University of Melbourne 2010 - Updated 2013

Unit 3/4 Business Management involves 5 Areas of Study across the 2 units (3 in Unit 3 and 2 in Unit 4)

Unit 3: Corporate management

AoS 1: Large-scale organisations in context

AoS 2: Internal environments of large-scale organisations

AoS 3: The operations management function

Unit 4: Managing people and change

AoS 1: The human resource management function

AoS 2: The management of change

ORGANISATIONS ARE USUALLY LED BY ONE PERSON OR A NUMBER OF PEOPLE AND ARE COORDINATED BY SOME FORM OF STRUCTURE (MANAGEMENT)

REVENUE

ORGANISATIONS USUALLY EXIST TO BRING TOGETHER PEOPLE AND RESOURCES (INPUTS) TO GET THINGS DONE (OUTPUT) MORE EFFICIENTLY AND EFFECTIVELY

LARGE-SCALE ORGANISATIONS ARE THE FOCUS OF BUSINESS MANAGEMENT AND CAN BE DEFINED AS ORGANISATIONS THAT ARE SUBSTANTIAL IN TERMS OF:

PEOPLE

Worth more than $200 million

Earn revenue in the millions

Employs 200 people or more

TOTAL ASSETS

STRUCTURE

Branches/divisions/plants in a number of locations within and/or outside Australia

Complex structure to provide control over all aspects of the LSO. Eg;

MULTIPLE LOCATIONS

CEO

Marketing Operations R&DHRFinance

INDUSTRY LEVEL

AIM

Manufacturing, Retail, Tourism, etc

Manufacturing or Service

Profit or Not-for Profit

OWNERSHIP

ACTIVITY TYPE

INDUSTRY TYPE

Public, Private or GBE

Primary, Secondary & Tertiary

1. Political pressures

2. Economic pressures

3. Pressures for change

4. Legal issues

5. Technology

6. Ethical and social responsibility

2. Finance companies

1. Competition

3. Employees/Unions

5. Suppliers

6. Customers

4. Lobby Groups

Management roles

Organisational structure

Corporate culture

Management skills

Management stylesEthical and

social responsibility

Policies

LSO’s are continually engaged in evaluation of their performance.

For example, has the credit crisis affected our cash flow – are we able to meet our financial commitments? Is now the best time to expand? Etc.

With LSO’s being affected by forces outside their control, they are required to evaluate how a ‘factor’ has affected their performance

There are 10 Performance indicators that students can be examined on and/or use in a response to an exam question. Can you name them?

1. Percentage of market share

2. Net profit figures

3. The rate of productivity growth

10. Number of workplace accidents

4. The number of sales,

5. Results of a staff satisfaction survey

7. The level of staff turnover

8. Level of wastage

9. Number of customer complaints

6. Results of a customer satisfaction survey

These performance indicators measure the efficiency and effectiveness of the business

A stakeholder is any person/group that interacts with an LSO and have an interest in the activities of the LSO

Shareholders

Management

Customers

Employees

Suppliers

Society/community as a whole

Organisational Objectives

An objective is a desired goal, outcome or result that an organisation would like to achieve.

Organisational objectives may include:* Profit* Expansion of the organisation* Increased market share* Providing excellent customer service* Providing services to the community.

Objectives can be:•Strategic•Tactical•Operational

Organisational Objectives

Organisational Objectives often involve the creation of a Mission and Vision Statement

Society has developed a notion that all LSO’s should act in an ethical and socially responsible manner to all stakeholders

Social responsibility is the obligations of an LSO over and above its legal responsibilities

Ethical management is the process of abiding by moral standards and ‘doing the right thing’ in the interests of all stakeholdersCan be measured by the ‘triple bottom line’ – economic, social and environmental performance of an LSO

Situations where E & SR is a consideration?

Organisational structure looks at how the various levels of management are arranged within an LSO. They tend to be hierarchical.

An organisational structure provides:

1. Chain of command

3. Positions of accountability

2. Lines of communication

4. Positions of responsibility

Accountability

Authority

Responsibility

Communication

More

Less

TYPES OF ORGANISATIONAL STRUCTURE

MAIN TYPES OF ORGANISATIONAL STRUCTURE

1. FUNCTIONAL

2. DIVISIONAL

3. MATRIX

FUNCTIONAL

•THE FUNCTIONAL STRUCTURE IS THE MOST BASIC ORGANISATIONAL FORM

•EMPLOYEES ARE GROUPED TOGETHER IN SEPARATE DEPARTMENTS ON THE BASIS OF COMMON TASKS, SKILLS OR ACTIVITIESie: A HIGH LEVEL OF SPECIALISATION

Advantages of a Functional Structure

* Career pathways can be easily identified

* Staff can become experts in their field through task specialisation

* Opportunities for skill and knowledge development

* Efficient use of resources

* Ability to develop as a team and enhance goal congruence

Disadvantages of a Functional Structure

* Departments can become inflexible and overly bureaucratic

* Departments can become narrow in their focus and move away from broader organisational goals

* Managers can become more concerned about ‘empire-building’

* Hoarding of resources for future use rather than ‘sharing’ excess resources.

Product structureProducts manager

Manager – Canned food

Manager – Diet goods

Manager – Dry goods

Manager – Soft drinks

Manager - Confectionery

Global manager

Manager - Europe

Manager – Nth America

Manager – Sth America

Manager - Australia

Manager - Asia

Geographic structure

Customer structureClient services manager

Manager – Corporate clients

Manager – Private clients

Manager – Government clients

Operations manager

Manager - Production

Manager – Warehouse

Manager – Quality control

Manager - Purchasing

Process structure

THE MATRIX STRUCTURE IMPLEMENTS FUNCTIONAL AND PROCESS ORGANISATION SIMULTANEOUSLY

•EACH DEPARTMENT IS SUPERVISED BY TWO MANAGERS HAVING EQUAL AUTHORITYFUNCTIONAL MANAGER RESPONSIBLE FOR THE SPECIALIST DEPARTMENTPROCESS MANAGER (PROJECT MANAGER)IS RESPONSIBLE FOR INTEGRATING THE ACTIVITIES OF THE SPECIALISTS ACROSS THE FUNCTIONAL DEPARTMENTS

•WHEN THERE IS A NEED FOR DUAL FOCUS

•LARGE AMOUNTS OF INFORMATION MUST BE PROCESSED

•EFFICIENCY OF RESOURCES IS NEEDED

Advantages of a Matrix Structure

* Enhanced flexibility – operations can be altered quickly to suit circumstances

* Ability to trouble-shoot – if an area has a problem, a project team can be created to solve the problem

* Enhanced communication, cooperation and teamwork

* Pooled expertise allows better conditions for problem solving

Disadvantages of a Matrix Structure

* Decisions in one department can undermine line authority in that department

* This can challenge the ‘unity of command’ principle

* Employees may find themselves reporting to two managers which can effect communication and goal congruence

Team structure General Manager - Products

Manager- Canned food

Manager- Confectionery

Manager – Soft drinks

Manager – Dry goods

Manager – Diet goods

New products team

Marketing team

2. Corporate CultureCorporate culture is a set of unwritten or informal rules that dictate how people in an organisation should behave in any given circumstance.

These rules are based on the beliefs, values, ideas and expectations shared by the members of the LSO.

Knowing these rules makes it easier for managers to get things done and/or initiate change.

An understanding of an LSO’s corporate culture by employees can create a positive and personalised environment leading to a more successful LSO.

A corporate culture generally consists of 4 essential elements:

1. Values 2. Symbols

3. Rituals, rites and celebrations

3. Management Roles

There are generally considered to be 4 roles that managers perform.

These roles are referred to as POLC:

PLANNING

ORGANISING

LEADING

CONTROLLING

Planning is seen as the most important or primary management role.

Planning provides for the short- and long-term success of an LSO.

Planning occurs once an LSO has identified its organisational objectives.

Planning involves making the decisions on how to achieve the organisational objectives.

Planning must involve all activities at all levels of the organisation.

This requires 3 levels of planning:

1. Strategic (long-term) planning

* Respond to emerging trends, events, challenges and opportunities within the context of the LSO vision and mission.

* Provide direction towards achieving goals and targets.

* Plan for and anticipate the future.

* Concentrate on an idea and vision.

* Create a framework for achieving competitive advantage by analysing the potential of the LSO and its internal and external environments.

* Guide management of the human, financial, technical and social resources.

2. Tactical (medium-term) planning

* Formal medium-term planning undertaken by middle management to implement the organisation’s strategic plan.

* Respond to changes caused internally and externally.

* The allocation of resources in order to achieve the organisation’s objectives.

3. Operational (short-term) planning

* The planning of day-to-day operations by the lower level supervisors and managers within an organisation.

* The implementation of the strategic plan against specific objectives.

Strategic Plan

Tactical Plan Tactical Plan Tactical Plan Tactical Plan

Operat Plan

Operat Plan

Operat Plan

Operat Plan

Operat Plan

Operat Plan

Operat Plan

Operat Plan

To work effectively – all levels of planning must ‘fit’ together

Internal assessment External assessment

T

Threats

S

Strengths

W

Weaknesses

O

Opportunities

What does the LSO do well?

Are we financially sound?

Do our processes reflect best practice?

Are our staff performing to the level expected?

Is our equipment the most modern and efficient?

Is the economic climate right?

What new markets are available to us?

Is there new competition emerging?

What new laws affect us?

Is our market share declining?

The basis of the planning process is a SWOT analysis.

Management Roles - Organising

Organising – managers need to make decisions that reflect the mission statement, objectives and goals that have developed from the planning process.

Managers organise a variety of people and tasks and systems to ensure the LSO operates efficiently and effectively.

Organising involves the following activities:

1. Division of labour – divide jobs between individuals and/or groups who are then assigned responsibility for performing them.

Management Roles - Organising

2. Delegation of authority – distribute authority to employees. How much authority to give to each employee.

3. Span of control – in organising employees and delegating authority, managers must determine the ‘span of control’ for each employee with management responsibilities.

4. Coordination – organising the various sections/departments/work units so that all employees are working together and aiming to meet LSO objectives.

Management Roles - Leading

Leading – the ability to influence others so as to achieve goals.

Leading is a dynamic process that helps to define and shape the LSO’s culture and is primarily a process of influence.

Power is the focal point of leadership. There are four categories of power:

1. Legitimate power – the power that is confirmed on a manager by the very structure in place at the LSO. It is accepted by all and is not disputed.

Management Roles - Leading

2. Expert power – the employment of expert skills, knowledge and information allows a person to influence others.

3. Reward or coercive power – the power to reward or punish people as a means of influencing them so they comply to the way of thinking required.

4. Referent power – power achieved through being liked and respected by subordinates, peers and supervisors.

Management Roles - Controlling

Controlling – a continuous process that ensures plans are being implemented appropriately and alerts managers to any deviations from the plan so corrective action can be instigated.

There are a number of types of controls:

1. Cost controls

2. Time controls

3. Financial controls

Most LSO’s develop a control process:

Management Roles - Controlling

The control process

1. Establish performance standards

in line with LSO objectives and influences from

employees, government, industry &

management.

2. Measure performance and make comparisons against

standards.

3. Take corrective action – changing

processes, personnel and activities to ensure plan is ‘back on track’.

4. MANAGEMENT STYLES

How a manager interacts with stakeholders in an effort to achieve the LSO goals will in some way depend upon the style of management they adopt.

A management style is the manner and approach of providing direction, implementing plans and motivating people.

There are 5 broad management styles

Most managers will use all 5 broad management styles at some point, however, most long term managers will develop a style that will become more dominant.

Management controlMore Less

Laissez-faire

Persuasive

Consultative

Participative

Task orientated hierarchical structures

Employee orientated flatter structures

Autocratic

4. MANAGEMENT STYLES

Autocratic

An autocratic manager likes to be in control – the POLC functions are centralised around the manager.

Decision making is centralised with a strict hierarchical chain-of-command.

An autocratic manager has a high regard for production and efficiency (task orientated.

An autocratic manager expects team members to comply with their decisions and are not concerned with the attitude or thinking of the group.

This type of management style results in passive resistance and requires continual pressure and direction to get things done.

This type of management style uses rewards and punishments to achieve objectives.

Persuasive

A persuasive manager uses their ability to interpret a situation, people’s actions and dialogue, and then convince them to do a task their way

Decision making is made by the manager who then tries to convince others it is in the best interests of subordinates to agree..

A persuasive manager lets their intentions be known.

A persuasive manager operates a centralised system as communications are still one-way and reflects a hierarchical system.

This type of management style does not encourage initiative and commitment from employees.

This type of management style is task orientated.

Consultative

A consultative manager likes to gather the opinion of staff members before making a decision.

The power of a consultative manager is more employee-based and less centralised than the previous mentioned styles..

While seeking ideas and suggestions from employees, the manager ultimately makes the decision.

The level of communication (or consultation) and employee involvement means employees are task-orientated, motivated and perform at their best in achieving the LSO’s goals and objectives.

Communication is more two-way.

Participative

A participative manager will share the decision-making with employees and team members.

The participative management style engages employees by asking for their opinions and sharing information and agendas openly in order to gain the best performance from the team.

Communication is open and two-way, there is high employees involvement and generally a flatter organisational structure.

This type of management style empowers employees be being a leader and a coach. Allows the team to decide how a task will be tackled and by whom

This type of management style encourages employees to design their own work and involves a decentralised system.

Laissez-faire

A laissez-faire manager exercises little control over their team, leaving the team to determine their roles and carry out their work, without participating in the process themselves.

Decision making is highly decentralised and so is power and the organisational structure.

A laissez-faire manager has little or no role in the day-to-day running of the organisation.

This type of management style involves management setting the objectives but employees take full responsibility to implement their achievement.

This type of management style is most effective in creative or research work environments.

5. MANAGEMENT SKILLS

Skills are the abilities of a manager to produce an outcome that meets or exceeds the standards required by the LSO in order to meet goals and objectives.

Each management level requires a set of skills. As a manager moves up the hierarchy, they are required to build on existing skills as well as develop new skills.

Skills that a manager may have include:

* Communication skills

* Technical skills

* Delegation skills

* Problem-solving skills

* Emotional intelligence

* Teambuilding skills* Decision-making skills

* Visionary/Creative thinking skills

* Time management skills

* Negotiation skills

5. MANAGEMENT SKILLS

* Communication skillsThe ability to clarify with employees the tasks that they are required to complete.

Communication can be:• Written• Verbal• Non-verbal

Poor communication can lead to: * Staff frustration

* Lack of motivation

* Loss of direction

Listening is an important part of communicating

Communication movement will reflect the organisational structure and management style.

* Delegation skills

5. MANAGEMENT SKILLS

Delegation -manager gives authority to an employee to complete a set task.

Delegation allows employees to use/develop their skills/knowledge to their potential

Managers who can delegate effectively will train the delegates to apply appropriate criteria to avoid losing control of their employees.

Managers who can delegate are showing their employees that they trust them and see a future for them within the LSO.

* Negotiation skillsManagers who can resolve a dispute or produce an agreement that satisfies the majority of stakeholders

5. MANAGEMENT SKILLS

* Problem-solving skills

Problem solving involves identifying problems, then devising and implementing an action plan.

1. Identify

4. Rank 5. Implement 6. Evaluate

3. Develop2. Gather

To competently solve problems, a good manager will seek help, think critically, creatively, reflectively and be able to adapt.

Managers must be open and honest in their communication with those involved and recognise that quick, easy solutions to complex problems will not work.

The problem-solving process:

* Decision-making skills

5. MANAGEMENT SKILLS

Decisions made by managers affect the LSO’s ability to meet its objectives.

Managers are required to look at and evaluate alternatives, consider the short- and long-term risks and then select the best alternative.

Managers may make decisions individually or may involve team involvement . This will depend upon the style of management used.

There is a strong connection between decision-making and problem-solving as decisions are made to solve problems identified.

* Teambuilding skillsTeamwork -a set of behaviours which two or more people demonstrate when working on a common task.

Employees who are part of or encouraged to be part of a team are more likely to share the vision of the LSO and management.

Teamwork encourages open communication, improves morale and workplace co-operation, productivity and develops a positive corporate culture.

The skill is putting the ‘right’ team together

5. MANAGEMENT SKILLS

* Technical skillsManagers need to be constantly updating their technical skills – particularly in IT.

Managers need to be make technical decisions, advise on technical matters and give technical instructions to employees.

Good technical skills allow managers to establish procedures for equipment usage and allow them to gain respect from staff.

5. MANAGEMENT SKILLS

* Creative thinking skills

The ability to ‘think outside the square’

Managers are often required to come up with creative solutions to new problems.

Managers with creative thinking skills are often generating new ideas.

Managers with creative thinking skills are constantly looking for better ways to overcome problems and achieve their goals in changing macro and operating environments.

* Visionary skillsThe ability to ‘see the big picture’

Managers with visionary skills are often able to look forward and identify future opportunities/problems and come up with solutions/plans so as to be ready to meet the challenges or take advantage of the opportunities.

* Time management skills

5. MANAGEMENT SKILLS

Time management allows managers to allocate their time between tasks so a greater majority of tasks can be completed.

Time management is also about setting realistic timelines for tasks to be completed and meeting deadlines imposed upon them.

Good time management ensures each decision and each problem is given the proper consideration and all alternatives are properly evaluated – nothing is rushed.

* Emotional intelligenceThe skill of identifying, assessing and managing the emotions of yourself and others – particularly staff

Also known as people skills – being empathic to the needs of staff

6. POLICY DEVELOPMENT & ITS APPLICATION

An LSO should establish a set of policies and procedures that is communicated to all employees so they are aware of what is expected of them.

Where policies and procedures are known, there is a greater chance of success for the LSO in meeting its objectives.

There are a number of legislative policies that an LSO must follow and policies the LSO creates for it’s own environment

Without such policies and procedures an LSO would be in chaos with little chance of meeting its objectives.

A policy is an established set of broad guidelines to be followed by all employees when dealing with decision-making issues.

A procedure is a process that describes what actions are to be taken to ensure a policy is followed or what to do in the case of a breach of a policy.

Both policies and procedures provide a level of consistency for all stakeholders of an LSO as there is certainty as to how certain issues will be dealt with.

6. POLICY DEVELOPMENT & ITS APPLICATION

Policy development requires a process:

1. Identify the need for a policy

4. Develop draft policy

5. Gather feedback and revise draft 6. Implement policy

3. Consult stakeholders

2. Research business environments

7. Evaluate

OPERATIONS MANAGEMENT

Operations Management can be defined as the design, operation and control of the transformation process that converts resources into products or services.

Operations Management establishes:

A level of quality of good or service

Overall cost of production

Ability to meet consumer demand

InputsRaw Materials, Financial Resources, Human Resources, Time, Capital Equipment, Information

ProcessesInputs are converted by a series of processes to produce

the output. Becomes a value adding process.

OutputFinished products (goods or services) for sale

The systematic planning and control of all the production activities.

Maximizing productivity.

 Making use of the latest technology.

Maximizing the use of resources; labour, equipment.

Maximising stock, layout and information systems.

Minimising manufacturing, inventory, maintenance and distribution costs.

 Managing projects in accordance with the planned timetable.

Multi skilling of staff via training.

 Increase the motivation and commitment of staff.

The Operations Manager is involved in decision-making at the strategic level, operational level and front line level and therefore needs various skills to perform these tasks.

Strategic Planning Tactical Planning

What to produce What stock levels are optimal

Production capacity required

How do we conduct equipment maintenance

How to produce Sequencing of orders

How do we manage quality

How do we establish our production process

Facilities Design and Layout/Production Processes

Operations Strategies

Technology

Quality

Materials Management

offer efficiency savings (productivity) -

time and cost quality improvements and safety

benefits. Organisations that fail to keep up

with technological innovations will lose the competitive edge.

Computer Aided Manufacturing (CAM):Involves the control of machinery, tools and equipment through a computer program.

Computer Aided Design (CAD): This is a computer program that facilitates the creation and modification of product designs.

Allows simulations

Computer Integrated Manufacturing: (CIM):CIM can utilise CAM, CAD, MRP (Materials Requirements Planning inventory management) together in one computerised system. A CIM facility can take a product idea from general concept to actual production in a very short time.

RoboticsRobots are used to undertake simple and repetitive tasks and usually deliver greater strength, speed, precision and safety. Robotics can be used to replace manual labour and can achieve efficiency improvements in the

operations of LSO’s. Office Technology:

Allows tasks to be completed in less time (efficiency) and often more accurately.

Quality Control: An inspection approach involving checking the

final products for defects and faults. Method: removing samples from production line, visually inspecting or testing. Places responsibility

for quality on the Quality Control Manager or inspection team.

Defective products are rejected and sometimes sold as ‘seconds’

Quality Control TQM Quality Assurance

Advantages:Immediate recognition of defects by trained specialists,Identifies issues in production process Accountability for Quality rests with manager, Clearly defined roles

Disadvantages: Defects may be missedLimited focus on productionGeneral workers avoid responsibility for quality and may not

feel encouraged to make suggestions for improvement Lack of ownership for quality (Them vs Us mentality)

Main Features: Holistic approach All workers equally participate in ongoing

improvements in quality Emphasis is on proactively detecting and

rectifying potential flaws/errors before they occur

Time is given to work teams (quality circles) to detect errors or suggest improvements to quality

Advantages: All workers and management have

ownership and responsibility for Quality Every aspect of organisation continually

assessedDisadvantages: Difficult to allocate responsibility for errors relies on all staff being motivated and

highly skilled to contribute good communication skills needed

Builds quality into work processes

The emphasis is on eliminating defects and reducing waste during the production process.

An external organisation (Certification body) can audit the organisation’s processes against published national or international standards.

Employees and management are encouraged to share

responsibility for improving quality.

A widely used international standard is the ISO 9001

Is the control of the raw materials necessary to the production of a good or service. Adequate and timely supply of stock or materials is crucial to the success of a business.

Materials management involves: Receiving and safely storing materials Controlling the release of materials into the

production process Minimising the holdings of surplus stock Forecasting and controlling the acquisition of

stock(Materials Handling, Stock Controller)

JIT receiving materials needed for production precisely when needed. Avoids storage costs, reduces capital investment and avoids obsolescence and waste.

MPS Master Production Scheduling: What is to be produced and when.

MRP Materials Requirements Planning: A computer program that lists all materials involved in production to meet scheduled production.

Inventory Control: Physical Stocktakes, Barcoding, Computerised inventory recording, Security cameras, Restricted Access.

Supply Chain: Those suppliers that provide the materials necessary to production must be able to deliver quality materials, adapt to varying production schedules, guarantee delivery at a reasonable cost.

Considerations: Space Equipment Safety Volume of production, size of product Storage, delivery of raw materials Work flows, movement of workers, raw materials

and Customer Interactions, privacy, efficiency of service

provision Toilets, lunchroom/recreational facilities, childcare Potential for expansion in the future (Flexibility)

Fixed Position Product Layout (Assembly Line Production) Process Layout Retail Layout Office Layout

The product is in one place and workers and equipment come to that work area.Examples: Ship or Aircraft building, Roadworks, Bridge or Commercial building

A sequential line is established that supports a repetitive or continuous flow of production. High volume of a standardised product with production runs generating large volumes of outputs.

Eg. Motor Vehicle manufacturing, Milk processing plant.

Facilities are designed to handle a variety of processes and resources are organised according to their function. Production is in batches with relatively low volume and varied goods being produced.Eg. Hospital, Bank, Ripcurl T-Shirts, Soft drink manufacturing.

The aim of retail layout is to maximise customer exposure to products.

Considerations include: Worker and Customer Safety Customer flow and access to goods Worker movement and positioning Product security Lighting, privacy, change rooms, toilet

faciltities, customer assistance, noise.

Offices deal with flows of information and must effectively support the operations or core business.

Considerations include: Worker movement and access to

equipment Safety Privacy, noise transfer, security of

information Ventilation, Lighting, Climate control,

Ergonomics