be far from effective in reducing incidents and injury unless they are deployed within an effective management framework. Risk assessments result in changing the actions and behaviour of those affected. The behaviour change is sometimes mistakenly thought of as affecting shop floor employees only but directors, managers and supervisors are also affected. If risk assessments are to be effective the organisation as a whole needs to understand its roles and responsibilities. This factor is evident in the Factories Act, where various setions require the employer to provide safe systems of work, information, instruction, training and supervision. This can best be achieved through a proper organisation and administration. Thus, to derive the greatest benefit from safety activities, and particularly risk assessments, the organisational and administrative arrangements within the company should be clearly understood by all involved.

For any organisation to function effectively and successfully it is necessary that those who constitute that organisation understand the goals of the enterprise and identify with them. They should know where they fit into the executive structure and must be competent and confident in the work they have to do. This applies to all the many facets of the enterprise’s activities, whether production, financial, administrative or safety. There needs to be an understanding of the influences, both internal and from outside, that bear on the success of the component parts and the organisation as a whole. There should be an appreciation of the conflicts that can arise, their causes as well as the techniques that can be used to defuse the situation.

Similarly there needs to be an understanding and recognition of the informal structures and relationships that occur within the more formal imposed organisation structure. These informal arrangements very often ‘oil the wheels’ of commerce and keep the organisation running smoothly and effectively. While a firm structure is necessary to ensure a consistent direction of the efforts of the enterprise, that structure must not be so rigid that it cannot adjust to changes in the trading, economic, legislative and other aspects of the operating environment over which the enterprise has no control.

7.1      Organization Structure Models
An overall management structure needs to be established in order to achieve successful health and safety performance and the management of risks. An international health and safety management standard, ISO 18001, is available and it follows the general structure of the quality standard and the environment standard. An existing UK standard is a precursor which offers a scheme for integrating the elements of the international systems with the HSE guidance booklet. Both refer to the need for effective organisational and administrative processes.

7.1.1   Formal organisation structures
For an enterprise to succeed it needs to have some sort of organization and the most common is hierarchical with authority flowing through definite channels from top management to the workpeople. How that power is exercised will be determined by the culture of the organisation, whether it is authoritarian or bureaucratic.

Organisation structures vary with the size and complexity of the enterprise. As profit margins are cut, there is a tendency to remove intermediate layers of management and supervision to reduce costs. The rationale is based upon the concept that it is only the shop floor operative who actually ‘adds value’ to the product or in providing a service. Other (higher) members of the management and supervisory hierarchy are engaged in planning, organising and monitoring.
These tasks are seen as ‘burdens’ because they do not directly ‘add value’ but do add cost. The increasing use of electronic information technology is making some of the administrative tasks performed by managers and supervisors redundant allowing these roles in the organisation to be dispensed with.

As a further move at cost cutting, some organisations have ‘outsourced’ whole parcels of their operations. The original enterprise continues to assemble the final product or provide the service but employs only key people to fulfil essential administrative functions, the non-core functions being undertaken either by subcontractors or by people hired on contract. This type of arrangement applies more easily to engineering manufacture than it does to line production. There are moves for organisations to create ways of focusing only on the essential functions of their operations with the aim of having as few direct employees as possible. In parallel with this trend in organisational change, information technology is permitting more people to work from home. Employees in sales, purchasing, systems support, etc., are all able to do much of their work from home. While still on the direct payroll, they are removed to a significant degree from the day-today control of their supervisor or manager.

7.1.2   Informal organisation structure
Within any formal organisation will be found whole networks of informal organisations based on personal relationships, social needs, personal allegiances and sometimes a desire to be helpful in by-passing the formal organisation. These informal organisations are rarely committed to paper.
They come into existence to serve a perceived need of those involved and may remain for many years or can disappear when the need is satisfied. The informal structure serves to improve communication and to develop non-official roles. It has an important part to play in the resolution of conflicts between roles and positions. Questions raised in the formal organisation often elicit answers that rely on the informal structure. Questions such as ‘what’s the best way to get this information?’ or ‘who can get this done?’ produce answers that cut right across the formal structure – but get the job done. Occasionally there is tacit recognition of the informal structure by the formal since the informal level allows for practical interpretation of rules and procedures that can otherwise place restrictions on achieving enterprise targets. This flexible interpretation of the formal rules may be to the common organisational good, but may also be detrimental where they concern safe working practices.

7.1.3   Roles and responsibilities
Each person in an organisation should be confident of the role they have to play and aware of the degree of executive responsibility they bear. This responsibility must be limited to the extent of the control they have been authorised to exercise. While the company, as a legal entity, carries the overall legal responsibility and is answerable to the law of the land, individual employees carry executive responsibilities and are answerable to the Chief Executive or owner of the company. Executive responsibility can be delegated, legal responsibility cannot.
Factors to be taken into account when considering the extent of control exercised by an individual person are the authority and the power that the person has.

Authority
A simple definition of authority is ‘legitimate power’ and Max Weber saw authority and its legitimacy as central to the question of organisational structure. He maintained that authority exists when instructions are obeyed in the belief that they are legitimate. In other words that they are justified and that obedience is the appropriate response. Weber classified authority into three kinds:

• rational legal authority based upon rules and procedures and with bureaucracy as its purest form,
• charismatical authority where the personality of the individual predominates, and
• traditional authority founded on respect for custom and practice.

These three authority types are not mutually exclusive but can appear in any organisation at any hierarchical level.
Authority often has at its base the rules and regulations that the organisation has drawn up to regulate its affairs, but for the authority to be effective relies on a number of presumptions:

• that the rules exist and are accepted by those they are aimed at,
• that the rules are relevant to the particular circumstances,
• that the rules will be obeyed by every member of the organization including those exercising the authority, and
• that the authority is vested in the office and not the individual.

A question that has frequently been debated but never resolved is the relationship between authority and responsibility. Which should come first? If authority is vested in an individual does responsibility follow or does the holding of responsibility grant the taking of authority? Common sense suggests a balance has to be struck if internal conflict is to be avoided and an organisation is to operate at its most effective.

Power
Power has been described as the capacity to influence others to do that which they would not have done voluntarily and is defined as ‘the capacity to make and carry out decisions even if other people resist.’ Power can derive from authority vested in a person by the organisation, the control of a desired product, such as money, or by virtue of special knowledge or expertise.
There are at least three dimensions of power which are of practical importance: weight, domain and scope. He describes weight as the ability of an individual to affect the probability that another individual will act in a certain way under certain circumstances; domain as the span or number of individuals or groups influenced, and scope as the range of outcomes over which power can be exercised.
A safety adviser in a factory may have the power to cause a manager to abandon a particular production method or process immediately on his advice or at the other extreme so little power that his advice is completely ignored. The scope of his power may extend to authorizing production procedures within the factory but not extend to influencing basic safety matters that affect employees in their leisure pursuits, thus his domain encompasses the factory premises but does not extend outside it.
The power referred to above is ‘power over’ – the exercising of control over the actions of others, but it is arguable whether this is as effective use of power as ‘power with’ – the concept of two people pulling in the same direction exerting greater force than one person trying to drive another.
Each person may be seen to have a degree of power and authority. At the lowest levels of an organisation an individual may exercise formal power and authority only over his own individual actions. However, by his actions and behaviour, he may influence another employee, i.e. through the use of informal or personality power.
Employees whose position places them in higher levels in the organisation exercise power through the formal recognition of their position which carries the appropriate authority. With this elevated level of control comes increased responsibility. An issue for people who hold higher positions in an organisation is the extent to which they should exercise control over particular and specific tasks delegated to subordinates.
For example, it is not reasonable for an engineering manager to provide specific instructions and personally oversee a qualified electrician re-wiring a 220 V circuit. In most circumstances, the engineering manager will have discharged his responsibility by ensuring the electrician chosen for the job is competent in terms of training and experience. If, however, the task involved a 11 kV circuit, then much more vigorous steps need to be taken for the manager to discharge his responsibilities. These could include establishing a safe procedure of work including ensuring a risk assessment is carried out, the work people are competent and experienced in the particular work, ensuring isolation from live conductors and counter-signing the permit-to-work. The key skill of the manager is to be able to identify when the hazard and the risk demand specific action and ensure it is taken. Only then can the responsibility be discharged in a proper manner.
In more complex circumstances there must still be one person in overall charge although he may delegate responsibility for a number of functions, including safety. When he does delegate, he must ensure the people concerned are competent and experienced in the area of responsibility they have been given.
Roles and responsibilities are usually considered in relation to the position within the formal organisation structure. In recent years there has been a trend towards self-managed workgroups which have a much greater degree of control over the planning, organization and carrying out of the work.

SELF-EVALUATION QUESTIONS:

Q1.      Discuss the organisation structure models