Students learn to:examine contemporary business issues to:• discussstrategiesthatcouldreconciletheconflictinginterestsofstakeholders• compareandcontrastapproachestomanagement• explainthebenefitsofqualitymanagementpractices

investigate aspects of business using hypothetical situations and actual business case studies to:• identifythequalitiesofmanagerswhohaveexhibitedhighpersonalandethicalstandards• analysedifferentwaysofcoordinatingkeybusinessfunctionsforanSME• examineeffectivecashflowmanagement• assesstheroleoftheincomestatementandthebalancesheetwhendescribingthefinancial

performanceofabusiness• explainhowSMEsmanagechangeeffectively

Students learn about:

nature of management• featuresofeffectivemanagement• skillsofmanagement

– interpersonal,communication,strategicthinking,vision,problem-solving,decision-making,flexibility,adaptabilitytochange,reconcilingtheconflictinginterestsofstakeholders

achieving business goals– profits,marketshare,growth,shareprice,

social,environmental– achievingamixoftheabovegoals– staffinvolvement–innovation,motivation,

mentoring,training

management approaches• classicalapproach

– managementasplanning,organisingandcontrolling

– hierarchicalorganisationalstructure– autocraticleadershipstyle

• behaviouralapproach– managementasleading,motivating,

communicating– teams– participative/democraticleadershipstyle

• contingencyapproach– adaptingtochangingcircumstances

management process• coordinatingkeybusinessfunctions

andresources• operations

– goodsand/orservices– theproductionprocess– qualitymanagement

• marketing– identificationofthetargetmarket– marketingmix

• finance– cashflowstatement– incomestatement– balancesheet

• humanresources– recruitment– training– employmentcontracts– separation–voluntary/involuntary

• ethicalbusinessbehaviour

management and change• respondingtointernalandexternalinfluences• managingchangeeffectively

– identifyingtheneedforchange– businessinformationsystems– settingachievablegoals– resistancetochange– managementconsultants

Chapter 2 BUSINESS MANAGEMENT

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Summary• Managementistheprocessofgettingthingsdonethroughtheactivitiesofothers.• Theresponsibilityofmanagementistoguidethebusinessthroughitslifecycle.• Agoodmanagershouldhavearangeofbusinessandinterpersonalskillsandbeable

toreconcilethedifferent,andoftencompeting,interestsofthebusiness’sstakeholders.• Businesseshavearangeofbusinessgoalsthatusuallyreflecttheirstageinthebusiness

lifecycle.• Threedifferentapproachestomanagementcanbeused:classical,behaviouraland

contingency.• Thebusinessshouldunderstandthemarketinwhichitoperates.• Thevariousbusinessfunctionsshouldbecoordinatedtocontributetothesuccess

ofasmallormediumenterprise(SME).• Themarketingmixconsistsofproduct,place,servicepromotionandprice.• Accountingandfinancesupporttheoperationsofabusiness.• Cash-flowmanagementandbudgetplanningarecrucialtothesuccessfuloperations

ofanSME.• Humanresourcemanagementinvolvesallaspectsofanemployee’srelationship

withthebusiness.• Employersandemployeeshaverightsandresponsibilitiesintheoperationofa

business.• Abusinessalsohasethicalandsocialresponsibilitiestothecommunityinwhich

itoperatesandtosocietyingeneral.• ChangeprocessesmustbemanagedeffectivelyforchangetotakeplaceinanSME.

Introductory activities

Business literacy1 Usingtheglossaryinthetext,findthemeaningofthefollowingterms:

balancesheet businessculture businessethics

externalenvironment finance humanresources

internalenvironment internalinfluences keybusinessfunctions

management managementapproaches marketing

operations organising planning

stakeholders technologicalchange vision

Business thinking skills2 Thinkabouthowthingsgetorganised.Thinkabouttheanswerstothefollowing

questions.

a Howistheschooltimetabledevelopedandwhodevelopsit?b Howaretheteachersassignedtoclasses?Andhowaretheteachersassigned

toschools?c Whodecidesthecurriculumthatyoustudy?d Aretherespacesintheschoolthatareusedonlyforschoolorganisationand

management?Whooccupiesthesespaces?

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Unit 2.1 The nature of management

What is management?Managementistheprocessofgettingthingsdonethroughtheactivitiesofothers.Inbusiness,managementinvolvescreatinganenvironmentthatencouragesindividualstocarryoutactsdesignedtoachievepersonalaswellascorporategoals.Managementislargelyapeople-orientedactivityinvolvingdiscussion,decisionmaking,directingandadvising.Thetasksmanagersperformvarygreatly,anddependonsuchfactorsasthenatureofthebusinessandlevelofmanagement.Forexample,lowerlevelsofmanagement(suchasproductionmanagers)spendagreatdealoftheirtimedirectlyinvolvedinthesupervisionofworkersengagedintheproductionprocess.

Importance of managementManagementatthevariouslevelsplanandcoordinatetheinputsofbusinessandensurethattheproductionprocessoperatesefficientlysothatthebusinesscontinuestosatisfytheneedsofcustomers.

Figure 2.1.01 Good management encourages individuals to achieve personal as well as corporate goals.

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Thestepsinvolvedfromtheproductionofagoodorservicetoitsdeliverytoconsumersrequirethecoordinatedinputofmanyworkers.Managers,bycoordinatingtheactivitiesofotherworkers,playavitalroleinthisprocess.Theyareresponsibleforcreatinganenvironmentwithinthebusinessenterprisethatallowstheobjectivesofthebusinesstobeachieved.Asadirectresult,abusinessmighthavegreatervaluethanthetotalworthofitscombinedresources.Becauseoftheirresponsibilitiestothevariousgroupswithastakeinthesuccessofthebusinessenterprise,managerstendtobefinanciallywellrewarded.

The features of effective managementThemanagerormanagersofasmallorlargebusinessplanandorganisethefunctionsofthebusinesstoensurethattheeffortofemployeesiscoordinatedtoproducevalueforconsumers.Itistheeffectivenessofthisprocessthatdetermineswhetherabusinesswillsucceedorfail.Managementhastheresponsibilitytoguidethebusinessthroughitslifecycleasitmovesfromestablishmenttogrowthandmaturity(andpost-maturity),mustmakedecisionsthatwilldeterminetheoutcomeofitsoperationsandthedirectiontobetakeninthenextphase.

Inalargebusiness,thebusiness’smanagementisabletodelegateoverallresponsibilityforitssuccesstoexperiencedpeoplewithinthebusiness’sdepartments,whileinasmallerbusinessthemanagerisexpectedtobeanexpertineveryaspectofitsoperations.Ineithercase,effectivemanagerswillperformrolesthatcouldbeclassedasinterpersonal,informationalordecisional.

Figure 2.1.02 One role of a manager is to coordinate the various pieces of the puzzle that is business.Sam

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The interpersonal roleIntheirinterpersonalrole,effectivemanagersareresponsibleforcreatinganenvironmentwithinthebusinessenterprisethatwillhelpstaffcometogetherandcooperatetoachievethegoalsofthebusiness.Consequently,theyneedtocommunicatetheirvisionandthevaluestheybelievetheirstaffshouldhave.Theyalsoneedtorecognisethatbusinesseshavebothpersonalandbusinessobjectives,andthatmanagersandemployeesmutuallydependoneachother.Theproductivityofemployeesreflectstheirrelationshipwiththeorganisationandwithotheremployees.Itisinthebestinterestsofmanagementtoensurethatthebusinessoperatesinawaythatsatisfiesthehumanneedsofitsstaff.

The informational roleTheinformationalroleofeffectivemanagersistocommunicatetostaffthebusiness’sgoalsandwhereitisgoing.Theyalsoneedtocommunicatedirectionsanddecisions,probablyonadailybasis.Managersmayalsobecalledontopassontheirknowledgeandexpertise.Theyneedtobegoodlistenerssotheycangatherinformationaboutlonger-termstrategiesfromthepeoplewithexperienceandexpertise.Justasimportantly,managersneedtofindoutfromindividualswhattheirpersonalobjectivesareandwhattheythinkthebusiness’sobjectivesshouldbe.

The decisional roleIntheirdecisionalrole,effectivemanagershavetochoosefromanumberofalternativesbeforedecidingonthebestcourseofaction.Thesedecisionswilloftenhavewide-reachingimplicationsforthefutureofthebusiness.Tomakeinformeddecisionsthatbestsuitthebusinessanditsstaff,effectivemanagersneedtohavefullknowledgeoftheimplicationsofallavailablecoursesofaction,oratleastbeabletorelyonsoundadvice.

Effectivemanagementrequiresbusinessmanagersto:• provideclear,consistentandwell-communicateddelegationofroles,activitiesand

responsibilitiesforwork• havegoodinterpersonal,communicationanddecision-makingskills• knowthevariousskillsoftheirstaffandbeawareoftheirneeds• weighupallbusinessissuesandbusinessdecisionsthatneedtobemadeandthink

inalong-termstrategicway.

The skills of managementPeople skills and interpersonal communicationAspartoftheirleadershiprole,managersoftenhavetogetthecommitmentofalltheiremployeesandinfluencethemsotheywillactinacertainway.Thisinvolves:• beingabletomotivateandcommunicateasenseofpurposetothemembersof

thestaff• encouragingstafftoproducetheirbestresults• gainingtherespectandloyaltyofstaffwhilebeingdecisivebutconsistent• beingintouchwithstaffsotheirsupportinachievingthebusiness’sobjectives

canbenegotiatedandenlisted.Goodmanagersmustknowtheirstaff,notjusttheirjob-relatedabilities,andalso

whethertheyhaveunrealisedorunderutilisedabilitiesandskills.Managersmustknownotonlywhoneedstobespokento,butalsowhoshouldbelistenedtoandwhen.

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Strategic thinkingBusinessmanagershavetobeabletotakealonger-termviewofwhatisthebestwayaheadfortheirbusiness.Theyrequireathoroughknowledgeoftheirownbusiness,theircompetitorsandthebusinessenvironment.Businesstheory,research,andpracticalexperiencearebothneededinordertodevelopappropriatestrategiesforthebusiness,asisinsightintohumannatureandthebusinessworld.

Inthepracticalsense,strategicthinkingmeansbeingabletodeterminethebusiness’sobjectives,thecoursesofbusinessactionneededtoreachthesebusinessobjectives,andhowresourcesneedtobeallocatedsothesebusinesscoursesofactioncanbepursuedandthebusinessobjectivesachieved.

VisionIfabusinessistogrowandprosper,itmustdevelopavisionthatwillstimulateadvanceswithinthebusiness.Themostvisionaryideaswillincludesomeinventions,buttheymayalsoinvolvealargemeasureofinnovationbytakingexistingideasandadapting,extendingorcombiningthemtodevelopsomethingnewforthebusiness.

Visionarymanagersarethosewhocandeveloptheirownideas,orusethecreativityofothersintheirbusiness,tocomeupwithavisionorlong-termgoal,eventhoughthevisionmaynotyetbeattainablegivenexistingresources.Thevisionshouldbebroadlyunderstoodandagreedtobyallstaff.

Problem solving and decision makingThekeytoflexibilityandadaptabilityistheabilityofbusinessmanagerstosolvebusinessproblemsandmakeappropriatebusinessdecisions.Thisdependsonunderstandingthedifferentbusinesschallengesatdifferentpartsofthebusinesslifecycleandtrainingandexperience.Businessadvisorsandconsultantsarealsoavailabletoassistbusinessmanagerstosolvekeybusinessproblemsandprovidedecision-makingadvice.

Flexibility and adaptabilityManagersareconstantlyhavingtoguideanddirectstaffandoffersolutionstobusinessproblemsbasedontheirownexperienceandtheexperienceofothers.Consequently,ascircumstanceschange,managersmustbepreparedtoseekoutandimplementtheoriesandpracticesappropriatetotheircurrentneeds.Businessmanagerswholackflexibilityoradaptabilitytochangecannotrespondeffectivelytochangesintheexternalenvironment.Ifthisisthecasetheyareunabletomeetnewrequirementsorredevelopthebusiness’svisionandoperations.Thisisoneofthereasonswhymanysmallbusinessesfail;thebusiness’smanagersareunabletochangethewaythebusinessoperatestomeetnewchallengescreatedbychangesinthebusinessenvironment.

Reconciling the conflicting interests of stakeholdersAkeyaspectofeffectivebusinessmanagementistobeabletoresolveconflictsbetweenthebusiness’sstakeholders.Oneoftheaimsoftheownersofthebusinessistoincreasetheirprofitsorreturnfromthebusiness.Thismayconflictwiththeobjectivesofthestaffandemployeesforincreasedremunerationandpaymentfortheircontributiontomakingthebusinessasuccess.Managersneedtoconsiderandresolvethesesortsofconflictstobeeffectivebusinessmanagers.

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Business FocusKeeping good company with your staff

With skill shortages already evident in the trades and professional services, it’s little wonder companies are scrubbing up their employee retention plans.

And as employers are finding out, what drives someone to stay with you now may have changed from what was important a year ago.

‘Right now, I think people want to be valued, but it’s still about pay and work appropriate for their abilities,’ said Meaghan Callaghan, Human Resources Director of online recruiter SEEK.

‘It may be nice giving fruit or a free breakfast, but you have to value staff in personal ways.’‘Employee retention is simple if you (as a manager) focus on that all the time.’Ms Callaghan says it’s important to give any employee meaningful reward through verbal praise

for the work done or a positive review of that person’s performance.And as job recruitment gathers pace, people really want to know where they stand.‘Last year, many people weren’t happy (in their jobs), but didn’t necessarily act on that because

of their limited options,’ says John Asquith, retention adviser and founder of Talent Drain.‘Mostly, organisations may not be growing, but for one new position, you may have ten different

people hopping organisations and that creates a lot of movement,’ Mr Asquith said.Typically, a weak point for companies is holding onto new starters, who tend to have a 30-40 per

cent attrition rate, and the level of happiness of these workers tends to drop after 12 months unless they’re actively engaged.

‘Ensuring these new workers are part of a team, and being trained, is important. Good supervision is good management.’

Management practices can’t always be separated from the culture so that’s why good leadership counts.

‘I think little notes of appreciation and chats with the boss are essential ... when those are missing then the other factors become more important. These don’t cost you,’ Mr Asquith said.

Often strategies for retaining talent can often come down to either altering the workplace environment or changing something regarding your people.

‘Lawyers, for instance, spend a lot of time in their office so the work environment is a big part of their lives,’ said Mr Asquith. ‘It’s not just a place to work.’

‘On the other hand, accountants have a long way to go with HR strategies. They don’t tend to have such a focus on these HR-related engagement factors.’

‘We hear about their problems in retaining staff, but these firms don’t seem to be on top of that problem.’

One firm which has ramped up their retention efforts is SNP Security - the third largest security player in Australia, with almost 2000 employees and contracts for airports, the National Portrait Gallery and a number of CBD buildings.

According to Darlene Winston, SNP’s manager of people and culture, 90 per cent of the company staff are security guards, hailing from 57 different countries - so English is a second language for most.

The industry faces a high turnover in manpower although not as high as in the US, where it’s almost 50 per cent. In Australia last year, security firms generally lost more people than they employed, while the average turnover for SNP fell from 22 per cent to 14 per cent.

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‘Keeping security guards longer than a year is a challenge because they see it as a stepping stone’, says Ms Winston, ‘and the company has moved to change things through more training, and clear promotion and non-cash rewards such as English language courses.’

The business is also seeking more women through a new mentoring campaign, active recruitment through their staff and schools, and career succession planning.

‘When you engage people, and you have the right people in the right roles in a thriving environment, you can retain them,’ Ms Winston said.

Tips to stop the drain:1 Understand the commitment of staff and match candidates to the job – for instance, if it’s about

boredom then job rotate or increase responsibilities.2 Monitor staff on their needs through surveys and discussion.3 Make ‘quick win’ changes, such as the induction process, or a change in work environment.4 Highlight your strengths.5 Have a retention budget.

Source: Julienne Dowling, Talentdrain, viewed at Sydney Morning Herald website, 19 May 2010

Business focus questions1 Discuss what Ms Callaghan identifies as the key issues for retention of staff.2 Identify how Ms Winston demonstrates the key skills of managements.3 Describe staff retention strategies you would recommend for a manager working in the security

industry. How do these strategies relate to the key skills of a manager?

Achieving business goalsBusinesseshavearangeofbusinessgoals.Inpartthesegoalsreflecttheirstageinthebusinesslifecycle.Usuallybusinesseshaveamixofgoals,forexample,focusingonprofitandreturnstobusinessownersorfocusingonsalesandmarketshares.Sometimesbusinessespursuemanybusinessgoalsatthesametime.

Atthecommencementofthebusinesslifecycle,intheestablishmentphase,themainbusinessgoalisfocusedaroundenteringthemarket,makingsalesandcommencingthebusiness.

Figure 2.1.03 Common business goals

Goal Description Example

Profit Providingareturnoninvestment Toincreaseprofitsby5%overfiveyears

Marketshare Thepercentageofthetotalmarketusingthegoodsorservice

Toestablishbusinessinthemarket

Growth Positiveincreaseinsales,distribution,staff,etc.

Toopenanewoutletinadifferentgeographicarea

Shareprice ValueofshareholderequitymeasuredontheASX

Tomaintainsharepriceinafluctuatingmarket

Social Businesstakesresponsibilityfortheimpactithasonstakeholders

Topromoteapositivework–lifebalanceforemployees

Environmental Businesstakesresponsibilityfortheimpactithasontheenvironment

Tominimise‘carbonfootprint’throughecologicallysustainablepractices

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Balancing responsibilities to stakeholdersBusinessmanagersandownerstrytoensurethattheirbusinesscontinuestooperateprofitably.However,therewillbetimeswhenstakeholderswillbeadverselyaffectedbyunfavourablebusinessconditionsand/orunfavourablebusinessdecisions.Stakeholdersareallthoseindividualsandgroupswhohaveaninterestinthecontinuingsuccessofthebusiness.Whethertheyareemployees(fromtheinternalbusinessenvironment)orcustomersorclients(fromtheexternalbusinessenvironment),businessmanagersmustconsidertheirneedsastheydeterminethegoalsofthebusiness.

Themanagementhasaresponsibilitytoensurethatitsstakeholdersarenotadverselyaffectedbythepursuitofitsgoals.Ifthelawiscompliedwithorifindustrycodesofpracticearefollowed,stakeholdersareunlikelytobeadverselyaffected.However,somebusinessgoalsmaybenefitonegroupofstakeholdersattheexpenseofanother.Thisiswhenthemanagementhastoreconcileconflictsofinterest.

Businessesneedtosetgoals.Onewayofdoingthisistousethe‘SMART’method.

SpecificMeasurableAchievableRealisticTimed

Figure 2.1.04 A manager has a responsibility to the internal and external stakeholders of the business.

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Business FocusBob’s Books

Bob, Ian and Mike have started a small publishing business called Biriwa Education. They wrote a number of textbooks for large publishers and decided to start their own publishing business and make cheap textbooks for school students. They all have a lot of teaching experience and have written a lot of textbooks together. Bob and Ian work in schools but Mike works in a university department. At first their business goal was to sell some of their textbooks and create a small market share and brand name for their textbooks. So they chose an unusual name Biriwa, (which is a very small bird that lives in Vanuatu) because they published some books about the Pacific Islands.

As their books grew in popularity the goals of the business changed, Ian became interested in providing courses for teachers and students using the textbooks and Mike became interested in selling the small textbook business to a large publisher. Australian publishing has about 220 publishers. The 10 largest publishing firms account for the majority of sales of textbooks. The industry is very dynamic as larger publishers often purchase small publishers who have developed a good product. Mike’s goal is a post-maturity one, to sell the business and move into starting a new one with a new market.

The business managers also considered the environmental aspects of the business. Producing textbooks can be environmentally wasteful as publishing uses lots of paper. The business experimented with CD and online publications to reduce the environmental footprint of their small publishing business.

Business focus activities1 In pairs, draw up a table of the goals of this small business as it grew through the business life

cycle.2 Identify how communication between the three business managers might have occurred.3 Explain how even small business must be concerned about environmental issues.4 In pairs, make a different plan for the post-maturity goals of Biriwa Education, the small

publishing business.

Staff involvement—innovation, motivation, mentoring, trainingSetting,implementingandachievingbusinessgoalsshouldnotonlybetheresponsibilityofmanagement.Staffinvolvementintheprocesscarriesarangeofbenefitsforthebusiness.Employeeinvolvementindecisionmakingempowersstaffandincreasesmotivation,productivityandsupportofbroaderorganisationalobjectives.Asemployeesaredirectlyinvolvedinproductionandservicedeliveryprocesses,theyoftenhaveideasandinnovativesolutionstoboostefficiencyandproductivity.Throughaprogramofmentoringandtraining,staffinvolvementcanbeencouragedandpromoted.

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Unit 2.1 ReviewKey terms and conceptsbusinessgoals conflictsofinterest decisionalroles

delegation effectivemanagement informationalroles

interpersonalroles peopleskills problemsolving

strategicthinking

Business literacy 1 Analyseandcontrasttheinterpersonal,informationalanddecisionalroles

ofmanagement.

2 Definetheterms‘vision’and‘strategicthinking’.Inabriefstatement,explainthesimilaritiesanddifferencesbetweenthem.

3 Effectivemanagersshouldalways .

Completethissentencewiththreeactionsthatyouwouldconsiderthateffectivemanagersdo.

Business teamwork 4 Workinginpairs,describehowyoukeepintouchwithyourfriends.Howdifferent

wouldthisprocessbeformanagerswhowanttobeintouchwiththeirstaff?

5 Workinginpairs,decideifthefollowingbusinesssituationsreflecteffectivepeopleskills,strategicthinking,vision,flexibilityandadaptability,orproblemsolvinganddecisionmaking.

a Thebusinessownerhascomebackfromaproductexhibitionwithdetailsofanewmachinethatlowersproductioncostsandreduceswasteandpollution.Theownerwantsthestafftoexaminethewaythenewmachineworkstoseeifitcouldbeaddedtotheproductionprocess.

b Thesmallbusinessownerhasgivenaspeechtoalltheemployeesabouthowthebusinessisgoingtoimproveitscustomerservice.

c ThesmallbusinessmanagerhasinvitedabusinessconsultantfromtheGovernmentregionalbusinessorganisationtoadviseonimprovingsalesandnewmarketopportunities.

6 Discussthechallengesformanagementinbalancingamixofbusinessgoals.Giveexamples.

Business ICT and thinking skills 7 Visitthe Business Review Weeklywebsiteandbrowsethemenuforarticleson

businesses(firms).Readanarticleaboutafirmmakingamajordecisionforthefuture.Describethestrategicthinkingbehindthisidea.Dothisintheformofadiagramandthenshowtheexpectedorlikelyoutcomesofthisstrategicdecisionbythefirm’smanagement.

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