Large Scale Organisations.

1. Large Scale Organisations.

2. Unique nature of organisations • Organisation- a formal or structured arrangement where two or more people work together to accomplish some specific purpose or set of goals. • They use inputs (resources such as time, human labour, finance, and IT), then process them to create outputs of goods and/or services. • They are unique because they start small, and look to grow, through mergers and acquisitions, or going public and raising capital. • They have in common with each other a distinct purpose, often expressed as a mission or vision statement, at least 2 people, and have a deliberate form of structure.

3. Characteristics of LSOs. Businesses are often referred to by their size. There is no standard definition but the following is generally used to distinguish an LSO from others. • Number of employees: 200+ employees • Total Assets: assets worth more than $200 million. • Sales Revenue: LSOs have income or sales revenue in the millions of dollars. • Profit after tax: LSOs make profit in the millions of dollars • LSOs are also characterised by being transnational or multinational corporations. This means they are based in one country and have branches or offices in other countries, eg ANZ operate in more than 30 countries. All our largest LSO’s are multinationals

4. Characteristics of LSOs. • LSO’s undertake strategic planning, ie Long-term planning (2- 5 years) by senior management (CEO and Board of Directors)to achieve objectives. • LSO’s have formalised rules, procedures and policies, so organisation can function properly. • Organisational structure: Shows how management is linked and how authority is transmitted. Invariably the CEO is answerable to a Board of Directors, but still has a seat on the Board. • Chain of command and hierarchical management structure: Route through which authority can be passed down. • The specialisation of activities into departments or within departments: due to the size of LSOs, they will often be broken into specialised departments, eg: finance, marketing, sales.

5. TYPES OF LSOs ,and their objectives/aims and business strategies • Companies/corporations eg: NAB/Fernwood fitness centres, aim is to make profit or add to their financial worth (net worth). Either privately owned (up to 50 private shareholders, eg Fernwood, Linfox, Dimmeys, Grocon) or listed on the stock exchange and publically owned ( eg. NAB)by many shareholders. • Gov’t Business enterprises (GBE’s) – owned by one of the 3 tiers of gov’t ; aim is to provide a product/service to the public and make a profit, eg, Australia Post, VicRoads. • Government Departments (eg. Defence, Education, Taxation). Aim is to provide a service to the community. Owned by the government and responsible to a government minister and public servants. Operate within a pre-determined budget and to implement political objectives. • Charities/Foundations (also called not for profits - NFP) eg: Salvation Army, Heart Foundation, Red Cross - whose aim is provide goods, services, and funds to alleviate a social problem.

6. Classifications of LSOs • Primary industries: They draw from nature, (eg: farming, forestry, mining) • Secondary industries: organisations that transform raw materials, (eg: processing, manufacturing, assembly, construction) • Tertiary: divided into two categories (a) quaternary sector; includes organisations that provide information, (eg: newspapers, banks, real estate, education, postal services) and (b) quinary sector; includes organisations that provide paid and voluntary domestic services, (eg: hospitality, restaurants, child care centres, mowing, pet care)

7. LSOs – objectives and business strategies • Mission statement: express the rationale for the organisation’s existence, its purpose and operation. Vision statement: outlines what the organisation hopes to become, eg Visy’s on page 9, textbook. • Corporate objectives (goals): Are long-term (2-5 years), determined by senior management and outline what is required of the organisation to achieve its overall purpose. These objectives need to be achievable and measureable and communicated to all stakeholders. • Department objectives (goals): These are medium-term (1-2 years), consistent with corporate objectives and sufficient resources need to be allocated for their achievement. • Operational objectives: These are daily, weekly, monthly, yearly objectives. They are precise and measureable, eg: a sales quota for a month. • Individual employee objectives: Objectives that are set to each employee. They are measureable.

8. Management functions in LSOs The function of management is to achieve the objectives determined by the senior managers/board of directors (strategic -2-5 years), departmental/tactical objectives of 1-2 years from middle managers, and operational objectives of front-line managers – up to annually. This will involve co-ordinating resources and planning activities. Most LSOs are structured so that managers are responsible for major functions within the organisation. These functions are: • Operations management: involves the daily activities of the organisation. • Human resource management: involves the management of people within the organisation. • Financial management and administration: involves all the financial aspects of the organisation. Objectives might include profit maximisation • Research and Development. • Marketing .

9. Positive contribution of LSOs to the economy • Provide Employment : account for about 30 % of the workforce in Australia, with Coles Myer and Woolworths. (LSOs make up only 3% of all businesses). • Contribution to research and development: LSOs undertake extensive R&D, and thus produce many new products. They adopt efficient work practices and innovative management ideas as a result. This will have an impact upon the whole of Australian society, as these new products are implemented because they increase productivity. • Gross Domestic Product (GDP): this is the total monetary value of goods and services produced in Australia in a 1 year period. LSOs contribute about 50%- 55% of Australia’s GDP. • Contribution to exports: many LSO’s export products O/S, eg Rio Tinto earns 90% of its revenue from O/S. Exporting products contributes positively to our Balance of Payment, as a favourable BoP exists when there are more payments coming in to Australia than going out • Help infrastructure growth: roads, railways, ports, communication systems – all improved and this assists economic growth, eg, upgrades to Monash Freeway and Citylink estimated to deliver $14 billion in benefits through reduced travel time.

10. Contribution (negative) of LSOs to the Economy • Downsizing/outsourcing to overseas countries: by laying off workers in an attempt to reduce costs and stay competitive, this increases unemployment rate, reduced tax income for gov’t, and increasing welfare payments. • Environmental damage: through their activities, polluting waterways, or greenhouse gas emissions, LSO’s cause untold environmental damage. • Price setting; powerful LSO’s have the ability to set prices and control markets, especially where there are oligopolies, ie small number of businesses that control most of a particular market (oil companies and petrol)

11. Stakeholders • Stakeholders: individuals or groups that have a vested interest in the activities of an organisation. • Stakeholders have conflicting interests – not all want/care for an organisations aims/objectives, eg, environmental lobby groups may conflict with some shareholders who only care about increasing profits and therefore dividends. • They include: competitors, customers, creditors, suppliers, gov’t, employees, management, and shareholders, trade unions.

12. Internal and external environments of LSOs All LSOs operate in a complex and evolving business environment. Successful businesses must be able to respond to changes or pressures from internal or external environments. Internal Environment Operating Environment (External environment) Macro Environment (External environment)

13. Internal and external environments of LSOs Pressures can come from; 1. Internal Environment (activities, functions and pressures which occur within an organisation over which they have some control) • Owners/shareholders: Shareholders as a group can influence the sale and merger of companies. • Board of directors and management: The board of directors work to ensure the organisations corporate objectives are achieved. They need to strike a balance between interfering in and under scrutinising decisions made by the organisation. • Employees: Organisations need to provide workplaces that are non-discriminatory, flexible, ethical, safe and have equal opportunity. This places pressure on organisations to develop policies, procedures and work practices. • Organisation structures: Organisations have restructured themselves to run more efficiently, eg; contracting out services, empowerment of workers. • Corporate culture: The shared values and beliefs of an organisation.

14. Internal and external environments of LSOs 2. Operating/task Environment (environment immediately external to an organisation with which it has close interaction when conducting its business activities) • Customers: Obviously important to any business is its customers. They ensure profitability, if they are handled correctly. They can also posedifficulties.Customers are more careful in their purchase and are expecting healthy alternatives. • Competitors: Always a concern, even if a business is ranked number 1. • Suppliers: Important to and can impact an organisation. (eg: High oil prices on cost of air travel) • Trade Unions: Can be problematic in staff relations. • Lobby/pressure groups: environmental groups, Choice magazine, Anti- Cancer Council can all pose restrictions or pressure upon an organisation. • Financial institutions: Repayment of loans and access to credit a real concern in current economic crises. • Regulatory bodies: Governments can impose impediments to an organisation. (eg: rates, laws prohibiting takeovers, health and safety legislation.

15. Internal and external environments of LSOs 3. Macro environment (broad operating conditions in which an organisation operates and in which it has no control) • Economic forces: Current economic crises has affected many businesses. • Government forces: Budgetary policy (taxation, government spending, government rebates eg: LPG gas conversions), monetary policy (interest rates), microeconomic reform (encouraging competition). • Legal forces: Organisations have to comply with certain legal requirements, eg: health and safety, environmental, packaging, labelling. • Technological developmental forces: Technology assists a business in improving productivity. • Globalisation forces: Foreign competition has put pressure on Australian LSOs. • Political, social and environmental forces: Is the political system stable, as this can affect currency and foreign investment. Social and environmental forces include concern for the environment, the carbon footprint left by the organisation, migration patterns ....etc

16. Evaluation of performance The management process requires the efficient and effective combination of resources to produce goods or deliver a service. Efficiency is when available resources are used in the best way possible to meet objectives. It is a relationship between inputs (resources) and outputs. Productivity is a quantitative measure of efficiency. It is about ‘doing things right’. Effectiveness is the ability of the organisation to make and achieve appropriate objectives. It is about ‘doing the right things’. MEASURING ORGANISATIONAL EFFICIENCY AND EFFECTIVENESS Performance Indicators (PI’s) are tools via which we measure efficiency and effectiveness of an organisation. PIs include both quantitative measures and qualitative measures. Quantitative measures are based on collected numeric data. They tend to be objective. Eg: net profit, number of sales, percentage of market share, productivity growth. Qualitative measures are based upon opinions of a group of people. They tend to be subjective. Eg, results of staff and customer satisfaction surveys, staff turnover, workplace accidents, level of waste.

17. PI’s - continued • These include: • Staff Turnover – if turnover is high, this may indicate dissatisfaction in the workplace; • Absenteeism – If absenteeism is high, this affects productivity and the cost of using other staff. It may also indicate low employee morale; • Benchmarking – measuring your business against your best competitor according to certain measurements; • Market share – share of the market; • Number of customer complaints –a decrease in the number of customer complaints is a positive indicator of performance • Number of faulty products- if this can be reduced it means resources are being used more efficiently; • Waste- is an expense to a business and reducing it means resources are again being used more efficiently. Unilever’s brands, ‘Surf” and ‘Omo’, recently launched ‘small and mighty’ detergent products – a range of laundry liquids packaged in smaller containers, which reduce waste and cut costs. • Return on Investment – expressed as a %age • Profit- ie the difference between revenue and expenses • Debtors turnover – ie the time taken for a debtor to pay off their debts • Productivity – the LSO’s ability to transform inputs into outputs

18. Other measures of organisational performance. • The “balanced scorecard” measurement. This method allows managers to assess the performance of their organisation from four perspectives; (a) customer perspective (How the customer views the organisation?), (b) internal capabilities perspective (What does the organisation excel at?), (c) innovation and learning perspective (Can the organisation continue to improve?) and (d) financial perspective (How is the organisation viewed by the owners/shareholders?) • Triple bottom line accounting(TPL or 3BL); LSO’s are measuring themselves in terms of: • Economic/financial factors • Social factors • Environmental factors

19. Unethical behaviour investigation • NAB • HIH • One.Tel • Pan Pharmaceuticals