Business Management Concepts
Business Structures
Types of Businesses
Sole Traders: Owned and operated by one person, who is responsible for all aspects of the business. They are cheap to set up but have unlimited liability.
Partnership: A business structure involving 2 to 20 people who run a business together. Risks are shared, but potential disputes between partners can arise.
Private Limited Companies: A business with 2-50 shareholders, whose stocks cannot be bought or exchanged on the stock market. They are a separate legal entity but have a high degree of establishment and complexity.
Public Listed Companies: A business without a minimum number of shareholders, whose shares are freely traded on the stock exchange. They offer limited liability but have high establishment costs.
Social Enterprises: Private sector businesses that distribute profits to benefit the community or a social need. They have a positive reputation but can be hard to finance.
Government Business Enterprises: Businesses that are government-owned and operate in the public sector. They deliver community services but are less accountable, potentially leading to lower worker productivity.
Management Styles
Autocratic: Managers make all decisions without employee input.
Persuasive: Managers make all decisions but explain their reasoning to employees.
Consultative: Managers seek employee ideas and opinions before making decisions.
Participative: Managers and employees collaborate to make decisions.
Laissez-faire: Managers communicate business objectives, and employees work independently to achieve them.
Management Skills
Essential Skills for Effective Management
Communicating: The ability to clearly exchange information with employees and stakeholders.
Delegating: Transferring authority and responsibility for tasks to employees.
Planning: Establishing objectives and strategies to achieve them.
Leading: Motivating and inspiring employees to achieve business objectives.
Decision Making: Determining suitable courses of action for the business.
Interpersonal Skills: Interacting positively with employees to build and maintain professional relationships.
Stakeholder Relationships
Balancing Conflicting Interests
Employees & Shareholders: Employees want fair wages, which can reduce business profits and shareholder dividends.
Management & Customers: Management aims for higher profits, potentially leading to higher prices that upset customers.
Suppliers & Community: Suppliers may use unethical practices to keep prices low, potentially upsetting the community.
Corporate Culture
Shared Values and Beliefs
Official Corporate Culture: Values and beliefs the company conveys to the public (e.g., logos, slogans).
Real Corporate Culture: Actual values and beliefs present in the company (e.g., staff behaviors).
Roles of Participants in the Workplace
Key Players and Their Responsibilities
Human Resource Managers: Manage the employer-employee relationship.
Employees: Perform duties, follow procedures, and act ethically.
Employer Associations: Promote common interests and ensure fair standards.
Unions: Represent and protect employee rights.
Fair Work Commission: Australia’s national workplace relations tribunal.
Training and Development
Enhancing Employee Skills and Knowledge
On-the-job Training: Learning from experienced employees at the workplace.
Off-the-job Training: Learning from professionals away from the business.
Performance Management
Evaluating and Improving Employee Performance
Management by Objectives: Measuring performance based on defined objectives.
Appraisals: Assessing performance against set standards.
Self-evaluation: Employees assess their own performance.
Employee Observation: Objective assessment by observing employees performing their roles.
Motivation Theories
Understanding What Drives Employees
Maslow’s Hierarchy of Needs
A theory suggesting employees have five fundamental needs they strive to fulfill in a set order:
- Physiological Needs
- Safety and Security
- Social Needs
- Esteem Needs
- Self-Actualization
Four Drive Theory (Lawrence and Nohria)
A theory suggesting employees strive to fulfill four fundamental needs:
- Drive to Acquire
- Drive to Bond
- Drive to Learn
- Drive to Defend
Goal Setting Theory (Locke and Latham)
Examines how work-related goals motivate employees. Key factors include:
- Clarity
- Challenge
- Commitment
- Feedback
- Task Complexity
Motivational Strategies
Techniques to Enhance Employee Performance
Performance-related Pay: Financial rewards for exceeding standards.
Career Advancement: Opportunities for promotion and new roles.
Investment in Training: Developing employee skills and knowledge.
Support Strategies: Building positive employer-employee relationships.
Sanction Strategies: Punishments for failing to meet objectives.
Employment Termination
Ending the Employment Relationship
Retirement: Voluntary departure from the workforce.
Redundancy: Termination due to job elimination.
Resignation: Voluntary termination initiated by the employee.
Dismissal: Termination initiated by the employer due to unsatisfactory behavior.
Dispute Resolution
Resolving Workplace Conflicts
Mediation: An independent third party facilitates discussion to reach a resolution (non-binding).
Arbitration: An independent third party makes a legally binding decision.
Legal Influences on HRM
Understanding Employment Standards
National Employment Standards: Minimum standards for employment conditions.
Awards: Industry or occupation-specific pay rates and conditions.
Agreements: Contracts between employers and employees regarding terms and conditions.
Operations Management
Efficient and Effective Production of Goods and Services
Operations Management: Coordinating resources to achieve efficient and effective output.
The Operations System
Inputs: Resources required for production.
Processes: Transforming inputs into outputs.
Outputs: Final products (goods or services).
Types of Operations
Manufacturing Businesses: Create tangible goods.
Service Businesses: Provide intangible services.
Materials Management
Planning and Controlling Materials Flow
Forecasting: Predicting material requirements.
Master Production Schedule: Breaking down the production process into stages.
Materials Requirement Planning: Itemized list of required materials.
Just in Time (JIT): Supplies arrive as needed, and finished products are immediately dispatched.
Lean Management
Maximizing Customer Value and Reducing Waste
Pull: Production based on customer demand.
One-piece Flow: Focus on one product at a time.
Takt: Speed of manufacturing.
Zero Defects: Mistakes are fixed before moving to the next stage.
Quality Management
Ensuring Products and Services Meet Standards
Quality Control: Inspections at different stages to ensure standards are met.
Quality Assurance: Proactive process to build quality into work processes.
Total Quality Management (TQM): Holistic approach involving all employees in continuous quality improvement.
Corporate Social Responsibility (CSR)
Going Beyond Legal Requirements
Environmental Sustainability: Sourcing raw materials sustainably and using green energy.
Waste Minimization: Reducing the environmental impact of operations.
Ethical Production: Ensuring high quality, truthful marketing, and non-harmful products.
Technology Developments
Impact on Operations Management
Automated Production Lines: Minimal human intervention in production.
Robotics: Using robots for manual tasks.
Computer-aided Design (CAD): Improving product design and creation.
Computer-aided Manufacturing (CAM): Controlling machinery and equipment through computers.
Artificial Intelligence (AI): Recommending products to customers.
Online Services: E-commerce and website development.
Waste Minimization
Reducing Environmental Impact
Reduce: Using fewer resources.
Reuse: Using resources multiple times.
Recycle: Turning waste into useful resources.
Global Considerations
Operating in a Globalized World
Global Sourcing: Sourcing inputs from outside the country of origin.
Overseas Manufacturing: Completing operations in another country.
Global Outsourcing: Contracting another business overseas to perform roles or functions.
Business Change
Adapting to a Dynamic Environment
Proactive Change: Initiating change before pressure arises.
Reactive Change: Responding to pressure by making changes.
Forces for and Against Change
Restraining Forces
- Managers
- Employees
- Time
Driving Forces
- Owners/Managers
- Employees
- Competitors
- Legislation
- Pursuit of Profit
- Technology
Key Performance Indicators (KPIs)
Measuring Business Performance
Level of Staff Turnover: Rate at which employees leave the business.
Level of Wastage: Extent to which processes are lean and effective.
Number of Customer Complaints: Dissatisfaction with products or services.
Number of Website Hits: Files downloaded on the website.
Number of Workplace Accidents: Unplanned events interrupting workflow.
Change Management Theories
Understanding and Managing Change
Force Field Analysis (Lewin)
Examines forces driving and restraining change.
Porter’s Generic Strategies
Strategies for achieving competitive advantage:
- Lowering Cost
- Differentiation
Management Strategies for Change
Effectively Implementing Change
Staff Training: Improves productivity, sales, and safety.
Staff Motivation: Improves productivity growth and reduces absenteeism.
Change in Management Styles: Empowering employees and improving productivity.
Increased Investment in Technology: Improving productivity, reducing waste, and increasing profits.
Effects of Change
Impact on Stakeholders
Owners/Managers: Increased stress and potential changes in management style and structure.
Employees: Potential role changes, new uniforms, or work environments.
Customers: Improved customer experience and approval.
Suppliers: Improved relationships and communication.
Community: Potential economic impacts, such as job creation or loss.
Change Management Strategies (cont.)
Minimizing Resistance to Change
Low-Risk Strategies
- Communication
- Empowerment
- Support
High-Risk Strategies
- Manipulation
- Threat
Reviewing Indicators
Evaluating the effectiveness of change through KPIs.
Leadership and Change
Guiding the Change Process
Leadership: Positively influencing and encouraging individuals to achieve objectives.
Lewin’s Change Management Model
Unfreezing: Preparing for change.
Changing: Implementing the change.
Refreezing: Maintaining momentum and ensuring long-term implementation.