Success in VCE Business Management1. Keep notes and handouts organised (a workbook for any class

notes and exercises done and a folder with plastic sleeves for handouts)

2. Prepare summary notes from the textbook(s) you have and the slides referred to in class (summary diagrams or notes with heading and bullet points etc.

3. WORK ON A CONSISTENT BASIS (a bit (30+ minutes) most days not a lot one day and nothing for 6 days)

4. DO THE MAJORITY OF THE TASKS GIVEN TO YOU5. MAKE EFFECTIVE USE OF CLASS TIME6. Review the day’s lesson in the evening (look at the class slides /

read the textbook section7. Have some interest in current events / affairs involving businesses8. DO THE REVIEW QUESTIONS GIVEN TO YOU BEFORE AN

ASSESSMENT (SAC)

SUCCESS IN VCE = GETTING YOUR BEST RESULT

Involves a partnership !!!!!

VCE Business Management Unit 3 & 4

4

http://www.vcaa.vic.edu.au/vce/studies/index.html

Outcome 1

On completion of this unit the student should be able to discuss and analyse the context in which large-scale organisations operate.

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Key knowledge

• the context which contributes to the unique nature of large-scale organisations;

• characteristics of large-scale organisations;

• variations in types of large-scale organisations, their objectives and related business strategies;

• typical management functions in large-scale organisations, including operations, finance, human resources, marketing, and research and development;• contributions, both positive and negative, of large-scale organisations to the economy;

• internal and external (operating and macro) environments of large-scale organisations;

• performance indicators used to evaluate the performance of large-scale organisations, including the percentage of market share, net profit figures, the rate of productivity growth, the number of sales, results of a staff and/or customer satisfaction survey, the level of staff turnover, level of wastage, number of customer complaints and number of workplace accidents;

• identification and characteristics of stakeholders of large-scale organisations, including their interests, possible conflicts and related ethical and socially responsible considerations.

Key Knowledge:

The context which contributes to the unique nature of LSO’s

(Section 1.1 in textbook)

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What is an organisation? 2 or more people working together

Has an internal structure: - positions of responsibility - tasks to be carried out by certain

people

Use of ‘resources’... (human, natural,& capital (man-made)

to create a product or service (output)

Has goals or aims to be achieved, as expressed broadly in a ‘Mission Statement’ and ‘Vision Statement’.

•From goals or objectives, strategies (plans of action) are undertaken to achieve those goals

What is an organisation? Adding these elements together, we arrive at the following definition:

“An organisation is a structured arrangement where two or more people work together to achieve some specific purpose. They take physical, human, capital (man-made) inputs, then process them to create outputs of goods and/or services.”

Examples: Large Scale Organisations

Large scale organisations make up less than 1% of all businesses in Australia

however, they generateapproximately 56% of total revenue and are vital to Australia’s economy

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The unique nature of LSOs• LSOs have complex management structures due to their size often

with many departments

• LSOs can produce of goods and services more cheaply than smaller businesses because they produce large volumes and thus can spread their costs over a greater number of units produced; LSOs can take advantage of ‘economies of scale’

• LSOs have access to large amounts of financial funds which allows them to expand their business

• LSOs can influence Governments because of their size and their needs (can influence legislation, the building of infrastructure etc)

• Operate in many countries

• Can have many owners who are not involved in the day to day operations of the organisation

The growth of LSOsLSOs have grown in number and size over the past 30 years due to:

Globalisation of & deregulation of markets - increased trade and - movements of people and financial resources between countries - Governments allowing more foreign investment and competition

from overseas businesses

Improvements in technology and communications - make it easier for organisations to expand nationally or internationally, thus increasing their size.

•Larger businesses can take advantage of ‘economies of scale’ ( lower unit cost of production as fixed costs can be spread over more units produced)

Key knowledge:

Characteristics of LSO’s(Section 1.1 in textbook)

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Characteristics of a ‘LSO’ More than 200 employees (Australian Bureau of Statistics definition)

Turnover / sales / revenue in the millions of $ per annum

Profit in the millions of $ per annum

Assets in the millions of $- items of value: land & buildings, cash, machinery, furniture, equipment, vehicles etc.

- Generally accepted that LSO assets worth > $200 million

Numerous branches / outlets nationally or internationally “a large network of stores nationally”, “transnational corporation”, “multinational corporation”

Characteristics of a LSO

Large percentage of the market share in their industry Eg: Woolworths has 45 % of the market share in the food and liquor industry

What is meant by market share ? Number of customers compared to ____________________________________ Total number of customers in that industry

Sales revenue or profits achieved compared to ________________________________________________________________

Total sales revenue or profits of all businesses combined within the industry

CHECKLIST- Characteristics of a LSO Employ over 200 employees

Over $200 million in assets

Extensive operations, often multi-national

Significant percentage of market share

Revenue and profits in the tens of millions of dollars

Large Scale Organisation?

Examples of LSOs Qantas

- 36000 employees - Sales revenue $16.2 billion - Profit (after tax) $970 million

- Over 200 aircraft (assets) - 36,449,000 passengers carried to 140 destinations in 37 countries

BHP Billiton - 41000 employees

- Sales revenue U.S $59.5 billion - Profit U.S $15.4 billion - 100 operations (mines) in 25 countries

Amcor Ltd - 21000 employees - Sales revenue $11 billion - 260 factories in 38 countries

ACTIVITY- LSO Characteristics

2009 BUS MGT EXAM

Question 2Wombat Airlines is a large-scale .......

a. Describe two characteristics that would identify Wombat Airlines as a large-scale organisation.

Typical management functions in large-scale organisations, including: • operations (Unit 3 Area of study 3)

• finance

• human resources (Unit 4 Area of study 1)

• marketing• research and development

(Section 1.1 in textbook)

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A Typical Organisational Structure

Operations

Marketing

R&DFinanceHuman Resource

s

Other functions may include:• Information Technology, Public Relations, Legal etc.

Chief Executive Officier (CEO)

Board of Directors

What are Management Functions?

• The functions of management are the different key areas of work within an organisation

These functions or departments include such areas as:

– Operations– Finance– Human Resources – Marketing– Research & Development

Management Functions

• Operations Manager– Deals with the actual production of goods and

services

• Finance Manager– Deals with the monetary, accounting and financial

aspects of the business including preparing accounting reports and financial budgets

• Human Resources Manager– Deals with recruitment, training and well being of

the staff, employees

Management Functions

• Marketing Manager– Deals with promotions, prices and distribution of

products, as well as gaining new customers

• Research & Development Manager– Deals with the generation of ideas and the

development of new goods and services, as well as testing the quality of the product.

ACTIVITY- Management Functions

Classify the following activities according to their management function:

– Preparing monthly profit reports– Recruiting new employees– Running an employee in-house training program– Planning the production ‘runs’ for the next month and

maintaining machinery & equipment on the production line

– Reviewing the organisation’s OHS policy– Preparing a new television advertising campaign– Developing a new and improved product

Key knowledge:

Variations in types of LSOs, their objectives and related business

strategies

(Section 1.2 & 1.3 in textbook)

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Types of LSOs

Large Scale Organisations can be of 4 main types:

1) Corporations (Companies)

2) Not for Profit Organisations

3) Government Departments

4) Government Business Enterprises (GBEs)

Types of LSOs1) Corporationsowned by ‘shareholders’ managed by a ‘CEO’ & a board of management (‘Directors’) who are elected by the shareholdersAim is to maximise profit for shareholdersOwners (shareholders) have LIMITED LIABILITY (not personally responsible for the corporation’s debts if it is unable to pay them)

Two types of corporations:

Public Companies (………….Ltd) Private Companies (……….. Pty Ltd)

Types of LSOs

Public Companies ………… LtdAre listed on the Australian Stock Exchange (ASX) Listed companies – ASX

Raise funds by offering shares (units of ownership) to the public via the ASX

Unlimited number of shareholders (At least 5+)

Public is able to buy and sell their shares (units of ownership) in the Company

Shareholders are able to receive dividends (part of the profit) based on the number of shares they hold. Dividends are declared once or twice a year

Types of LSOs

Public Companies …………… Ltd

Shareholders are also entitled to vote at the Annual General Meeting (AGM)

Why be a shareholder in a public corporation ??

• Shares may increase in value if the company makes good profits (your investment is worth more)

• Receive dividends hopefully at least once a year

What is meant by ‘market capitalisation’ ?The total number of shares held by the public x Value of each share

Basically, it is a measure of the overall value of the listed company.

Types of LSOs

Private Companies (…………………….Pty Ltd)

Not listed on the ASX (don’t initially need to or want to raise funds from the public)

Created by individuals who buy the units of ownership and become the shareholders (often family members). THEY COMMENCE A PRIVATE COMPANY RATHER THAN A PARTNERSHIP OR SOLE TRADER BECAUSE THEY WANT THE BENEFIT OF ‘LIMITED LIABILITY’ !!

Maximum of 50 shareholders

Examples

Rip Curl, Retravision, 7-Eleven.

Types of LSOs

2) Not for Profit Organisations (also called NGOs – non-government organisations) Private sector organisations, such as charities and foundations

Charities - ultimate objective is to lessen social problems to benefit the community

Foundations – set up to raise money for a particular social issue and raise awareness of that issue (eg Leukaemia Foundation)

Examples

Salvation Army, World Vision, Australian Conservation Foundation.

Types of LSOs

3) Government DepartmentsExist to implement Government policies and provide important services to society

Operate on a pre-determined budget (It receives money from the Government each year which it spends on services it is responsible for. It does not generate revenues / sales. It just spends money allocated to it for the year. It does not produce a profit.

Headed by a ‘Minister’ (an elected member of the Government selected by the PM/Premier) with Government employees (public servants) in the department

Examples: Department of Agriculture Fisheries and Forestry / Defence / Health and Ageing / Education, Employment and Workplace Relations / Foreign Affairs and Trade

Types of LSOs

4) Government Business Enterprises (GBEs)

Not listed on the ASX

Owned & operated by the government (public sector) – they are not shareholders

Government elects a management team to operate the organisation (Board of Management)

Has sales revenues and expenses (costs) like a corporation

Aim is to maximise / produce a ‘healthy’ profit like a public corporation but also there is a community service aspect

Examples

Australia Post, Medibank Private, Vic Roads.

Types, Objectives & Strategies of LSOsPrivate SectorPrivate Sector

Owned by Private individualsPublic SectorPublic Sector

Owned and run by the Government

Government Government DepartmentsDepartments

Government Government Business EnterpriseBusiness Enterprise

Private Private CompanyCompany

Public Public CompanyCompany

Non Profit Non Profit OrganisationsOrganisations

Not on ASXNot on ASX

2-50 Shareholders

Restricted Restricted transfer of transfer of

sharesshares

Objective to make a profit

for shareholders

Rip Curl Pty Rip Curl Pty LtdLtd

Listed on ASXListed on ASX

5+ Shareholders

Shares traded Shares traded on ASXon ASX

Objective to make a profit

for shareholders

Qantas Airways Ltd

Run like a Run like a Corporation but Corporation but

NOT ON ASXNOT ON ASX

Profit but also Profit but also service motivatedservice motivated

Make a profit for the government but

also to provide a service

Australia PosAustralia Postt

Medibank Medibank PrivatePrivate

Seen to be Seen to be inefficientinefficient

Bureaucratic (Minister in charge with many public

servants)

Service motivatedService motivated

Does not generate Does not generate salessales

Given a Given a predetermined predetermined

budget (money) to budget (money) to spend each yearspend each year

Defence DeptDefence Dept

Charities & Charities & FoundationsFoundations

Objective to raise funds to provide for a

cause or for the disadvantaged

World Vision World Vision AustraliaAustralia

Salvation ArmySalvation Army

St Vincent De St Vincent De Paul SocietyPaul Society

Key Terms• Privatisation (GBE turns into Public Corporation)

– Where a government business enterprise (GBE) is sold to private investors or floated on the ASX, and the business is run primarily to make a profit; (i.e. Public sector asset or organisation now becomes part of the private sector)

– Governments traditionally are seen to run inefficiently so privatisation will mean:

Cash injection for the Government because they sell it lower prices for consumers as the business becomes more

efficient to run and have lower costs

E.g. Telstra (89% shares held by public, and 11% by government) CBA was once government owned

Key Terms• Public Sector– Government owned• Private Sector– Non-Government owned. Owned by private enterprise – individuals or groups

of people.

• Public Private Partnership (PPP)– A joint venture between the Government and private

enterprise in order to complete a project.

– The government benefits by creating infrastructure for the community, without having to finance the entire project , and the private organisation benefits by gaining exclusive operation of the asset for an agreed period of time in order to earn revenue.

E.g. Eastlink Citylink Desal plant in Victoria

Objectives and Strategies of LSOs

Strategies (Plans of action)

Mission Statement

Vision Statement

Objectives

What is a Vision Statement ?

A brief statement that broadly describes the future direction and outlook of the organisation.

It is the organisation’s value and philosophy

E.g. Telstra’s Vision

“To improve the way people live and work”

What is a Mission Statement ?

Sets out the reasons for the LSO’s existence & it’s principal activities

what the corporation does why it exists

E.g. Telstra’s Mission

“We build technology and content solutions that are simple, easy to use and valued by our customers. We strive to serve and know our customers better than anyone else”

What is a Mission Statement ? Eg: Commonwealth Bank Ltd

“To be Australia’s finest financial services organisation through excelling at customer service”

Eg: Coles

“To give the people of Australia a shop they trust, delivering quality, service and value”

What are objectives?

Describes the goals or aims of the organisation for the short, medium and long term.

The purpose is to fulfil the company’s Mission.

Examples...

What are objectives?

Financial ObjectivesIncludes the level of profits, market share and revenue.

Eg. Company may want to increase profits by 10% in 2011

Service ObjectivesProvide a level of service to the customers.

Eg. To reduce the time spent by customers on hold by 5% before May 2011

What are objectives?

Social and Ethical Responsibility ObjectivesBecoming caring corporate citizens.

Eg. To increase donations to charities by 20% in 2011

Environmental ObjectivesCaring for the environment and reducing our impact

Eg. To reduce carbon footprint by 15% by 2013

What are strategies?

Statements of actions or plans outlining how the

objectives are to be achieved

What is the link between objectives and strategies ?

Objectives or goals are formulated based on the organisation’s vision and mission and then plans of action or strategies are formulated to ensure that objectives are achieved

Key knowledge:Contributions, both positive and

negative, of large-scale organisations to the

economy

(Positive Contributions – Section 1.4 in textbook)(Negative contributions – Section 1.5 in textbook)

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LSOs- Positive Contributions

• LSOs contribute to the nation in many ways including:

– Economic Growth– Employment (direct & indirect)– Research & Development– Infrastructure growth– Export Income– Industrial Base– Training and Skills Development

LSOs- Positive Contributions

• Contribute to ‘economic growth’– LSO’s are continually expanding and producing more

products leading to an increase in the nation’s Gross Domestic Product (GDP), which is the total market value of all goods and services produced in Australia in a year

– LSO’s contribute roughly 55% of Australia’s GDP

LSOs- Positive Contributions

• Employment (Directly & indirectly)

– LSO’s provide employment opportunities to approximately 2.7 million Australians, the equivalent to roughly 33% of private sector (non-government) employment both directly (those who work in LSOs) or indirectly through businesses that exist due to LSOs activities

• Research & Development – R&D

– LSO’s have the financial capacity and incentive to invest heavily in innovation and invention to gain a competitive advantage. Smaller companies may later copy these innovations leading to overall increased efficiency. LSOs spend approximately $8+ billion per annum on R&D

LSOs- Positive Contributions

• Stimulate Infrastructure Growth

– LSO’s force governments to invest in the provision of essential services that allow for the expansion of commerce and industry in such areas as roads, railways, water, power, education, health and telecommunications (especially when LSOs locate in regional areas of Australia)

– This growth in infrastructure can also be utilised by smaller businesses and society as a whole

LSOs- Positive Contributions

• Export Income

– LSO’s look to export their products to overseas markets, thus generating export income for the Australian economy and improving Australia’s ‘Balance of trade’ (Exports – Imports)

– One fifth of the revenue of LSO’s comes from exporting goods and services overseas. (Income received when other countries buy our goods & services)

LSOs- Positive Contributions

• Industrial base (variety of goods & services)

– LSOs increase and make a large contribution to the range of products and services produced and available in Australia as well as exported – we have a more DIVERSIFIED economy because of LSOs

• Training and Skills Development

– LSOs provide ongoing training and skill development to employees thus increasing the skill base and productivity of the Australian labour force

– Smaller businesses may also benefit by employing these former LSO skilled workers if they change jobs to a smaller business

LSOs- Negative Contributions

• Although they make enormous contributions to the nation, there are some negative impacts that LSOs have including:

– Downsizing– Outsourcing work – Moving operations overseas– Anti-Competitive Practice– Environmental damage– Perceived lack of community goodwill

LSOs- Negative Contributions

• Downsizing resulting in unemployment

– Downsizing is restructuring the organisation resulting in a reduction in staff numbers in order to cut costs and improve efficiencies and profits

– As LSO’s look to become more efficient and increase productivity, they often look to reduce their employee numbers. As a result, staff redundancies are commonplace in LSO’s

LSOs- Negative Contributions

• ‘Outsourcing’ results in unemployment

– Outsourcing is the transferral of non-core business activities to an external organisation. Examples include telephone customer service, legal and accounting services, IT services, cleaning, maintenance of equipment

– LSO’s look to improve efficiency by having specialists deal with areas of their business that are not their core activities in order to reduce costs and increase the quality of the service.

– This often results in further staff redundancies• eg customer service to Asia

LSOs- Negative Contributions

• Anti-Competitive Practice

– May practise “bullying” behaviour by destroying smaller competitors in their market through undercutting prices or buying them out

– LSOs in the same industry may practise ‘collusion’ by fixing prices in agreement with each other until such time as smaller businesses can no longer compete and there is little or no competition

LSOs- Negative Contributions

• Environmental damage

– LSO’s are often responsible for much of the environmental damage we see on the planet through pollution, poor waste management, environmental accidents and excessive emission of greenhouse gases.

– This often results in large economic costs to clean up the damage and makes resources unusable for future generations.

LSOs- Negative Contributions

• Perceived lack of community spirit

– At times LSOs are perceived as being too big and heartless, treating consumers and employees poorly

– Import a lot of their materials requirements from overseas rather than buying from Australian suppliers

– Possibly argued that they don’t contribute / donate enough of their profits to community projects

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Key knowledge:

Internal and external (operating and macro)

environments of large-scale organisations

(Section 1.6 in textbook)

The environments of LSOsInternal EnvironmentInternal EnvironmentFactors within the organisation that the organisation has control over

External Environment Factors outside the organisation that the organisation has some or little control over. Made up of 2 environments:

Macro EnvironmentBroader factors in society in which the organisation operates – very little or no control

Operating EnvironmentOutside factors which the organisation interacts with in conducting business on a day to day basis – some control

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The Internal Environment of LSOs

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• The environment within the organisation itself.

• Within this environment a business has a high degree of control or influence:

– Managers (Number of levels and positions)– Employees (their tasks and responsibilities)– Organisational rules, policies & procedures– Corporate culture (shared values and beliefs)– Structure of the organisation (departments)– What & how the organisation produces it’s goods

and services and markets it’s product(s)

The External Environment of LSOs

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• Factors from outside the organisation that impact on business performance.

• The organisation has at times some control, little or no control over these factors.

• External factors are further broken down into the

Operating environmentMacro environment

The Operating Environment of LSOs

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• Those factors which the organisation interacts with in conducting business often on a day to day basis

• The organisation may have some control over these factors.

• Sometimes these external parties can affect change within the organisation

Suppliers Customers Unions Competitors Banks

Protest & Lobby groups

• Suppliers•Unions & lobby groups•Customers•Creditors•Competitors

The Macro Environment of LSOs

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• Those broader factors in society in which the organisation operates

• The organisation has no control over these factors

• These factors could either negatively threaten or cause positive changes within the organisation

Examples include:

• Social and Demographic factorsageing of the population changing of society attitudes to issues (environment ?) birth rates and migration (population growth)

The Macro Environment of LSOs

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• Technological DevelopmentsInvention and improvement of technology in the way goods are produced and how communication takes place

• State of the economy (Domestic and Global)Boom – high levels of employment, consumer spending

and production is high

Recession – high unemployment, low consumer spending and production by business is low

• Legal and Political Issues (laws & changes of Government)Governments create and can change laws and different governments have different policies they would like to implement. E.g. carbon tax, GST

The Macro Environment of LSOs

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• Education standards and training facilities

Affects skill levels of job seekers and thus potential employees for organisations, as well as the availability of people with certain skills that the LSO needs

• Increased globalisation and trade between countries

Cheaper imports coming into Australia (negative aspect of globalisation)

vs. New markets for Australian businesses

(positive aspect of globalisation)

Key knowledge:

Performance indicators used to evaluate the performance of large-scale organisations, including:

the percentage of market share, net profit figures, the rate of productivity growth, the number of sales, results of a staff and/or customer satisfaction survey, the level of staff turnover, level of wastage, number of customer complaints and number of workplace accidents

(Section 1.7 & 1.8 in textbook)

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Performance Indicators

Percentage of Market SharePercentage of Market ShareNet Profit Net Profit

Rate of Productivity Growth Rate of Productivity Growth Number of SalesNumber of Sales

Staff/Customer Satisfaction Staff/Customer Satisfaction Level of Staff TurnoverLevel of Staff Turnover

Level of WasteLevel of WasteNumber of Customer Complaints Number of Customer Complaints Number of Workplace AccidentsNumber of Workplace Accidents

Performance Indicators (PIs)

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• Specific criteria used to measure the efficiency and effectiveness of the organisation’s performance.

Efficiency - how well the organisation using it’s resources (human / capital / natural) to produce it’s output (productivity) **aim to increase output without increasing resources (inputs) or maintain output levels with less resources (inputs) used

Effectiveness - how well is the business achieving it’s objectives/goals

Mission/Vision Statement More specific corporate goals

Department Goals Individual employee goals

Efficiency (Productivity)The levels of output (goods and services produced) from a

given amount of inputs (resources)Current situationInputs Outputs$100000 to create 10 carsIncreases in productivity / efficiency$100000 to create 15 cars$90000 to create 10 carsDecreases in productivity / efficiency ?$100000 to create ____cars$_______ to create 10 cars

Performance Indicators (PIs)

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Provide relevant and measurable data to evaluate a business’ performance.

PIs need to be ‘measurable’, ‘reliable’ (accurate), and ‘comparable’ between periods of time within the business and with other businesses.

Qualitative PIs – PIs based on opinion or personal feedback / responses which are often subjective in nature (e.g. Employee or customer feedback from surveys)

Quantitative PIs – Based on numerical data and can be expressed in a numeric format. Objective in nature.

Performance Indicators (PIs)

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Percentage of Market Share

The proportion of company sales (or customers) of company sales (or customers) compared to total industry sales (or customers) compared to total industry sales (or customers) expressed as a percentage expressed as a percentage

Performance Indicators (PIs)

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Net Profit figures

• Profitability measures the Profitability measures the earning potentialearning potential of an of an organisation by looking at the revenue from sales organisation by looking at the revenue from sales and subtracting the costs of production and subtracting the costs of production

From this, the amount of company taxes is then From this, the amount of company taxes is then subtracted to obtain a final profit figure. subtracted to obtain a final profit figure.

Net Profit = (Revenue – Expenses) - TaxNet Profit = (Revenue – Expenses) - Tax

Performance Indicators (PIs)

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Rate of Productivity Growth

• Productivity measures the amount of output produced from a given number of inputs (resources such as e.g. materials, time , labour)

• If the rate of productivity improves from one year to the next, then the business is generally performing well

E.g. 2million cars produced (outputs) in 6 months (input).If in the next 6 months we create 2.5 million cars in 6 months our Productivity, and therefore efficiency has improved by 25%

Performance Indicators (PIs)

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Number of Sales (Volume of sales)

• This is the number of units of a particular product sold in a given period of time

• If the number increases, generally, the business would be performing better

Key Performance Indicators (PIs)

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Staff/Customer Satisfaction

• The level of staff or customer satisfaction can be obtained by way of a survey.

• For customers, it is the degree to which they are happy with the products and the level or service offered by the company.

• For staff, it is the degree to which they are happy with the work, their environment and level of pay.

• If the level of satisfaction is increasing, the company would be performing better

Key Performance Indicators (PIs)

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Level of Staff Turnover

• Staff turnover is the number of employees who are leaving an organisation and is used as an indicator of staff satisfaction.

• If staff turnover is high it generally indicates that motivation levels are low amongst employees and there may be issues that need to be corrected within the organisation.

Performance Indicators (PIs)

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Level of Waste

• This is a measure of how efficiently the company uses its resources

• Many resources are under-utilised or left over at the end of the production process. This is known as waste

• By reducing waste, organisations would reduce production costs, reduce the costs of disposal and the impact on the environment

Performance Indicators (PIs)

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Number of Customer Complaints

• This is a measure of customer satisfaction with the products and level of service.

• It is important to realise that for every customer who complains, there are many more who don’t.

• As this number is reduced, it is a sign that customers are becoming happier with the quality of the company’s output.

Performance Indicators (PIs)

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Number of Workplace Accidents

• This is a measurement of safety in the workplace

• Workplace accidents are not only bad for those involved and diminish a company’s reputation, but they also halt production and cost the company money

• By decreasing the number of accidents through providing a safe and healthy workplace, businesses can increase employee productivity

Performance indicators to assess certain areas in an organisation

• Operations (Production)Operations (Production)Rate of Productivity growth Rate of Productivity growth (inputs vs outputs), Number of times (inputs vs outputs), Number of times

pproduction targets achieved, stock levels, roduction targets achieved, stock levels, level of wastage in level of wastage in productionproduction, number of defective items produced, Number of , number of defective items produced, Number of items produced per houritems produced per hour

• SafetySafetyNumber of workplace accidentsNumber of workplace accidents, staff knowledge of OH & S, number , staff knowledge of OH & S, number

of days lost to accidents of days lost to accidents

• EnvironmentEnvironmentNo. of environmental spillages, Money spent on environmental No. of environmental spillages, Money spent on environmental

improvements and community programs, amount of green house improvements and community programs, amount of green house emissionsemissions

Performance indicators to assess certain areas in an organisation

• Financial PerformanceFinancial PerformanceNumber of Sales (volume), Number of Sales (volume), Sales $ levels, Expense $ levels, Sales $ levels, Expense $ levels, Net Net

Profit $Profit $, ,

• Human Resources (HR) managementHuman Resources (HR) managementTraining days per employee p.a, $ spent on training, % of vacancies Training days per employee p.a, $ spent on training, % of vacancies

filled, level of employee absenteeism, length of service of staff, filled, level of employee absenteeism, length of service of staff, level of staff diversity, Number of industrial disputes, level of staff diversity, Number of industrial disputes, Results of Results of staff satisfaction surveys, level of staff turnover (resignations)staff satisfaction surveys, level of staff turnover (resignations)

• MarketingMarketing% of market share, Number of sales (volume), % of market share, Number of sales (volume), Sales $ levelsSales $ levels, , results results

of customer satisfaction surveys, Number of customer of customer satisfaction surveys, Number of customer complaintscomplaints

Key Terms linked to performance indicators

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Benchmarking

• Measuring organisation’s performance against that of the industry leader, which may be an organisation in Australia or overseas, that is well known for its excellence.

Best Practice• Using the most efficient and effective techniques

in all management functions / departments to achieve the industry benchmark

Key Knowledge:

Identification and characteristics of stakeholders of large-scale organisations, including their interests, possible conflicts and related ethical and socially responsible considerations.

(Section 1.9 in textbook)84

Who or what are Stakeholders?

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• Stakeholders are any individuals, groups or institutions who

- interact with the organisation or

- have a vested interest in the activities, conduct and performance of the organisation

• Stakeholders can be internal or external to the organisation

Best Practice• Using the most efficient and effective techniques

to duplicate the industry benchmark

The Typical Stakeholders of a LSO

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Board of Directors and the CEO Management Employees Owners [shareholders – if a corporation]

Customers Suppliers Competitors Unions [represent employees in the LSO] Consumer groups [eg: ‘Choice’] Government [Local/State/Federal] Government regulators [ACCC and ASIC] Financial institutions [lenders of money e.g. bank] Local Communities Protest or lobby groups [e.g Greenpeace]

INTERNAL

EXTERNAL

Conflicts Between Stakeholders Interests

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• At times, the interest of various stakeholders will conflict as they have different expectations of the business

Possible areas of conflict between stakeholders include:

Selling prices charged for products or services The large profits made by organisations CEO and upper management salaries and bonuses Outsourcing of work to other businesses in Aust. and overseas Wages of employees and conditions of their work Overseas Suppliers of LSOs e.g. sourcing cheaper raw materials vs quality control

poor ethical standards countries with poor human rights records etc.

Can you think of any more?

Stakeholder Conflict Activity

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• Which stakeholders are likely to have conflicting opinions about the following strategies?

–Outsourcing work or moving off-shore

–Wage rises for workers

–An increase in Bank Fees at the ANZ–New policies about the use of facebook during

work hours

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Main Stakeholders and their Interests

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Shareholders

• People who are partial owners of LSO’s through the purchase of shares

• They are generally interested in a solid return on their investment, so are motivated by profit

• This may come at the expense of the company acting in a socially responsible manner, as this costs money

• However many shareholders are now only purchasing shares in companies that are known to be ethical and socially responsible

Main Stakeholders and their Interests

9191

Employees

• Interested in fair wages and conditions, a healthy & safe workplace, work-life balance and job security

• This can conflict with the interests of other stakeholders such as managers and shareholders, as providing such things can conflict with profitability in the short term

• Employees also are increasingly becoming aware of ethical issues and many will now choose not to work for companies who are not ethical or socially responsible

Main Stakeholders and their Interests

Main Stakeholders and their Interests

9292

Customers

• They are interested in lower prices, better quality products and high levels of service

• Often customers will purchase products from organisations known to be ethically and socially responsible

9393

Main Stakeholders and their InterestsUnions

• Unions have the interests of employees at heart and negotiate more favourable pay and conditions on employees behalf

• The actions of unions can sometimes conflict with the actions of other stakeholders such as shareholders and management, as the level of profits may be impacted upon by an increase in staff wages

• They are interested in companies acting ethically in the way they treat their staff and in their Occupational Health & Safety practices

9494

Main Stakeholders and their Interests

Suppliers

• Suppliers provide LSO’s with the raw materials used in the company’s operations

• They wish for the success of the organisation so they can guarantee continuing business

• Most organisations realise it is beneficial to deal with ethical and socially responsible suppliers in order to improve delivery times, enhance their own reputation and improve the quality of their own products

9595

Main Stakeholders and their InterestsCommunity members

• Society expects organisations to act ethically and show concern for the community

• They are interested in such factors as:

- the level of waste

- amount of greenhouse gas emissions

- the organisation’s carbon footprint

- whether they are supporting the local community through sponsorships

9696

Main Stakeholders and their InterestsGovernments

• Are interested in the tax revenue received from company profits so are happy when companies announce large profits.

• They also like the contributions companies make to the economy such as to GDP and employment.

• However, they too are beginning to realise the importance of organisations acting socially responsible as global warming has a potentially damaging impact on the economy

9797

Activity – Case Study “Chemco”

Chemco Pty Ltd is a large industrial chemical manufacturer based in South Australia.

Chemco intends to build a toxic dump waste 10 kilometres from the country town of Woopidoo which as a population of 9000 people, of which 900 are directly employed in this LSO.

The waste dump is designed to comply with very strict environmental standards and according to Chemco’s CEO is vital for the long term survival of this manufacturing facility.

It will significantly reduce the costs of transporting waste to a depot 300 kilometres away thus impacting positively on company profits.

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Activity – Case Study “Chemco”

Which stakeholders would have an interest in this situation and what would their stance be ?

Stakeholder Stance

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Ethics & Social Responsibility (ESR)Ethics

• Moral standards and principles that guide behaviour (many businesses have a ‘Code of Ethics’ or ‘Code of Conduct’ for employees)

Ethical Management• Process of abiding by the developed organisational moral

standards and acting in a way that is deemed acceptable to the interests of society as a whole

Social Responsibility• A general concern for the well-being of society and an awareness

of the organisation’s impact upon society and the environment. • Obligations a business has to the well being of its stakeholders,

over and above its legal responsibility.

100100

Ethics & Socially Responsible Management (ESM)

Triple Bottom Line

• In the past, companies would measure their performance by predominantly looking at the ‘financial bottom line’. (final net profit figure)

• Companies are now expected to measure their performance by taking into account ALSO social and environmental performance as well as their financial performance.

This is known as the Triple (3) Bottom Line

Best Practice• Using the most efficient and effective techniques

to duplicate the industry benchmark

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Ethics & Socially Responsible Management (ESM)

ESM- Activity

1. Using the internet, research the ESM policies and activities of 2 Australian LSOs (for your ‘Business

Profile’)2. Complete the ESM activity for Woolworths