MANAGEMENT IN ACTION
Chapter 6: HSC course
(40% of course time)
This topic examines the practical nature and responsibilities of management and focuses on its planning, organising, leading and controlling functions in response to environmental change.
Expected Outcomes
On completion of this topic students should be able to:
recognise management theories underpinning businesses
relate differences in management styles to changing organisational structures
explain the key functions of management
evaluate various management planning, organising, leading and controlling techniques
critically analyse published financial reports
outline the types of debt, equity and leasing finance
describe the role of finance and cash flow in the operation of a business
explain the role and importance of working capital management.
Terminology
Formal and informal organisations, proactive, line management, staff/functional management, span of control, chain of command, bureaucracy, delegation, downsizing, flattened management structures, capital, gross profit/loss, cost of goods sold, net profit/loss, selling and distribution expenses, general administrative expenses, financial expenses, current and non-current assets, investments, intangible assets, current and non-current liabilities, statement of cash flow, balance sheet, revenue/profit and loss statement, debenture, commercial bill, mortgage, promissory note, accountability, benchmarking, quality assurance, total quality management, world best practice, quality circles, just-in-time, kaizen, quick response, prevention costs, appraisal costs, failure costs, zero defects, consumerism, planned obsolescence, level playing field, organisational transformation.
Possible Approaches
See Business Studies Support Document.
Area of Study
1. An overview of business
The role and responsibilities of business in the national economy.
Review the prime function and goals of a range of businesses.
Review the classifications of business.
Review the support services (internal and external) in a range of businesses.
Review the importance of the business plan in the operation of a range of businesses studied in the Preliminary Course.
2. The business environment
Review the distinction between the internal and external business environments of a range of businesses.
Sources of change in the internal environment:
- resources (human, natural, manufactured and financial)
- markets (human, natural, manufactured and financial)
- accelerating technology.
Sources of change in the external environment
- economic, geographic, social, institutional, legal, political, international and technological influences.
Stakeholders in business:
- customers/clients
- employees
- managers
- owners/shareholders
- creditors/financiers
- government
- society
- environment
- future societies and environment.
3. The nature of management
Definition of management.
Importance of management.
Functions of management:
- planning
- organising
- leading
- controlling.
Brief overview of management theories, including classical/scientific, behavioural, quantitative, systems, contingency, management-by-objectives, total quality management, value-added management.
Effect of management theories underpinning a business on its:
- organisation and allocation of tasks to staff
- organisational structure, including pyramid, flat, federal decentralisation
- levels of management including top, middle, supervisory
- management styles, including autocratic, democratic, collegial, laissez-faire.
Responsibilities of management to the stakeholders in business:
- managing change
- social justice
- ecological sustainability
- compliance with the law
- codes of practice.
4. Actions of management in implementing change
(a) Planning
Setting the mission statement and organisational objectives.
Sources of planning ideas from the internal and external business environment.
Making plans and decisions about inputs, work in progress and outputs through:
- strategic planning
- operational planning
- tactical planning.
Establishing the sources of finance:
- owners' equity
- sources and types of debt
- leasing
- factoring
- comparison of debt versus equity, including terms and costs, gearing/leverage, matching the term and source of finance to business purpose and structure.
Planning tools:
- assumptions and limitations of planning tools
- financial modelling, break-even analysis, financial performance measures, and budgets (including capital, cash, raw materials, labour hours, inventory purchases)
- decision-making techniques, including SWOT analysis, decision trees,
schedules, critical path, staff teams, consultants.
(b) Organising
Translating plans to reality.
The organisation process:
- consideration of plans
- determining the work activities
- classifying and grouping activities
- assigning work and delegating authority
- establishing the chain of command.
Approaches to organising the chain of command, such as functional, geographic, product, customer.
Adapting organisational structures in response to environmental change, including technological change.
The cyclical flow of funds to and within a business, including paying for raw materials, production costs, overheads, collecting receivables.
Working capital management, including control of cash, receivables, inventories, costs, leasing, factoring.
(c) Leading
Power bases of leadership, including legitimate, expert, referent, reward, coercive.
Expertise in the use of accounting and other financial information, including knowledge of the objectives of accounting, provision of useful information to stakeholders.
Leadership styles continuum from task-oriented, to people-oriented including authoritative, consultative, participative.
Relating leadership styles to changing organisational structures.
(d) Controlling
The control process:
- establishing standards
- measuring performance
- taking corrective action.
Types of controls:
- prevention (input controls)
- concurrent (work-in-progress controls)
- feedback (output controls).
Management controls:
- methods such as management information systems, key indicator management
- applied to areas such as human resources, inventory, sales, marketing, production, finance, risk.
Financial controls:
- the use of budgets for guiding the use of inputs, and identifying major deviations from the budget
- analysis and interpretation of financial reports within and across business entities over time
- tools for analysis including liquidity ratios, leverage/gearing ratios, profitability ratios, audits
- limitations of financial reports.
Production controls:
- quality control
- program evaluation review technique
- critical path analysis.
5. Management in Action Case Studies
Brief examination of management responsibilities, functions and styles in a range of businesses to gather illustrations of the dynamic nature of business.
TERMINOLOGY
Accrued Wages - Kept over the end of the financial year. (Incurred by the business but have not yet been paid.)
COGS - (St1 + PC - St2)
Proactive - Plan for the future ahead of time. Management has to be proactive to stay ahead of change.
line management - management of production line
benchmarking - comparing the organisation to recognised standards for that particular type of business. Eg Benchmark GP ratio for a retailer in the hardware industry is 30%, while NP ratio is 7%
quality circles - groups of staff which get together and develop ways of doing something better?
debenture - long term borrowing by a business from the general public
commercial bill - contract for a short term loan (eg 90 or 180 days) between businesses to get additional WK.
level playing field - all businesses face same restrictions (eg no tariffs like in international trade)
zero defects - manufactured products have zero defects (due to quality control) to avoid wastage, cost excesses, and customer complaints.
promissory note - a note from debtor to creditor promising to pay sometime in the future.
Federal decentralisation - where large companies divide themselves up in to smaller self contained business units, with their own management.
Unknown Terminology
Formal and informal organisations, staff/functional management, quality assurance, quick response, prevention costs, appraisal costs, failure costs, consumerism
kaizen: Japanese employees are encouraged to strive for quality improvements in all aspects of life, including work. Continual improvement in business.
Organisational transformation: Most applicable to businesses facing constant change in the internal and external business environment. Transformational Managers concentrate on embracing a business culture that encourages change. All individuals accept and welcome change as part of normal business operations, they also have a shared vision.
1. An overview of business
The role and responsibilities of business in the national economy.
Business has a number of different roles:
Review the prime function and goals of a range of businesses.
The prime function is the central core activity of the business. It can change over time, eg CSR.
Goals and objectives are those things which the business seeks to achieve through its operations. There are three broad groups of goals:
Social goals are becoming more important. The purpose of a business's social goals is to benefit certain sections of the community within which the business operates.
Review the classifications of business.
Businesses can be classified in a number of ways:
Review the support services (internal and external) in a range of businesses.
All businesses are trying to gain a competitive edge and can do so through the knowledge and skills of specialist people. The main types of support services are in the following areas:
Administration and information services
This support function is responsible for such things as:
Accounting and finance
Accounting is concerned with the producing of financial statements from records kept on a day to day basis.
Main statements - profit and loss statement, balance sheet and cash flow statement. These statements provide 'pictures' of the performance and financial position of the business, which can be compared to industry benchmarks.
Finance involves ensuring the business has sufficient funds to operate effectively, and it involves evaluating the financial impact of various business activities. This evaluation is concerned with:
Employee relations
This support function is concerned with:
Marketing
This support function is concerned with communicating and developing a relationship between the business and its customers. Marketing plays a central role in identifying and evaluating market opportunities since it:
This involves market research and determining the marketing mix of product, price, promotion and distribution.
Most larger businesses have internal support services. Small businesses often use external specialists such as accountants and marketing consultants for limited periods of time to gain specialist advice.
There has recently been a trend towards the provision of support services for medium to large businesses by other business entities. This is called outsourcing. Under this system the business concentrates on its prime function and outsources other functions - eg: Westpac sold buildings and leased them back.
The Business Plan
Review the importance of the business plan (in the operation of a range of businesses studied in the Preliminary Course).
A formal business plan is a written statement by the owners or mangers of a business and outlines the goals and objectives of the business as well as the steps to be taken to achieve them.
The business plan (through SWOT analysis) takes into account factors from the external environment such as:
and factors from the internal environment such as:
The steps taken in developing a business plan are as follows:
Situational Analysis
|
Strategic Audit
|
| Objectives |
Strategies
|
Implementation
|
| Monitoring and Modifying |
2. The business environment
Review the distinction between the internal and external business environments of a range of businesses.
The business environment consists of all the factors that have actual or potential influence on the operation of a business. The business environment is a source of both business opportunities and threats.
A business has varying degrees of control over some of the factors in the environment. When a business has some control over factors in the environment these factors relate to the internal business environment. Some of these factors are:
There are also aspects of the business environment that are largely beyond the control of managers. These external factors include:
The central task of management has shifted to the leadership of change.
Sources of Change
Sources of change in the internal environment:
- resources (human, natural, manufactured and financial)
- markets (human, natural, manufactured and financial)
- accelerating technology.
Resources: What the business draws on to produce its product or service
Markets: Where the business sells its product or service.
Customers
Customers' needs are constantly changing. A business needs to change with its customers. Successful businesses monitor customer needs and adjust products and services accordingly. This can be done through developing customer profiles of their target market(s).
Suppliers
Changing products and prices
Financial
Changing type and amount of credit. Eg. A shorter time to repay will affects a businesses working capital.
Labour
Availability and skills of people to be employed.
Sources of change in the external environment
- economic, geographic, social, institutional, legal, political, international and technological influences.
Economic
The business cycle: periodic fluctuations in business activity.
Things which affect the level of economic activity are changes in business investment, government economic policy and the international economic environment.
Geographic influences
The location of markets - markets consist of people.
The most important type of geographic influence is demography. This includes:
The physical location of a business is another important geographic factor.
Social influences
The values of society have a tremendous influence on the activities of a business.
There has been a relatively recent demand for businesses to become socially responsible.
Institutional influences
Institutional influences are associated with some of the more important groups in society and include:
Legal influences
Laws regulate business in such matters as location, ownership, protection of consumers, licensing and taxation.
Political
The policies of the three levels of government impact on business.
International influences
Some of the main influences in the international business environment for Australia are:
International influences (competition from overseas) have become more important following deregulation and the removal of Tarriffs and quotas.
Technological influences
Technology has the capacity to completely change the way business operates. It includes machinery and computers as well as knowledge and knowhow.
New ways of making products, new product innovations and improved quality can threaten the very existence of a business if it fails to respond to these changes quickly enough.
Stakeholders in business
Stakeholders in business:
- customers/clients
- employees
- managers
- owners/shareholders
- creditors/financiers
- government
- society
- environment
- future societies and environment.
Customers/Clients
Employees
Managers
Owners/Shareholders
Creditors/Financiers
Government
3. The nature of management
Definition of management.
Importance of management.
Nature and Importance of Management
Management involves the creation of an environment that harnesses special skills to achieve the objectives of a business.
Businesses have to possess flexibility and be proactive.
Businesses require a significant degree of employee commitment. Effective managers ensure that all employees are committed and working towards the common goal.
Today's business leaders must have:
Organisational Transform - refers to changes in systems and processes resulting in improvements in quality, efficiency and competitiveness.
MANAGEMENT THEORIES
Brief overview of management theories, including
Pendulum
One extreme
Scientific Management
Middle
Continency Theory
TQM (near HRM)
Other End
HRM
MANAGEMENT THEORISTS (sheet)
Robert Owen
Charles Babbage
Henry Fayol
Principles of management:
Advocated Definite business plans
*Frederick W. Taylor
Scientific Management - Problem was that it treated workers as less than human, as parts of a machine.
F + L Gilbreth
Elton Mayo
Douglas McGregor
Rensis Likert
*Maslow 1908 - 1970
Theory of motivation based on Hierarchy of needs.
Basic -> Complex
William Ouchi
Developed Theory Y
Japanese. Support and participation of employees.
The Future
New kinds of organisations will:
MANAGEMENT STYLES
Classical/Scientific Management
Behavioral Management
Quantitative Management Approach
Systems Management
Contingency Theories
Management by objectives (MBO)
Total Quality Management
Value Added Management
Just in Time management
Best Practise Management
Current emphasis on 'best practice management' managers models their management on what are generally considered to be the best practises at the time.
EFFECT OF MANAGEMENT THEORIES
Effect of management theories underpinning a business on its:
- organisation and allocation of tasks to staff
- organisational structure, including pyramid, flat, federal decentralisation
- levels of management including top, middle, supervisory
- management styles, including autocratic, democratic, collegial, laissez-faire.
MANAGEMENT STYLES
Autocratic
Democratic
Collegial
Laissez-faire
RESPONSIBILITIES OF MANGERS TO STAKEHOLDERS
Responsibilities of management to the stakeholders in business:
- managing change
- social justice
- ecological sustainability
- compliance with the law
- codes of practice.
Managing Change
Change is a fundamental aspect of an organisation strategic planning
Principles for effective management of change:
Karpin Report
A report on change in the Australian business environment over the next 10-20 years. Major changes will include:
Social Justice
Responsibility of business towards society
Ecological Sustainability
'Development which meets the needs of the present without compromising the ability of future generations to meet their own needs'
Keeping the environment for future generations
Planned obsolescence -> consumerism. Negative impact on environment
Compliance with the Law
Codes or Practice
4. Actions of management in implementing change
FUNCTIONS OF MANAGEMENT
PLANNING
(a) Planning
Setting the mission statement and organisational objectives.
Before getting down to the planing process, management should establish the main purpose of the business and where it is going. The mission statement outlines the broad purpose and values of the business enterprise.
Mission Statement ->
Situational Analysis ->
Objectives ->
Strategies and Tactics
Planning determines where the business is going and how it should get there.
It involves establishing the best ways to achieve the overall goals and objectives of the business.
Planning is the key to short and long term success. Effective planning provides:
Organisational objectives divide the business operation into achievable manageable outcomes which can be measured and evaluated.
SOURCES OF PLANNING IDEAS
Sources of planning ideas from the internal and external business environment.
Internal
External
TYPES OF PLANS
Making plans and decisions about inputs, work in progress and outputs through:
- strategic planning
- operational planning
- tactical planning.
The three main types of business planning are strategic, tactical and operational:
Strategic planning
Tactical and operational planning are concerned with making the long term goals of the business achievable.
They are action plans, ie they explain how things will be done
Tactical planning
Operational planning
BUSINESS FINANCE
Finance is a key component for the functioning and success of any business. It provides the necessary capital for achieving the goals of the business.
Establishing the sources of finance:
- owners' equity
- sources and types of debt
- leasing
- factoring
- comparison of debt versus equity, including terms and costs, gearing/leverage, matching the term and source of finance to business purpose and structure.
Sources of Finance:
Equity finance comes from those who own or have a shareholding in the business. Shareholders receive a dividend on their investment. Owner equity comes from two sources:
Internal equity finance
External equity finance:
Owners expect a good return on their investment
Advantages of equity finance:
Disadvantages of equity finance:
Funds which a business borrows.
Advantages of debt financing
Disadvantages of debt financing
Most businesses use a combination of debt vs. equity. Risk and Return
Two other forms of finance are leasing and factoring:
Payment is made to the owner for use of the asset and frees up capital for use in other areas. There may be an option to buy the asset at the end of the lease (Financial lease).
Advantages of Leasing
Involves a third party (factor) purchasing a businesses accounts receivable for a discount.
Venture capital - fund risky but innovative schemes with high potential for profit
Factoring - Selling accounts receivable to get money in fast. Manufacturing firms.
Gearing/Leverage - proportion of debt to equity.
Secured Loan - Security is offered for the loan so the creditor cannot lose their money
Unsecured loan - have no claim over the assets of the business, no security. Paid last in liquidation.
PLANNING TOOLS
Planning tools:
- assumptions and limitations of planning tools
- financial modelling, break-even analysis, financial performance measures, and budgets (including capital, cash, raw materials, labour hours, inventory purchases).
Planning tools are the decision making models and techniques to help in the planning process.
Limitations: It is important to note that theses models and techniques are only as good as the data (assumptions) on which they are based.
These assumptions can limit the effectiveness of planning tools in the following ways:
There are 3 main financial models used by business: break even analysis, financial performance measures and budgets.
Break even analysis
Determine the point at which total revenue covers fixed and variable costs.
Financial performance measures
Gross Profit ratio =
Gross Profit
Sales
Net Profit ratio =
Net Profit
Net Sales
Return on Total Assets =
Net Profit
Total Assets
Return on Investment
Net Profit
Owners' Equity
Current ratio or Working capital ratio =
Current Assets
Current Liabilities
Quick asset ratio (acid test)=
Current Assets - Inventory
Current Liabilities - Bank overdraft
Debt to equity ratio (gearing/leverage) =
Liabilities
Owners' equity
Debt to asset ratio=
Liabilities
Assets
Inventory turnover ratio=
Cost of goods sold
Average inventory
Accounts receivable turnover ratio=
Sales
Accounts receivable
Budgets (Financial Planning)
Budgets are financial forecasts that provide information in monetary terms (quantitative - measurable).
Budgets can show:
Budgets enable constant monitoring of objectives and whether they are being achieved. They are used both for reviewing past figures and projecting future levels.
Types of Budgets:
These financial controls give management formal measurable information about a business.
- decision-making techniques, including SWOT analysis, decision trees, schedules, critical path, staff teams, consultants.
Decision Making Techniques
A number of decision making techniques are also available to management to aid them in planning decisions. These include SWOT analysis, decision trees, scheduling, CPA, staff teams and consultants.
SWOT
Useful in strategic and tactical planning. Allows management to size up the business in relation to existing and potential competition.
Both strengths and weaknesses are internal.
Examples: Opportunities and Threats
Opportunities and threats are external to the business.
Decision Trees
Decision trees outline various alternatives (options) available to management when crucial decision need to be made.
It attempts to quantify the alternatives by assigning probability and benefits of each.
Helps a firm decide which route to take.
Scheduling
Scheduling involves a plan which sets out the time frames completing a sequence of tasks.
Allows management to see if projects are on time.
Gantt chart.
Critical Path Analysis
CPA sets out the most time and cost effective sequence of events that need to be carried out.
CPA is timing and sequencing a number of activities that they can be carries out in a particular order or simultaneously.
It works out what activities have to be finished before the next activity can start and what activities can be run in parallel.
It works out the shortest possible time that a project can be finished. The critical path is the longest route thought the network and delays in the critical path will hold up the organisation.
CPA helps managers to decide where to allocate resources to allow the project to be completed in the shortest possible time.
Inappropriate sequencing will cost time and money.
PERT (performance evaluation review technique) is like CPA but is more complex and shows the sequence of activities needed to complete a particular project and the time or costs of each activity. Also is for evaluation after a project has been completed.
Staff teams
Staff teams are from within the organisation and bring a variety of special skills together.
Consultants
Outside experts which can assist in providing information and advice.
The relationship between Planning and Control
Many planning guidelines (e.g. best practise benchmarks) can be uses as control and evacuation mechanisms.
ORGANISING
(b) Organising
Translating plans to reality.
The organisation process:
- consideration of plans
- determining the work activities
- classifying and grouping activities
- assigning work and delegating authority
- establishing the chain of command.
Adapting organisational structures in response to environmental change, including technological change.
Determining the structure of a business.
It is organising the resources (financial, human and material) in the business to achieve the objectives of the organisation determined in the planning stage.
(Translating plans into reality)
Organisation is determining:
THE ORGANISATION PROCESS C.D.C.A.C
1. Consideration of Plans
2. Determining work activities
3. Classifying and Grouping Activities
4. Assigning Work and Delegating Authority
5. Establishing chain of command
Organisational Structure
Organisation also gives a business its structure, ie:
Wide organisational structure
Narrow organisational structure
Today the trend is towards flatter organisational structures.
Where upper level management is largely responsible for the decisions in the business then it is said to be highly centralised. If the decisions making power rest lower in the hierarchy then the decision making is decentralised.
One of the most popular organisational structures for large business has been federal decentralisation. The work activities are delegated to a number of self-contained business units. Each unit has its own management, and responsible for its own performance. Finance is still central.
Business Organisation
Approaches to organising the chain of command, such as functional, geographic, product, customer.
Businesses may structure their organisation and chain of command according to:
Divisional Structures, based on
Delegating Authority
To be fully effective:
Span of Control
How many people you directly control.
CYCLICAL FLOW OF FUNDS
The cyclical flow of funds to and within a business, including paying for raw materials, production costs, overheads, collecting receivables.
The cyclical flow of funds refers to the inflow and outflow of cash in a business. If cash inflow and outflow are timed wrongly, the business can have cash flow problems. Budgets are an important part of cash flow management.
The cyclical flow of funds:
What are accrued expenses?
WORKING CAPITAL MANAGEMENT
Working capital management, including control of cash, receivables, inventories, costs, leasing, factoring.
Cash flow is the life blood of any business, and accordingly, cash flow management is extremely important.
A cash flow budget is used to determine any possible cash flow problems so they can be planned for.
| Working K = CA - CL |
It is the amount of free money available for use to generate revenue and pay costs in the organisation.
Management must achieve a balance between using funds to create profits and holding sufficient funds to cover payments.
Working capital management is determining the best mix of current assets and current liabilities.
The more efficient a business is in organising its working capital, the more effective and profitable it will be.
Effective Working capital management can substantially reduce the amount of working capital required and increase significantly the competitive position of the business.
Improving Cash Flow
There are a number of steps that can be taken to improve cash flow:
There is a range of strategies that management can use to ensure the firm has sufficient liquidity and cash flow to achieve the objectives of the organisation. These include:
A Balance.
Maintaining adequate amounts of cash to pay expenses. Also making sure that not too much cash is kept - idle cash should be invested to earn income.
If accounts receivable are payed quicker, the firm is in a better financial position- ie they have more working capital.
Maintaining an optimum level of inventory. Not too little to run out and lose sales and not too much lying idle which costs money in storage and lost income. Just In Time (JIT) - good are supplied immediately, reduces idle inventory.
Keeping cost to a minimum. Eg keeping overdrafts to a minimum.
Frees up capital, payments can be budgeted for.
Selling of Acc Rec. to get money in quickly.
Organising Key Points
LEADING
(c) Leading
Power bases of leadership, including legitimate, expert, referent, reward, coercive.
Expertise in the use of accounting and other financial information, including knowledge of the objectives of accounting, provision of useful information to stakeholders.
Leadership styles continuum from task-oriented, to people-oriented including authoritative, consultative, participative.
Relating leadership styles to changing organisational structures.
PEOPLE
Leading is about having a vision of where the business should be in the future and directing and motivating human resources to achieves these objectives.
The three main parts of leading are:
A Good Leader
Power Bases
Leadership involves influencing people in a number of ways. There are a number of power sources available and the types used depends on the situation and the aims of the leader.
Leadership styles
There are a range of leadership styles that can be adopted by management. The best course of action would be to adopt the style which best suits each individual work situation as it arises. The three styles of leadership are:
Authoritarian style (Task-oriented)
Consultative style
Participative style (People-oriented)
Changes in management structure
Organisational hierarchy has flattened
Because of increased international competition firms have had to become more efficient and dynamic.
This in turn has led to a less authoritarian management style to more participative and consultative approach where workers are given more freedom and greater participation.
Why do leaders (managers) have to understand accounting and financial management?
Accounting is the book keeping part of the business, while financial management refers to decision making based on financial management. Having an understanding of accounting and financial management allow leaders to :
Q. How can the organisational structure of a business relate to management style?
CONTROLLING
Controls are used by managers to increase the chances of meeting the standards and objectives of the organisation.
Planning and controlling are interrelated functions of management. Planning provides the framework of goals and objectives and controlling provides the checks to ensure plans are met or modified as necessary.
(d) Controlling
The control process:
- establishing standards
- measuring performance
- taking corrective action.
EVALUATION.
COMPARING PERFORMANCE WITH ESTABLISHED STANDARDS
The control process E.M.C
There are three steps in the control process.
Many of the tools used in planning can also be used for evaluating performance. eg. financial ratios.
Types of Controls
Types of controls:
- prevention (input controls)
- concurrent (work-in-progress controls)
- feedback (output controls).
Prevention (feedforward) controls
Concurrent control
Feedback (output) control
Management Controls
Management controls:
- methods such as management information systems, key indicator management
- applied to areas such as human resources, inventory, sales, marketing, production, finance, risk.
Management Controls
Managers need information to compare performance with plans. Thy devise key indicator management to measure key indicators of business performance. Controls are established in areas such as human resources, sales, marketing, production, finance and risk.
Management Information Systems
A MIS is a formal system which has been set up to gather, process, analyse and dispersing relevant information about performance of the business.
Managers use MIS to monitor key indicators in the following areas:
Human Resource Control
Performance Appraisal is Concerned with making judgements about how well people are doing their jobs and giving them feedback. Performance targets can be set and performance is compared to these. This can them be used as a basis for training and as a basis for rewards.
Inventory Control
Must not be oversupplied or run out. JIT. Another way of inventory control is with bar codes which allows tight monitoring and control.
Raw materials, work in progress and finished goods all need controlling.
Sales management
Performance can be compared using a sales analysis report. A sales analysis report break down sales according to sales by product, market segment, market territory and salesperson. Using this they can analyse specific areas where performance is lacking.
Marketing management
Three key marketing indicators are:
Market share analysis compares sales performance compared to competitors.Through this managers can assess the competitive position of the business.
Marketing profitability analysis allows managers to work out which marketing activities are the most profitable.
Market research is also used to see how successful marketing has been.
Production management
Finacial management
are key indicators used by management for production control.
Risk management
By analysing the risks involved following different courses of action managers can minimise this risk.
Financial controls
Financial controls:
- the use of budgets for guiding the use of inputs, and identifying major deviations from the budget
- analysis and interpretation of financial reports within and across business entities over time
- tools for analysis including liquidity ratios, leverage/gearing ratios, profitability ratios, audits
- limitations of financial reports.
The three main financial objectives for the success of a business are liquidity, profitability and growth.
Production controls:
- quality control
- program evaluation review technique
- critical path analysis.
Outcomes of the control process and their implications for management decision making and future planning.
Cash Flow Budgeting
Cash Flow Statement - Flow of cash
Asset - Owns or Owed
Liability - Owes
Owners Equity
Accounts Receivable - Debtors
Accounts Payable - Creditors
Percentage Change - difference over original.
Goal: best Aluminium producer.
Change in Management
Holistic (Democratic) management
Divided into 4 operations centres:
Allows more effective communication.
Eg. Beating environmental pollution aims.
Flow --> one business to the next.
TQM
Total Quality management. Seeks the involvement of employees at every level in quality and product control. Team work and continuos improvement are key features. Aspects of TQM:
Always seek to improve production quality.
Treats workers as a prime resource.
All people can contribute. Blur between managers and workers.
HRM
Humanist Style
HRM Roles
Changes in Human Relations Management
Before:
Had a Functional (hierarchical) organisational structure. Manager in each area, divided up into function related units. From Scientific management. Time and Motion, Frederick Taylor, 1850s.
Now:
Democratic, Humanist approach. Holistic management style.
The humanist style treats humans as the most important resource. It:
Aim: Use Portland Al. to be whatever you want to be. Achieve your personal best.
Personal initiative encouraged. Before workers were simply told what to do.
Why change Management Style?
Holistic Management
All areas are seen as interconnected.
Diagram of circle with areas on it.
Plant is divided into four different areas based on function with 200 workers in each. Each area is a business in its own right and the supplies and customers of that particular business could be another area of the business. Eg. Purifying -> Smelting.
Ownership - Workers are encouraged to have ownership of the plant and production and responsibility for the product and environment.
EEO Act (1986) Commonwealth
Fair go for all
Cannot discriminate based on: Sex, Colour, Race, Marital Status, Religious Beliefs.
Exemptions, Defence Force and Schools.
New Workers (Training and Personal Development)