Internal environment of large- scale organisations VCE Business Management Unit 3

Internal environment of large-scale organisations

VCE Business Management Unit 3

Three basic types of management structure

• These are:– Functional structure– Divisional structure– Matrix structure

Common exam question relating requiring you to choose one of these structures and relate it to a simulated scenario.

Different management structures

Horizontal StructureThe Functional Model •Employees organised into departments based on the organisations’ functions.•Chief Executive Officer develops strategic plans•Senior Managers implement the plans•Middle Managers develop operational plans to carry out these visions.

Horizontal StructureThe Functional Model

• Lower level Managers organise day to day plans to run the business.

Horizontal StructureDivisional or Geographical Model

• Employees grouped according to divisions and Geographical locations.

• Billabong Limited• Wide range of products and markets• Shops all over Australia• Most employees in Billabong interact with customers

and don’t make the clothes.• Results can be assessed on location levels.

Horizontal StructureDivisional or Geographical Model

• Suited to large retailers like Billabong• Each store identified by geographical location.• Team building occurs.• Cultures often exist in the teams eg Billabong

would have a surf culture.

• Combines both FUNCTIONAL and DIVISIONAL Models.

• Complex• May be project specific• Construction firms or IT (Information Tech

Companies)• May lead to power struggles between

managers.

Horizontal StructureMatrix Model

Formal Structures

• Known as mechanistic or bureaucratic structures.

• They may appear on the firm’s website as representative of what the corporation wants the public to see.

• In reality, the organisation is a dynamic structure, constantly changing and evolving as the business grows / contracts. These formal structures may be different than what is portrayed to the public.

Formal and Informal Structures

• The Management Structure and its members can influence the valuation of the corporations shares.

• Analysts of the share market look at the structures, board members and the CEO’s resumes with much interest and report to the public accordingly.

Informal Structures

• Exist inside the formal management structure.• Can be norms, work methods and unwritten

procedures.• May be called ‘Organic structures’• Billabong - Surf culture• Nokia - tech culture• Toll Holdings - transport culturehttp://www.toll.com.au/

Corporate Culture and its Future Development

• Corporate Culture - definition (defn)

‘A learned and shared way of life of a group of people or society’

Corporate Culture

• Includes values, beliefs, moral codes, customs and rituals.

• Corporate Culture is the values and beliefs shared by employees of an organisation.

• May be in the Mission or Vision Statement.

Levels of Culture in an Organisation

• SURFACE CULTUREWhat is visible to the public / shareholders and potential investors.Layout / dress codeWesfarmers - owns Bunnings.UniformStore layout

Policy of ‘no sales’ cheapest prices guaranteed.

Levels of Culture in an Organisation

• MIDDLE LEVEL CULTUREStated beliefs and values.On all correspondence or documentation.The Mission StatementOccupational Health and Safety Policy.See Wesfarmers reports.

Levels of Culture in an Organisation

• DEEPEST LEVEL CULTUREThe culture the employees / management

believe in.Virgin Blue - ‘a sense of fun’ but........No frills airfares and pay for your meals!Richard Branson’s culture from day one.

Levels of Culture in an Organisation

• DEEPEST LEVEL CULTUREManagement and employees believe in the

culture, values and practices of the organisation

Firms with this type of deep level culture are often highly successful.

NokiaGoogle

Ethical Morality

• What we know as ethical and social responsible management

• Evidenced by Corporate Governance sections on corporations’ websites.

• Has arrived as a result of serious litigation by the Australian Securities and Investment Commission of company directors acting unethically.

Creating a Corporate Culture

1. Orienting - mission statements, policies and charters available to all stakeholders and given as an induction to new employees

2. Institutionalising - ensuring the practices of the organisation reflect the documentation.

3. Sustaining - continual improvement of these practices and assurance they become the norm for all new employees.

Creating a Corporate Culture

• Horizontal organisational structures are the ones with the best chance of maintaining an effective corporate culture.

• The team environment can aid all employees in following the line the management has chosen to show the public.

• Eg: Ray’s Outdoors have morning staff meetings every day before the shops open for trade.

Creating a Corporate Culture

RAY’S OUTDOORS• Morning Staff Meetings:1. ‘This is what we have on special today / this week.’2. ‘This is what is appearing on our TV / Newspaper

adverts at the moment.’3. ‘There are the staff away today and here are the new

staff or replacements, please help them as much as possible today etc.’

Creating a Corporate Culture

RAY’S OUTDOORS• Every manager of every store (36 I believe) has

a morning meeting with staff.• Every manager receives training on what the

Ray’s Outdoors corporate image is to be like.• Although they are responsible for their store,

changing the corporate image and culture is not negotiable.

Learning Cultures

• Business needs to adapt to the changing times with subtle changes to their culture.

• Ray’s Outdoors never opened a store in Townsville (population 130,000) because they couldn’t purchase a suitable site and were prepared to wait rather than risk a location that didn’t suit their culture.

• Consequently ANACONDA and BCF (Boating, Camping & Fishing) both opened stores there.

Learning Cultures

• Ray’s Outdoors still haven't opened in Townsville and management reports indicated that online sales and mail order sales from their Cairns shop

(4 hours away) has increased substantially over the last 3 years.

• The learning culture at Ray’s is not to panic at market changes. Learn from them and create a Competitive Advantage.

Learning Cultures

• Successful organisations can become innovative as Ray’s has done with the online catalogues and sales. They adjust to change without wasting shareholder’s money and Reinvent themselves.

• Successful companies do this as research suggests.

© Cambridge University Press 2012

Policy development and its application

Policy development involvesthe following:• Policy – a written statement detailing

processes and procedures, rules and regulations that must be observed in a given situation

© Cambridge University Press 2012

Policy development and its application (cont.)

• External pressures to change policies – can be legal, social, environmental, international, technology

• Operating pressures – lobby groups, regulatory bodies, customers, suppliers, unions

© Cambridge University Press 2012

Policy development and its application (cont.)

• Internal pressures – these come from owners/shareholders, management, employees.

Key Management Roles

P O L CThe key management functions of an organisation:

• Planning• Organising• Leading• Controlling

PLANNING (P O L C)

• Developing strategies or tasks to achieve objectives that are set by senior management.

• Undertaking a Situational Analysis as to the current position of the corporation. Where are we now?

• Set Objectives - Where do we want to be?• The Strategy to get there - what do we want

to do? Monitor - has it been done well?

PLANNING (P O L C)

Situational AnalysisEvaluating the situation of the business and trends in the

organisation’s market.Ray’s Outdoors and the Townsville dilemma.Open a store or wait?Their objective was to wait until a suitable commercial building was available to purchase in a preferred location matching their demographic ideal. Result - wait!

ORGANISING (P O L C)

• Management aim to use the developed strategies in the organisation.

• ILUKA - Plan to use Hopetoun as a freight terminal for Zircon and Mineral Sands deposits.

• ILUKA - Management will carry out those plans.• ILUKA - Intend to employ 90 personnel either from

the area or recruit nearby.

ORGANISING (P O L C)

• Management needs to allocate the necessary resources to ensure strategies are achieved.

• ILUKA - allocate the Human Resources• ILUKA - allocate the Physical Resources

• Finance comes from share holders capital or loans are raised.

ORGANISING (P O L C)

• Managers choose the personnel who will drive the plans / changes.

• Managers use their judgement in these matters

• Tasks are delegated to achieve necessary strategies.

ORGANISING (P O L C)

• Managers receive information on the physical resources necessary to achieve their plans.

• Finance officers prepare budgets and allocate the required resources for the new startegy.

LEADING (P O L C)

• A complex task of directing and coordinating the business.

Day to day tasks.Individual objectives.• Successful leaders motivate employees• Successful leaders help employees reach their

potential.

LEADING (P O L C)

• Note the different management styles and understand how they work

• Autocratic• Persuasive• Consultative• Participative• Laissez-faire

LEADING (P O L C)

• The individual who leads an organisation can have a tremendous impact on the valuation of shares, future trends in share price and employee morale.

• In many ways, the success of a corporation depends on the individual who is the leader either the CEO, Chairman of the Board or the managing Director. Read from management journals

CONTROLLING (P O L C)

• Managers allocate tasks then ensure that resources, tasks and time are all use effectively.

• ILUKA and Hopetoun Terminal.• ILUKA - careful checking and monitoring to

ensure a schedule is adhered to within reason. The rain events of this last summer would be hard to allow for in any plan.

• However, successful managers would still be able to control the project with minimum delays.

CONTROLLING (P O L C)

• A manager that is good at controlling often measures events against standards.

• Indicators may be used.• ILUKA - Product moved through the Hopetoun

depot 2012, 2013 etc• ILUKA - savings in transport costs with Kalari

(Those orange Trucks!) as a result of the Hopetoun depot 2011, 2012 etc

CONTROLLING (P O L C)

• Human resources (shortage of skilled labour in WA has lead to shortages here in Vic especially earthmoving, mining and trades. Managers need to know this.

• Financial resources - budgets, interest rates and working with financial managers.

• Materials - no tyres for 50 ton and over haul dump trucks. Shortages due to the mining boom. Now Japan is restricted, managers expect shortages there.

CONTROLLING (P O L C)

• Performance standards for company depts.• Feedback - open door policy of some

managers or closed door policy. • Feedback - depends on the culture and

management styles in the organisation.

P O L C

• Planning• Organising• Leading• ControllingKnow these, how they work both independently and together. There will be a question on the final examination about this management role.

POLICIES

• High level statements or guidelines that embrace the strategic direction of the organisation.

• Written• Internal Factors - changes to policies reflect

circumstances.• External factors - changes to amend policies

affected by govt legislation changes.

POLICIES

• To carry out policies, organisations use procedures (usually written) to implement them.

• Example:ILUKA - short term incentive plan p9 annual

report and p12 retention plan.

Know and Understand the 4 styles ofmanagement examinable here.• Autocratic• Persuasive• Consultative• ParticipativeRealise their are some other styles such as laissez-faire, Contingency management and situational approach.

Styles of Management

• Management Style defn - ‘The way in which managers go about their work and interact with people.’

• What managers do?• POLC• Aim at achieving organisational objectives and

strategies.• Managers have different styles and abilities.

Styles of Management

The Continuum of Management Styles

• Associated with hierarchical or vertical management structures - top down

• Often seen as management focused.• Defn - Management style where the power

and decision making remain with management in terms of policy, operations, planning and setting of tasks.

• An autocrat is authoritarian.

AUTOCRATIC MANAGEMENT

• Senior managers make decisions for subordinates and direct them accordingly.

• Workers only receive monetary reward for their skills and services.

• Praise of workers = seldom• Criticism - often handed out and in public.

AUTOCRATIC MANAGEMENT

• In the Master of Business Administration degree, the best management theory has the following rule (1980)

• ‘Praise in public, Punish in private.’

• Therefore our Autocratic managers are somewhat outdated in their methods?

Your Opinion ????

Management Theory (Not on your exam)

• Managers rarely deviate from plans.• Often check on subordinates.• May cause poor morale in the organisation.

• News Corp - modified version• Bob Jane T Marts - were autocratic under Bob

until the company almost collapsed, his son took over and went back to their original successful management styles.

AUTOCRATIC MANAGEMENT

• Centralised Decision Making• Control at Management level.

• Managers sell their decisions to employees.• Employees feel they have some ownership of

these ideas and the decision making process.

PERSUASIVE MANAGEMENT

• HARD SELLRewards or threats to employees to follow the

new plans, strategies or policies.

• SOFT SELLManagement forms relationships with

employees to encourage the new procedures, strategies or plans.

PERSUASIVE MANAGEMENT

• Management is willing to consult with subordinates.• Builds relationships.• Working in groups.• This is how modern management techniques are taught at

undergraduate and postgraduate levels.

CONSULTATIVE MANAGEMENT

• Group Synergy ie an effect created by collective intelligence.

• The ideas of the group can outweigh the ideas of the individual.

• Employees feel valued.• Morale and motivation may be high.

CONSULTATIVE MANAGEMENT

• Managers require certain attributes to be good at this style of Management:

Good ListenersAre trusted by employees / subordinatesCan use the information provided by employees

and create solutions.

CONSULTATIVE MANAGEMENT

• Employees are able to actively make decisions themselves.

• Supported by management to make these decisions and there is no consultative process.

• ‘Common Goals’ of workers and management ie to increase shareholder wealth and obviously this will lead to job security and long term employment.

PARTICIPATIVE MANAGEMENT

• Employees need management training.• Employees are selected that have the ability

and resources to make the required decisions.• Communication flows both ways.• People focused management

Example: Woolworths

PARTICIPATIVE MANAGEMENT

BENEFITS• Employees feel free to talk to management.• Team environment.CRITICISMS• May be difficult to make quick decisions.• Uncertainty may exist in employee roles.Example: Billabong

PARTICIPATIVE MANAGEMENT

• ‘Leave well enough alone.’ Employee focused management style with hardly any management interference.

• Workers decide on how to achieve goals.SAAB Sweden• Managers set deadlines that employees meet with

their own KPI’s• Used where employees are highly motivated

Other Management StylesLAISSEZ-FAIRE MANAGEMENT

• Management vary their styles according to the circumstances.

• Contingency - a situation that arises unexpectedly that needs to be handled quickly and effectively.

• Used by the Australian Army• Multi-styled managers.

Other Management StylesCONTINGENCY MANAGEMENT

• James Hardie limited

Other Management StylesCONTINGENCY MANAGEMENT

Head office and company located in AustraliaAsbestos claims lead to multiple law suits

Management had a ‘knee jerk’ reaction and moved the company headquarters to Holland to avoid paying claims agreed to in court.

Australian directors faced court for not acting with due care and diligence in facing up to their responsibilities.

• James HardieKnee jerk reactions of managers, bad contingency plans, lack of Corporate Governance and failing to listen to employees and the public has cost the shareholders of the company.Share prices fell and have remained below their true worth.Investors are still concerned about management even though all 9 directors have gone and will never manage a company again.

Other Management StylesCONTINGENCY MANAGEMENT

COMMUNICATIONDefn - the transmission of information in a way

that the recipient is ensured to understand the message.

Communication that is ineffective in business leads to poor achievement of goals and strategies.

The Key Management Skills required for Effective Management

• COMMUNICATIONFormal Communication - may be via policy, memo or email.Informal Communication - unofficial message, gossip, smokos etc.Good managers take careful note of all forms of communication.

The Key Management Skills required for Effective Management

• COMMUNICATIONVerbal Communication - encourages feedback, occurs frequently and may not require an agenda. Effective managers send a written form of communication after a verbal meeting to confirm main points.

The Key Management Skills required for Effective Management

• COMMUNICATIONNon-Verbal Communication - body language,

tone of voice, image and setting. Can be regarded as important especially when dealing with overseas traders. Take note of cultural factors ie some cultures don’t like standing too close or touching. Other cultures may not look you in the eye.

The Key Management Skills required for Effective Management

• Non-Verbal CommunicationBody language, dress and setting for meetings.Are you a mind reader or a manager?????It is often smart to ask about cultural

communication methods, most people respect this and will advise accordingly.

The Key Management Skills required for Effective Management

• EFFECTIVE COMMUNICATIONSuccessful managers use a variety of skills and techniques to promote effective communication.

The Key Management Skills required for Effective Management