Large-Scale Organisations Chapter 1 Large-Scale Organisations

What is an Organisation? An organisation is a formal or structured arrangement where two or more people work together to accomplish some specific purpose or set of goals. A stakeholder is an individual or group that has a direct or vested interest in the activities of an organisation.

Why are organisations needed? Organisations can achieve things that could not be achieved by individuals – Together Everyone Achieves More Organisations serve to manage complex social and technological change Organisations ensure that there can be continuity of knowledge between past and future generations Organisations, whether they are for profit or not-for-profit in their orientation, provide and important source of employment. -working as part of a group people are able to achieve a common purpose or goal. Importance of team approach hichlighted in 1995 in Karpin Report which emphasised that the ideal manage of the future must be able to perform as a team player. -the sharing of responsibilities assists in the effective management of the required change -varying ages, life and business experiences allows the passing down of valuable knowledge while also providing the future members or group leaders with a diverse range of opinions and experiences. Invaluable for decision making -organisations can also influence our career direction Being part of an organisation, such as a school, sports club or cadet unit, may create employment opportunities through connections with prospective employers who may be past students of the school, members of the club etc. This is referred to as networking.

What do all organisations have in common? Distinct purpose, usually expressed as a set of goals that an organisation wishes to accomplish Purpose Comprise two or more people Structure People Either a formal structure with clearly defined rules, regulations and procedures, or informal with simple network of loose working relationships.

Characteristics of Large-scale Organisations Number of business locations –locally, nationally or globally Total assets – own substantial assets (millions) Large Size of operations – operate using a multiple factories, branches, stores Large Scale Organisations may have one or more of these characteristics Employee base – employs more than 200 employees Market share – commands a large percentage of the marketplace Total revenue – earns substantial gross income (millions of dollars revenue) Profits – has substantial gross profits

Other Characteristics Strategic Objectives are formulated – both management and employees working to achieve common set of objectives, creates synergy Strategic planning is undertaken – long-term planning undertaken by senior management to achieve corporate objectives. Formalised policies, procedures and rules are adopted and documented. An organisational structure is developed – internal formal framework to show how management is linked and how authority is transmitted. Synergy – working together to achieve a common goal. The sum of all parts is greater than the individual parts. 3. For all employees to know how to act and react to situations. 4. Typical structure is based on departmental lines, with departments divided according to their function, such as operations, finance, human resources, marketing and R&D. Commonly shown diagrammatically in an Organisational Chart.

Other Characteristics continued… 5. A chain of command and hierarchical management structure is established – Each level represents a ranking of staff, with lower ranks being subordinate to superiors of a higher rank. 6. A coordinated and decentralised approach to decision making is adopted – Decentralisation involves delegation to and empowerment of employees 7. Specialisation of activities into departments or within departments occurs. 6. Requires coordination to ensure that all decisions made throughout the organisation work towards achieving its overall corporate objectives. 7. Size and range of activities involved will generally require it to be broken into departments which allows for specialisation of activities in departments.

Large-scale organisations in Australia Australia is an open market economy – economy operates freely without government intervention Many Australian businesses choose to expand their operations beyond their national or domestic borders and become global, become multinational/transnational corporations. Organisations can change in size due to a takeover by, or merger with either foreign or Australian companies. 3. Some takeovers or mergers can be mutually beneficial in advancing the strategic direction of the organisations involved. Others would be classified as hostile where an organisation is virtually wiped out by another organisation taking it over.

Merger/Takeover examples: Entering into a joint venture agreement with a foreign enterprise can provide those much needed funds as well as providing for economics of scale in production. Merger/Takeover examples: Wesfarmers – diversification approach (process of entering new markets and/or developing new products) Adelaide and Bendigo Bank – merger beneficial to their joint long-term strategic direction BHP Ltd and Billiton Plc – dual listed company (two companies merge but retain their original listing on two stock exchanges.) More information on each merger in text book.

Different Types of LSO’s - Ownership Government Business Enterprises (GBEs) Privately Owned Government owned and operated Employ large numbers of people and provide essential community services Corporatisation: GBEs are incorporated and run like private companies to be fully accountable Privatisation: Process of selling public sector businesses to the private sector Owned and operated by private individuals, groups or institutions ‘Proprietary Limited’ – private company owned by individuals or groups ‘Limited’ – public company whose shares may be openly traded on the Australian Stock Exchange

Types of Private Ownership Public Company Private Company Shares are listed on the Australian Stock Exchange Shares can be bought and sold by any person or company Must have at least 50 shareholders with unlimited upper number of shareholders to be listed on ASX Small number of shareholders (2 to 50) Shares bought and sold privately with consent of other shareholders Often run as a family business Activity 1.4 – Corporatisation of Australia Post

Different Types of LSO’s – Orientation or Focus For profit Focus of these organisations is profit attainment, market share and growth This classification makes up the majority of enterprises in Australia Not-for-profit Focus is on providing a specific service to the community Include charities, environmental conservation organisations, special school, medical research organisations, local sporting groups etc. Main aims are to provide social, educational, religious, medical or humanitarian assistance Read profile of Australian Red Cross Activity 1.5

Public Sector Government Department ∙Australian Tax Office (ATO) Type Examples Objectives Features Revenue Source Government Department ∙Australian Tax Office (ATO) ∙Department of Foreign Affairs and Trading (DFAT) ∙To provide services ∙They are not expected to make a profit ∙Responsibility lies with the relevant level of government (local/state/federal) ∙Government revenue – mostly from taxation Government Business Enterprise (GBE’s) ∙Australia Post ∙Vic Roads ∙To provide a service and to pursue profit ∙While essentially owned by the government, they are often self-funded and must manage their own operations. ∙Primarily from the user-pay services they provide

Private Sector Private Company ∙Fernwood Fitness Centres Type Examples Objectives Features Revenue Source Private Company ∙Fernwood Fitness Centres ∙Blundstone Boots ∙To provide goods and/or services in the pursuit of profit ∙May have up to 50 shareholders – not listed on the stock exchange ∙The sale of shares must be with the consent of other shareholders. The business name is followed by Pty. Ltd.: Proprietary Limited ∙Income from the sale of goods and/or services that they provide Public Company ∙Wesfarmers ∙ANZ ∙Quiksilver ∙May have any number of share-holders, and are listed on the stock exchange ∙Shares can be bought and sold by the public Charities and Foundations (Sometimes called ‘charitable foundations’ ∙Red Cross ∙St Vincents de Paul ∙Make a Wish Foundation ∙To raise funds to be used to provide services for the needy or to support one particular cause ∙Often called ‘Not for profit’ (NFP) organisations. The expectation is that only funds raised will be used to support the stated causes that the charity supports. ∙While some money will be used to cover overheads such as administrative costs, this should be kept to a minimum ∙Income from various methods of fundraising that are undertaken. Eg Red Cross doorknocks, Royal Childrens Hospital Good Friday telethon and oppe shoppes.

Different types of LSO’s – Type of Business Activity Organisations are placed into industry sectors associated with a particular product or service . Level of Sector Type of business/service Contribution to Gross Domestic Product (% of GDP) Primary Mining, agriculture, fishing and forestry – those industries concerned with land or sea 9.6% Secondary Manufacturing, processing, construction, fabrication of final product 27.1% Tertiary Wholesaling, retailing and transport 20.7% a) Quaternary Information processing, finance and insurance, property and business services education 38% b) Quinary Hospitality, health and social assistance, personal and other services 4.5% Australian businesses categorised by the AB into 496 individual industries. The industry is used as the basis to determine award wages and working conditions. Look at chart of 17 main industry categories

Organisational Objectives and Strategies Objectives are statements of desired achievement that provide direction for actions. When establishing objectives, the following characteristics must be addressed: The objectives being set are specific (S) The objectives and their outcomes are measurable (M) The objectives, while difficult, are achievable/attainable (A) The objectives are understood and accepted by the organisation as relevant (R) The objectives are time-bound (T) This is known as adopting the SMART principle. All organisations, no matter what their size or ownership, must set objectives and then determine strategies or actions to achieve these aims to succeed.

Hierarchy of Objectives Mission Statement Corporate Objectives (strategic) Departmental Objectives (tactical) Operational Objectives Individual employee objectives

Hierarchy of objectives 1. Mission Statement: the purpose or reason for an organisation’s existence. Vision Statement: outlines an organisations overall concept or aspirations Values Statement: outlines what the organisation sees as its corporate values or cultural priorities These are usually determined by the board of directors working in conjunction with the chief executive officer. 2. Corporate objectives establish the strategic objectives required by the organisation to reach its overall purpose. -determined by senior management -long term (2-5 years) -must be specific, achievable and measureable - communicated to stakeholders -act as motivators to employees -often covers financial, social, ethical & environmental goals The first task for every organisation, whether for profit or not-for-profit, is to establish its overall purpose or reason for existence. Look at Telstra’s mission, vision and values statements for a better understanding of the difference between the three.

3. Department objectives are the tactical objectives needed to achieve the specific targets set for a department or division. -medium term (1-2 years) -consistent with corporate objectives -significant resources allocated to allow for achievement -important that coordination takes place between department and divisions for cohesive approach to goal achievement. 4. Operational objectives are precise, measurable and establish the short term (daily to annually) objectives. 5. Individual department member’s goals/objectives are individual objectives set for an employee or tasks they are required to perform. The setting of these objectives is the basis of a process called Management by Objectives (MBO). MBOs are discussed later regarding employee appraisal Activity 1.6

Types of Objectives Financial Objectives: goals relating to achieving financial performance Areas such as profit maximisation, sales growth, improving market share, increasing productivity, management performance, staff performance etc. These goals prominent in private sector, profit-making organisations e Service Objectives: relate to an organisations desire to provide a stated service either to customers or community at large Social Objectives relate to an organisations role and participation in the community as a corporate citizen. Environmental objectives relate to an organisation’s minimisation of resource use and the environmental effects of their activities. After achievement setting, strategies need to be put in place to achieve those targets. Strategies are the plans or actions which need to be formulated by the various departments to actually get things done. Key Performance Indicators (KPIs) are a set of measures that helps a company determine if it is reaching its performance and operational objectives. Indicators can be financial or non-financial. Examples of financial objectives: -to increase profits by a stated percentage -to reduce production costs by a stated amount -to gain a stated percentage of market share Social objectives – the role may extend to the provision of community facilities or services, contribution to community causes, the adoption of policies reflecting community views or even assistance for causes. Examples include: -to promote equity in the workplace -to support unemployed youth through our recruitment program Environmental objectives – examples include waste and emission reduction, lessening environmental impact, and adoption of recycling. The body shops environmental objective example. The strategies to be used will depend not only on the objectives being set, but also on the strengths of the organisation, the resources available to it and the nature of its competitive environmet.

Typical Management Functions Management is the process of planning, organising, leading and controlling the work of subordinates to achieve organisational goals. Management uses resources to achieve the organisation’s objectives. These resources are: Human: the people or employees of the organisation Material: the raw material, equipment, buildings and machinery Financial: the capital and ongoing finances required to establish and operate the business activity Informational: the vast amount of data, information and intellectual property available to the organisation In a traditional organisation it is possible to clarify managers into levels: Senior: executive managers spend a large proportion of time planning and setting objectives Middle: managers translate these objectives into specific projects for their subordinates and monitor the progress of these projects Front-line: lowest level of management, time is spent leading, supervising and controlling their subordinates (workers) No matter their level in the organisational hierarchy, all managers have one thing in common: getting things done through the work of others Human: generally regarded as the most important resource of any organisation

Basic Roles of Management Planning involves establishing the general direction and objectives (strategic, tactical and operational) of the organisation. Organising relates to developing a systematic approach to coordinate the human, material, financial and informational resources of the organisation in order to achieve organisational objectives. Leading refers to how a manager, by their behaviour and style, direct, influence and motivate their subordinates to work towards achieving organisational objectives. Controlling involves the necessary monitoring and evaluation to ensure that organisational objectives are being met. Standards need to be established and checks carried out to assess performance against forecast or budget, and corrective action taken if necessary. Planning: managers at all levels are involved in the planning needed to put these objectives into effect Organising: it can cover areas such as setting up work group to establish teams, establishing a chain of command, channels of communication, outlining an organisational or departmental structure a division of tasks and allocating jobs and tasks Leading: It is important that managers establish an atmosphere where their subordinates want to work and are able to excel As managers move into higher positions within an organisation the role of the manager changes: they are required to spend a greater percentage of their time planning rather than supervising. Management at all levels perform these roles in the different functional areas of the organisation including operations, finance, human resources, marketing and research and development. The two functional areas of operations

Positive Contributions of large-scale organisations to the economy Gross Domestic Product (GDP) Employment Measures the value of goods and services produced within a given period of time by a country LSOs are responsible for more than 50% of Australia’s GDP Economies of Scale: Larger businesses can afford to buy the machinery, or bulk buy raw materials so they can produce items at a greatly reduced rate Employ fewer people than small to medium businesses Still employ a significant number Largest employers in Australia – Wesfarmers, Woolworths, Queensland Health, Telstra The number of LSO’s in Australia is small in comparison with the number of small- and medium-sized businesses in operation. However, the groups overall contribution to the Australian economy is significant, particularly in the following five areas.

Balance of Payments (BoP) Research and Development (R&D) Account of our international transactions How much Australia as a whole spend on imports in a given period of time compared with the amount we earned on exports LSO’s are responsible for much of the exporting of goods and services, therefore contributing to BoP in a positive way The cost in undertaking R&D is expensive so it is often only LSO’s that can afford to do it High risk and provides no certainty of recouping expenditure Government policy often extends to providing financial incentives to encourage organisations to invest in R&D

Negative Contributions of large-scale organisations to the economy Carbon emissions and other pollution Price setting Some LSOs are main emitters of carbon in our atmosphere They are subject to emission control measures as prescribed by the government Powerful businesses have the ability to set prices and control markets Oligopolies – a small group of businesses that control most of a particular market Colluding is illegal but difficult to prove Consumer loses as lack of competition reduces downward price movements

Further Criticism of LSOs Outsourcing to overseas Large payments to senior executives Many LSOs outsource parts of their operations overseas Jobs are lost in Australia LSOs are often criticised for sourcing machinery and raw materials from overseas Many Senior Executives were dismissed from LSOs yet they left with millions of dollars from part of their contracts Organisations not doing well and payments caused great distress to many employees