Chapter 1Large-Scale Organisations

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.

What is 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.

What do all organisations have in common?

Purpose

StructurePeople

Distinct purpose, usually expressed as a set of goals that an organisation wishes to accomplish

Either a formal structure with clearly defined rules, regulations and procedures, or informal with simple network of loose working relationships.

Comprise two or more people

Characteristics of Large-scale Organisations

Large Scale Organisations may have one or more of these characteristics

Employee base – employs more than

200 employees

Total assets – own substantial assets

(millions)

Total revenue – earns substantial gross

income (millions of dollars revenue)

Profits – has substantial gross

profits

Market share – commands a large percentage of the

marketplace

Large Size of operations – operate

using a multiple factories, branches,

stores

Number of business locations –locally,

nationally or globally

1. Strategic Objectives are formulated – both management and employees working to achieve common set of objectives, creates synergy

2. Strategic planning is undertaken – long-term planning undertaken by senior management to achieve corporate objectives.

3. Formalised policies, procedures and rules are adopted and documented.

4. An organisational structure is developed – internal formal framework to show how management is linked and how authority is transmitted.

Other Characteristics

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 employees7. Specialisation of activities into departments or within departments occurs.

Other Characteristics continued…

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.

Large-scale organisations in Australia

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.)

Different Types of LSO’s - Ownership

Government Business Enterprises (GBEs)

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

Privately Owned

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

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

Private Company

Small number of shareholders (2 to 50)

Shares bought and sold privately with consent of other shareholders

Often run as a family business

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

Different Types of LSO’s – Orientation or Focus

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

Public Sector

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

∙To provide goods and/or services in the pursuit of profit

∙May have any number of share-holders, and are listed on the stock exchange∙Shares can be bought and sold by the public

∙Income from the sale of goods and/or services that they provide

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.

Private Sector

Organisations are placed into industry sectors associated with a particular product or service .

Different types of LSO’s – Type of Business Activity

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%

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.

Organisational Objectives and Strategies

Hierarchy of Objectives

MissionStatementCorporateObjectives (strategic)

Departmental Objectives(tactical)

Operational Objectives

Individual employee objectives

1. Mission Statement: the purpose or reason for an organisation’s existence.Vision Statement: outlines an organisations overall concept or aspirationsValues Statement: outlines what the organisation sees as its corporate values or cultural prioritiesThese 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

Hierarchy of objectives

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).

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.

Types of Objectives

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)

Typical Management Functions

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.

Basic Roles of Management

Positive Contributions of large-scale organisations to the economy

Gross Domestic Product (GDP)

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

Employment

Employ fewer people than small to medium businesses

Still employ a significant number

Largest employers in Australia – Wesfarmers, Woolworths, Queensland Health, Telstra

Balance of Payments (BoP)

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

Research and Development (R&D)

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

Some LSOs are main emitters of carbon in our atmosphere

They are subject to emission control measures as prescribed by the government

Price setting

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

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

Large payments to senior executives

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