BUSINESS MANAGEMENT

Revision for Unit 3 and Unit 4

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UNIT 3 = THREE AREAS OF STUDY

1 Large-scale organisations in context 2 Internal environment of large-scale organisations 3 The operations management function

UNIT 4 = TWO AREAS OF STUDY

1 The human resource management function 2 The management of change

ASSESSMENT
Outcomes unit 3 = Outcomes unit 4 = Exam =

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UNIT 3 AREA OF STUDY ONE LSOs IN CONTEXT

HOW DO WE DEFINE A LSO? Employs more than 200 people Earns revenue in the millions Or has assets or more than $200m TYPES OF LSOs Government departments Corporations public companies private companies government business enterprises Not-for-profit organisations Need to be able to define, or outline the characteristics of a LSO and distinguish between the different types of LSOs Each of the different types of LSOs have a different purpose. 4/15/12

Organisational MISSION or VISION statements are:

For each of the different types of LSOs identify a specific organisation and a possible objective Type of LSO Example Objective

Organisational Strategies are:

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LSOs are important because they

Contribute to the economy = Provide jobs Pay taxes Contribute to economic growth (GDP) Provide exports Contribute to research and development Contribute to infrastructure growth LSOs are sometimes criticised for making a negative contribution

Downsizing Outsourcing Environmental damage

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ORGANISATIONAL ENVIRONMENTS Internal environment = refers to conditions and factors within the organisation, such as policies, processes, staff, resources, etc that the organisation has control over External environment = operating environment and macro environment, refers to those factors outside the organistion that the organisation has little control over OPERATING ENVIRONMENT =

MACRO ENVIRONMENT =

Organisations need to respond to external pressures. They 4/15/12 should aim to be proactive, rather than reactive to the

HOW DO ORGANISATIONS MEASURE THEIR PERFORMANCE? Differentiate between EFFECTIVENESS AND EFFICIENCY Effectiveness = to what degree the objectives have been met Efficiency = how well resources have been used to achieve objectives Use of KEY PERFORMANCE INDICATORS Profitability Sales figures Percentage of market share Productivity compares output (in relation to inputs) from one period of time to to another period of time Customer satisfaction Staff satisfaction/morale Staff turnover Number of workplace accidents

Remember to use specific factors that can be measured when writing about KPIs Note: staff surveys, or customer surveys, are not KPIs. They are things 4/15/12 used to measure a KPI

STAKEHOLDERS There are many stakeholders in LSOs a stakeholder is Often stakeholders have conflicting interests For example:

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from the 2008 exam. Question 1

Australian Mineral Resources (AMR) and Jerrilderi Mining have been negotiating a merger with the aim of achieving economies of scale. The Chief Executive Officers (CEOs) of the two mining companies have been in discussion over the past three months. The focus of these discussions has been the potential problems of merging two well-established companies with different cultures the possible structure of the new entity the content of a joint mission statement the adoption of a single planning process at the three levels.
a.

Define mission statement.

1 mark

b.

i. Define organisational structure. ii. Describe the key features of a matrix organisational structure. 1 + 2 = 3 marks

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Preparation for the examination The best responses used specific details to answer the questions asked, rather than providing prepared answers to questions that had been asked in past examinations. Students who had studied all areas of the course were able to provide relevant and detailed answers. It was evident that many students had consulted previous assessment reports and used the advice provided to prepare for the examination. It is good examination preparation to practise by using past examination questions; however, students must also be able to adapt their knowledge to questions that ask for information in a different way, or with a different emphasis. From the 2008 examiners report.

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Question 1a: The following is an example of a good response. A written document which outlines an organisations overall reason for existence. Its strategies and plans are then based on achieving the objectives in the mission statement. It provides the employees and organisation with direction eg. to provide our clients with high level of service. Question 1bi: Organisational structure describes the way that an organisation chooses to divide the labour and coordinate the activities of individuals and groups within the organisation. When answering questions that require definitions, students should ensure that they do not use the same words that are in the question. For example, when asked to define organisational structure, responding with is the structure of the organisation will not score any marks. The following is an example of a good response. The way in which the roles in a business relate to each other, outlining 4/15/12 the direction of delegation and communication. Outlines the ways in

Question 1bii: In the matrix structure, teams are formed for specific projects or tasks. Team members are assigned from their department to perform a specific role. They are responsible to both their team leader and department manager. Some students confused the matrix structure with other structures and did not score any marks. The following is an example of a good response. A matrix structure exists when an employee is a part of a specific group or team, but remains part of a functional area. Its key features are hence effective communication both upwards and downwards in their functional area (eg. Human resources) and across in their team. Employees are hence accountable to both a team leader and a functional manager. Skills are pooled across the organisation and it is characterised by synergy within the organisation and flexibility.

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UNIT 3 AREA OF STUDY TWO INTERNAL ENVIRONMENT

The internal environment of LSOs includes the factors within the organisation. These factors are often things that the organisation has control over (as opposed to the factors in the external environment, which they may have little control over). The internal environment includes such factors as:

Management roles Management structures Corporate culture Policy and procedures Management styles Management skills ESM

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MANAGEMENT ROLES
These include PLANNING ORGANISING LEADING and CONTROLLING: POLC PLANNING - Three levels: strategic (long-term) tactical (medium- term) operational (short-term) also known as frontline planning PLANNING is the process of setting objectives and deciding on methods to achieve them. A typical PLANNING PROCESS or MODEL IS: Set objectives Analyse current situation (SWOT analysis) SADI Develop alternatives M Implement an alternative Monitor/check feedback

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ORGANISING the coordination of resources and tasks to achieve objectives Organising includes: Determining work activities Classifying and grouping activities Assigning work Delegating authority

LEADING the process of influencing/motivating people to work towards the achievement of the organisations objectives Leadership is closely related to the skills of communication/motivation Leadership can be transactional or transformational Difference??

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CONTROLLING the process of evaluating performance and taking corrective action to ensure that set objectives are being met. Controlling compares planned or forecasted achievements with actual performance. Management needs to ask the questions: Did we achieve what we set out to achieve? How can we do things better? Controlling helps with the development of new policies, procedures and objectives for the future Control Process: Establish standards or benchmarks for performance Select ways to measure performance (use KPIs where appropriate) Measure performance Compare to forecast or planned objectives Taking corrective action where necessary

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2008 exam question 1c 4 marks Identify and describe the three levels of planning. Strategic: Long-term planning for 35 years dealing with the overall direction of the company and done by top level management. Tactical: Medium-term planning 12 years implements the strategic plan and done by middle management. Operational: Short-term planning, day to day planning, done by supervisors or line managers. In some text books the three levels of planning are identified (in order) as strategic, operational and frontline the definitions remain the same. Students who did not score full marks for this question either did not include the level of management involved or did not specify a timeframe for the level of planning.

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The following is an example of a good response. The three levels of planning are strategic, tactical and operational types of planning. The strategic level of planning is typically conducted by senior managers and refers to the development of long term goals and strategies, which generally take over a 3 5 year timeframe. A strategic plan for Safeway supermarket could include expanding the market share by 5% over a 3 year period. The second level of planning is tactical planning. This is generally conducted by middle management in order to create objectives and plans for a 1- 2 year period. Tactical planning usually refers to the goals of each department rather than the overall organisation. A tactical plan for Safeway could include deciding to renovate a store of stock a new food product. The third type of planning is operational planning, which is undertaken generally by frontline managers. Operational planning is for short-term goals to achieve on a daily or monthly basis. Operational planning for an organisation such as Safeway can entail 4/15/12 setting daily targets for staff.

MANAGEMENT STRUCTURE or ORGANISATIONAL

STRUCTURE refers to the ways in which an organisation chooses to divide the labour and coordinate the activities of individuals and groups within the organisation. Management structure is about authority relationships Communication lines Decision-making authority Management structures can be centralised (where the decision-making and authority occurs mainly at the top) These type of structures have a narrow span of control Decentralised (where the decision-making and authority is spread throughout) These type of structures have a broad span of control

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There are three main types of organisational structures Functional Structure Divisional Structure Matrix Structure

FUNCTIONAL STRUCTURE This is structuring the activities and tasks in the organisation according to the various functions that happen. Common functions include (but arent limited to) HR, Accounting/Finance, Operations and Sales DIVISIONAL STRUCTURE This is structuring the activities and tasks in the organisation according to areas other than function. Common divisions include (but arent limited to) Product, Customer Base, Geography, Processes MATRIX STRUCTURE This is structuring the activities and tasks in the oganisation according to functions, but then extending it (or overlaying it) to bring together specialists from different functions to work on specific 4/15/12 projects

You need to be able to: Identify and explain the characteristics or features of each type of structure. For example, a divisional structure by product organises the tasks/activities of the organisation according to the various products that it produces. Each division would have its own functions (marketing/sales, HR, etc) within it

Identify the strengths(advantages) and weaknesses(disadvantages) of each structure. For example, a Matrix structure is useful for responding to rapidly changing conditions and promotes team work. A divisional structure may mean that there is a duplication of resources

Acknowledge that most LSOs utilise more than one type of structure at any given time

Organisations regularly restructure in order to better meet organisational objectives

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On this page draw an example of each of the three main organisational structures.

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KEY FEATURES FUNCTIONA L

ADVANTAGES DISAVANTAGE S

DIVISIONAL

MATRIX
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CORPORATE CULTURE

refers to the values, ideas, expectations and beliefs shared by the members of the organisation There is OFFICIAL corporate culture shown through the companys policies, slogans and objectives. Sometimes the ACTUAL corporate culture is the same as the official corporate culture. Sometimes the ACTUAL corporate culture is not always what management is striving for. There are also things that demonstrate a more accurate culture thing that are shown through the behaviours, language used by employees, the management style used, the way employees treat colleagues and customers, and to some extent, the dress code. Each organisation has a unique culture. Organisations often try to change or develop their culture in an effort to meet objectives more readily. If organisations want to make their culture more positive, they need to work on the ACTUAL culture, as well as the OFFICIAL culture

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PHRASES TO DESCRIBE CORPORATE CULTURE A A A A A A A A

positive culture negative culture culture that values employee participation culture that rewards loyalty culture that encourages and supports creativity and risk taking culture of intimidation/bullying flexible culture culture of innovation

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Management has a critical role to play in developing an organisation's corporate culture How do organisations change/maintain their culture?

Firstly, establish what the desired culture is, then Ensure the official culture is entrenched in policies and objectives Ensure management role model the expected behaviours

Ensure staff have training that reflects the values of the organisation

Reward staff who demonstrate appropriate values Recruit staff who fit in with the values of the organisation

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2008exam question 1d. Discuss two indicators of corporate culture the organisations would have considered. (4 marks) Indicators include: the prevailing management style attitudes of management to staff and staff to management relations among staff budgets and other statements of priorities style of dress and language rituals symbols task or people orientation. Students needed to select two indicators and discuss them. For example, rituals. These express and reinforce the key values and can include recognition and award ceremonies, weekly Friday drinks, uniforms or identification badges and how new staff are introduced. The following is an example of a good response where the student has incorporated the case study. Students who incorporated the case study were able to give a much better response and, as a result, scored highly. 4/15/12

Corporate culture is the shared beliefs of an organisation which can either formally or informally guide employee behaviour. Staff turnover can indicate corporate culture that its the number of employees leaving on organisation in a given time. This is because the rate at which people leave an organisation may indicate the level of staff satisfaction, which is intrinsically related to corporate culture. If the corporate culture is positive then morale and motivation of employees is generally high AMR and Jerrilderi Mining may have noticed that one of the companies had a high staff turnover and the other had a low staff turnover and hence observed the impact that this may have on the employees when they merge as a potential problem. Uniforms may also indicate the corporate culture because this is tied to public image, while uniform is generally dictated by management, it may reflect the way in which employees conduct themselves when dealing with each other or suppliers. If AMRs culture is reflected in the fact that their employees take pride in their uniform then Jerrilderi corporate culture may conflict with this. 4/15/12

Policy and Procedures

Difference between the two?

Examples:

Policies and procedures assist a LSO achieve its objectives Policies and procedures need to be reviewed regularly Organisations should follow policy development process

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Management Styles

Identify three characteristics/features of each style Identify one advantage/disadvantage of each style Autocratic

Persuasive

Consultative

Participative

Laissez-faire

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Management Skills
Communication Delegation Negotiation Teamwork Problem solving Decision making Time management Stress management Emotional intelligence 4/15/12

Ethical and Socially Responsible Management

Ethical Issues Social Responsibility Issues

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UNIT 3 AREA OF STUDY THREE OPERATIONS MANAGEMENT

What is operations management?

What are the elements of an operations system in a LSO?

What Operations Management Strategies can a LSO use to optimise operations?

Identify some ESM issues that affect Operations Managers

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2008 exam Question 3 Classic Cleaners specialises in supplying Australian households with washing machines and dishwashers. The company is planning to reorganise its operations as it prepares for the introduction of new models. The Operations Manager, Connie Lemnos, is investigating having some product parts manufactured in China and shipped to its Australian factories.
a.

Identify and describe

one quality strategy one materials management strategy one facilities and design layout strategy that could be employed as a result of the introduction of the new models at Classic Cleaners.

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Quality Control, TQM and Quality Assurance: Quality Control involves the use of a series of physical checks at different stages of the production process to ensure that products and services meet designated standards and errors are eliminated post production.

Just In Time Make or Buy, ABC Inventory Analysis: Just In Time is where the organisation determines the lead time for each stock item and orders are placed to allow the new stock to arrive Just In Time to avoid running out of stock. Functional, Product or Fixed Position: Given that Classic Cleaners are manufacturing white goods, the product layout, which is where the components are arranged in progressive steps in a production line process, would be an obvious choice. Students were able to give a good response to the quality and materials part of this question, but were not able to give a good response to the facilities and design layout part. Students need to ensure 4/15/12that they answer all components of the question asked. Following is an example of a good response.

Quality is a standard which meet the needs and wants of the customer. Classic Cleaners could implement quality assurance, which is a certification by an external body which shows that the quality of Classic Cleaners production process and washing machines and dishwashers meet a set of predetermined quality standards eg. ISO 9000. This would be necessary for Classic Cleaners so that sales do not suffer as a result of customers hearing that the new parts of the new model are manufactured in China and hence may not be of equal quality. Materials management is the planning organising and controlling of all activities relating to the resources required in the production process. Just-in-time materials management should be adopted as a result of the new models as because theyre new, the business shouldnt have too many resources on hand in case they end up being unsuccessful and their production is discontinued. Just-in-time means that resources required for production are only delivered when they are needed to reduce waste and costs of storage. Facilities design and layout refers to the way an operations system is organised. They should adopt a process layout which is required for organisations which produce a variety of products as they do produce different models. Their work stations should be grouped according to functions eg. Assembling to be done in one place and sticking of stickers in4/15/12 to allow for high levels of productivity and efficient flow of the another new machines through the production line.

UNIT 4 AREA OF STUDY ONE HUMAN RESOURCE MANAGEMENT FUNCTION

What is HR? The connection/relationship between HR and the objectives/strategy of organisations: Organisational objectives outline what the organisation wants to achieve and employees are a key resource that help the organisation achieve its objectives. Good HR strategies maximise the capacity of employees to carry out their duties and help the organisation meet its objectives. KEY EMPLOYEE EXPECTATIONS

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MOTIVATING EMPLOYEES How do organisations motivate their employees to get the best out of them? Need to provide extrinsic and intrinsic rewards. Organisations can apply particular MOTIVATION THEORIES to try to maximise motivation. A motivated employee will be more productive than an non-motivated employee. THREE theories you need to be able to write about MASLOWS HIERARCHY OF NEEDS HERZBERGS TWO-FACTOR (MOTIVATION-HYGIENE) THEORY LOCKES GOAL-SETTING THEORY

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MASLOWS HIERARCHY OF NEEDS THEORY The basic idea of this theory is that employees have needs, and these needs must be satisfied in a certain order. Employees are most motivated when they have their highest level (self-actualisation) needs satisfied:

Self actualisation fulfilment and personal growth Esteem needs respect and sense of accomplishment Social needs love, affection, sense of belonging Safety and security physical and emotional Physiological needs food, shelter, clothing 4/15/12

HERZBERGS TWO FACTOR (MOTIVATION/HYGIENE) THEORY

This theory is similar to Maslows, except that it claims that employees have two levels of needs hygiene needs and motivation needs HYGIENE NEEDS refer to the conditions under which the employees work and include such things as pay, job security, policies and procedures, interpersonal relationships. MOTIVATION NEEDS refer to challenging work, recognition, a sense of achievement, responsibility and opportunities for advancements. Satisfying hygiene needs does not lead to motivation, but does lead to employees not being dissatisfied therefore organisations should address them Satisfying motivation needs does lead to more motivated employees _____________________________________________________________________ LOCKES GOAL SETTING THEORY The basic idea of this theory is that workers are motivated if they have clear goals and regular feedback. The goals need to be clear, specific, challenging, but not overwhelming. Feedback needs to be regular, recognise effort and may modify the goals

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You are likely to get a question that will ask you to apply a motivational theory the examiners may specify a particular theorist, to a given situation. From the 2008 exam: Question 2 Country Foods is a food processing company with plants in Bendigo, Ballarat and Geelong. It is a major employer in these regional centres. Due to the severe drought in Victoria, Country Foods has made a business decision to close the Bendigo factory. The Human Resource Manager, Bob Spiteri, is responsible for implementing the closure in relation to staffing matters. The companys CEO has contacted Bob Spiteri as he is concerned about possible industrial relations action that might impact on the companys stakeholders. Bob Spiteri is concerned about the impact of the closure of the Bendigo factory on staff at the Geelong and Ballarat plants. e. Describe how an appropriate motivational theory would assist him to maintain staff morale. (4 marks) 4/15/12

Theories could include Maslow, Herzberg, McClelland, Alderfer and McGregor. In the past, Maslows lower order needs (physiological and safety) have been met at the Geelong and Ballarat plants. However, with the closure of the Bendigo plant, job security, which is a safety need, may become significant to the staff at these two plants. It is therefore important that Bob addresses this by reinforcing the safety of their jobs as a priority in the immediate future. Any attempt to motivate staff through social or esteem needs is likely to be unsuccessful until the safety needs of staff have been satisfied. Many students gave a rote-learned response about a motivational theory and therefore did not answer the question. To obtain full marks for this question, students needed to relate the motivational theory to the case material. Average mark for this question was 1.8 out of 4.

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The following is an example of a good response. Maslows hierarchy of needs outlines a 5 stage theory ranging from basic needs (food and water) to higher order needs such as self actualisation. While the employees at the other factories may feel slightly affected by the closure, Bob could motivate them according to Maslows theory. According to Maslow, the second highest need is esteem that is for status, recognition or attention. As a HR Manager, Bob could hence conduct performance appraisals with employers which is where their ability to perform their job is observed and evaluated and then Bob could provide feedback. This would involve setting goals to improve their performance, employees could be motivated to work more productively, while the recognition by Bob of what they are doing well would satisfy their esteem needs. Furthermore, to help employees to achieve self actualisation, that is the highest need which is a desire to reach their full potential and utilise all of their talents and capabilities, Bob could organise for them to participate in workplace training so that they will develop new skills and hence aim to achieve their full potential. According to Maslow, satisfying these needs will ensure that morale is maintained. Hence, this response was able to include specific HR strategies that 4/15/12 would enable different levels of Maslows hierarchy to be achieved, thus

How can a HR Manager apply Maslows hierarchy of needs? MASLOWS LEVEL Self Actualisation HR STRATEGIES Performance appraisal Job design Clear promotion path, awards, positive feedback Team work opportunities, social get togethers OH&S policies, job security

Esteem Needs

Social Needs

Safety and Security Needs

Physiological Needs

Reasonable pay and conditions

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EMPLOYMENT CYCLE: establishment

maintenance termination

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EMPLOYEE RELATIONS What is employee relations?

Centralised system?

Decentralised system?

Advantages and disadvantages of each: Key terms you need to be familiar with: Collective agreements, arbitration, Awards, conciliation, enterprise bargaining, industrial action, negotiation, mediation, NES, Fair Work Australia 4/15/12

UNIT FOUR AREA OF STUDY TWO MANAGEMENT OF CHANGE

Change is the new constant Change means that the organisation alters/changes/modifies its structures, culture and/or objectives Pressure on organisations to change can come from the external or INTERNAL PRESSURES EXTERNAL PRESSURES EXTERNAL PRESSURE internal environment FOR CHANGE FOR CHANGE FOR CHANGE (MACRO) (OPERATING)

Organisations can be prepared for change or react to change. They can be proactive or reactive. Obviously, a proactive approach is 4/15/12

DRIVING AND RESTRAINING FORCES Driving forces are things that push the change along, like the pressures for change on the previous slide. Restraining forces are things that work against the change, things that are resisting the change RESTRAINING FORCES INCLUDE

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So, how do organisations manage change? They need to be proactive (prepared) When they decide to implement change they can use a change management theory to minimise the resistance to the change and maximise the success of the change. STEP NUMBER: INVOLVES: Kotters Eight Steps to Successful Change 1 2 3 4 5 6 7 8 4/15/12

2006 exam Question 3 Joe Johnson owns and runs Slippery Shirt Company. He makes large profits by using sweatshops (where pay and conditions are well below the industry award) to sew his shirts. Joe is retiring and passing the business to his son, Jack, who is determined to bring in policies that treat his staff and contractors in a socially responsible manner. a. Define the following terms. i. policy ii. organisational change 1 + 1 = 2 marks b. Describe an appropriate change management theory Slippery Shirt Company could use to implement the new policies. 3 marks c. Discuss how two elements of the external environment of Slippery Shirt Company are pressuring the organisation to change its policies. 3 marks Total 8 marks 4/15/12

A policy is a written statement of the processes and procedures, rules and regulations and responsibilities and strategies that an organisation will follow. A good student response Policy is a written document outlines expectations in an organisation. Policies outline acceptable behaviour and they guide staff actions. Policies are designed to create uniformity and formality in an organisation. 80% got the 1 mark for this question Change is the process of taking the existing organisation and altering or transforming it to establish a new or altered form of the organisation. It could be because of internal pressures such as culture changes or external pressures such as globalisation. A good student response Organisational change is any alteration to the internal business environment. Organisational change occurs as a response to pressures in the external/internal environment. Organisational change must occur for an organisation to remain competitive. 4/15/12

Using Kotters model, identify actions that may be taken that fit each step. STEP NUMBER: ACTIONS: 1 establish a sense of necessity/urgency 2 form a team/group to guide the change 3 create a vision/strategy 4 communicate the vision 5 empower the people to fulfill the vision 6 recognise and reward achievements 7 consolidate improvements 4/15/12 8 institutionalise the

Elements of the external environment that would have pressured Slippery Shirts to change are social pressures and changes in community attitudes. Customers have a much higher awareness of organisational behaviour and are placing demands on them to behave in a socially responsible manner. Increasingly, customers are basing their purchasing decisions on factors other than purely financial reasoning. The legislative environment is another element of the external environment that has placed pressure on Slippery Shirts. Parliaments are passing many laws relating to industrial relations and businesses are expected to meet those minimum or award conditions for their employees. Many students used social and political elements to answer the question and handled it well. Other elements of the external environment that could be discussed included competitors and lobby groups. Some students used employees and, as they are not external, these students did not score marks. A good student response Social and legal factors of the macro environment force Slippery Shirts to change policy. They have no control over these factors and must change in order to not be negatively affected by them. Social attitudes towards sweatshops and the general opposition to the perception of slave labour means that companies must provide adequate conditions 4/15/12 for workers or face public condemnation. Likewise, legislation involving

Effectively managing change management There are lots of things management can do to manage change effectively. Not only can they can make use of a change management theory (Kotter), but they can use a variety of strategies to minimise resistance to the change. Some of these strategies are low risk and some are high risk clearly, high risk strategies carry the danger of not working and actually damaging working relationships. LOW RISK STRATEGIES may include:

HIGH RISK STRATEGIES may include:

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SIGNIFICANT ISSUES IN CHANGE MANAGEMENT

You are required to have a detailed knowledge and understanding of one particular issue in change management. The issue we have examined is GLOBALISATION Globalisation refers to organisations increasingly competing on a worldwide basis. Advances in technology, communication and distribution have led to an increase in international competitiveness. Globalisation provides both opportunities and challenges to Australian LSOs the potential for more customers, but also increased competition.

ROLE OF LEADERSHIP IN CHANGE MANAGEMENT

Kotters model for managing change effectively is based on three critical elements: thorough preparation and planning clear communication cooperative participation with all stakeholders Leadership skill are critical. Empathy, listening, ensuring employees 4/15/12 fears are considered. Managers who do this will experience less

IMPACT OF CHANGE ON THE INTERNAL ENVIRONMENT

Change will often have significant effect on the internal environment of a LSO: possible effects include outsourcing flatter organisational structures development of work teams changes in corporate culture changes in HR processes changes in Operations Management processes

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