Business Management 3/4

Summary Notes
By Andrew Ma aka shinny.

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 Unit 3: Corporate Management
Area of Study 1: Large-scale organisations in context
Large Scale Organisations
Organisation: An organisation is an entity that enables groups of people to work in a planned and coordinated way to
achieve a common goal or objective.
Classifying a Large Scale Organisation
 Number of employees: Greater than 200
 Revenue (Gross Income): Sales are in the millions of dollars
 Total assets or market capitalisation: More than $200 million
 Profit after Tax: Profit is in the millions
 Extent of Operations: Multinational or transnational
 Management Structure: Clear distinction of power between owners and managers
Note: Not all criteria must be met to be classified as a large scale organisation.
Types of Large Organisations:
 Private Sector: The private sector refers to the part of the economy which is controlled by private individuals or
groups of individuals who are not affiliated with the government.
o Corporations (Companies): Companies aim to make a profit or add value to their net assets through the
manufacture or trading of goods, or the provision of services. Corporations may either be public or
private.
 Public Companies: Public companies are companies that have registered its securities to be sold
to the general public through a stock exchange such as the ASX, and hence have members of
the public as its owners.
 Private Companies: Private companies are companies that have up to 50 privately selected
shareholders.
o Charities and Foundations: Charities and foundations aim to provide goods or services or funds for the
alleviation of specific social problems or for the broader benefit of the community. Funds are often
generated by promoting a public profile. Also known as non-government organisations (NGOs).
 Public Sector: The public sector refers to the part of the economy which is controlled by the local, state and
federal government.
o Government Departments: Government departments aim to provide a high level of service within a
specified field. Government departments may exist within the local, state or federal levels of
government and aim to achieve social and political objectives of the government, while operating within
the limits of their budget and relevant laws.
o Government Business Enterprises: GBE’s are government owned organisations that are often self-
funded, and hence aim to provide a service whilst also pursuing a profit. GBE’s are often corporatised.
 Corporatisation: Corporatisation is the process of a public sector organisation operating as if
they were part of the private sector, and hence be predominately aiming to make a profit.
 Public Private Partnerships (PPPs): PPP’s are government services or private business ventures funded and
operated by a partnership agreement between the government and one or more private sector companies.
Therefore, they are a collaboration between the public and private sectors.
 Privatisation: Privatisation refers to the process of an organisation changing from the public sector to the
private sector.
Benefits of Large Scale Organisations
 For themselves:
o Economies of scale: Economies of scale implies that mass production and bulk buying will lower costs
per unit of output, and therefore allow outputs to retail at a lower price.
o Financial Benefits: Becoming a large organisation allows more capital to be available, thus allowing
greater potential for growth.
o Specialisation: Large scale operations allow the organisation to specialise into fewer services, which
possibly allows an increase in efficiency.
 For society:
o Provide employment: Large organisations directly offer jobs within them, as well as indirectly to their
suppliers and customers.
o Develop an industrial base and stimulate infrastructure growth: Large organisations have the capital
and expertise, as well as the support of the government to perform large-scale projects.
 o Earn export income: Exports, particularly those of secondary products, allows more money to enter the
country; increasing the country’s economic strength and decreasing the country’s trade account
(surplus/deficit).
o Increased standard of living: Large scale organisations increase the standard of living within society by
providing a wide range of products and services to consumers.
o Encourage World’s Best Practice: Competition between LSO’s encourages all organisations to strive for
world’s best practice status.
 World’s Best Practice: World’s best practice refers to a comprehensive, integrated and
continuous approach to apply and improve upon world-class standards of performance to all
aspects of an organisation.
 To capitalise on such benefits, mergers and acquisitions often occur in order to increase the size of an LSO.
 Merger: A merger takes place when two or more organisations join together to form one larger organisation.
The use of this term, as opposed to acquisition implies that both parties have taken a degree of equality.
 Acquisition: Acquisition refers to the purchasing of all of an organisation’s shares and assets by another
company. Also referred to as a takeover.
Disadvantages of Large Scale Organisations
 For themselves:
o Diseconomies of scale: Diseconomies of scale occur when operating on a large scale causes negative
implications on the organisation or its stakeholders. Examples are;
 Environmental damage
 Management inefficiencies
o Less Flexibility: Inability to change quickly to market demand.
o Legal implications: Large scale organisations are subject to greater legal scrutiny due to their significant
implications on the flow of society.
 For society:
o Offshoring: Offshoring refers to the act of relocating business processes from one country to another.
o Large payments to senior executives: In recent years, many senior executives had received millions of
dollars when they left or were dismissed from an organisation, even if their actions had initially
financially damaged the organisation.
o Importing of overseas raw materials and goods: Criticism has been targeted at large organisations who
import significant amounts from overseas, which in turn could damage local industries.
The Environments of a Business
The environments of an organisation are the factors which influence its strategies, processes, policies, procedures and
performance.
Internal Environment: The internal environment refers to the factors intrinsic to an organisation that can influence a
change, over which management has almost complete control.
 Micro Environment
o Employees
o Shareholders
o Organisational structure
o Management style
o Resources
o Corporate culture
o Policies and procedures
External Environment: The external environment refers to the factors and influences which management has some to
little control over.
 Operating Environment: The operating environment refers to the external factors which interact directly with
an organisation which can influence a change, over which management has some to little control over.
o Suppliers: Large organisations require a reliable input of supplies, such as raw materials, equipment and
external services.
o Creditors: Large organisations also require sources of finance to fund their objectives.
o Customers: Customers are ultimately the source of revenue for an organisation. The revenue generated
is proportional to the number of customers, so customer satisfaction is central to business success.
Generally, customers will expect an increasingly superior product at a competitive price.
o Competitors: Competition from other similar producers will divide the potential profit of a market
between the participating organisations. The nature of business means there is always potential for new
competition, particularly due to globalisation meaning international competition is a new factor.
 o Special Interest Groups: Special interest groups can impact on the activities and decisions of large
organisations. These include trade unions, which represent employees in certain industries, consumer
groups, which represent consumers in particular industries or broader areas and lastly, special issue
groups which deal with issues that affect society.
 Macro Environment: The macro environment refers to the factors external to an organisation that can influence
a change, over which the management has no control.
o Economic factors: Economic factors are made of quantitatively measured factors which relate to the
state of wealth in the nation. Examples of economic factors are:
 Lowered consumer spending during a recession
 Difficulties in borrowing money due to increased interest rates
 Greater expenses in importing due to a fall in the Australian dollar
 Inflation
 Rising oil and fuel costs
o Society’s attitudes: Social factors are aspects which influence the decision making of consumers, and
hence, that of the large organisations, as they must adapt. Social factors most often affect the moral
judgements of the consumers. Some examples are:
 Greater concern and awareness for the natural environment
 Greater concern and awareness for worker conditions e.g. Sweat-shop labour
o Legal factors: Legal factors refer to the current laws which restrict the actions of organisations.
Examples are:
 GST and taxes
 Water restrictions
 WorkChoices
 Legislative compliance
 Health and safety such as operational health and safety laws (OH&S)
o Political factors: Political factors refer to the current situation of the political scene. Examples are:
 International trade agreements
 Upcoming federal election
 War
 Water restrictions
o Education and training conditions: Education and training conditions are important to organisations, as
they cannot afford the infrastructure to train employees capable of driving an organisation’s objectives.
As such, the majority of education in a country is provided by its schools and universities. Examples are:
 Technical and technological skill levels
 Academic skill levels
o Technological factors: New technology, and the type that is available to the organisation is now an
important factor in business success. A limitation in terms of technology may prove to be a competitive
disadvantage. Examples are:
 Business-to-consumer (B2C) or business-to-business (B2B) e-commerce transactions
 Higher productivity in production as a result of technology
o Environmental factors: Environmental factors refer to the state of the natural environment of Earth,
and its influences on the manner in which we live. For example;
 Global warming
 Drought in Australia
Factors Preventing Control of the Environment
o Forces change dramatically and quickly
o Lack of planning and analysis
o Lack of funding
o Lack of communication and evaluation

Stakeholders
Stakeholders: Individuals or groups of people who have a vested interest in the performance and activities of an
organisation.
Main Stakeholders:
 Shareholders: Shareholders are people who have a financial stake within the organisation, and as such, are its
owners. Owners will receive profit, or suffer losses according to the performance of the organisation.
o Interests: Increasing the value of their investment through capital gains and greater dividends from
increasing company profits.
  Managers/Employers: Managers are people employed by the organisation to perform managerial work within
the organisation. However, as they are employed, they are not actual owners of the company and are instead
paid a salary.
o Interests: Increasing their salary/wage, job security and working conditions.
 Employer Associations
o An employer association is similar to a union, but consists of employers protecting and promoting their
interests. An example is the Master Builders Association
o Interests: Same as employers
 Investors/Lenders: Investors and lenders refer to sources of money external to shareholders, such as
individuals, financial institutions or other organisations. The invested funds of these people will be more secure
under strong organisation performance.
o Interests: Maintaining security over invested funds and interest resulting from these.
 Employees: The staff of an organisation are directly affected by its performance, particularly through work
environment, opportunities as well as job security.
o Interests: Increasing their salary/wage, job security and working conditions.
 Trade Unions: A trade union consists of a collective of people who perform similar work who have united in
order to protect and promote their common interests. The majority of unions are represented by the Australian
Council of Trade Unions (ACTU) at a federal level, and the Trades Hall Council (THC) at a state level.
o Interests: Same as employees.
 Suppliers: Suppliers sell inputs to organisations, and thus rely on the strong performance of these organisations
to continue buying these inputs and paying reliably.
o Interests: Maintaining a repeat customer.
 Customers: Customers purchase the outputs of an organisation and rely on the strong performance of these
organisations to produce an acceptable price and quality.
o Interests: To be able to purchase goods or services at the highest quality at the lowest possible price.
 Government: The successes of organisations generate wealth within the country, and increase taxation revenue
for the federal government.
o Interests: May vary, but typically favour the profitability of organisations as it closely relates to the
country’s standard of living, and generates more taxation revenue. Conflict may occur in excessive
industrialisation or environmental issues.
 Industrial Tribunals
o Industrial tribunals are institutions that perform certain tasks relating to employee relations. An
example of an industrial tribunal is the Australian Industrial Relations Committee (AIRC).
o Interests: Resolving industrial disputes, creating and upholding ideal employee relations laws
 Local Community: Organisations provide goods, services, employment and training that may not be possible
without them. Large organisations can also affect the natural environment positively or adversely.
o Interests: Typically favour the profitability of organisations to gain the economic benefits, but may often
conflict in terms of environmental damage.
 International Community: The international community particularly has a stake in the issues of product pricing,
global warming, worker conditions and sustainability.
o Interests: Typically favour environmental concerns, but also product pricing due to the effect it has on
the global market.
Organisational Performance
Objectives and Strategy: The task of management is to achieve the objectives of an organisation, through the planning
and usage of strategies.
Strategies: A strategy is a planned course of action that uses an organisation’s resources to achieve an outcome or
advantage in support of its objectives.
Organisational Performance: Organisational performance is measured by the extent to which an organisation meets its
goals, given the constraints imposed upon it by the macro and operating environment.
Effectiveness and Efficiency
 Effectiveness and efficiency are two broad concepts which evaluate organisational success.
 Effectiveness: Effectiveness refers to an organisation’s ability to formulate and achieve suitable objectives.
 Efficiency: Efficiency refers to how well an organisation uses its available resources in achieving objectives.
Productivity is a measure of efficiency.
 Productivity: Productivity refers to the relationship between the inputs used per unit of output in achieving
organisational goals.
Key Performance Indicators
  Performance indicators are precise and measurable criteria used to measure an organisation’s performance.
 Financial Key Performance Indicators: Financial KPI are quantitative monetary or numerical indicators which
relate to financial data.
 Non-Financial Indicators: Non-financial KPI are quantitative or qualitative non-monetary indicators relating to
non-financial data.
 Benchmarking: The act of comparing an organisation’s level of performance currently being achieved to the
leading organisation’s outcomes in a particular performance indicator.
Criteria for Evaluating Performance
 Specific: Factors to be measured must be specific
 Measurable: Quantitative data, or qualitative data that can be compared and standardised
 Achievable: Must be able to be achieved
 Relevant: Relevant to the goals of the organisation
 Time-related: Must be measured within a particular timeframe
Evaluation of an Operations System
 Time lost due to lost time injuries per year: Lost time injuries refer to injuries that occur at work as a result of
an employee conducting their job which result in the employee’s prolonged absence.
 The frequency of understocking or overstocking per month
 Productivity in terms of input per unit output for a particular product over a time period
 Time spent on repairing equipment breakdowns
 The extent of maintenance of workforce levels and minimisation of labour costs
 Customer satisfaction levels of the product
 Number of defective products per month
 Sales numbers of the product
 Number of product returns per year
Evaluation of a Human Resources System
 Absenteeism levels: Absenteeism refers to frequency of employees being late or not showing up to work over a
period of time.
 Staff turnover levels: Staff turnover refers to the rate at which employees leave an organisation over a period of
time, expressed as a percentage of the total workforce.
 Job satisfaction levels as measured from surveys
 Employee motivation as measured by interviews
 Degree of participation and consultation by employees in the decision making process as measured by an audit
 Quality of communication channels between employers and employees as measured by a survey
 Level of employee morale as measured by a survey
 Values that are prevalent among the organisation as according to interviews
 Incidences and frequency of strikes and industrial action
 Employee satisfaction as measured from exit interviews
 Employer of choice ranking
Evaluation of the Triple Bottom Line
 Annual profit: Profit refers to the difference between the amount of money earned and expended in an
organisation’s operations.
 Market share: Market share refers to the proportion of the total market that a particular company or product
controls expressed as a percentage
 Corporate ethics and social responsibility rating
 Environmental complaints
 Area of Study 2: Internal Environment of Large-Scale Organisations
Organisational Objectives
Organisational objectives are outlined in two important statements;
 Vision Statement: A philosophical statement that describes the future direction and outlook of the
organisation.
 Mission Statement: A broad statement that provides insight into the core beliefs and values of an organisation,
and the reasons why the organisation exists.
Management Structures
Management Structure refers to the division and hierarchy of positions within an organisation.
Organisational chart: A visual representation of the formal structure that coordinates work activities and sets out the
roles and responsibilities of the members of an organisation.
‘Structure follows Strategy’: The type of management structure implemented in an organisation is determined by the
one which aids organisational strategies, and thus objectives most. This is because the purpose of a structure is to
provide the chain of command which sets out the roles and responsibilities of employees, to ensure the company is
organised in the pursuit of its objectives.
Organisational Patterns
The main patterns seen in an organisations structure are usually;
 Vertical Specialisation (Level of Centralisation)
o Vertical specialisation refers to the hierarchy of formal authority and decision making within an
organisation. This commonly takes the form of either;
 Centralised structure (Tall): A centralised structure is one where the responsibility and decision
making power primarily resides within upper management.
 Advantages:
o Decisions can be made quickly
o Communication lines and expectations are clear
o Consistency to decision making
 Decentralised structure (Flat): A decentralised structure is one where some responsibility and
decision making power is delegated to lower level management and staff, so that decision
making is shared and occurs in a multidirectional fashion.
 Advantages:
o Higher job morale and satisfaction from employees
o Frees up time for senior management to concentrate on strategic decision
making
 Horizontal Specialisation (Departmentation)
o Horizontal specialisation refers to the division of people and resources within an organisation into
groups or departments. The three main bases used are;
 Functional Model Structure: Employees are divided into departments based on organisational
functions. E.g. Human resources, marketing, operations, finance, research and development
departments.
 Advantages:
o Efficient use of resources
o In-depth skill specialisation and development
o Excellent coordination within functions
o High quality technical problem solving
 Disadvantages:
o Poor communication across functional departments
o Slow response to external changes, lagging innovation
o Responsibility for problems may be difficult to pinpoint
o Limited view of organisational goals by employees
 Divisional Model Structure: Employees are divided into department based on divisions other
than functions, such as geographic area or product or target market.
 Advantages:
o Fast response and flexibility in an unstable environment
o Fosters concern for customers’ needs
o Easy pinpointing of responsibility for product problems
o Emphasis on overall product and division goals
 Disadvantages:
o Duplication of resources across divisions
 o Less technical depth and specialisation in divisions
o Poor coordination across divisions
o Less top management control
o Competition for corporate resources among divisions
 Matrix Model Structure: The matrix model combines both the functional and divisional model.
This means employees are divided into both a function department, and a division.
 Advantages:
o More efficient use of resources than single hierarchy
o Flexibility and adaptability to a changing environment
o Development of both general and specialist management skills
o Interdisciplinary cooperation, expertise available to all divisions
o Promotes teamwork and leads to synergy
 Disadvantages:
o Frustration and confusion from dual chain of command
o High conflict between two sides of matrix
o Many meetings, more discussion than action
o Human relations training needed
o Power dominance by one side of matrix
Typical Management Structure Styles
 Mechanistic/Bureaucratic structures are characterised by;
 Tall hierarchical structures
 Centralised decision-making
 Clearly defined roles and responsibilities (i.e. High division of labour and specialisation)
 Formal rules and procedures
o Focus: Organisational efficiency
 Organic structures are characterised by;
 Flat hierarchy
 Decentralised decision making
 Informal processes and flexible in nature
 Multidirectional communication flow
 Multi-skilling encouraged (i.e. Low division of labour and specialisation)
o Focus: Innovation and motivation of staff
 Network/Virtual corporations are characterised by;
 Significant outsourcing of functions to other organisations
 Upper management exerts control over organisations that it has outsourced to
o Focus: Cost saving and adaptability to a volatile market
Outsourcing
 Outsourcing: Outsourcing is the process of an organisation sub-contracting operations to be performed by a
third-party company. The advantages of outsourcing are;
o Allows the organisation to focus on core activities
o Reduces operational costs and saves time
o May increase quality and efficiency by having a third-party specialised in providing a particular service
o Allows flexibility
whilst the disadvantages are;
o Loss of control over the areas of the operations of the business
o May cause quality problems
o Can create a negative image for the company if the outsourcing involves an ethical dilemma
Corporate Culture
Corporate Culture: The set of key values, beliefs, understandings and norms shared by all members of an organisation.
The Two Levels of Culture:
 Official (Surface Level) Culture: The official culture is the impression that is given to the public, and thus
produces the company’s image. This can be identified by;
o Uniform
o Company logo
o Symbols and slogans
o Physical appearance of employees
 Real (Deeper Level) Culture: The real culture is the set of values and beliefs actually prevailing within an
organisation. It can be identified by;
 o Language
o Behaviour
o Customer relations
o Management styles exhibited
Learning Culture:
 Learning Culture: A learning culture is a corporate culture in which all members of an organisation are open to
personal change and new knowledge that improves organisational performance. This fosters the creation of
new ideas, more efficient work practices and innovation.
Strong corporate culture creates:
 Motivated staff with high levels of job satisfaction and company loyalty
 Increased productivity and quality
Managers can encourage a positive culture by:
 Leading by example
 Providing training
 Providing a clearly defined vision and mission statement
 Providing rewards and incentives for desired behaviour
 Recruiting employees which foster a good culture
Management Roles (POLC)
Planning
Planning is the process of setting objectives and deciding on the overall strategies to achieve them.
Levels of Planning:
Strategic Planning Operational Planning Frontline Planning
Timeframe 3-5 years in advance 1-3 years in advance Daily/weekly/monthly
Conducted by Senior management Middle/departmental management Supervisors and forepersons
Focus Turning organisational goals into a Providing intermediate goals to Ensuring the successful operation of
reality reach organisational goals the organisation
Steps in Planning (SADIM):
Analyse the
Develop and Monitoring and
Setting current situation Implementing
evaluate reviewing
Objectives and future the plan
alternatives results
oppotunities
1. Setting objectives: The organisation sets new goals, and redefines existing goals.
2. Analyse the current situation and future opportunities: The organisation audits their position through a SWOT
analysis. A SWOT analysis is a technique that assists in planning by identifying and analysing the organisation’s
internal strengths and weaknesses, and its external opportunities and threats.
Internal to  Strengths: Organisations attempt to maximise the breadth of strengths
organisation  Weaknesses: Organisations attempt to minimise the breadth of weaknesses

External to  Opportunities: Organisations attempt to maximise benefit from opportunities

organisation  Threats: Organisations attempt to neutralise or mitigate threats
3. Develop and evaluate alternatives: The organisation develops a range of plans and assesses their effectiveness
in achieving organisational goals.
4. Implementing the plan: The optimal plan is chosen and its implementation is coordinated so that the plan is
communicated to the entire organisation effectively.
5. Monitoring and reviewing results: The organisation monitors if the plan is achieving its intended objectives
through the assessment of KPIs. In the case that these are not being achieved, another alternative is developed
in step 3, or another alternative is chosen in step 4.
Organising
Organising is the process of coordinating and managing the available employees and resources into set processes to
ensure the organisation is efficient in its pursuit of its objectives.
Tasks in organising:
 Organising the structure of the organisation
 Establishing staff in productive working environments
 Evaluating available resources and allocating them appropriately to tasks
 Determining what additional resources are needed and how to obtain them
 Delegating tasks and responsibilities
 Coordination of machinery and physical resources to optimise work
Leading
 Leading is the process of influencing staff to follow organisational tasks, resulting in securing their commitment to
organisational objectives.
Leadership: Leadership is the process through which leaders influence the atttributes, behaviour and values of others.
Qualities of a good leader: The Karpin Report (also known as Enterprising Nation) published in 1995 stated that leaders
should;
 have a vision of the future  have decision-making skills
 be proactive – not reactive  have humility
 be disciplined  deal with conflict in a positive manner
A leader has three distinct roles;
 Interpersonal roles
o Interpersonal roles refer to the activities that involve liaising and corresponding with people.
 Informational roles
o Informational roles refer to the activities involving gathering and communicating information.
 Decision-making roles
o Decision-making roles refer to the activities involving making choices in order to solve problems or take
up opportunities.
Controlling
Controlling is the process of comparing intended objectives with the actual outcomes and taking corrective action to
rectify any discrepancies.
Steps in controlling:
Establish Determine Measure Compare actual Take corrective action
Review
methods of performance if there is a discrepancy
performance measuring actual with established
between intended performance
objectives and actual
standards performance performance standards outcomes. standards
1. Establish performance standards
2. Determine methods of measuring performance
3. Measure actual performance
4. Compare actual performance with established standards
5. Take corrective action if there is a discrepancy between intended objectives and actual outcomes.
6. Review performance standards
Management Styles
Management style refers to the consistent patterns of behaviour exhibited by managers as they are performing their
functions. Management styles are influenced by;
 Employees  The manager
o Attitudes and values o Personality, values, attitude
o Level of motivation o Competency in management skills
o Level of experience  Current situation
 The organisation o Macro environment conditions
o Culture o Operating environment conditions
o Available resources o Time frame available to make decision
o Stage of operations
Contingency/Situational approach
 Characteristics:
o Style chosen is dictated by circumstances
 The factors which are taken into account are same as the ones previously outlined
 A SWOT analysis would need to be done in order to determine which style to choose
 Strengths:
o High flexibility and adaptability
o Best results can be achieved from a certain situation
 Weaknesses:
o Inconsistency and unpredictability of manager’s expectations and reactions to particular situations

Management Structure
Communication Channels
Orientation
Delegation of decision-making
responsibility
Mode of motivation
Autocratic
 Centralised
 Tall hierarchy
 Bureaucratic structure
 One-way from top downwards
only
 Reactive criticism is primary
form of feedback
 Primarily formal
communication e.g. business
letters
 Lack of information presented
to employees regarding
decisions
 Task oriented
 Low levels of trust in employees
 Managers are not concerned
about the welfare of employees
 Managers have total control
and responsibility of decision
making
 No input by employees in
decision making
 Decisions are not explained to
employees
 Wages
 Material incentives
 Pressure on employees to meet
outcomes or otherwise face
punishment or termination of
employment
Persuasive
 Centralised
 Tall hierarchy
 Bureaucratic structure
Same as autocratic except;
Information presented to staff
is selective with the intention of
accentuating the benefits of
decisions
Same as autocratic except;
Managers are slightly
concerned about the welfare of
employees
Same as autocratic except;
The benefits of decisions are
explained to employees
Same as autocratic
Participative
 Decentralised
 Flat hierarchy
 Organic structure
 Multi-directional
 Reactive praise is primary form
of feedback
 Informal communication used –
often verbal
 Employee oriented
 Substantial trust in employees
 Emphasis on personal and
professional development of
employees
 Focus on improving
relationships between
employees and management
 Decision making is made by
management but involve
participation by employees in
the process
 Wages
 Feelings of worth, importance,
achievement through non-
material incentives. i.e.
employee of the month awards
etc.
Consultative
 Slightly centralised
 Flatter hierarchy
 Organic structure
 Primarily top-down, but
channels for bottom-up do exist  Reactive praise is primary form
 Feedback is objective and fact-
based
 Informal communication used –
often verbal
 Provision of information to staff
regarding policy decisions
 Task oriented
 Moderate level of trust in
employees
 Focus on fostering an
environment in which staff
suggestions are valued
 Decision making is made by
management but involves
consultation of employees in
the process
 Wages
 Material incentives
Laissez-faire
 Highly decentralised
 Flat hierarchy
 Organic structure
 Multi-directional
of feedback
 Informal communication used –
often verbal
 Completely employee oriented
 Substantial trust in employees –
supervision and monitoring is
kept at a minimum
 Emphasis on personal and
professional development of
employees
 Focus on improving
relationships between
employees and management
 Total delegation of decision
making and tasks to employees,
except those concerning
resources and timelines
 Employees tend to be self-
motivated, but may require
non-material incentives if any
Strengths  Communication is clear from
upper to lower levels
 Workers’ roles are clearly set
out allowing accountability and
ease of monitoring
 Problem solving and decision-
making is quick as discussion
does not take place – ideal for
unfavourable conditions
 High degree of consistency in
managerial behaviour and
procedures
 High degree of predictability in
outcomes
Weaknesses  Poor employee to employer
relations, resulting in poor
morale
 Encourages excessive attention
to detail in production for fear
of making mistakes, thus
lowering productivity
 Constant supervision required
 Difficulty in establishing a
positive culture
 Ideas and skills of employees
are not utilised
 Creates resistance among
employees, possibly leading to
industrial disputes or reduction
in commitment to
organisational objectives
 Processes and hierarchies are
convoluted and inefficient in
passing information
 Inflexible and unable to deal
with change
Same as autocratic except;
Employees are more inclined to
accept decisions such as
employment agreements as
they are persuaded of its
benefits
Employees are more trusting of
management, and thus more
positive towards the
organisation
Same as autocratic except;
Attitudes of distrust and
frustration still exist as they
have not been involved in the
decision-making process,
although to a lesser extent
 Clearly communication
throughout the organisation as
employees are kept informed
 Fosters positive and trusting
employee to employer relations
 Employees are highly motivated
and accept management
decisions as they have
contributed
 Utilises the full potential of
employee talents and skills
 Lines of communication and
accountability are clear
 Promotes a positive corporate
culture
 Promotes synergy throughout
the workforce
 Employees have more expertise
in their field and thus are in a
better position to make certain
decisions
 The quality of decisions in
regards to organisational
objectives may be questionable
 Excessive amounts of time and
other resources are used in the
decision-making process
 Inconsistency in policies and
procedures may occur as a
result of multiple channels of
input
 Unpredictability in outcomes as
a result of different
interpretation of policies
 Perceived lack of authority may
lead to insecurity among staff
 A consensus is difficult to reach
 Same as participative except;
 Employee to employer relations
are positive, but to a lesser
extent
 Employees’ ideas may help the
decision-making process
 Less time consuming than the
participative style
 Allows managers greater
control over the proceedings of
the decision-making process
 Consultation is a time and
resource consuming process –
although not as much as in the
participative style
 Employees who are not
consulted may feel ostracised
 A consensus is difficult to reach
 Some decisions should not
involve input by the lower
levels of an organisation
 Promotes creativity and
development of ideas
 Promotes development of
alternative processes which
benefit the individual and
organisation
 Enables employees to establish
and improve skills
 Lack of task orientation,
productivity and direction if
employees are not suited to
this style
 Lack of accountability for
managers
 Employees may not respect
management
 Tends to be inappropriate for
many tasks such as the creation
of employment agreements,
unless the staff are highly
experienced and motivated
 Policy Development
Policy: Policies provide a general framework for guiding an organisation’s decision making and action. Thus, policies will
reflect the organisation’s mission statement and objectives. Policies are developed for any areas where guidance is
believed to be necessary, such as adherence to legislation, OH&S (occupational health and safety), bullying and sexual
harassment, equal opportunity and privacy. Policies are developed as follows;
1. The pressure for developing a new policy exists and is identified
2. Research is conducted
3. Stakeholders of the policy are consulted and their opinions considered
4. A draft policy is circulated to all stakeholders, and any flaws should be modified
5. The policy is finalised and issued to all stakeholders
6. The policy is reviewed after a certain period of time
Procedure: Procedure refers to the series of steps involved in implementing a policy.
Management Skills
Skills are the abilities which result from knowledge, aptitude and practise. Skills are measured in terms of
competencies.Competency refers to the level with which managers and employees are expected to reach with respect
to a specific skill so that they may perform their roles efficiently and effectively.
Communication
Communication is the act of transmitting information. Its two important aspects are;
1. Transmission of information
2. Maintenance of positive personal relationships
The different forms of communication are;
 One-to-one personal communication is verbal communication that occurs between two individuals. The
advantage of this is it generates commitment and enthusiasm due to its direct personal appeal. In addition,
feedback may be given immediately.
 Written communication is communication through written or typed documents such as memos, reports and
letters. The advantage of this is it allows the recipient to maintain a record of the information presented.
 Electronic networks is communication through electronic means such as email or SMS. The advantage of this is
it is fast and resource-efficient.
 Committees are groups of people which communicate together in a group meeting. Committees may be built
into the structure of an organisation. The advantage of this is multiple sources of input are obtained, while
information is also communicated to multiple individuals at once.
 Conferences are typical highly formal meetings to communicate between groups. The advantage of this is the
exchange of information between many individuals can take place.
Noise in communication refers to any factor which blocks or distorts the message which is intended to be transmitted.
Noise can be reduced or lowered by;
 Moving to a more suitable location
 Adopting a level of language which is understandable by the recipient
 Showing interest in the concerns of the recipient
 Seeking feedback from the recipient regarding the effectiveness of the form of communication
 Trialling communication channels in advance
Negotiation
Negotiation is the process of discussion between two people to resolve a conflict by arriving at a mutually agreeable
outcome. The five stages in the typical negotiating process are;

Preparation Opening Bargaining Closing Implementation

Time-Management
Time-management is the process of conserving time by managing its use in the most efficient manner. Time is regarded
as one of the scarcest resources to an organisation. As such, time-management is imperative to properly manage time
by a systematic approach such as;
 Setting out tasks to be done  Allocating time to particular tasks
 Delegating tasks  Building in deadlines and other controls
 Establishing priorities among the remaining  Periodically reviewing the plan in operation
tasks
 Delegation
Delegation is the handing over by management of specific tasks to subordinates. These employees are given an
adequate level of authority to perform their task, but the ultimate responsibility lies with the manager. Tasks suitable to
delegation include repetitive and time-consuming tasks, the collection or organisation of data and tasks that develop
and train employees for future roles. Tasks not suitable for delegation include strategic planning, high-risk decisions,
high-cost decisions, confidential matters and highly specialised areas in which employees lack training.
Three advantages of delegation are;
 If the manager is absent, employees may continue working. Consequently, employees may also develop
more efficient methods of performing tasks
 The manager saves time, allowing more time to be spent on managerial tasks such as strategic planning
 Delegation shows the faith of management in staff, allows employees to show initiative and promotes skill
development of staff, leading to increased job satisfaction and motivation
Decision-making and Problem-solving
Decision-making is the process of making choices among possible courses of action, whereas problem-solving consists
of making a series of decisions to rectify a problem. Decisions are made either to solve a problem or take up an
opportunity. The decision-making and problem-solving process is;
Decide on Develop Select the Evaluate the
Define the Outline the preferred
the cause of several effectiveness
objective facts alternative and
of the solution
the problem solutions implement it

1. Define the objective/Identify the problem

o Management must specify exactly what the objective is. If a problem is needed to be solved, the
actual problem must be identified, not a symptom or effect of it.
2. Outline the facts
o Gather all available facts from records, documents, people and observation. Once the facts have
been gathered, assess the feasibility of the original objective.
3. Decide on the cause of the problem
o By analysing the collected data, identify the precise cause of the problem.
4. Develop several solutions
o Develop a wide range of solutions beyond the obvious ones through research and creativity. The
possible effects of each solution are then identified to eliminate unfeasible solutions.
5. Select the preferred alternative and implement it
o Management must consider the advantages and disadvantages of each solution, and implement the
one which has the most advantages and least disadvantages. Management must then also aid the
implementation process.
6. Evaluate the effectiveness of the solution
o The effectiveness of the solution must be measured, and then periodically be gauged against other
alternatives in relevance to the new business environment.
Stress Management
Stress-management is the process of alleviating stress among the organisation. Some stress is required as it is an
activator that challenges us and helps us achieve goals. Dystress is excessive or prolonged amounts of stress, which
exceeds an individual’s stress threshold. Dystress can cause many negative effects such as depression, absenteeism,
poor industrial relations etc. Minimising dystress in the corporate environment can be achieved by;
 Promoting physical exercise and mental relaxation
 Establishing support programs
 Redesigning particular tasks
 Clarifying work roles in the organisation
 Obtaining and providing reliable information on issues causing stress
 Introducing initiatives to improve employee morale
Emotional Intelligence
Emotional intelligence refers to the level to which an individual can understand and restrain their own emotions, and
understand the emotions of others. Emotional quotient (EQ) is a measure of the emotional intelligence of an individual.
Two personal attributes used when relating to others is;
 Self-restraint involves understanding and controlling your own emotions.
 Compassion involves understanding the position of others and utilising this understanding.
Higher levels of EQ can result in better teamwork and thus synergy, reduced levels of stress and heightened levels of
motivation.
 Area of Study 3: The Operations Management Function
The Operations System
 The operations system is the core function and purpose of an organisation and is involved in the transformation
of inputs into valued outputs.
 Other functions such as marketing, accounting and human resources are support services.
Elements of an Operations System
 Inputs: Inputs are resources used in an operations system
Human resources Facilities and equipment Materials Finance Time
 Employees labour  Buildings  Raw materials  Money  Time
 Stakeholders  Machinery  Parts and
 Management  Equipment components
 Customers’ input  Technology
 Transformation/Processes: Processes are activities that transform or convert inputs into valued outputs.
 Outputs: Outputs are valued goods or services resulting from a production process
o Goods: Goods are physical items that have been processed to give them more than their raw material
or original value
o Services: Services involve the provision of facilitating a change in a customer’s physical possessions or
intangible assets
Goods Services
 Tangible  Intangible
 Permanent  Impermanent
 Needs storage  Cannot be stored
 Consumption is separate from production  Product is consumed during production
 Does not have to be provided at point of purchase  Generally provided at point of purchase
 Independent of client participation  Dependent on client participation
 Little contact with customer  High levels of customer contact
 Normally many activities in production process  Fewer activities in production process
 Major application of economies of scale  Some application of economies of scale
 Product Definition: A product definition is a documentation of all the features and inputs required for a good or
service to be produced.
Operations Management
 Operations management is the area of expertise and responsibility covering the planning, organising, leading
and controlling of the transformation of inputs into valued outputs
 The prime concern of operations managers is optimising resource use which results in increasing productivity
Roles of an Operations Manager
 Planning:
o Strategic planning:
 Planning the introduction of a new technology or quality system
 Deciding how quality will be achieved and maintained
o Operational planning:
 Development of the Master Production Schedule and Materials Requirement Plan
o Frontline planning:
 Resource needs
 Employees required
 Organising:
o Allocation of employees to appropriate tasks
o Procuring and allocation of sufficient resources to specific tasks
 Leading:
o The operations manager must motivate employees and foster a culture of commitment to quality by
leading by example
o The leader may need to help employees maintain confidence in the operations system when a critical
incident occurs such as employee safety problems or equipment breakdowns
 Controlling:
o Establishing a system to monitor the stocks of inputs and finished and unfinished goods at all times
o Monitor quality and quantity of production
 Business Competitiveness
 Business Competitiveness: Business competitiveness refers to the state of rivalry between organisations acting
independently to secure the business of a third-party such as customers, by offering the most favourable terms.
 Business competitiveness relies on maximising productivity ratios, as increased productivity can;
o decrease the price per unit of output
o decrease costs of inputs
o increase speed of production
o increase flexibility
and thus increase sales and profit.
 Increasing productivity can increase an organisation’s competitive advantage by decreasing the cost of inputs
and increasing the speed of production, and thus decreasing the price per unit of output. This enables an
organisation a competitive edge.
 Competitive Edge: Competitive edge refers to the advantage or advantages that an organisation may have over
another organisation as a result of an aspect of the organisation being superior to the other.
 Competitive Advantage: Competitive advantage refers to the beneficial position a business finds itself in
relative to its competitors as a result of being superior in some aspect of the organisation’s functioning.
Strategies to Optimise Operations
 Productivity can be increase through the use of strategies. The four main strategies are;
Facilities design and layout
 Facilities design and layout refers to the way in which the organisation’s operations and production facilities are
designed and physically laid out. An effective layout should maximise the efficiency of the production process by
assisting the flow of inputs through the production process. The choice of layout is based upon the following
factors;
o Product: The layout should be able to produce a quality product at a competitive price
o Volume: By forecasting future sales, the volume of production can be predicted, and a layout which
facilitates the scale of production can be chosen. The typical different volumes of production are;
 Project: A one-of-a-kind customised product is produced
 Job-shop: Small batches of a range of products
 Batch: Large volumes of a range of products
 Assembly line: Large volumes of a narrow range of products
 Continuous flow: A high volume process that runs endlessly
o Activities: The layout should take into account the processes that will be undertaken purposefully, and
events that will inevitably occur such as equipment breakdowns, performance of maintenance and
delays in deliveries
o Size: The layout should allow adequate space for equipment, workers and materials, while taking into
account future expansion
o Layout: The layout is then chosen by considering the above factors
 The three basic design layouts used by organisations are;
o Functional/Process layout: A facilities layout in which equipment and workstations are grouped
together according to their function
 This is a suitable layout when a facility produces a variety of products or services through many
different processes and procedures.
o Product layout: A facilities layout in which equipment and workstations are arranged in a line to provide
a sequence of specialised tasks
 This is a suitable layout when a facility produces a standardised product in high volumes, such
as in manufacturing.
o Fixed position layout: A facilities arrangement in which workers and equipment come to a product that
stays in one location
 This layout is used when it is not feasible to move the product.
Materials management
 The aim of materials management is to ensure that the right amount of different types of inventory is available
at the right time at the right quality when required by the production process.
 The materials planning process involves the following documentation;
o Master Production Schedule: The MPS is a general guide to operations that specifies what needs to be
produced, what resources are required and how, when and where production is to occur.
o Materials Requirements Plan: The MRP is a more specific guide to operations which specifies the
quantities and types of materials required at each stage of the production process, and the optimal
times for these supplies to be ordered and delivered from suppliers.
 Inventory Control: Inventory control refers to the management of an organisation’s stock of materials. An
organisation’s inventory must be controlled as surplus stock ties up the organisation’s capital, creates waste and
costs money in its storage, while shortages in stock will cause production delays or shutdowns, which also cost
money. A balance in inventory is controlled by;
o Physical Control:
 Regular stocktakes
 Security control
o Accounting Control:
 Maintaining a secure accounting system
 Regular comparisons between accounting records and physical inventory
 Just-in-Time (JIT) is an approach to inventory control that involves the delivery of inputs just before their time of
use in the operations process.
o Advantages:
 Storage costs of stock is reduced
 Reduces capital invested in idle stock
 Less chance of stock being damaged or stolen in storage
 Increases flexibility if production needs to change as there is not a surplus of existing stock
o Disadvantages:
 Production schedules may be disrupted or cease if deliveries are delayed
 Buying in small amounts may result in lower economies of scale
 Freight and handling costs are higher due to more frequent deliveries
 Supply Chain: The supply chain refers to the entire flow of materials through the network of suppliers, third-
party service providers and customers associated with an organisation’s operations process.
 Supply Chain Management: Supply chain management encompasses the management of all activities involved
in sourcing, procuring, storing, processing and distributing all the materials in the supply chain.
Quality management
 Quality management is the process of maximising the many characteristics of a product that assist it in satisfying
customers’ needs. By improving quality, a business can gain a competitive advantage and improve customer
loyalty. The three forms of quality management are;
o Quality Control: Quality control is a process for monitoring the quality of a good or service during its
production or delivery. The four steps in quality control are;
1. Establish performance standards or specifications
2. Inspect output for performance
 Random sampling and analysis
 Customer assessment
3. Compare actual performance with established standards
4. Take corrective action if necessary
Quality circles can also be used in quality control. Quality circles are teams of employees who meet
periodically to discuss and solve issues regarding quality.
o Quality Assurance: Quality assurance consists of certification assuring customers of exceptionally high
quality standards. Certification is given by an independent organisation such as the International
Standards Organisation who manages the ISO 9001 standards for a generic management system. Once
these standards have been met, certified organisations may display quality assurance symbols as a sign
to customers of their quality level.
o Total Quality Management: TQM is a management philosophy that seeks continuous improvement in
the quality of performance of all processes, products and services of an organisation. The principles of
TQM are;
 If the organisation focuses its attention on the quality of each of its processes, then overall as a
whole, a competitive edge can be achieved
 Quality levels are customer-driven
 A culture of quality should be adopted to encourage every individual to take responsibility for
maintaining quality
o Six Sigma: Six Sigma (6σ) is a quality strategy that seeks to virtually eliminate defects in manufacturing
and service-related processes, by reducing defects to as few as 3.4 per million opportunities. Six Sigma
has TQM as its foundations, and its implementation involves the processes of;
 Define project goals
 Measure the current performance of the process
 Analyse and identify the causes of defects
  Improve the current process or Design a new quality inducing process
 Control or Verify the performance of the process
Technology
 Process Technology: Process technology is a term describing technology used to transform inputs into goods
and services, such as machinery, equipment, computer systems and work practices. The advantages of using
technology are;
o Increased productivity and consistency
o Increased quality levels due to minimisation of human error
o Reduced need for highly strenuous human labour and can replace labour intensive operations
 Labour intensive operation: Labour intensive operations are processes which make extensive
use of human resources in performing the work.
o Increased safety in the workplace
While the disadvantages are;
o Substantial costs in initial purchase, implementation, maintenance and training
o Technology dates and quickly becomes obsolete
o May cause anxiety in employees due to a change in job designs
o Technology such as automation may result in job displacement and downsizing, resulting in job
insecurity.
 Job Displacement: Job displacement refers to the loss of an employee’s tasks or position in the
organisation as a result of the introduction of new technology.
o May result in deskilling
 Deskilling: Deskilling refers to when the previously valued capabilities of an employee are no
longer needed as a consequence of the introduction of new technology.
 The main types of technologies used are;
o Automation: Automation refers to technology which performs tasks that reduce or replace the need for
human labour.
 Robots: Robots are computerised work machines which are programmed to do various
sophisticated tasks. While the initial cost of robots is high, they do not need breaks and
holidays.
 Computer-aided manufacturing (CAM): Computer-aided manufacturing involves the use of
computers in the control and design of the manufacturing process. This allows the specifications
of the production process to be readily altered.
 Flexible manufacturing systems (FMS): Flexible manufacturing systems involve the
manufacturing process being controlled by automated computer systems which can be adapted
to produce a variety of different components or products. This includes the control of
manufacturing equipment, and automated transport systems that deliver resources in the
correct quantities as they are required.
 Computer integrated manufacturing (CIM): Computer integrated manufacturing is a highly
technical system that incorporates the use of many technologies (such as all the above) into a
single integrated system.
o Computerisation: Computerisation refers to technology that assists the communication and
management of information.
 Electronic data interchange (EDI): Electronic data interchange is the computer-to-computer
exchange of business data between organisations. This can involve purchase of inputs,
inventory control and accounting data being exchanged over a network.
 Computer-aided design (CAD): Computer-aided design is a computerised graphical design tool
that allows organisations to create product possibilities from a series of specifications. From the
design, a three-dimensional diagram can be viewed and the cost of materials and time taken to
produce the product can be calculated.
 Unit 4: Managing People and Change
Area of Study 1: Human Resource Management
The Human Resource Function
 The human resource function is concerned with managing the relationship between employees and employers to
complement the organisation’s strategies and increase productivity.
 The human resource function superseded personnel management which was concerned only with recruiting staff
and keeping employment records.
Human Resource Management
 Human resource management (HRM) is the area of expertise and responsibility covering the planning, organising,
leading and controlling of the establishment, maintenance and termination of the employment relationship.
 HR management is significant because it increases productivity, influences the potential employees employed and
furthers skills in employees. An organisation can gain many benefits if it achieves employer of choice status.
 Employer of Choice: An employer of choice is an organisation that attracts and retains staff of a higher calibre than
its competitors. This is achieved by providing better opportunities and rewards, as well as developing a positive
corporate culture and reputation. This results in the EOC employing higher quality staff than its competitors, likely
resulting in productivity increases and thus a competitive edge.
Roles of a Human Resources Manager
 Planning:
o Establishing agreements that meet the organisations’ needs
o Developing a clear grievance policy and procedure
o Analysing the human resource needs of the organisation in relation to objectives
 Organising:
o Organising meetings between key stakeholders (management, employees, union representatives etc.)
for negotiation
o Coordinating time and human resources to different departments of the organisation
 Leading:
o Leading consists of the human resource manager keeping employees informed of discussions and
developments in negotiations and resolving conflict through effective methods of resolution
o Advising senior executives on the HR implications of their decision-making
 Controlling:
o Controlling and monitoring the success of the agreement by performing processes such as an employee
relations audit
o Establishing performance appraisal programs to manage employees
The Employment Cycle

Departure Recruitment

Exit
Selection
interviews

Terminating Establishing

Counselling/
Induction
advice
Maintaining

Career
Training
development

Performance
management
  The employment cycle is a model outlining the stages that an organisation sequentially performs throughout an
employment relationship. This cycle moves through an establishing process involving recruitment, selection and
induction, a maintenance phase involving training, performance management and career development,
followed by a termination phase involving counselling, advice, exit interviews and departure.
Establishment
 Establishing: Establishment covers all the activities at the commencement of the employment relationship including
planning the organisation’s human resources needs and selection, recruitment and induction of staff.
Steps in Establishing the Employment Relationship

Analysing human
Recruitment Selection Induction
resource needs

 Analysing human resource needs: The organisation must continually determine its current and future human
resource needs as employees are in a dynamic state of retiring, resigning and being promoted; leading to new
positions being created constantly. Such planning involves the production of;
o Job Analysis: A job analysis is a systematic process that determines the exact nature of the job in order to
facilitate accurate recruitment and selection of staff. Specifically, it details;
 The specific activities that the individual will perform
 The equipment that will be used to perform the job
 Performance expectations of the job
 The working conditions of the job
o Job Description: A job description outlines the tasks and responsibilities related to the job within the
context of the organisation. Specifically, it covers;
 The job title
 The position of the job within the organisation
 The duties and activities that the job will perform
o Job Specification: A job specification covers the personal qualities and qualifications required of an
employee to perform the job.
 Recruitment: Recruitment refers to the initial process of identifying and attracting a source of potential employees.
It involves;
o Communicating the existence of vacant positions to potential applicants
o Making initial contact with the applications
Employees can be recruited through;
o Internal recruitment: Internal recruitment involves recruiting employees for a new position whom are
already employed within the organisation. This can occur through email and intranet notices, memos,
noticeboards or newsletters. The advantages are;
 Morale may increase as promotional opportunities exist
 Individual strengths and weaknesses are already known
 The costs of recruitment may be reduced
 The candidate is already familiar with the organisation’s culture and procedures
while the disadvantages are;
 No new skills or ideas are brought into the organisation
 Narrow choice of applicants
 Conflict may arise for promotions
o External recruitment: External recruitment involves recruiting employees whom are not already employed
under the organisation. This can occur through advertisements in the media, employment agencies or
recruiting consultants. The advantages are;
 Broader choice of applicants
 New ideas and skills are introduced into the organisation
 Recruiting applicants with existing skills can reduce training costs
while the disadvantages are;
 The employee’s competencies are unknown
 Morale may reduce among internal applicants
 Costs of recruitment are often high
 External applicants may not adjust well to the organisation’s culture
 Selection: The selection process involves choosing the most suitable applicant from the attracted group of
prospective employees. The selection process comprises of;
o Screening and shortlisting applicants: In this stage, applicants are checked as to whether they meet the job
specifications, and applicants may be processed and ranked by the selection panel.
 o Interviewing applicants: An interview is performed to determine the suitability of an applicant in terms of
the job specification and the culture of the organisation.
o Check background of applicants: The background of applicants is checked through referees, as well as
further inquiries by the selection panel.
o Conduct any suitability tests and medical examinations: Tests may be used to further determine an
applicant’s suitability, and can be used to predict future work performance. Examples are role-plays,
psychological profiling and simulations.
o Advise all applicants of the outcome: Unsuccessful applicants should be notified promptly of the outcome
of the selection process, while suitable applicants should be selected in ranked order.
A rigorous selection process is important because;
o it ensures that employees have the correct skills, which ultimately increases productivity
o it minimises the costs associated with re-doing the selection process if the initial candidate is unsuitable,
such as the costs of advertising, interviewing, induction and training
o it avoids legal implications, as dismissal of a poor performing employee may not meet legislation
requirements
o It avoids creating morale problems for existing staff
 Arrangements of Employment: The conditions of employment must be determined for the new employee. The
broad arrangements of employment are;
o Full-time permanent employee
o Part-time permanent employee
o Flexible contract employee
o Fixed-term employee
o Casual employee
 Induction: Induction refers to activities relating to introducing and familiarising new employees with the
organisation, its culture and policies, other employees, the expectations of the job and the working environment.
Formal induction tends to be more successful than informal induction programs.
Maintenance
 Maintaining: Maintenance involves training and motivating staff, improving the quality of the working environment
and relationship, and the organisation of industrial relations.
Steps in Maintenance of the Employment Relationship
Performance
Training Development Reward management
management and reviews

 Training: Training is the process of providing or improving an employee with respect to knowledge and specific skills
needed to perform a job.
o Training needs analysis: A training needs analysis involves identifying the deficiencies in skills and
knowledge that workers currently have, so that training programs can be modified to alleviate or remove
such deficiencies.
 Development: Development refers to learning opportunities aimed at an employee’s overall personal growth,
rather than strictly job related improvements.
 Training and development are important because they;
o Improve confidence and expertise of employees, leading to increased productivity
o Encourages stronger employee loyalty and commitment to the organisation
o Opens up new ideas and opportunities for employees
o Increases morale as employees feel more valued
o Greater flexibility is present with well-trained, multi-skilled employees
 Principles of effective employee training are;
o Allowance for differences between employees
o Provision of feedback to the trainees
o Providing opportunities for ongoing practise of new skills
o Evaluation of the training program
o Ensure that the training program targets the skills required in the particular job
 Performance management and reviews: Performance management refers to a strategic and integrated approach to
organisation success by improving the performance of the employees. Features of a good performance review
system are;
o it has a systematic approach
o it is not biased
 o it is unaffected by the ‘halo effect’ – that is; that other aspects of the review are not neglected due to
impressive results in one particular aspect
o it has clear standards of performance that are not open to interpretation, which are established with the
participation of those undertaking the respective work
o it has an emphasis on productivity improvements that encapsulate the overall goals of the organisation, not
just specialised activities
Types of performance review include;
o 360o feedback: 360 degree feedback refers to a holistic approach to a performance appraisal where
feedback is sought from all areas where an employee has interaction and involvement.
o Interviews
o Checklists
o Essays
o Monitoring
Methods of performance appraisal are using;
o Comparative Standards: Employee performance is ranked against other employees’ performance.
o Absolute Standards: Employee performance is evaluated independently of other employees’
performance and instead against a set of independent standards.
o Critical Incident Analysis: Employee performance is measured by recording the frequency of highly
favourable and unfavourable incidents caused by an employee.
o Management by objectives: The employer and employee jointly determine a set of goals at the
beginning of a review period, and performance is then measured against the extent of achievement of
these goals.
 Reward management: Reward management involves the provision of rewards and recognition as a business
strategy designed to ensure that its employees are skilled and motivated. Rewards can be in the form of;
o Direct financial rewards
 Wages
 Salaries
 Commissions
 Bonuses
o Indirect financial rewards
 Company cars
 Free or subsidised child-care/health care
o Non-financial rewards
 Job satisfaction
 Increased responsibility
 Challenges
 Positive feedback and recognition of performance
The overall reward package consisting of monetary and non-monetary (fringe benefits) payments to an
employee is known as a remuneration or an employment package.
 Employee empowerment: Empowerment refers to the process of granting employees involvement in decision
making to allow employees to contribute creatively and effectively to the achievement of organisational goals.
Termination
 Terminating: Termination involves decisions and actions regarding ending the employment relationship. This can
occur through;
o Retirement: Retirement refers to an employee ceasing employment permanently due to them having
reached retirement age. Often, employees retire in pursuit of travel, leisure time, or in order to secure
superannuation payments.
o Resignation: Resignation refers to the voluntary ceasing of an employment contract by the employee. This
often occurs as a result of the employee being unsatisfied, or feeling unsuitable for their current work.
o Retrenchment: Retrenchment refers to the ceasing of an employment contract by the employer due to the
job performed becoming redundant. This occurs when an organisation is involved in ‘downsizing’ – a term
also euphemistically known as ‘rightsizing’. Retrenchment can be voluntary or involuntary, and
retrenchment packages may be offered which are usually based upon the number of years served at the
organisation.
o Dismissal: Dismissal refers to the ceasing of an employment contract by the employer due to poor
performance or misconduct by the employee. Dismissal may occur;
 Summarily: Summary dismissal refers to the instant and lawful dismissal of any employee as a result
of gross or serious misconduct on behalf of the employee.
  Due process: Dismissal by due process refers to an employer initiated process of counselling and
discipline which may lead to either the termination of the employment contract, or resolution of
the problem.
Expectations, Satisfaction and Motivation
 Organisations should see employees as more than just inputs due to;
o Employee expectations refers to the personal benefits an employee anticipates from working with an
organisation. These include;
 Fair treatment by the employer
 Safe and positive working environment and conditions
 Adequate conditions of employment such as pay and leave
o Job satisfaction refers to the level of contentment achieved by an employee with respect to their work in an
organisation. This is influenced by factors such as;
 The pay received
 The quality of the relationships with other employees
 The existence of career pathways and promotions
 An acceptable balance between work and non-work life
 The nature of their work – a factor which can be improved through multiskilling
o Multiskilling: Multiskilling refers to extending the variety of skills and tasks required in an individual’s job.
This allows the individual to gain access to a wider variety of career options, have increased job satisfaction
and acquire better pay. It also allows the organisation to make better use of its available human resources.
Multiskilling is also referred to as broadbanding.
o Motivation refers to the internal and external influences which incite an individual to some kind of action.
Theories of Corporate Management
 Scientific Management
o Scientific management theories which were proposed mainly by Frederick Taylor are characterised by;
 Task-orientation: Equipment being considered more important than employees
 Time and Motion Study: All tasks can be measured in time increments and improved in time
efficiency. This resulted in tasks being broken down into simple repetitive elements.
 Wages: Wages are used to motivate employees, and are paid according to efficiency.
 Disassociation: Employees are kept separate so they do not distract one another.
o The scientific school of thought was often resisted by employees – leading to decreased productivity –
as workers felt they were not recognised as individuals, whilst they were also bored as a result of
overspecialisation of tasks. Furthermore, one fault is that it is now quite obvious that wages are not the
sole motivator for workers.
 Behavioural Management
o Behavioural management theories proposed mainly by Elton Mayo are characterised by;
 Employee-orientation: Employees are considered more important than machinery
 Work Design: Jobs were made as interesting as possible through job rotation and multi-skilling
programs.
 Wages: Wages are not the only motivator. Some non-financial rewards are required to motivate
employees.
 Empowerment, Reinforcement and Motivation: Through the understanding and use of
motivational theories, worker productivity increased.
o The behavioural school of thought significantly takes into account the combined psychological, social
and economic factors which impact on workers.
Theories of Motivation
 Theories have emerged which help managers understand what motivates people to perform well at work. Some of
these theories include;
 Maslow’s Hierarchy of Needs
 The Hierarchy of Needs is a psychological theory originally developed by Abraham Maslow which states that
individuals have ascending sets of needs which motivate them.
 Maslow’s theory relies on the assumptions that; Self-
o Needs that are not satisfied motivate behaviour actuali
o Needs that are satisfied do not motivate behaviour sation
o Needs are arranged to a hierarchy of importance
 Self-actualisation: This stage represents the fulfilment of an individual’s
ultimate goals and potential. E.g. Challenging work involving creativity, Esteem
opportunities for personal growth and advancement
 Esteem: This stage represents the desire of an individual to achieve and
be recognised and differentiated from others. E.g. Promotions, praise
and recognition Social
 Social: This stage represents the need of an individual for the
companionship of others and a sense of belonging, acceptance and love.
E.g. Corporate functions
 Safety and Security: This stage represents the desire to be protected Safety and
from danger and fear. E.g. Insurance and retirement plans, safe and security
healthy working conditions
 Physiological: This stage represents the desire to meet the basic needs
required by human beings in order to live. E.g. Pay, benefits, working
Physiological
conditions

The ERG Theory of Needs

 The ERG Theory of Needs is a psychological theory developed by Clayton Alderfer which states that individuals
have three basic needs; existence, relatedness and growth.
 The key difference between Alderfer’s theory is that Alderfer does not believe there is any hierarchy, but that
an individual may require any of the three levels at one time.
Herzberg’s Theory
 Frederick Herzberg’s theory of motivation states that the needs identified by Maslow are either maintenance
(‘hygiene’) or motivational (‘satisfiers’) factors.
o Maintenance factors are needs which have a tendency to cause dissatisfaction when absent, but do not
necessarily promote motivation in their presence.
o Motivational factors are needs which have a tendency to promote motivation and job satisfaction.
Comparison of the Theories of Motivation
Maslow Alderfer Herzberg
Physiological Existence Hygiene
Safety and security
Social Relatedness
Esteem Growth Motivators
Self-actualisation
Diversity Management
 Diversity in human resource management refers to the breadth of variety of people in an organisation in terms
of gender, race, nationality and other characteristics. The ways in which employees may differ are;
o Personal (Primary):
 Age  Nationality
 Gender  Race
 Mental and physical ability  Sexual orientation
o Personal (Secondary):
 Beliefs  Socio-economic status
 Educational level  Values
 Marital status
o Organisation-related:
 Working hours (Casual/part  Position in hierarchy
time/full time)  Tenure
 Management of diversity is related to equal employment opportunity laws, but goes beyond just the basic
requirements set by the laws as it views diversity as a means of obtaining a business advantage by;
 o Improving employee job satisfaction, motivation and work performance
o Reducing costs associated with poor diversity management such as inefficient communication, conflict,
absenteeism, staff turnover and legal action.
o Capitalises on the skills, experience and ideas of all employees, resulting in innovation in work
operations and product development.
o Utilises cross-cultural capabilities within the organisation
Strategies to Implement Diversity
 Show that diversity is valued and promoting its advantages to the organisation
 Offering training to develop awareness of diversity, communication and conflict management skills
 Establishing recruitment and selection processes that diversify the group of potential employees
 Identifying and collecting resources required to support diversity management initiatives
 Affirmative Action: Affirmative action refers to a policy or program which provides advantages to people of a
minority group, or a group which has been typically discriminated against.
Family-Friendly Workplaces
 An increasingly prominent form of diversity management is the implementation of family-friendly workplaces.
This is because many employees continue to face family commitments even while at work, and thus these need
to be catered for. Strategies to foster a family-friendly organisation include offering;
o Family and parental leave
 e.g. Paid or unpaid maternity and paternity leave
o Childcare
 e.g. Free or subsidised on or off-site childcare facilities and school holiday childcare programs
o Flexible working arrangements
 e.g. Part-time work, flexible working hours, job sharing, telecommuting and career breaks
Employee Relations
 Employee relations refers to the relationship, interactions and processes between employees and employers
regarding conditions of employment. Employee relations has also traditionally been known as industrial
relations, and may also be called workplace relations.
 The broad foundations on which employee relations are based upon are;
o The joint commitment of management and employees to the objectives of the organisation.
o An organisational culture that values ethical behaviour.
o The promotion of an acceptance among staff of the inevitability of change.
o The use of effective communication and competency in emotional intelligence throughout the
organisation.
o The provision of good pay, working conditions and other rewards for effort.
o The maintenance of good working relationships between management and union officials.
Human Resource Managers in Employee Relations
 The legislative shift to a more decentralised employee relations system in Australia has meant that most
agreements are made at the enterprise level, creating a greater need for human resource managers in
managing employee relations.
The Aim of Human Resource Managers in Employee Relations
 Management should aim to facilitate positive and productive relationships with its employees, which provide
mutual benefits to both parties because this will ultimately improve productivity and improve employee
commitment to the organisation, as employees feel more valued.
 Good employee relations contributes to the achievement of corporate strategy by;
o ensuring that employees are satisfied with the objectives and strategies of the organisation
o ensuring that employees carry out such strategies with maximum efficiency and motivation
o linking the achievement of corporate objectives into incentives in the conditions of the employment
agreement
 Industrial relations audits are used to assess and review the state of employee relations in an organisation
based on a set of indicators.
Conflict in Industrial Relations
 When conflict occurs, workers may indicate their dissatisfaction by;
o Striking: Striking refers to the deliberate withdrawal of workers from the workplace to halt operations.
o Setting up a picket line: A picket is where employees physically demonstrate outside their workplace to
raise awareness to their cause, and hinder the operations of the organisation.
o Increasing absenteeism: Increasing absenteeism refers to increasing the number of employees which
are absent over a period of time
 o Work-to-rule: A work-to-rule campaign involves employees only completing tasks outlined in their job
description
o Go slow: A go slow campaign involves employees performing operations at a less productive rate
 A grievance is a formal complaint made by an employee made either directly to management or through a
union.
 A grievance procedure refers to a systematic process employed to resolve employee relations disputes.
 In order to handle employee complaints, employers may employ the methods of;
o Conciliation/Mediation: Conciliation is the use of a third-party to settle a dispute where the advice
given is not legally binding.
o Arbitration: Arbitration is the use of a third-party to settle a dispute where the ruling is legally binding.
o Negotiation: Negotiation typically involves all parties trying to reach a mutually agreeable outcome
where they should;
o Treat the employee and the complaint as being important
o Listen carefully and get all the facts
o Explain to the employee the reasons for decisions
Types of Employment Contracts
 Awards: Awards are legally binding conditions specifying minimum employment conditions for employees in a
given industry. Awards act as a safety net because other agreements are compared to the awards in a no-
disadvantage test, and any conditions negotiated cannot fall below the standards in the awards.
 Certified agreements: Certified agreements are a type of enterprise bargaining agreement negotiated
collectively between employers and unions or groups of employees, which specify employment conditions. The
conditions outlined in certified agreements result from enterprise bargaining, and these conditions must be
approved by the AIRC. Certified agreements also prohibit industrial action from taking place during the
agreement’s operation. These are also known as enterprise bargaining agreements (EBAs) and collective
agreements.
 Australian Workplace Agreements (AWAs): Australian Workplace Agreements are employment contracts
negotiated individually or collectively between an employer and an employee, which specify pay levels and
working conditions. The conditions outlined in the agreement must be approved by the Office of the
Employment Advocate (OEA). In addition, even as part of a group, each individual must sign the agreement.
 Individual Contracts of Employment: An individual contract of employment is typically an agreement between
an employee and employer which covers pay and working conditions which may differ to what would typically
be covered in an award for that position or collective agreement at that workplace. These are typically used for
managerial positions or an employee performing specialised work as these are not covered by awards.
Enterprise Bargaining
 Enterprise bargaining refers to the negotiation of pay and working conditions between employers and
employees – or a representative of the employees such as a union – at the level of an individual organisation.
The advantages of enterprise bargaining are;
o Development of a more multi-skilled, committed and motivated workforce
o Opportunity for the formulation of cooperative relationships between employees and employers
o Increased flexibility and team work to suit the organisation’s specific needs, allowing them to compete
effectively in domestic and global markets
The disadvantages are;
o Conflict and disagreements may arise between the employers, its employees and their unions
o Employees with little bargaining power may lose conditions
History of Employee Relations
Pre-1991: Centralised System
 Degree of Centralisation: Centralised
 Key Characteristics:
o Basis of the system was awards
1991: National Wage Case of October
 Direction of Centralisation: Decentralising
 Key Changes:
o Enterprise bargaining was introduced
o All pay increases would have to be negotiated at an enterprise level
o Such agreements would be scrutinised by the AIRC before approval
o Increases in pay would only be approved if there was a demonstrable increase in productivity
1993: Industrial Relations Reform Act
 Direction of Centralisation: Decentralising
 Key Changes:
o A non-union stream of enterprise bargaining known as enterprise flexibility agreements was introduced
o Enterprise-level agreements became distinct from awards
o Guarantees for union involvement in agreements
o Minimum safety net increases for employees unable to enter into an enterprise agreement
1996: Australian Workplace Relations Act
 Direction of Centralisation: Decentralising
 Key Changes:
o Simplified awards to 20 conditions
o Australian Workplace Agreements are introduced
o Reduced the role of unions
o Reduced the role of the AIRC
2005: Workplace Relations Amendment (WorkChoices)
 Direction of Centralisation: Decentralising
 Key Changes:
o Establishment of the Australian Fair Pay Commission to set and adjust minimum wages and conditions
of employment without the involvement of unions or employer groups, which form the Fair Pay and
Conditions Standard – a standard which replaces the safety net functions of awards
o Safety net consists of 5 conditions
o Encouragement of individual enterprise bargaining due to the simplified awards system, whereby award
coverage did not apply under certified agreements and AWAs
o Abolition of the no-disadvantage test
o Limiting of unfair dismissal laws to business with only more than 100 employees, as well as further
restrictions in which they are applicable
Post-2008: Transition Bill and ‘Forward with Fairness’
 Direction of Centralisation: Centralising
 Key Changes:
o Raised the safety net to 10 conditions, which is then further supplemented by awards
o Australian Workplace Agreements were abolished
o Establish a new industrial tribunal known as Fair Work Australia to replace the AIRC
o Reintroduce unfair dismissal rights
Decentralised/Centralised Employee Relations
 In a decentralised employee relations system, employment conditions tend towards being negotiated
individually at an enterprise level.
 In a centralised employee relations system, employment conditions tend towards being negotiated collectively
at an industry level by a centralised power.
 The advantages of decentralisation of the employee relations system are;
o Increased flexibility in the workplace as each employees’ needs differ
o Added incentive for employees to increase their productivity
o Increased international competitiveness in an increasingly globalised economy
o Removal of wasteful work practices fostered by the awards system where employees were only legally
bound to perform work which was set out in their agreement
o Employers feeling more confident about creating jobs due to greater control and less legal scrutiny over
termination of poor performing employees, and a simplified awards system
o Dispute resolution is likely to be quicker and cheaper
while the disadvantages are;
o Increased conflict due to differing needs of individual employees and employers
o Favouring of workers who are highly skilled and not easily replaced. Workers who have less power may
be disadvantaged
 Overall Trend in Employee Relations
 The major trend in Australia over the last few decades regarding employee relations is one of decentralisation.
 A move towards industrial democracy is also evident.
 Industrial Democracy: Industrial democracy refers to a range of schemes which promote elements of employee
involvement in the managerial decision-making process in an organisation. Industrial democracy stems from the
recognition that those performing a particular job are in the best position to make decisions regarding it.
 The roles of the AIRC have changed over time. The major roles of the AIRC were;
o Establishing nationwide industry based awards in which conditions were changed through annual
National Wage cases where all relevant stakeholders would contribute.
o Resolution of disputes through the use of conciliation and arbitration.
o Ratifying enterprise agreements
 Area of Study 2: The Management of Change
The Concept of Organisational Change
 Change refers to the modification of an aspect of an organisation.
 Organisations are subject to a dynamic business environment where changes occur in the internal and external
environments. As such changes are on-going, organisations must respond to these changes in order to stay
competitive.
Forces for Change
 Driving forces are factors that create pressures for a particular change.
 Restraining forces are factors that restrict or prevent a particular change from occurring. Examples of restraining
forces are;
o Organisational Inertia: Organisational inertia refers to the culture in an organisation not welcoming
change
o Organisational Insecurity: Organisational insecurity refers to the culture of an organisation fearing the
uncertainty of change
o Management Procrastination: Management procrastination refers to delayed or indecisive decision
making by management
o Financial Costs of Influencing Change: Various costs are associated with fuelling change within an
organisation.
 Any change that is to be implemented will be influenced by driving and restraining forces. If the driving forces
are greater than the restraining forces, the change is likely to be successful, while if the driving forces are equal
or less than the restraining forces, the change is not likely to be successful.
Theories of Effective Change Management
 Employees in an organisation will naturally resist any changes, as changes often inevitably result in new
responsibilities or tasks to be performed.
 Due to this, management needs to minimise the risk and magnitude of resistance by employees to change
through planning. Such planning can be aided through the use of change management theories.
Kurt Lewin’s Change Model

Unfreezing Changing Freezing

 Step One: Unfreezing the present situation

o Unfreezing involves preparing the organisation for change. This can be done by having an existing
climate for change such as;
 Reacting to operating environment factors such as competition
 Reacting to macro environment factors such as society’s attitudes
 Rapid growth occurring within the organisation
 Alteration of Industrial Relations legislation
or creating a climate for change by;
 Assessing the current organisational environment through a SWOT analysis to proactively
identify potential reasons for change
 Creating a positive vision regarding the ultimate goal of the change to justify the effort in
undertaking the change
 Clearly communicating throughout the organisation any important reasons for change so that
employees understand the need for change
 Empowering staff to implement the change by involving them in the change process
 Communicating planned rewards and recognition for progress in the change
 Choosing a ‘change agent’. A change agent is a person who initiates and champions a change
within the organisation. A change agent focuses on what the change is, the process involved in
institutionalising the change, and how to get workers interested in the change.
 Step Two: Moving to a new state
o Moving to a new state involves actually making the changes. The implementation of change in an
organisation will inevitably affect the internal environment of the organisation. The following are the
eight targets of change;
 Facilities and technology
  Management structures
 Objectives
 Planning
 Management style
 Corporate culture
 Recruiting and training
 Tasks
 Step Three: Freezing
o Refreezing the new situation involves maintaining the momentum of the change. This can be done by;
 Providing adequate resource support to maintain the change
 Providing adequate care for those negatively impacted by the change
 Evaluating the effects of the change
 Maintaining a change agent to continually emphasise the benefits of the change
Tactics for Effective Change Management
 In order for an organisation to effectively implement change, resistance by employees must be minimised.
Several tactics that can be used to minimise resistance by employees include;
o Communication: This tactic assumes that if employees understand the reason for change, they are
more likely to accept it. Such communication can occur through a variety of communication channels.
o Participation: Commitment to change can be obtained by involving employees in the change process, as
Low it is difficult to resist decisions that you have contributed to making.
risk o Support: Employees can be helped through the change process to minimise dystress levels through
active listening and appropriate training.
o Negotiation: Negotiated agreements between management and employees involving incentives can be
used to gather support.
High o Manipulation: Manipulation involves selectively presenting facts and events with the intention of
Risk favourably presenting the change.
o Threat: This tactic involves direct threat against those who resist the change, such as retrenchment,
transfer, loss of promotion, demotion or a poor employment reference.
Globalisation
 Globalisation refers to the global trend of increasing interdependence and economic integration between
countries.
 Driving forces for globalisation are;
o The emergence of new major industrial nations embracing a market-based economy has resulted in
such countries requiring to import many resources to build and manufacture goods, which are then
exported
o Technological advances are improving communications (e.g. the internet) and logistics (e.g. container-
handling systems) between countries
o The reduction, removal and deregulation of trade barriers across the world particularly by the World
Trade Organisation (WTO)
o National development strategies which promote foreign businesses to establish within a country
through the removal of tariffs and duties
 Restraining forces for globalisation are;
o The differences in laws and regulations across countries can raise ethical and legal issues regarding
safety, employee relations etc.
o A lack of understanding of the culture and traditions in a country which could impact on product and
service provision.
o A lack of knowledge of the economy and market conditions of a country, such as knowledge of
competitors, consumer behaviour, labour supply and risk assessment.
o The possible need to source a different supply chain in another country, which may be more costly, less
reliable or unfeasible.
 The benefits of globalisation are;
o Globalisation allows access to more markets, therefore increasing potential for profit, whilst market
diversity reduces financial risk
o Globalisation has increased the standard of living in many developing countries due to the creation of
jobs, provision of goods and services and creation of competition to increase local efficiency
o Globalisation increases economic growth
 o Globalisation allows companies to reduce costs by taking advantage of greater application of economies
of scale, cheap labour in developing countries and cheaper resources in countries where they are
abundant
Whilst the disadvantages of globalisation are;
o Globalised companies have a tendency to deplete resources and cause environmental damage
o Globalisation causes competition, leading to loss of jobs in the local economy
o Trade unions have argued that globalisation can decrease wages and working conditions due to threats
such as offshoring and outsourcing
o Globalisation has led to profits in one country being taken elsewhere
o Companies can avoid legislation in one country by establishing business in a less ethical or strict country
The Effects of Globalisation on the Internal Targets for Change
 Management style: The management style must adapt to a globalised economy so that it is suitable in dealing
and managing people of other cultures, promote a corporate culture which has a global perspective, whilst also
presenting the organisation as an ethical entity.
 Facilities and technology: The technology of the organisation must be adequate to efficiently communicate
with overseas companies, whilst adequate facilities may need to be established or acquired overseas. New
technology may need to be acquired in order to increase productivity in order to remain competitive against
international competition.
 Recruiting and training: Recruitment of staff from overseas may be required, or language training may need to
be arranged for local staff otherwise. Also, many staff now recruited are put under agreements which are made
to result in productivity improvements.
 Management structure: The structure of an organisation might need to be changed to accommodate new
global functions and management responsibilities. Many non-core operations are also outsourced to allow the
organisation to concentrate on improving the productivity of its core operations.
 Objectives: Organisations now tend to benchmark their performance against leading global organisations, and
attempt to reach a similar level.
 Ethically and Socially Responsible Management
Ethics and Social Responsibility
Corporate Social Responsibility (CSR): CSR refers to going beyond just basing decision making on financial results, but
also considering and accepting responsibility for impacts on all stakeholders, the environment, and the community and
large.
Corporate Governance: Corporate governance refers to the self-regulation of an organisation by shareholders and the
Board of Directors in order to achieve their objectives in an open and accountable manner.
Ethics: Ethics refer to the moral principles which guide an individual’s decisions and behaviour. Ethical is a relative term
describing behaviour which is generally considered moral.
Code of Ethics: A code of ethics is a policy created to guide an organisation’s members on corporate matters involving
business ethics.
Business Ethics: Business ethics is the process of knowing what is right and wrong in the workplace and doing what’s
right in terms of products, services and in relationships with stakeholders.
Triple Bottom Line: The triple bottom line represents the increased scope of considerations when analysing
organisational performance. The triple bottom line consists of:
 Financial Profit
 Environmentally Aware
 Socially Supportive
Ethical Issues
 Ethical issues may occur under one of the following categories:
o The Operations System
 Organisations should ensure that all organisations and parties that are part of their supply chain
operate ethically as well
 The transformation process should be aimed to have a minimal impact on the environment, and
any waste that is produced should be disposed of effectively
 The outputs of an organisation should not cause problems for society
o The Human Resources Function
 Accurate job descriptions should be included in advertisements
 Employment should be based solely on merit, rather than taking into account other factors
 Unsuccessful applicants for a position should be contacted
 Avoid inappropriate testing procedures in the selection process
 Staff need to be trained in all required areas – especially safety
 The organisation should not breach the confidentiality rights of its employees
 Honest disclosure with employees any relevant information regarding their position and
conditions of employment
 Counselling services should be provided in termination
 Adequate advance notice should be given to employees to be terminated
 Departure packages should be adequate
 Morale issues should be dealt with in the organisation following terminations
o Change Management
 The effects of change on stakeholders of the organisation