Notes For Exam

Business Management
Units 3 & 4 Notes

A summary of all knowledge required for the
VCE exam.
By Andrew Whatman Haileybury College
Business Management Units 3 & 4 Notes
By Andrew Whatman
Table of Contents
Unit 3 ...................................................................................................................................................... 2
Chapter 1 - Large-Scale Organisations ................................................................................................ 2
Performance Indicators. ................................................................................................................. 3
Chapter 2 The Internal Environment of Large-Scale Organisations................................................. 5

Management Structures: ................................................................................................................ 7
Corporate Culture ........................................................................................................................... 7
Key Management Roles (POLC) ...................................................................................................... 9
Management Styles ...................................................................................................................... 10
Management Skills ........................................................................................................................ 11
Ethics & Social Responsibility ........................................................................................................ 12
Chapter 3 Operations Management .............................................................................................. 13
Optimising Operations .................................................................................................................. 14
Unit 4 .................................................................................................................................................... 18
Chapter 4 Human Resource Management .................................................................................... 18
Motivation Theories ...................................................................................................................... 19
Chapter 5 The Employment Cycle .................................................................................................. 21
The Establishment Phase .............................................................................................................. 21
The Maintenance Phase................................................................................................................ 22
The Termination Phase ................................................................................................................. 23
Chapter 6 Employee Relations ....................................................................................................... 25
The Centralised Approach to Employee Relations........................................................................ 26
The Decentralised Approach to Employee Relations.................................................................... 27
Chapter 7 The Management of Change ......................................................................................... 30
Sources of Change:........................................................................................................................ 30
Kotters Change Model ................................................................................................................. 32
Strategies for the Effective Management of Change.................................................................... 34
The Impacts of Change.................................................................................................................. 35
Case Study: Changes Occurring at Fairfax Media Ltd ................................................................... 36
By Andrew Whatman
Unit 3
Chapter 1 - Large-Scale Organisations
An organisation is two or more people working together to achieve an objective.
Large-scale organisations:
Employ 200 or more people
Have assets greater than $200 million
Earn substantial revenue in the millions
Multinational corporations are owned and based in one country but operate in many countries
around the world. (Eg. McDonalds, Toyota.)
A function is a department within an organisation. The 5 organisational functions are: (HFORM)
Human Resources, Finance, Operations, Research & Development and Marketing.
A corporation is owned by shareholders and aims to make a profit.
A shareholder is any person who owns shares in a company.
A government business enterprise is a corporation that is owned by the government and aims to
carry out government policies and deliver community services. (Eg. Australia Post, Vic Roads.)
A government department is a department of government that provides essential
community services such as health, education and welfare. (Eg. Department of Education.)
A public company is an organisation listed on the Australian Stock Exchange that does not
restrict the purchase of its shares to certain people. These organisations must have more
than 50 shareholders, but usually have thousands or millions. (Eg. Telstra, Facebook.)
A private company is an organisation that is not listed on the Australian Stock Exchange and
has restrictions on who can purchase shares. These organisations have between 2 and 50
shareholders. (Eg. 7-Eleven, Rip Curl.)
Objectives are the stated outcomes of the organisation.
Profit Organisations generally have objectives of earning a profit, but can also have
objectives such as the provision of quality customer service, community
involvement, care for the environment and concern for employees.
Not-For-Profit Organisations generally have objectives to provide an essential
service for the benefit of the community, or to increase the awareness of a particular
cause.
Strategic objectives are long-term goals determined by senior management, which usually
take more than 2 years to achieve.
Tactical objectives are medium-term goals determined by middle management, which
usually take between 1 and 2 years to achieve.
Operational objectives are short-term goals determined by frontline management, which
usually last for a period of days, weeks or months.
Strategies are the actions that an organisation takes to achieve specific objectives.
A vision statement is a general statement that describes what an organisation aspires to
become.
A mission statement expresses why an organisation exists, its purpose and how it will
operate.
Question: Distinguish between a mission statement and a vision statement.
A vision statement is a general statement that describes the future direction and outlook of the
organisation. It is a dream of what the organisation will look like in the future. On the other hand, a
mission statement is more concrete and expresses why an organisation exists, its purpose and how it
will operate, providing a framework for strategic planning and decision-making which should reflect
the organisation's objectives.
2

Positive contributions of large-scale
organisations to the economy
Produce goods and services to satisfy needs and
wants. This increases production levels,
increasing economic activity which is measured
by Gross Domestic Product (GDP).
Provide significant employment opportunities,
equipping people with the money they need to
spend on goods and services from other
organisations, which in turn also provide
employment opportunities themselves.
Pay taxes to the government, allowing the
government to provide essential infrastructure
to the community, such as roads, hospitals and
schools.
By Andrew Whatman
Negative contributions of large-scale
organisations to the economy
Create high levels of unemployment, especially
during periods of downsizing and outsourcing, or
periods when the economy is in a weak state.
People then have less money to spend.
Cause significant damage to the environment
through pollution or the release of greenhouse
gas emissions. This results in a high cost
associated with repairing or cleaning up the
damage that is caused.
The internal environment refers to the conditions inside the organisation that affect its
performance. These are the factors that the organisation has the most control over. (PCME):
Policies
Corporate Culture
Management
Employees
The operating environment refers to the outside stakeholders that the organisation comes into
contact with in the course of conducting business. These factors can provide both opportunities and
threats to a business. The organisation has some control over these factors. (CC SUC):
Customers
Competitors
Suppliers
Unions
Creditors
The macro environment is made up of the broad factors in the economy and society within which
the organisation operates. These factors can influence the organisation, but the organisation has no
control over them. (GEE SPIT):
Globalisation
Economic
Environmental
Social & Demographic
Political/Legal
International
Technological
Efficiency refers to how well an organisation uses resources to achieve objectives.
Effectiveness is the degree to which an organisation has achieved its stated objectives.
Performance indicators are used by organisations to measure efficiency and effectiveness.
The 10 performance indicators (in no particular order) are:
Net profit figures
Number of sales
Percentage of market share
Rate of productivity growth
Results of a staff satisfaction survey
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Results of a customer satisfaction survey

Level of staff turnover
Number of customer complaints
Level of wastage
Number of workplace accidents
1. Net profit figures Measures the earning performance of the organisation and indicates its
capacity to use its resources to maximise profits.
2. Number of sales Measures the number of products sold (or services provided).
3. Percentage of market share The proportion of the total market that a business has,
expressed as a percentage.
4. Rate of productivity growth Measures the change in productivity (the level of output
obtained from a set level of input) from one period to the next.
5. Results of a staff satisfaction survey Measures how satisfied staff are within the
organisation.
6. Results of a customer satisfaction survey Measures the degree to which an organisations
performance meets a customers expectations.
7. Level of staff turnover Measures the number of staff who are leaving the organisation.
8. Number of customer complaints Indicates whether or not customers are satisfied with the
performance of the organisation.
9. Level of wastage Measures the amount of waste created by the production process.
(Increased waste = increased costs).
10. Number of workplace accidents Indicates how safe the workplace is for employees.
Benchmarking occurs when an organisation measures its performance against that of other leading
organisations known for their excellence.
Triple bottom line refers to the economic, social and environmental performance of an organisation.
A stakeholder is an individual or group that has a direct or vested interest in the activities of an
organisation.
Organisations recognise that they increase their chances of success when they pursue goals that
align with the interests and expectations of all stakeholders.
The 7 main stakeholders of an organisation are: (MCC SUS E)
Management
Customers
Community
Suppliers
Unions
Shareholders
Employees
Compatible interests are agreeable interests that stakeholders have which provide many positive
changes within the business.
Some expectations between stakeholders and the organisation are compatible:
Customers Want a high quality product at a reasonable price.
Management If this is met, sales will increase, leading to greater profits, which will in turn
satisfy shareholders.
Incompatible interests oppose each other, where some stakeholders may disagree with the
interests that the other stakeholders have.
Some expectations between stakeholders are incompatible:
Employees Want an increase in pay and safer working conditions.
Customers Want products of a reasonable price.
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By Andrew Whatman
Chapter 2 The Internal Environment of Large-Scale Organisations

A management structure refers to the division of the organisation into parts based upon the roles,
responsibilities and lines of communication required of each person.
A management hierarchy is the arrangement that provides increasing authority at higher levels of
the hierarchy.
- Responsible for strategic planning.
- Monitors the whole organisation.
- Eg. CEO / Managing Director.
- Responsible for tactical planning.
- Supervise lower level managers
and develop operational plans.
- Responsible for operational planning.
- Carry out decisions of middle
management and supervise employees.
- Eg. Store Manager.
Perform daily operational tasks.
A typical management hierarchy
Span of control refers to the number of people for whom a manager is directly responsible.
Chain of command refers to a system that determines the responsibility, supervision and
accountability of the members of the organisation.
The unity of command principle states that each employee within an organisation should report to
only one supervisor.
An organisational chart is a chart that depicts the levels of management, chain of command, lines of
authority, reporting relationships, job titles, job responsibilities and the division of labour.
The Functional Model

In a functional model, employees are grouped into departments according to the tasks they
perform.
Advantages of the functional model
Career pathways can be easily determined
Staff can become experts in their field through
task specialisation
Efficient use of resources
Disadvantages of the functional model

Departments can become inflexible and overly
bureaucratic
Departments can become narrow in their focus
and move away from broader goals
Managers can become more concerned about
meeting their own targets
The Divisional Model

In a divisional model, employees are grouped according to divisions that may be geographical,
customer, product or process focused.
Advantages of the divisional model
The direction of expertise at specific customers,
products or services, regions and processes.
The encouragement of cooperation between
departments
Greater flexibility in adapting to changes
Disadvantages of the divisional model

Departments can become inflexible
Departments can become narrow in their focus
and move away from broader goals
There is a potential to promote rivalry between
divisions
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The Matrix Model

In a matrix model, specialists are brought together from different parts of the organisations to solve
specific problems, or to undertake specific projects in teams.
Advantages of the matrix model
The ability to troubleshoot and solve problems
as a team
Enhanced communication, cooperation and
teamwork
Pooled expertise allows for better problem
solving
Disadvantages of the matrix model

Decisions in one department can undermine the
line of authority in that department
Can challenge the unity of command principle
Employees may find themselves reporting to
two managers which can affect communication
and goal congruence
Divisional Model
Functional Model
Matrix Model
Functional & Divisional

Similarities:
Communication flows only vertically

Upholds unity of command principle
Differences:
Functional lacks flexibility whereas divisional has enhanced flexibility

Functional has no duplication of work or tasks whereas divisional might
By Andrew Whatman
Divisional & Matrix

Similarities:
Enhanced flexibility facilitates expansion

May be the duplication of work or tasks
Differences:
Divisional upholds the unity of command principle whereas matrix does not
Divisional does not bring across expertise from across the organisation to work on tasks
whereas matrix does
Functional & Matrix

Similarities:
Communication flows vertically
Differences:
Functional lacks flexibility whereas matrix has enhanced flexibility

Functional has no duplication of work/tasks whereas matrix might
Management Structures:
A hierarchical structure features:
Employees arranged into levels with power, authority and responsibility at the top
Rigid lines of communication from top to bottom
Identifiable organisational roles of responsibility
Clearly definable span of control
Centralised decision-making made by upper management
A flatter structure features:
Fewer levels between staff and senior management
Employees involved in decision-making
Use of knowledge, skills and expertise
Workplace flexibility
Increased training and multi-skilling
Question: Why are many organisations deciding to move to a more flatter structure?
Rapid advances in technology, along with pressures from increased competition (due to forces of
globalisation) have resulted in organisations flattening their structures. Also, greater responsibilities
are given to employees, which links to an increase in motivation.
A bureaucracy is a system of management distinguished by its clear hierarchy of authority, rigid
division of labour, written and inflexible roles, regulations and procedures and impersonal
relationships.
Corporate Culture
Corporate culture is the shared values, expectations and beliefs of the members of an organisation.
It can be revealed officially through:
Policies, objectives or slogans
It can be seen in the unofficial rules (real corporate culture) through:
Language used, the way staff dress or the way staff treat other staff and their customers
The four elements of a corporate culture are:
1. Values
2. Symbols
3. Rites, rituals and celebrations
4. Heroes
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1. Values are the organisations basic beliefs, shared amongst its employees. (Eg. Honesty, hard
work or teamwork.)
2. Symbols are events or objects representing something the organisation believes is important.
(Eg. Competitive sports or employee development programs).
3. Rites, rituals and celebrations are routine behavioural patterns in an organisations everyday
life. (Eg. Friday night drinks or birthday celebrations).
4. Heroes are the organisations successful employees who reflect its values and therefore act as
an example for others. (Eg. Employee of the month).
Corporate culture can be recognised through:
Physical signs. (Eg. The way people dress or the layout of offices).
Published aspects. (Eg. Company logo or advertising).
Way of life. (Eg. Work ethics or language acronyms).
Underlying assumptions. (Eg. Acceptable behaviour or unspoken rules).
The culture of an organisation is often evident in its management structure:
Hierarchical structures often have cultures that emphasise accountability, communication and
cooperation and tend to conform to a culture of loyalty and respect for superiors.
Flatter structures often exhibit highly flexible, innovative and risk-taking cultures.
Common causes of change to an organisations corporate culture include:
New managers, new employees, or other macro factors external to the organisation.
Four methods for developing corporate culture include:
Increasing participation of employees in decision-making
Providing regular performance appraisals, recognition and rewards
Offering flexible working hours for employees
Changing the style of dress and language
A policy is a set of broad guidelines to be followed by all employees in an organisation.
They can be legislative required by law, (Eg. Sexual harassment policy), or voluntary
implemented by the organisation, (Eg. Social media usage policy).
A procedure is a series of actions that enable a policy to be put into practice. (Eg. A procedure for
dealing with customer complaints).
Policies should reflect the organisations mission and objectives, and be communicated to all
employees because, when policies and procedures are known, there is a greater chance of success
for the organisation in meeting its objectives.
The Policy Development Process (IRC DP PE)

1. Identify Issue (Why do we need the new policy? What issue needs to be resolved?)
2. Research & analyse business environments (Benchmark against the policies of competitors.
What exactly needs to be changed?)
3. Consult stakeholders (What do those affected by the new policy think? Comments and
feedback is called for.)
4. Develop new policy (Write a new policy once a decision has been made which incorporates
feedback from stakeholders and changes to legislation.)
5. Prepare a draft of the policy for review by stakeholders (The draft is displayed in a public
place and commented on.)
6. Policy Approval (Necessary changes are made and a final copy is issued.)
7. Evaluation (Was the policy effective? Did it help achieve organisational objectives?)
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Key Management Roles (POLC)

Planning is the process of defining objectives and determining methods or strategies that will be
used to achieve these objectives.
The 5 steps to planning: (IAD CM)
1. Identifying and setting objectives (What does the organisation want to achieve?)
2. Analysing the present situation and future opportunities (Conduct a SWOT analysis* to find
out exactly where the organisation currently stands)
3. Developing and evaluating alternatives (How will the organisation get there?)
4. Choosing and implementing the plan
5. Monitoring and reviewing results (Are objectives being met?)
*A swot analysis involves analysing strengths, weaknesses, opportunities and threats.
Organising is the process of arranging resources and tasks to achieve organisational objectives.
The organisation process: (DCA)
1. Determining the work activities The work activities required to achieve management
objectives must be determined.
2. Classifying and grouping activities Similar activities must be grouped together. This
improves efficiency by enabling the most appropriate allocation of resources.
3. Assigning work and delegating authority It is important to determine who is to carry out
the work, and who has the responsibility to ensure that the work is done. Effective
delegation can improve productivity.
Leading is the process of influencing or motivating people to work towards the achievement of the
organisations objectives.
Important leadership qualities:
Interpersonal skills - the ability to understand and relate to people, including having empathy for others.
Informational skills - a thorough understanding of the business. This will help the manager recognise problems
and find solutions. Good ICT (Information and communication technologies) skills are also necessary.
Decision-making skills - involves identifying & defining problems and opportunities and choosing a solution;
the ability to make sound decisions quickly and assessing the risks associated with decisions.
Controlling is the process of evaluating performance, by comparing planned performance to actual

performance; appropriately alerting managers to any deviations from plans so corrective action can
be taken.
The control process: (EMM)
1. Establishing standards in line with the objectives of the organisation.
2. Measuring the performance of the organisation against those standards or benchmarks.
3. Making changes when necessary to ensure the objectives have been met.
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Management Styles
A management style refers to the behaviour and attitude of the manager.
Features of each management style:
More Control
Autocratic
Communication
Authority
Decision-Making
Top-down
communication
with no staff
input required
Persuasive
Top-down
communication
with management
providing reasons
for their decisions
Consultative
Less Control
Participative
Laissez-Faire
Two-way
communication
with staff input
and opinions
sought
Two-way
communication
with employee
input equally
valued to that
of management
Very little
communication
where
employees are
left to complete
activities
independently
from
management
Total
decentralised
authority with
employees left
to be
responsible for
their own areas
of work
Decisions left to
be made by
employees with
little or no
direction from
management
Centralised
authority with
power and
control held by
managers
Centralised
authority with
power and control
held by managers
Centralised
authority but
employee input
is considered.
Decentralised
authority with
power shared
between
employees and
managers
Decisions made
by managers
with no input
from employees
sought
Decisions made by
managers with no
input from
employees sought,
however,
managers will
attempt to
persuade their
decisions and
make employees
believe that the
decisions made are
in their best
interests
Decisions made
by managers
after gaining
feedback and
input from
employees
Decisions made
by employees
and managers
together with
employees
valued for their
expertise
The Autocratic Style

Advantages:
Little uncertainty, with directions and procedures clearly defined.
Time efficient, where decisions are made quickly without discussion or consultation.
The roles of employees are clear, so management can easily monitor their performance.
Disadvantages:
No employee input is allowed, so employees may not feel valued and lose motivation.
Employees do not get the chance to develop their skills.
Does not take into account employee experience or knowledge.
The Persuasive Style
Advantages:
Time efficient, where decisions are made quickly with little negotiation.
There is no confusion over who is in charge.
Managers may gain trust and support through persuasion.
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Disadvantages: (Same as autocratic)

No employee input is allowed, so employees may not feel valued and lose motivation.
Employees do not get the chance to develop their skills.
Does not take into account employee experience or knowledge.
The Consultative Style
Advantages:
Employees feel valued when their feedback is considered.
Employees could contribute good ideas to benefit the organisation that management hadnt
thought of.
Good motivation and morale levels among employees.
Disadvantages:
Time-consuming.
Not all ideas can be implemented and some employees may lose motivation as a result.
May not be possible for managers to consult every time, causing inconsistency.
The Participative Style
Advantages:
Employees have a greater opportunity to acquire more skills.
High morale and motivation levels among employees.
Reduced likelihood of industrial disputes as employee relations are positive.
Disadvantages:
Internal conflict may arise, with too many people sharing different views.
Role and control of managers may be undermined.
Not all employees may want to contribute.
The Laissez-Faire Style
Advantages:
Can promote creativity and teamwork.
Staff may feel empowered and motivated to complete tasks on their own.
Allows management to focus on other areas of the organisation.
Disadvantages:
Total loss of control by management.
Employees may feel unguided and lose focus.
Not suitable for unskilled workforces.
The situational approach is when a manager uses a range of variables to determine the most
appropriate style required to meet its objectives.
The contingency management theory states that there is not one best style, and stresses the need
for flexibility and the adaption of management styles to suit the situation.
Management Skills
There are 9 main management skills:
1. Communication involves the ability to transfer information from a sender to a receiver, and listen to
feedback.
Communication can be:
Verbal (Eg. Meetings or one-on-one conversations)
Written (Eg. Letters, emails or reports)
Non-Verbal (Eg. Body language or facial expressions)
2. Delegation refers to the transfer of authority and responsibility from a manager to an employee to
carry out specific activities.
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Benefits of delegation include that the managers time is freed up for other tasks, stress is
reduced and employees are able to learn new skills.
3. Negotiation refers to the ability to resolve a dispute, or to produce a satisfactory agreement on a

course of action with an outcome that satisfies both parties.
4. Teamwork is when people interact regularly with others and coordinate their work towards a
common goal.
5. Problem solving refers to a broad set of activities involved in searching for, identifying and then
implementing a course of action to correct an unworkable situation.
It follows a 6-step problem solving process: (IGD ACE)
1) Identify the problem and its causes.
2) Gather relevant information. (Talking to people/conducting surveys).
3) Develop alternative solutions to the problem.
4) Analyse the alternatives. (Strengths & weaknesses of each).
5) Choose one alternative and then implement it.
6) Evaluate the solution. (Did it successfully solve the problem?)
6. Decision making refers to the process of identifying the options available and then choosing a
specific course of action.
Effective decisions should be made within a time-frame, and managers should be able to
adequately assess the risks involved in their decisions.
7. Time management involves the ability to prioritise tasks, set deadlines, review progress and
delegate.
8. Stress management refers to a managers ability to manage the level of stress/distress in both
themselves and their subordinates.
9. Emotional intelligence is the skill of identifying, assessing and managing the emotions of self and
others.
The type of management style a manager selects will determine the range and degree of the skills
they use. For example:
An autocratic manager is likely to use skills of communication, decision making and time management.
A participative manager is likely to use skills of communication, delegation, negotiation and teamwork.
Ethics & Social Responsibility

Ethics is the application of moral standards to management behaviour.
Ethical behaviour should be used when hiring and firing employees, promoting employees, and
through advertising. Also, ethical employers must not discriminate against race, gender or age.
Conflict of interest occurs when a person takes advantage of a situation or piece of information for
his/her own gain, rather than for the employers interests.
A code of conduct is a set of ethical standards for managers and employees to uphold.
Devising a code of conduct is a way to encourage ethical behaviour in the organisation.
Social responsibility is where organisations consider the interests of society by taking responsibility
for the impact of their actions on suppliers, customers, employees, shareholders, communities and
the environment.
Customers are often attracted to organisations that are socially responsible. Ways to be socially
responsible include through volunteering programs, charities or fundraisers, for example.
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By Andrew Whatman
Chapter 3 Operations Management

Operations management is the management of resources to achieve efficient output of goods or
services.
The main role of the operations manager is to meet operational objectives and strategies and
maximise the levels of productivity and quality through the operations process.
The operations system refers to the series of procedures and processes an organisation undertakes
in order to create its outputs of finished goods and services through the transformation of inputs.
The 3 key elements of an operations system:
Inputs are resources such as

raw materials, labour and
equipment that are used in
the process of production.
The transformation process

is the process involved in
converting inputs into
finished outputs.
Outputs are the final product, or

the result of the transformation
process that is delivered or
provided to the consumer.
There are 7 categories of inputs:

Raw materials, Equipment (Machinery), Labour (People), Time, Information & Knowledge,
Money and Technology.
Outputs can be divided into 2 categories:
Tangible (goods) and intangible (goods and services).
Tangible products can be handled and stored before they are sold to the consumer.
Intangible services (or products) cannot be touched. Services cannot be stored and the customer
may actually need to be present when the service is being delivered.
The Difference between Goods and Services:

Goods (Manufacturing Organisations)
Tangible
Production and consumption often occur
separately
Can be stored as inventory
Can be standardised to a consistent quality
Minimal customer contact
Produced
Services (Service Organisations)

Intangible
Production and consumption often occur
simultaneously
Difficult to store, however record of service is
maintained
Often specifically provided/tailored for individual
requirements
High degree of customer contact
Performed
Productivity is a measure of efficiency the level of output obtained from a set level of input.
Productivity = Outputs Inputs
Business competitiveness refers to the ability of an organisation to sell products in a market.
Increase in productivity = Increase in business competitiveness.
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The operations system will determine the cost of production and the quality of the finished product.
It therefore impacts directly upon revenue, costs, quality of output and ultimately profit.
To enhance business competitiveness through the operations system an organisation should:
Have optimal levels of operational efficiency
Have high standards of quality
Have ethical and socially responsible considerations
A competitive advantage occurs when an organisation is able to produce goods or provide services
better than its competitors.
Organisations can compete in 2 ways:
Cost Providing customers with lower priced goods or services
Differentiation Providing customers with added features over those of its lower-priced
competitors.
Optimising Operations
There are 4 ways an organisation can optimise its operations, therefore increasing productivity and
competitiveness:
1. Facilities Design & Layout
2. Technology
3. Materials Management
4. Quality Management
1) Facilities Design & Layout

Facilities design and layout involves planning the layout of the workspace to streamline the
production process.
The 5 Types of layout:
a) Fixed Position Layout
In a fixed position layout, the product remains in one location and workers and machinery come
to it. (Eg. Building a house or ship).
Advantages of the fixed-position layout
Good for the production of large, bulky products
Product does not need to be moved, reducing
costs associated with material movement
Work environment changes constantly, so
employees do not lose motivation
Disadvantages of the fixed-position layout

High storage and security costs to temporarily
store raw materials and equipment
Requires a large physical workspace
Workers and equipment need to be mobile
resulting in greater transport costs
b) Product Layout
In a product layout, goods are moved from workstation to workstation in sequential order, with
value added to the product along the way. (Eg. Manufacturing organisations using assembly lines).
Advantages of the product layout
A high volume of products can be produced in a
short amount of time, reducing costs
Requires less floor area per unit of production
Resources and equipment can be specifically
allocated to certain tasks
Disadvantages of the product layout

Requires a high level of initial capital investment
Breakdowns of machinery can halt the entire
production process
Workers can become deskilled performing the
same tasks daily, possible creating boredom and
decreasing motivation
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c) Process Layout
In a process layout, equipment and work centres are arranged according to the similarity of the
function. (Eg. Hospitals or Restaurants).
Advantages of the process layout
Breakdowns do not halt the entire production
process
Can promote better customer service with
individual needs being met
Can produce a variety of products or services
Disadvantages of the process layout

Can take time to process orders
Requires flexible planning on a day-to-day basis
Low equipment utilisation, where equipment
usage is dependent on output requirements
d) Retail Layout
In a retail layout, customers are channelled through departments or sections of the store.
High impulse products are located in prominent locations, often at the end of aisles or
near checkouts.
Children are targeted by putting popular items at their eye level and within their reach.
e) Office Layout
In an office layout, priorities for the efficient movement of information and proximity to
resources (printers/computers) are set.
Workstations are located in departments that are required to communicate constantly.
Should include a lunch room, for employees to take a break from the work environment.
The Virtual Factory
A virtual factory is when productive operations are outsourced to other component manufacturers
at a lesser cost.
Manufacturers are moving away from the closed factory model of production, where all production
is completed within the four walls of their own site, and are moving towards a virtual factory.
Advantages of the Virtual Factory
Quicker supply to some parts of the world
A concentration of expertise (1 site performs a
small number of tasks in large numbers)
Disadvantages of the Virtual Faactory

Possible language and cultural barriers when
dealing with suppliers
Ethical and social responsibility issues may arise
2) Technology
New technology can offer significant efficiency savings as well as improvements in the quality of
products. Organisations that fail to keep up with the latest technological advancements tend to lose
competitiveness.
Technology allows:
Organisations to produce goods and services using less labour
Organisations to make more efficient products faster with less labour
Organisations to reach international markets
a) Technology Used in Manufacturing Organisations:
Computer Aided Design (CAD) is a computerised design tool that allows a business to
create product possibilities from a series of input parameters. It allows the designer and the
end user to visualise what the product will look like through the use of 3D diagrams.
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Computer Aided Manufacture (CAM) is software that designs and controls manufacturing
processes. It can be linked with CAD to manufacture designs that are accepted by clients.
Computer Integrated Manufacturing (CAM) is a method of manufacturing in which the
entire production process is controlled by a computer. It is a combination of CAD and CAM
to manage the entire production process including product design, purchasing, costing and
distribution, for example.
Robotics are highly specialised forms of technology capable of complex tasks.
They are used in assembly lines and factories, and allow for precision and accuracy that is
generally unmatched by human labour.
b) Technology Used in Service Organisations:

E-Commerce allows business transactions to occur via the internet. (Eg. Online
shopping/banking)
Computerisation (Eg. Databases at call centres)
Mobile Phone Technology offers productivity gains which allow for greater workplace
flexibility. (Eg. Working off the jobsite)
Communications via the internet allows for greater flexibility. (Eg. Working from home)
3) Materials Management
Materials management is the strategy that manages the use, storage and delivery of materials to
ensure that the right amount of inputs are available when required in the operations system.
Inventory is the storage of raw materials as well as finished and unfinished products.
Inventory control is a system used to ensure that costs are minimised and that the operations
system has access to the right amount of inputs when required.
Inventory is stored to ensure that materials do not run out, however this creates a cost to the
organisation and materials may have a use-by date.
Materials Planning
A production plan is an outline of the activities undertaken to combine resources (inputs) to create
goods or services (outputs).
A master production schedule details what is to be produced and when, and plans the materials
needed for production.
Materials requirements planning involves developing a list of all the materials involved in
production to meet the specified orders.
Ways to Control Inventory:
a) Just in time (explained below)
b) Computerisation signals can alert management when stock must be re-ordered.
c) Stocktakes should be compared regularly to business records to ensure that stock levels are
accurate.
d) Timing the delivery of stock from suppliers needs to be efficient.
e) Security organisations must have adequate security measures to ensure that stock is not
stolen, lost or damaged.
Just in time is an approach that aims to avoid holding stock; supplies arrive just as needed for
production, and finished products are immediately dispatched or sold to customers.
This approach:
Minimises the use of labour, materials, equipment and space
Aims to avoid storing any stock (either finished or unfinished)
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Just In Time Benefits

Not as much money tied up in stock
More storage space
By Andrew Whatman
Just In Time Problems

You must have a good relationship with your
supplier and a good transport system
There is a chance of delays. Strike action could
affect your supply chain
Less risk of products becoming obsolete or

passing their expiry date
Supply Chain Management
A supply chain is the range of suppliers from which the organisation purchases materials and
resources.
The supply chain needs to be well managed because an operations system highly depends on
the quality and quantity of its inputs.
4) Quality Management
Quality is the degree of excellence in a good or service and its ability to satisfy the customer.
Organisations that develop higher quality operations systems gain significant advantages over
their competitors. (For example, they are able to reduce costs through minimising waste and
defect rates).
Quality Management Methods:
a) Quality Control is a reactive approach to quality management that involves the use of
inspections at various points in the production process to check for problems and defects.
b) Quality Assurance is a proactive approach to quality management that involves the use of a
system so that an organisation achieves set standards in production. It involves building quality
into work processes to prevent errors before they occur.
c) Total Quality Management is a holistic approach to quality management whereby the whole
organisation commits to excellence that is applied to every aspect of its operation.
Total quality management has an emphasis on continuous improvement in all aspects of the
organisation. Continuous improvement involves the ongoing commitment to achieving
perfection. It aims to create a defect-free production process and incorporates the use of quality
circles as a means of empowering employees. Quality circles are groups of workers who meet
regularly to solve problems relating to quality.
Ethics & Social Responsibility in Operations Management

How an organisation can be ethical and socially responsible in its operations system:
Inputs
Ensure that suppliers are ethical.

Use environmentally-friendly materials. (Eg. Recyclable plastic bottles).
Ensure that materials are not of a cheap quality.
Transformation Process
Reduce carbon emissions. (Eg. Energy efficient light bulbs).

Minimise level of wastage. (Eg. Through the use of technology).
Provide a safe working area for employees.
Outputs
Finished products must be of an acceptable quality and must be safe and reliable. (Eg. No
defective or harmful products).
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Unit 4
Chapter 4 Human Resource Management
Human resource management is the effective management of the formal relationship between the
employer and employees.
A human resource manager coordinates all the activities involved in acquiring, developing,
maintaining and terminating employees from an organisations human resources.
The human resource manager is responsible for managing the organisations most valuable
asset: the employee.
Company Objectives
Human Resource Objectives
Human Resource Strategies
Become a reliable supplier

Increase sales
Increase profits
Increase worker productivity

Develop sales skills
Improve product knowledge
Provide a safer workplace
Reduce number of accidents
Thorough selection process

Ongoing training
Provide regular performance
appraisals
Introduce flexible work practices
Motivation is the desire or drive to work well; the process of ensuring that there is a continuing
commitment to a common set of goals or a single goal.
Employee motivation includes factors that drive an employee to achieve in the workplace.
Common employee expectations:
Honest & fair treatment
Fair pay
Job security
A clean and safe working environment
Respect from boss and peers
Common employer expectations:

Honest employees
Punctual employees
Employees who are committed to their job
Employees who complete projects on time
Employees who work productively
If employee expectations are not met, employee dissatisfaction may cause employees to leave the company.
Conditions of employment refer to what an employer has agreed to give the employee in return for
their work.
Basic conditions of employment include the number of hours an employee is expected to work,
annual leave, sick leave and long-service entitlements and entitlement to redundancy pay if
employment is terminated.
Some employers go beyond the basic conditions of employment in order to satisfy their
employees needs, often by offering flexible working conditions.
Flexible working conditions are practices that allow employees to balance work and family
responsibilities.
Examples of flexible working conditions can include the ability to work from home, job sharing,
variable working days or longer lunch breaks.
A work-life balance involves achieving the right amount of time for work and for personal life.
Flexible working conditions help employees to achieve a better work-life balance.
Advantages of a better work-life balance include increased employee motivation and
productivity, and improvements in attendance rates and a reduction in sick leave costs.
Job security is the belief that the employee will not lose their job.
Employees like to feel assured that they have gainful employment for as long as they determine.
Job insecurity can affect the motivation of staff and therefore staff productivity. It can also have
a negative impact on the health of workers due to stress.
By Andrew Whatman
Motivation Theories
Factors that influence motivation:
Internal Factors Unique to each individual, and cannot be controlled by the organisation.
(Eg. The desire to be successful).
External factors Within the control of the organisation. (Eg. Performance recognition).
The 3 theories of motivation:
1. Maslows Hierarchy of Needs
2. Herzbergs Two-Factor Theory
3. Lockes Goal-Setting Theory
1) Maslows Hierarchy of Needs

Maslows Hierarchy of Needs suggests that employees have 5 levels of needs, which can be
arranged according to their importance in a hierarchy, where lower needs must be satisfied before
an individual can move to the next level of needs.
Self-actualisation
Needs
Self-esteem
Needs
Social
Needs
Safety & Security
Needs
Physiological
Needs
Challenging work allowing for creativity

Participative decision-making
Opportunities for advancement
Job title and task responsibilities

Rewards and promotions
Prestigious workplace facilities
Friendly work associates

Organised employee activities (Eg. Friday night drinks)
Job security
Safe working conditions (Eg. Bullying policies, OH&S)
Superannuation
A job
Remuneration (pay)
Maslows 5 Levels of Needs
If the needs of employees are unfulfilled, an organisation should expect both increased staff
turnover and decreased productivity.
Lower order needs tend to not increase job satisfaction, but rather tend to prevent dissatisfaction.
2) Herzbergs Two Factor Theory

Herzbergs Two-Factor Theory suggests that satisfaction and dissatisfaction are caused by separate
sets of factors: hygiene factors (which prevent dissatisfaction) and motivation factors (which
increase satisfaction).
Hygiene factors are the environment in which people work and do not increase satisfaction.
They include pay, adequate working conditions, supervision, effective leadership and job security.
Motivation factors are factors that lead to job satisfaction and worker motivation.
They include recognition, achievement, responsibility and opportunities for advancement.
Herzberg argued that job satisfaction and motivation at work only occur through the provision of
motivation factors he argued that meeting hygiene needs only results in a neutral state.
Hygiene factors are extrinsic (external) and relate to the first 2 levels of Maslows Hierarchy.
Motivation factors are intrinsic (internal) and relate levels 3, 4 and 5 on Maslows Hierarchy.
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3) Lockes Goal Setting Theory

Lockes Goal Setting theory suggests that employees are motivated by clear goals and appropriate
feedback regarding their achievement.
It assumes that the setting of clear and challenging goals provides employees with the
motivation they need to achieve them, therefore improving performance.
Once goals are set, it is imperative under this theory that managers provide feedback for
employees about their progress towards achieving their goals.
Two factors are considered to be important:
Goal Specificity: Goals should be clear and explicit. If an individual participates in selecting their own
workplace goals they are likely to have a greater commitment to achieving them.
Goal Difficulty: Refers to the extent to which a goal is challenging, and states that motivation will
increase as the difficulty of the task increases.
Comparing Motivational Theories
Maslows Hierarchy of Needs & Herzbergs Two-Factor Theory
Similarities:
They are both motivational theories that aim to improve the motivation, work ethic and attitude of
workers.
They both highlight factors that motivate employees, and factors that tend to not motivate
employees.
Differences:
Maslow categorises factors into 5 groups of needs whereas Herzberg categorises factors into only 2
groups.
Maslow identifies each level of need as a motivator at some point in time whereas Herzberg identifies
that motivation will only occur through motivation factors.
Maslows Hierarchy of Needs & Lockes Goal Setting Theory

Similarities:
workers.
They both believe that increasing the challenge of work increases motivation.
Differences:
Maslow categorises motivational factors into 5 groups of needs whereas Locke only identifies one
factor (goal setting) as a motivational force.
Maslow believes that before an employee can reach self-actualisation needs all lower level needs
must be met first, whereas Locke states that any individual can establish challenging goals.
Herzbergs Two-Factor Theory & Lockes Goal Setting Theory

Similarities: (Same as similarities between Maslow and Locke)
workers.
They both believe that increasing the challenge of work increases motivation.
Differences:
Herzberg categorises motivational needs into 2 factors whereas Locke only identifies one factor (goal
setting) as a motivational force.
Herzberg looks at the factors which prevent job dissatisfaction whereas Locke only looks at how goal
setting can increase job satisfaction.
Ethics and Social Responsibility in Relation to Human Resource Management
It is socially responsible for an organisation to look after the needs of its employees. (Eg. Access to counselling)
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By Andrew Whatman
Chapter 5 The Employment Cycle

There are 3 phases to the employment cycle:
1. Establishment Phase
2. Maintenance Phase
3. Termination Phase
1) The Establishment Phase

The establishment phase includes everything that involves establishing the employee within the
organisation.
This phase begins before the employee enters the workplace.
Step 1 Human Resource Planning

Human resource planning is the development of strategies to meet the organisations future human
resource needs.
Managers plan to ensure that they have the right number of people with the right skills at the
right time.
Human resource planning needs to account for:
Internal Factors (Eg. Changes in production, planned expansion or retirements)
External Factors (Eg. Peak seasons, the state of the economy and technological changes)
Step 2 Job Analysis

Job analysis is the study of an employees job to determine the duties performed and the
responsibilities involved.
It generates information for preparing job description and job specification documents.
Job description is a written statement describing the employees duties, tasks and
responsibilities associated with the job.
Job specification is a list of the key qualifications, skills and work experience needed to
perform the job.
Step 3 Job Design

Job design involves making decisions about:
Who will perform them (any qualifications needed?)
What tasks should be grouped together into a particular job
Where the work will be carried out
How they are to be performed (using technology?)
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Step 4 Recruitment
Recruitment is the process of attracting the best qualified pool of applicants.
It can be internal or external:
Internal recruitment involves advertising the position within the organisation. This
allows for staff to be promoted.
External recruitment involves advertising the position outside the organisation.
Candidates can come from anywhere.
Step 5 Selection
Selection involves choosing the applicant that best matches the organisations requirements.
It is the process of gathering information about each candidate and then using that information
to choose the most appropriate applicant.
Methods of selection include screening, interviews, background investigation, testing
(psychometric, aptitude and competency) and selecting the applicant.
Step 6 Employment Arrangements

An employee contract is a formal written agreement between an employer and employee, setting
out the legal obligations of each party.
Employee contracts can be permanent full-time, permanent part-time, casual or fixed-term.
Reasons many employees prefer full-time work include:
Income is maximised when working over 35 hours a week
A high level of job security
Entitlements to sick leave, maternity leave and annual leave
Remuneration is the monetary payment in return for the work an employee performs.
Remuneration includes wages (mostly for casual employees), salary (mostly for part-time and fulltime employees), packages (Eg. Company car or accommodation) and benefits (Eg. Medical benefits
or maternity leave).
2) The Maintenance Phase

The maintenance phase includes everything that involves maintaining and developing the
employees of the organisation.
This phase is all about ensuring that the organisation retains productive and efficient employees,
who are committed to the organisation.
Step 1 Induction
Induction is the process of acquainting new employees with the organisation.
It includes:
Socialising with current employees
Office tours
Communication of the organisations values and beliefs
Introductory information about the job
An introduction to important people who are relevant to the new employee
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By Andrew Whatman
Step 2 Training & Development

Training is the process of providing an employee with the knowledge and skills needed to do a job.
Development refers to activities that prepare employees to take on greater responsibility in the
future.
Training and development are both important for new and existing employees, and are
necessary for both personal and organisational growth.
Benefits of Training
The quality of work improves
Employee productivity increases
Implications Due To Lack of Training

Can affect competitiveness
May lead to higher staff turnover rates
Training can be on the job (Eg. Coaching or job rotation), or off the job, (Eg. Lectures or
simulations).
Benefits of development programs include that they ensure staff are retained and are able to
increase employee motivation.
Step 3 Recognition & Rewards

Recognition is acknowledging the work an employee has done.
A reward is recognition for a job well done, or to act as a motivator to perform a job.
Rewards can be financial or non-financial, as well as intrinsic or extrinsic.
Financial rewards include wages, bonuses or commissions.
Non-financial rewards include promotions, travel awards, laptops or cars.
Intrinsic rewards come from within. They are intangible awards of recognition or a sense of
achievement. (Eg. Challenging tasks or involvement in decision making).
Extrinsic rewards come from outside. They are tangible or intangible rewards for doing a job,
which are external to the individual. (Eg. Pay rises or promotions).
Step 4 Performance Management

Performance management focuses on improving both organisation and individual performance
through relating organisational performance objectives to individual employee performance
objectives.
This is done through a performance appraisal:
A performance appraisal involves measuring an individuals performance.
There are 3 steps to conducting a performance appraisal: (IER)
1) Identify performance appraisal objectives
2) Evaluation through a combination of observation and analysis
3) Review and feedback given to employees, with strengths and weaknesses identified.
Positive outcomes of performance appraisals can include remuneration, rewards, promotions or
job rotations. Negative outcomes of performance appraisals can include training and
development, counselling or termination.
Advantages of Performance Appraisals
Recognises strengths and rewards success
Improved motivation with employees
participating to decide performance objectives
Disadvantages of Performance Appraisals

Financial rewards can be costly
If feedback is negative, employees may lose
motivation
3) The Termination Phase

The termination phase includes everything that involves putting an end to an employees contract
with the organisation.
Termination can be voluntary or involuntary.
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Category 1 Voluntary Termination

Voluntary termination is termination decided by the employee.
Resignation is when the employee decides to leave the organisation, generally to take up
another position. A period of notice must be given.
Reasons for resignation can include that the employee was offered a promotion at another
business or that the employee is dissatisfied with the current job.
Retirement is when an employee decides to leave the workforce entirely. This is usually
associated with older employees.
Reasons for retirement can include that the employee is of old age, an athlete, or has to
leave the workforce due to injury or illness.
Impacts of voluntary termination can include a loss of talent or a decline in the morale of other
employees, along with the cost associated with replacing the terminated employee.
Category 2 Involuntary Termination

Involuntary termination is termination decided by the employer.
Redundancy is when an employer does not need a job done anymore or needs fewer employees
to do a job.
Reasons for resignation can include the introduction of new technology, downsizing of the
organisation or merging of the organisation.
Dismissal occurs when the behaviour of an employee is unacceptable and the organisation
terminates their employment.
Reasons for retirement can include unsatisfactory work performance, illegal behaviour or a
breach of employment contract.
Unfair dismissal occurs when an employee is dismissed because the employer has discriminated
against them in some way. (Eg. Pregnant employees, discrimination against race or age, or
discrimination against female employees).
It is extremely important that appropriate counselling and disciplinary procedures take place
before dismissal. Employers must also provide employees with plenty of notice.
Ethics & Social Responsibility In Relation to Termination

An employer must ensure that he is using ethical and socially responsible practices during
termination.
Redundancy:
Negotiate a good redundancy package.
Assist those redundant in finding a new job.
Assist in writing resumes.
Use an outplacement service to assist those made redundant in finding a new job.
Offer counselling to those made redundant (Eg. Career counselling, financial counselling or
personal/emotional counselling).
Retirement:
Assist employees to move into retirement without hardship by providing counselling and
preparing employees for retirement especially for those who have worked in the organisation
for a long time.
This can be done by setting up a network of support or by reducing work hours for these
employees prior to retirement.
Dismissal:
Provide entitlements to employees.
Give plenty of notice prior to dismissal.
Give plenty of warnings prior to dismissal.
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By Andrew Whatman
Chapter 6 Employee Relations

Employee relations is the relationship that exists between employers and employees, and how they
work together to determine the level of pay and working conditions.
It can also be referred to as Industrial Relations and Workplace Relations.
Linking employee relations to business objectives and strategies:
A good relationship between the employer and employees = happy and satisfied employees = an
increase in productivity and employee motivation = easier to achieve organisational objectives.
There are 6 major players in Australian employee relations:
1. Employees
2. Employers
3. Trade Unions
4. Employer Associates
5. The Government
6. Fair Work Australia
1) Employees
Employees today demand more:
Challenging and interesting work
Interesting and challenging work
Independence at their workplace
Employees are now more involved in the development of new or changed agreements due to an
increase in the negotiation of employment agreements at a workplace level.
Employees may vote to approve a new agreement that has been negotiated on behalf of all
employees by a representative organisation. (Eg. Union).
2) Employers
The human resource manager will deal with the legal responsibilities of the organisation in
relation to employee relations matters.
Recent government legislation encourages employers to negotiate and resolve disputes at the
individual workplace.
3) Trade Unions
A trade union is an organisation formed to represent and protect the rights of workers in a
particular industry. (Eg. The Australian Education Union [AEU] or the Australian Nursing Federation
[ANF]).
Unions arose as a result of poor working conditions experienced by many employees.
They are evolved from groups of workers who banned together and chose representatives to
negotiate on their behalf.
Unions:
Act as a spokesperson to the media
Campaign for better pay and conditions
Take action for safer workplaces
For:
Increased wages
Safer working conditions
Parental leave
Annual leave
Superannuation/Pensions
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By Andrew Whatman
4) Employer Associations
Employer associations are organisations that represent and assist employer groups.
There are 3 types: (IPP)
1. Industry Associations Employers from the same industry
2. Professional Associations Members of professions (Eg. Australian Medical Association)
3. Peak Bodies Employers from varied industries (Eg. Chamber of Commerce)
Role of employer associations:
To represent employers during collective bargaining over wages and working conditions, at
industrial tribunals and in the making of Awards (under a centralised system).
To advise employers of their rights and obligations.
5) The Government
The government felt it necessary to intervene in employee relations as the interaction between
employers and employees can have significant repercussions for the Australian economy and the
general public, (unemployment rates/inflation rates).
The government has streamlined the process of making arrangements in the workplace.
Key roles of the government in employee relations:
Legislator Pass laws that provide the legal framework for employee relations.
Employer The government employs over 30% of the Australian workforce.
Economic Manager Ensures that wages do not lead to inflation.
Administrator of Government Policies Implement legislation by publishing information and
guidelines and providing advice to employers, employees and their representatives.
6) Fair Work Australia

Fair Work Australia was established by the Fair Work Act of 2009 to be a one-stop shop for
information and advice on workplace issues.
It is an independent body with the power to carry out a range of functions relating to:
The safety net of minimum wages and working conditions
Dispute resolution
Industrial action (strikes)
Enterprise Bargaining
Termination of employment (dismissals/unfair dismissal)
The Centralised Approach to Employee Relations

A centralised system is where Awards and working conditions were determined by a central body
(The Australian Industrial Relations Commission [AIRC]) relating to an industry.
Pre-1991, the Australian workplace was a centralised system with the setting of wages and
working conditions.
The main emphasis was on conflict resolution using conciliation and arbitration:
Conciliation occurs when a third party participates in the resolution of a dispute and attempts to
help resolve the differences through discussion.
Arbitration occurs when a judge (such as a commissioner of Fair Work Australia) or a panel of
judges hears both arguments in a dispute in a more formal, court-like setting and determines the
outcome that will be legally binding.
Under this system, the AIRC acted like a court to settle disputes related to pay and working
conditions, and set Awards that employers had to abide by.
Awards set out minimum conditions of employment for employees doing a particular job. (Eg. Retail
Award).
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By Andrew Whatman
Awards set, for all employees in an industry, things such as pay rates, working conditions, meal
breaks, superannuation and holidays/leave.
Advantages of the Centralised System
Time-effective Employers can refer to a
government-determined document to find out
pay and working conditions, which takes time
and effort.
Allows for transferability Employees often

move from one workplace to another. A
centralised system helps to ensure that when an
employee moves they will know exactly what to
expect at their new workplace.
High degree of government control - Through

the AIRC the government was able to maintain a
high degree of control over the labour market in
the country. This meant that it was very unlikely
that an employer would try to provide substandard conditions for an employee, as
conditions were maintained at a national level.
Disadvantages of the Centralised System

Lack of productivity Under a centralised
system it was impossible for employees to
negotiate productivity-based bonuses, because
this needed to happen at a workplace level.
Industrial disputes Under a centralised system,
a problem at one workplace could quickly spread
to an entire industry. For example, if one
employer has a dispute with their employees,
any industrial action might end up causing
problems for every business in that sector.
Lack of flexibility The centralised system did
not make possible the actions of attracting
people into jobs that are more difficult to fill as it
didnt provide for different levels of pay or
working conditions. For example, a centralised
system would not allow employers to attract a
city employee to work in a rural area because
the employers could not offer bonuses in pay or
working conditions to cover the inconvenience
caused.
The Decentralised Approach to Employee Relations

A decentralised system is where employees and employers at each individual workplace determine
their level of pay and working conditions.
Post-1991 saw the introduction of collective bargaining, the freedom to negotiate wages and
working conditions to suit individual circumstances.
In 1996, further decentralisation occurred as a result of the Workplace Relations Act of 1996, which
focused on collective agreements and Australian Workplace Agreements.
A collective agreement is an agreement about pay and working conditions that may be made
between an employer and a union, acting on behalf of its employees, or between the employer
and a group/individual representing the majority of its employees. (Eg. Public school teachers
agreement with the government).
An Australian Workplace Agreement (AWA) is an agreement made directly between an
employer and employee, covering working conditions and remuneration.
AWAs were designed to encourage employers and employees to negotiate contracts
directly with each other, therefore increasing workplace flexibility and international
competitiveness of Australian business. They were abolished in 2007 under the Rudd
government.
Collective bargaining is the direct negotiation of working conditions and remuneration, which
takes place between an employer and employees (or representative) at a particular workplace.
An individual contract is an agreement made concerning pay and working conditions
between an employer and employee, as a result of the collective bargaining process. (Eg.
Professionals who are in a good bargaining position will have an individual contract).
Under the decentralised system, Awards are now limited in scope of what they cover and the
rights of employees to strike are restricted.
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Since 2009, Fair Work Australia has had the aims of restoring the balance of power in employee
relations in 3 main areas: 1) Strengthening the safety net of minimum conditions, 2) Abolishing
AWAs and restoring collective bargaining agreements, and 3) Restoring unfair dismissal laws.
Comparing Employee Relations Approaches

Similarities between a Centralised & Decentralised System
The final outcome is an agreement about the wages and working conditions in an Australian
organisation. Both will identify pay, holidays and benefits to which employees are entitled.
In each case, the final document will need to be approved by Fair Work Australia before it is
enacted. Once this takes place, the employer and employee are compelled to follow the
provisions of the legally binding agreement.
Both systems aim to create a process that will assist in resolving disputes. All enterprise
agreements are required to have a system for dealing with disputes. In some cases, Fair
Work Australia may be the arbiter during a dispute. Similarly, most Awards include a model
dispute resolution procedure for resolving disputes.
Differences between a Centralised & Decentralised System
A centralised system will result in an outcome that will be applicable to all employees in a
particular industry, whereas a decentralised system will result in an outcome that will only
apply to the people who work in a particular business.
A centralised agreement is negotiated at a central location with input from a number of
different stakeholders, including both employee and employer associations, whereas
enterprise agreements are negotiated at a workplace level which only involves employees in
one particular business.
A centralised system will result in the creation of an Award, whereas a decentralised system
will result in either a collective agreement (to cover a group of employees) or an individual
contract (to cover an individual employee and their employer.
Conflict & Dispute Resolution
A grievance procedure is a formal process that permits employees to complain about matters that
affect them and their work.
If the grievance cannot be resolved at the workplace, conciliation or arbitration may need to
take place.
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Industrial Action:
If employees wish to take industrial action, they must first seek approval from Fair Work Australia.
Protected Industrial Action is industrial action that is approved by Fair Work Australia and is
only allowed during the protected period.
Unprotected Industrial Action is industrial action which has not been approved by Fair Work
Australia and can result in a minimum deduction of 4 hours pay.
Common Forms of Industrial Action:
Methods for the Resolution of Conflict:

1. Negotiation The least formal method of dispute resolution that involves direct discussion
between the parties, without the involvement of external third parties.
2. Mediation A more formal method of dispute resolution that involves a third party
(mediator) who assists the parties in dispute to work towards their own agreement. The
mediator will usually not offer ideas or solutions, preferring to allow the parties to develop
the agreement in their own terms.
3. Conciliation More formal than mediation.
4. Arbitration More formal than conciliation.
There are 3 possible outcomes to the employee relations process:
Awards, collective agreements or individual contracts. (Explained on pages 26 & 27).
Role of the Human Resource Manager under the Decentralised Approach:
Human resource managers must negotiate with employees and/or their representatives on
employee relations issues, such as the establishment of collective agreements.
The must:
Be aware of all relevant Awards and legal requirements
Ensure that all relevant information is available to employee representatives
Report back to Fair Work Australia
Management Styles in Employee Relations:
The consultative and participative styles will result in positive employee relations, as employees will
gain trust and support from their managers. The autocratic style, however, is likely to result in
conflict between employees and management, and employees will lose motivation.
Management Skills in Employee Relations:
Communication Skills Helps to build trust, support positive negotiation and help with the timely
resolution of disputes.
Problem-Solving Skills Helps to avoid unnecessary conflict during negotiations.
Negotiation Skills Negotiations must be organised to occur at a certain time, and managers must
have skills needed for negotiating agreements with employees and heeding to legal requirements.
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By Andrew Whatman
Chapter 7 The Management of Change

Change management refers to any alteration to an organisation and/or its work environment.
All organisations face change. Some changes are forced on an organisation while others are
carefully planned.
All changes should be evaluated thoroughly to assess their overall impact.
Poorly managed changes normally result in employee resistance, tension, anxiety, loss of
productivity and ultimately, unmet objectives.
The ability to manage and adapt to change will increasingly determine an organisations
competitive advantage and survival.
Sources of Change:
Source of change refers to where the change comes from, which includes changes from both the
internal and external environments.
The Internal Environment: (PCME)
1. Policies
Policies may be developed or amended for a number of reasons:
Change in legislation (Eg. Carbon Tax, Occupational Health & Safety)
Introduction of a new law
Implementation of technology
Changes in employee behaviour and attitudes
2. Corporate Culture
If the organisations corporate culture is seen to be inappropriate or negative, then management
must decide on how it can be changed. This may include:
Training/re-training employees
Changes in incentive programs
Changes in performance appraisals
Change in method of recruitment (Eg. External rather that internal recruitment)
3. Management
Management will always try to think of new ways that jobs can be done, or ideas that will help the
business to expand. They are often one of the greatest driving forces for change.
4. Employees
Employees are more attuned to the possibility of organisational change.

They are the ones who park in the company car park, follow the policies and procedures of the
company, use the company equipment and produce/ provide the product/service.
At any of these points the employees may end up making suggestions that will result in change.
The Operating Environment: (CC SUC)
1. Customers
Organisations must adapt to the changing needs and wants of its customers if they want to
remain competitive.
Customers are one of the most significant influences on organisational change.
2. Competitors
Organisations must be aware of existing competitors and need to monitor the environment for
potential newcomers.
Organisations must respond to any changes in the actions of their competitors if they want to
survive. The actions of competitors are crucial during change.
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By Andrew Whatman
3. Suppliers
If there is a problem with the supplier, the organisation will not be able to produce its products
as inputs will not be available.
Organisations should always be on the lookout for new or backup suppliers in case of supply
difficulties. (Eg. If a supplier is closing down or raising its prices).
4. Unions
Unions have the power to influence change in regards to pay and working conditions within an
organisation.
They are always attempting to convince organisations to adapt particular policies.
5. Creditors
Organisations must be ready if creditors increase their rates or decrease the time available for
the organisation to pay off its debt.
The Macro Environment: (GEE SPIT)
1. Globalisation
Australian organisations now operate in a worldwide market.

Organisations now face the challenges of competing on a global scale, and must adapt to
changes made by other global organisations.
2. Economic Forces
When an economy is in a poor state, consumer spending decreases.

Organisations must adapt to changes in unemployment rates, the value of the Australian dollar,
inflation rates and interest rates. (Eg. Making many employees redundant when consumer
spending is low).
3. Environmental Forces
Extreme weather events such as floods, droughts, pollution and land degradation can severely
impact on organisations.
Organisations must ensure that they are prepared for such events when they occur.
4. Social & Demographic Forces
Societys attitudes, needs and wants are constantly changing, and this affects the way in which
organisations operate.
Changes in fashion, trends, culture and the environment are all influencing organisations.
5. Political/Legal Forces
Whenever new laws are passed, organisations must comply with the new legislative
requirements.
Organisations that do not comply with these laws can face large fines and damage to their
reputation, and are likely to lose competitiveness as a result.
6. International Forces
Changes in world economic conditions are having an impact on many Australian organisations.
Organisations must comply with different government regulations, currency changes and
cultural values. (Eg. No beef burgers in McDonalds restaurants in India).
7. Technological Forces
Organisations must keep up with the technology changes of their competitors in order to survive.
The increase of online shopping is influencing organisations to change the way they operate.
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By Andrew Whatman
Productivity during Change

Change can lead to a decrease in productivity levels as:
Employees may struggle to adapt to the change
Redundancy may occur
Re-training will likely have to occur
New systems may have to be learned
Driving and Restraining Forces for Change
A force-field analysis outlines the process of determining which forces drive and which forces resist
a proposed change.
These forces are always pulling in opposite directions.
Managers who are trying to implement a change must conduct a force-field analysis to
identify and balance the driving and restraining forces.
Driving forces are the forces affecting a situation that support the goal or proposed change.
They initiate the change and keep it going. (Eg. A supervisor, an incentive program).
Restraining forces are those that work against the change, creating resistance.
They hinder the successful implementation of the change. (Eg. Apathy, hostility, poor
maintenance of equipment).
An organisations ability to implement the change successfully depends on the strength of the
driving and restraining forces:
If driving forces are stronger than restraining forces, the change is likely to be successful.
If driving forces are equally as strong as restraining forces, the change is not likely to be
successful.
If driving forces are weaker than restraining forces, the change is not likely to be successful.
Driving and restraining forces for change include: (POT CCL ME)
Productivity
Organisational Inertia*
Time
Cost
Competitors
Legislation
Managers
Employees
*Organisational inertia is the lack of ability of an organisation to meet internal and external
pressures for change.
Kotters Change Model

The model outlines the steps that a manager should take to successfully implement change.
Case Study for Kotters Model: Fairfax Media Ltd.
There are 8 steps:
(Every American Condones Cheating, Especially President Clinton Idiot).
1. Establish a sense of urgency
2. Assemble a group of people
3. Create a vision for change
4. Communicate the vision
5. Empower others and remove obstacles
6. Plan to achieve short-term gains
7. Consolidate all the changes
8. Institutionalise the approach and create a new corporate culture
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By Andrew Whatman
1. Establish a sense of urgency
Examine the current market opportunities and threats and analyse the organisations current
competitive position by conducting a SWOT analysis, (explained on page 8).
This will highlight the need for the change and help spark the initial motivation to get things
moving.
It can be done by communicating why the change is necessary and the consequences of not
changing.
This will highlight the impending crises or potential opportunities.
Fairfax: Made statements such as if we do not increase revenue we may need to stop printing
newspapers altogether and we are operating in very challenging times. Readers behaviours
have changed and will not change back. As a result, we are taking decisive actions to
fundamentally change the way we do business.
2. Assemble a Group of People
This involves gathering strong leadership and support from key people within the organisation to
convince others that the change is necessary.
This should bring together influential people from all aspects of the organisation that will be able
to ensure that the direction of the change is correct.
Fairfax: Created a new executive leadership team that was aimed at simplifying the structure of
the business and reducing bureaucracy. It allowed for a more participative management style to
be used during the change, reducing resistance among staff.
3. Create a Vision for Change
A clear vision with values that are central to the change must be developed to ensure that all
stakeholders have a clear sense of direction that will allow them to achieve a common objective.
Without a vision there can be no cooperation and commitment, which makes adopting change
almost impossible.
Fairfax: Made statements such as we will be a company that creates high-value, premium
journalism and content for print, online, mobile and beyond.
4. Communicate the Vision

The vision must be shared with all those who will be affected by the change through a variety of
communication channels.
The advantages of the change must be explained to reduce the resistance to the change.
The vision should be communicated frequently and powerfully.
Fairfax: CEO Greg Hywood made statements at media conferences in New York communicating
their new vision. Fairfax also notified internal stakeholders via their companys intranet, and
distributed video releases to the public via their website.
5. Empower Others and Remove Obstacles

Empower others to act on the vision and try to remove any obstacles that may undermine the
change process and the new vision.
Removing obstacles can empower the people you need to execute the vision.
This can be done by :
Hiring change agents whose role is to manage the change
Recognising and rewarding people who contribute towards making the change happen.
Helping people who are resisting the change to overcome their resistance. (Eg. By offering
additional training, job sharing, coaching or counselling).
Fairfax: Empowered employees to act on the vision by providing insightful feedback. They
removed obstacles by identifying the employees that were resisting the change and convinced
them that the change was necessary.
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By Andrew Whatman
6. Plan To Achieve Short Term Gains
Create short-term goals that are achievable.

This will be good for morale and motivation as employees will feel a sense of achievement.
If employees cannot see success and are not recognised for their efforts they are more likely to
resist the change.
Fairfax: Emails were sent to employees outlining the dates of successful stage completions.
Fairfax employees were also treated to a barbeque lunch to celebrate this success as well as
keep motivation levels high. Employees were organised into a hot desk environment (multiple
employees using a single work station) to assist them in coping with the change by seeking the
help of other employees when aiming to achieve goals.
7. Consolidate all the Changes
As the change process proceeds, it is necessary to modify existing policies that no longer match
the changed systems and/or create new policies that are needed as a result of the change.
It is also necessary to assemble the benefits attained from the change into the organisations
operating procedures and systems.
This will lead the new structure to become a solid base upon which to produce more change.
Fairfax: Fairfax has approached staff members to gain feedback in relation to the new system.
Consultation sessions were developed to tweak the model and to gather advice on areas that
need improving.
8. Institutionalise the New Approach and Create a New Corporate Culture
Management must reinforce the link between the changes and future success, promoting a
corporate culture that supports the new behaviour.
The change must be embedded in the culture, by showing the connection between the change
and the success of the organisation.
Fairfax: Fairfax talks about their progress at every chance. They are consistently telling success
stories about their journey of changing from print to digital. They do this by making regular
statements to their stakeholders indicating their success. Additional training sessions have also
been incorporated to build a stronger, more positive corporate culture.
Strategies for the Effective Management of Change

Low risk strategies refer to the participative approach to the implementation of change.
Examples of low risk strategies to reduce resistance to change:
Use of two-way communication
Empowerment of employees to make decisions
Building trust among employees
Establishing work teams to implement changes
High risk strategies refer to the autocratic approach to the implementation of change.
Examples of low risk strategies to reduce resistance to change:
Use of one-way communication
Use of force
Use of centralised decision-making
Threatening employees who resist change
Low Risk vs. High Risk

Failure of high-risk tactics may generate negative outcomes and damage the working relationship.
Low-risk tactics are more likely to be successful in the long term and allow for all stakeholders within
the organisation to feel valued as their ideas and feelings are taken into account.
34
By Andrew Whatman
The Role of Leadership during Change
Managers and leaders play a vital role in the successful implementation of change.
The must be able to use their skills to act as a bridge to support the employees as they move
from existing work practices to new ones.
If leaders do not have the skills to implement the change effectively, then the introduction of the
change can lead to a situation there employees become cynical and resist the change.
Leaders should focus on building relationships with employees and external stakeholders.
Leadership qualities required during change include:
Empathy
Ability to resolve conflicts
Good listener
Able to communicate a clear vision
Have high expectations of employees abilities
Characteristics of Organisations That Are Ready For Change:

Decentralised structure
Positive corporate culture
Emphasis on leadership and on people
Practices to successfully implement change:
Educate leaders to ensure they understand what the change is
Use a team approach and involve stakeholders
Empower managers and employees to make decisions and implement changes
Provide training and development for those involved
The Impacts of Change

Change will impact an organisations structure. Change may cause:
Unprofitable parts of the business to be sold off

The business to expand
A change in structure
The relocation of departments
Change will impact an organisations operations. Change may cause:
New plant and equipment to be introduced
New technology to be introduced
New quality programs/environmental programs to be introduced
New production methods to be implemented
Change will impact an organisations human resources:
Downsizing may lead to a reduction in staff
Changes in management styles with affect employees
Expansion may result in more employees being introduced to the company
New training programs will have to be implemented
Impacts of technological change on:

Management Will have to develop new training programs and learn to configure work processes.
Policies Existing policies must be developed/new policies introduces based on technology.
Employees Need to develop new skills and change work practices operate the technology.
Corporate Culture Technology may result in cultural shifts where employees may feel insecure.
Customers Now expect organisations to introduce and improve technology to be more productive.
Competitors Organisations will have to keep up with their competitors changes in technology.
Social & Demographic Trends New employees will expect to use technology as part of their job.
Globalisation Trends Many organisations are now linked via technology.
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By Andrew Whatman
Case Study: Changes Occurring at Fairfax Media Ltd

Pressures for Change
Technology
Technological developments have resulted in changes in the way the public accesses news and
information services. The growth of the Internet and development, and the increasing use of tablet and
smartphone applications by the public has meant that the traditional print newspaper is in danger of
becoming obsolete.
The growth and use of online employment sites such as seek.com has led to a fall in newspaper revenue
made from job advertising.
Competition
The increasing pressure to build on online coverage in order to remain competitive with both local and
overseas media services is motivating Fairfax to change its online news services constantly. Additionally,
the cost of maintaining and distributing hard-copy newspapers is enormous.
Social & Demographic
The change in consumer preference in regards to accessing news (print to online) has resulted in Fairfax
changing the way it operates.
Shareholders
Falling sales/revenue led to Fairfax shares falling 87% in value over the previous 5 years. Unhappy
shareholders are demanding that Fairfax changes more to earn greater profits.
Customers
Customers demand change. For example, market research shows a demand for tabloid-size newspapers
rather than the traditional broadsheet. As a result, Fairfax must change its news service in order to comply
with the needs and wants of its customers.
Summary of Changes at Fairfax
Introduction of cost-cutting measures designed to generate annual savings of $235 million over 3 years.
Introduction of a re-designed front page for both The Sydney Morning Herald and The Age.
Establishing pay walls (compulsory subscriptions for online readers) around the websites of its two main
metropolitan newspapers: The Sydney Morning Herald and The Age.
Shifting to compact tabloid-size editions of the broadsheet newspapers from March 2013.
The closure of major printing works at Tullamarine (Melbourne) and Chullora (Sydney) by June 2014, with
printing to be done at regional areas.
A greater integration and sharing across digital, print and mobile platforms aimed at improving flexibility
and reducing costs.
Updating smartphone sites with many new features.
Introduction of two new sections in The Sydney Morning Herald and The Age.
Impacts of Changes at Fairfax

Impacts on Structure:
Fairfax has announced an organisational restructure and new Executive leadership team aimed at
simplifying the structure of the business in response to the change.
The stated aim of this restructure was to simplify how Fairfax does business, and to reduce bureaucracy
(flatten the structure), thereby reducing operating costs and making efficiency improvements.
Impacts on Operations:
The movement of printing facilities to regional areas and the loss of the two major printing works in
Melbourne and Sydney have occurred as a result of the changes at Fairfax.
Impacts on Human Resources:
As a result of the changes, 1900 jobs have to be cut, about one-fifth of Fairfaxs entire workforce of
10,000.
Many employees have been made redundant due to the rise in online media and news services.
Some employees may have to be trained on how to operate the online services as a result of the changes.
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By Andrew Whatman
Current Success of the Changes

Currently, as a result of the changes at Fairfax, the company:
Has declined net debt to less than $200 million.
Has expected to produce cost savings of $251 million by 2014-2015.
Has reported net statutory profit after tax of $386.3 million, up 285% in the reporting period.
Has won the support of many key stakeholders.
It has been estimated that by 2020, 80% of the worlds media will be digital.
Instructional Terms of Exam Questions:

Define To accurately state or explain the meaning of a term. Always provide an example with a
definition.
Outline- To provide a brief description of a term or topic.
Identify To determine or establish as being a particular thing. To determine the key characteristics
or features.
Distinguish To recognise or show points of difference between various items or topics.
Describe To provide a detailed account of something.
Explain To make the meaning of something clear and understandable.
Analyse To break into parts and examine the advantages and disadvantages.
Compare To bring together for noting the points of likeness and difference.
Select To choose one preference over the other.
Justify To provide reasons for your selection of a theory or conclusion.
Illustrate To provide an example to support your statement/comment.
Evaluate To apply criteria to the relative strengths and weaknesses of the arguments raised in the
stimulus material and provide your opinion.
Discuss To examine an issue and state the arguments or opinions for and against, covering both
sides of the issue raised in the stimulus material. Problems must relate directly to strengths.
Apply To use theory to help in a practical example. To show or make links, relationships or
connections.
The
End!
37
Copyright 2013 Andrew Whatman. All Rights Reserved.

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Business Management

Units 3 & 4 Notes

Business Management Units 3 & 4 Notes

Chapter 2 The Internal Environment of Large-Scale Organisations................................................. 5

Business Management Units 3 & 4 Notes

Business Management Units 3 & 4 Notes

Business Management Units 3 & 4 Notes

Results of a customer satisfaction survey

Business Management Units 3 & 4 Notes

Chapter 2 The Internal Environment of Large-Scale Organisations

The Functional Model

Disadvantages of the functional model

The Divisional Model

Disadvantages of the divisional model

Business Management Units 3 & 4 Notes

The Matrix Model

Disadvantages of the matrix model

Functional & Divisional

Communication flows only vertically

Functional lacks flexibility whereas divisional has enhanced flexibility

Business Management Units 3 & 4 Notes

Divisional & Matrix

Enhanced flexibility facilitates expansion

Functional & Matrix

Communication flows vertically

Functional lacks flexibility whereas matrix has enhanced flexibility

Business Management Units 3 & 4 Notes

The Policy Development Process (IRC DP PE)

Business Management Units 3 & 4 Notes

Key Management Roles (POLC)

Controlling is the process of evaluating performance, by comparing planned performance to actual

Business Management Units 3 & 4 Notes

The Autocratic Style

Business Management Units 3 & 4 Notes

Disadvantages: (Same as autocratic)

Business Management Units 3 & 4 Notes

3. Negotiation refers to the ability to resolve a dispute, or to produce a satisfactory agreement on a

Ethics & Social Responsibility

Business Management Units 3 & 4 Notes

Chapter 3 Operations Management

Inputs are resources such as

The transformation process

Outputs are the final product, or

There are 7 categories of inputs:

The Difference between Goods and Services:

Services (Service Organisations)

Business Management Units 3 & 4 Notes

1) Facilities Design & Layout

Disadvantages of the fixed-position layout

Disadvantages of the product layout

Business Management Units 3 & 4 Notes

Disadvantages of the process layout

Disadvantages of the Virtual Faactory

Business Management Units 3 & 4 Notes

b) Technology Used in Service Organisations:

Business Management Units 3 & 4 Notes

Just In Time Benefits

Just In Time Problems

Less risk of products becoming obsolete or

Ethics & Social Responsibility in Operations Management

Ensure that suppliers are ethical.

Reduce carbon emissions. (Eg. Energy efficient light bulbs).