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8.2 Coordinating Key Business Functions and Resources Management Process: C oordinating Key Business Functions and Resources:This involves aligning the various functions within a business to work together effectively towards achieving the business's strategic g...
8.2 Coordinating Key Business Functions and Resources Management Process: C oordinating Key Business Functions and Resources:This involves aligning the various functions within a business to work together effectively towards achieving the business's strategic goals. ○ Operations:Involves the production of goods or services. ○ Marketing:Focuses on promoting and selling productsor services. ○ Finance:Manages the financial resources and activitiesof the business. ○ Human Resources:Deals with employee management, includinghiring, training, and development. Interdependence:Each business function relies onthe others to perform effectively, creating a network of mutual support. ○ Example:In a hockey team, players have specialisedroles but must work together to win the game. Similarly, business functions must collaborate to achieve common objectives. Strategic Goals: B road Goals and Business Size:Coordination of keybusiness functions is influenced by the size and strategic goals of the business. ○ Large Businesses:Key functions are often separatedinto distinct divisions or departments, each led by specialised managers. These divisions require effective coordination to ensure they work towards common goals. Example:A large company might have separate departmentsfor employment relations, finance, operations, and marketing, each with its own specialists. ○ Small Businesses:Functions often overlap due to limitedresources and personnel. The owner or a few employees may handle multiple roles. Example:In a small hairdressing salon, employeesmay perform multiple tasks such as hairdressing, booking appointments, managing finances, and ordering supplies. Division of Business: S pecialisation and Coordination:The division of businessfunctions allows for specialisation, enhancing efficiency and expertise. However, it also necessitates strong coordination to ensure all functions align with the overall business strategy. ○ Example:In a large business, the finance departmentmust coordinate with operations to ensure budget allocations are aligned with production needs. Interdependence: U nified Approach:Business functions must work inharmony towards the same objectives. This unified approach ensures that the business operates efficiently and effectively. ○ S upport System:Each function supports the others. For example, marketing efforts rely on operations to deliver quality products, while finance ensures there are sufficient funds for marketing campaigns. Examples: S mall Business Overlap:In small businesses, employeesoften take on multiple roles due to limited resources. This overlap requires effective coordination to ensure all tasks are completed efficiently. ○ Example:In a hairdressing salon, hairdressers mightalso handle customer bookings, manage stock, and perform administrative tasks. 8.3 Operations Operations Management: D efinition:Operations management involves overseeingthe production process to ensure goods or services are created efficiently and effectively. Core Goal:Maximising profits through efficient productionprocesses is the primary objective. Operations Management Functions: A ctivities:Includes creating, operating, and controllingthe transformation process that turns inputs into outputs. Impact:Operations management directly influencesthe quality, cost, and availability of products or services, thereby affecting the business’s competitive position. Competitive Advantage: C ost Leadership:A strategy where businesses aim tohave the lowest costs in the market. Operations managers seek ways to minimise production costs to achieve this. Goods vs. Services: Manufacturing: ○ Produces tangible goods that can be stored and handled. ○ Little customer involvement in production. ○ Production and consumption are not linked. ○ Examples: Cars, clothing, electronics. Services: ○ Produces intangible services that cannot be stored. ○ Customer involvement is high; production and consumption often occur simultaneously. ○ Examples: Haircuts, education, transport. Production Process: Inputs, Processes, Outputs:The key elements in anyproduction process. ○ Inputs:Resources used in production, such as materials, information, and customer preferences. ○ Processes:The transformation activities that convertinputs into outputs. ○ Outputs:The final goods or services delivered tocustomers. Transformed Resources: M aterials:Basic elements used in production. Information:Knowledge gained from research and investigation. Customers:Their preferences and choices shape theinputs and final products. Transforming Resources: H uman Resources:Employees involved in the productionprocess. Facilities:Physical spaces and machinery used inproduction. Transformation Processes: D efinition:The conversion of inputs into outputs. Example:Sony transforms plastic, metal, and electronicparts into various electronic products using innovative design, manufacturing, and assembly processes. Outputs D efinition:Outputs refer to the result of a business’sefforts — the goods or services delivered to the consumer. This includes both tangible products and intangible services. ○ Example:Toyota separates its vehicle manufacturingoperation from its customer service operation, illustrating how businesses often manage both types of outputs. Activities Isolated from Direct Customer Interaction:Many business activities do not directly involve customers but are crucial for operations. ○ Example:Actuaries in insurance companies determinerisk and set insurance premiums without direct customer interaction. Characteristics of Services: ○ Intangibility and Customisation:Services are intangible and often customised to meet individual requirements. ○ Market Proximity:Services must be close to markets,as location and user proximity are vital. ○ Flexibility and Automation:Service businesses maybenefit from flexible zoning regulations and utilise office automation. ○ High Training Costs:Services often require highlyskilled and professional staff, leading to higher labour costs. ○ Quality Variation:Service quality can vary basedon industry regulations, skill, and experience of the provider. ○ Customer Relations:Strong customer or client relationsare essential, backed by public liability insurance. Service Nature:Services are inherently non-durable,though the work done may have lasting effects. ○ Example:A haircut or a training course has lastingimpacts, despite being intangible. Operational Responsiveness:Outputs must be responsiveto customer demands, balancing quality, efficiency, and flexibility with resources and strategic plans. ○ Example:A car's production involves numerous processesand inputs from various suppliers, managed by the operations manager to meet customer demands. Subtle Outputs: ○ Customer Service:How well a business meets customerexpectations. ○ Warranties:Promises made by a business to correctdefects in their products or services. 8.3.3 Quality Management Definition: uality refers to the degree of excellence of goods or services and their fitness for a stated Q purpose. Quality management ensures products meet customer expectations through strategies like quality control, quality assurance, and total quality management (TQM). Importance: D arrell Lea Example:Focuses on manufacturing high-qualityconfectionery, committed to continuous improvement, and uses independent audits to assess and improve processes. Quality Product Attributes: eliable R Easy to use Durable Well designed Delivered on time Includes after-sales services Appealing appearance Benefits of Quality Management: educed waste and defects R Reduced variance in final output Strengthened competitive position Improved reputation and customer satisfaction Reduced costs Increased productivity and profits Quality Management Strategies Quality Control: D efinition:Inspections at various production stagesto check for problems and defects. Process:Setting benchmarks, inspecting outputs, andcomparing actual performance to standards. Examples:Inspecting teller accuracy in banks, andmonitoring call quality in call centres. Quality Assurance: D efinition:Achieving set standards throughout productionto ensure products are fit for purpose. Process:Proactive strategy using systems like ISO9000 to prevent defects. Examples:Tatura Milk Industries tests every milkload, providing data to farmers via a secure website. Total Quality Management (TQM): D efinition:A commitment to excellence involving continuousimprovement and shared responsibility among all employees. Process:Employee empowerment, continuous improvement,customer focus. Example:Northrop Aircraft and Chrysler use qualitycircles for problem-solving, leading to cost savings and improved performance. Continuous Improvement: D efinition:Ongoing evaluation and enhancement ofbusiness processes. Process:Setting higher standards and striving forimprovement (Kaisen). Example:Schaeffler Group aims for zero defects throughcontinuous improvement and risk minimisation. 8.4 Marketing Importance of Marketing V ital for Business Existence: Marketing ensures customers are aware of products. Even if a product is innovative or improved, it won't sell without proper marketing. Product Launch Statistics: Over 80% of new productsfail within the first year, mainly due to poor marketing. Case of Success: Products perceived as insignificantcan become essential items through effective marketing. Example: The global success of Coca-Cola, which is essentially brown, sugary, fizzy water. Marketing Fundamentals D efinition: "Marketing is the process of planningand executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational objectives." Simplified Definition: Marketing involves interactingactivities to plan, price, promote, and distribute products to current and potential customers. Fundamental Question: "What do customers want to buynow and in the future?" This core question guides marketing efforts to meet and satisfy customer needs. Difference Between Selling and Marketing S elling: Focuses on getting rid of existing stock. Marketing: Involves a broader scope, aiming to bringbuyers and sellers together and make sales. It includes not only selling products but also informing the public about services offered by non-profit organisations. Practical Involvement in Marketing Examples of marketing activities students might have participated in: rganising a stall at a local fete O Setting up a raffle for a local sporting team Persuading parents to lend money for a new phone Coordinating publicity for a school musical These activities share common marketing elements. Impact of COVID-19 on Marketing Research by Ask Marketing (2020) on COVID-19's impact on marketing found: ○ 47% of SMEs planned to remove in-house marketing roles to cut costs. ○ 30% shut down marketing activities due to recession impacts. ○ 15.4% reduced marketing and advertising since March 2020. Marketing Strategies F our Ps of Marketing Mix: Strategies regarding Product,Price, Promotion, and Place (Distribution). Case Study: Polasports B ackground: Polasports, an Australian company, manufactures sunglasses for sports and outdoor enthusiasts. Challenge: Previously unknown brand needing visibility. Solution: ○ Celebrity Endorsement: Collaboration with Beau Ryan, former NRL star, to create a sunglasses range. This increased brand awareness, sales, and website traffic. ○ Social Media: Main advertising platform. Beau Ryan and his friends promoted the sunglasses on social media, boosting their online presence. ○ Charitable Partnerships: Affiliation with two charities (Men of League Foundation and Starlight Children's Foundation Australia) to appeal to socially responsible millennials, enhancing brand image and consumer trust. ○ Media Promotions: Mixed results from TV and radio promotions, with radio (Nova 96.9) being more successful than TV (NRL Footy Show). Traditional vs. Contemporary Marketing T raditional Marketing: Focused on pushing productsto customers through various channels without much regard for customer needs. Contemporary Marketing: Customer-oriented approachwhere businesses prioritise understanding and meeting customer needs, leading to long-term relationships and increased sales. 8.4.3 Identification of the Target Market Importance of Target Market S election: Businesses must select specific groupsof customers to focus marketing efforts due to the diverse needs of different consumer segments. Example: Coca-Cola's evolution from a single productto a range of drinks to cater to different consumer preferences. Approaches to Target Market 1. M ass Marketing: Aiming a single product at the entiremarket. Rarely used today except for basic items like food, water, gas, and electricity. 2. Market Segmentation: Dividing the total market intosegments based on shared characteristics. 3. Niche Marketing: Targeting a very specific segmentwithin a market. Market Segmentation Elements D emographic: Age, gender, education, income, occupation,social class, religion, ethnicity. Geographic: Urban, suburban, rural, regional, citysize, climate, landforms. Psychographic: Lifestyle, personality, motives, socioeconomicgroup, consumer opinions, interests. Behavioural: Purchase occasion, benefits sought, loyalty,use rate, price sensitivity. Benefits of Market Segmentation fficiency: Better use of marketing resources. E Understanding: Deeper insight into consumer behaviour. Data Collection: More effective and comparable overtime. Strategy Refinement: Improved marketing strategiestailored to specific segments. Primary vs. Secondary Target Markets P rimary Target Market: The main focus of marketingresources. Secondary Target Market: Smaller, less important segment. Case Study: The Pets Hotel F acility: Upmarket boarding for dogs and cats in PortMelbourne. Target Market: ○ Primary: Pet owners need long-term boarding while away. ○ Secondary: Daycare for pets of busy owners, obedience training, grooming. Market Dimensions: ○ Geographic: Proximity to CBD, ideal for apartmentdwellers. ○ Demographic: Families with children, apartment dwellers. ○ Psychographic: Affluent market, willing to pay forpremium services. ○ Behavioural: Regular and repeat users, incentivisedby discounts for frequent use. Niche Markets D efinition: A narrowly selected target market segment,often a segment within a segment. Example: Specialty teas within the broader tea market,catering to specific preferences such as green tea variants. 8.4.4 Marketing Mix Overview yllabus Link: This subtopic focuses on the developmentof marketing strategies to achieve S business goals using the marketing mix, which includes: roduct P Price Promotion Place (Distribution) s services have grown within the economy, three additional elements have been added to A the service industry, forming the extended marketing mix: People P rocesses Physical Evidence ource: Business Studies Stage 6 Syllabus © Copyright2010 NSW Education Standards S Authority (NESA). Marketing Mix (The Four Ps) arketing Strategies: Actions undertaken to achievebusiness marketing goals through the M marketing mix. The business has control over these elements and uses them to reach its target market. xtended Marketing Mix: In recent years, it has becomecommon to add three new E elements to the traditional marketing mix, making a combined 7 Ps. This is especially relevant for the service industry. etermining Emphasis: The business must decide howmuch emphasis to place on each D variable based on the product’s positioning and its stage in the product life cycle. Product Elements of Product Decision: uality Q Packaging Design Name Labelling Exclusive features Warranty and guarantee ustomer Satisfaction: Products must satisfy customerneeds and provide intangible C benefits like security, prestige, satisfaction, or influence. roduct Packaging: Important for sales as it givesa positive impression, promotes the P product, and preserves, informs, and protects it. Well-designed packaging can create an image of luxury and exclusiveness. Product Life Cycle: Involves four stages - introduction,growth, maturity, and decline. Product Branding: B rand: A name, term, symbol, or design that identifiesa specific product and distinguishes it from competitors. Brand Logo: A graphic representation that identifiesa business or product. Examples include the Mercedes-Benz star and McDonald’s golden arches. xample: JUST WATER’s Tetra Top carton bottle, praised for sustainability and consumer E appeal. Price Pricing Methods: 1. C ost-Based Pricing: Derived from calculating the totalcost of production or purchase and adding a markup for profit. 2. Market-Based Pricing: Setting prices based on theinteraction between supply and demand. 3. Competition-Based Pricing: Setting prices below, equalto, or above competitors’ prices. Importance of Correct Pricing: A high price can meanlost sales, while a low price can imply a ‘cheap and nasty’ product. Correct pricing is crucial for business success. Promotion ole of Promotion: To inform, persuade, and remindconsumers about a business’s R products, with the goals of: A ttracting new customers Increasing brand loyalty Encouraging more purchases from existing customers Promotion Mix Elements: 1. P ersonal Selling and Relationship Marketing: Directselling efforts and long-term customer relationships. 2. Sales Promotion: Activities to attract interest, suchas free samples, coupons, and displays. 3. Publicity and Public Relations: Free news storiesand activities to maintain favourable public relations. 4. Advertising: Use of mass media to communicate messagesabout the product. Example: Petrol stations use market-based pricingstrategies, often following price cycles. igital Marketing: Growing rapidly, with social mediaadvertising being effective and D cost-efficient. Place (Distribution) istribution Activities: Making products available to customers when and where they want D to purchase them. This often involves intermediaries like wholesalers or retailers. Common Distribution Channels: . P 1 roducer to Customer: Direct sale with no intermediaries. 2. Producer to Retailer to Customer: Retailers buy fromproducers and sell to customers. 3. Producer to Wholesaler to Retailer to Customer: Wholesalersbuy in bulk and sell in smaller quantities to retailers. Non-Store Retailing: E -Commerce: Buying and selling goods and servicesvia the Internet. M-Commerce: Buying and selling through mobile devices. xample: The Iconic’s competitive advantage in distributionby sending stock directly to E customers, reducing delivery times and costs. People eople in Marketing: Everyone involved in the business,whether in direct contact with P customers or not, can impact the marketing mix. The culture established by owners and managers affects customer perceptions and product success. Processes usiness Processes: The flow of activities or mechanismsinvolved in interactions with B customers. Effective processes ensure the smooth delivery of products and a satisfactory purchasing experience for customers. Physical Evidence hysical Evidence: Everything customers see when interactingwith a business. This P includes product features, store or website design, and customer feedback. Physical evidence helps in positioning the brand and attracting the target market. 8.5 Finance Overview F inanceandAccountingare critical components of business management, providing tools and insights necessary for making informed business decisions. They help in understanding how businesses source and allocate financial resources, track financial performance, and manage risks. Financeinvolves managing the firm's financial resources,including raising capital, budgeting, investing, and managing assets. Accountingfocuses on recording financial transactions,preparing financial statements, and providing financial information to stakeholders. Learning Objectives C ash Flow Management: Understanding the importanceof managing cash flows to ensure liquidity and solvency. Financial Statements: Utilising income statementsand balance sheets to evaluate a business's financial performance, position, and risk. 8.5.1 Accounting — Introduction and Scope Definition and Purpose of Accounting ○ Accounting: The systematic process of recording, classifying,and summarising financial transactions to provide information that is useful in making business decisions. ○ Functions: Includes bookkeeping, financial reporting,auditing, tax accounting, and cost accounting. ○ Users: Internal (management, employees) and external(investors, creditors, regulators). Key Financial Statements ○ Cash Flow Statement: Analyses the inflow and outflowof cash, indicating how well a business manages its cash position. ○ Income Statement: Shows the business's revenue andexpenses over a specific period, resulting in net profit or loss. ○ Balance Sheet: Provides a snapshot of the company'sfinancial position at a specific point in time, listing assets, liabilities, and equity. 8.5.2 Finance — Introduction and Scope Definition and Role of Finance ○ F inance: The science of managing money, encompassingthe processes of obtaining, investing, and allocating financial resources. ○ Primary Focus: Ensuring that funds are available whenneeded, at a reasonable cost, and allocated efficiently. Key Areas in Finance ○ C orporate Finance: Deals with funding sources, capitalstructure, and investment decisions. ○ Investments: Involves asset allocation, portfoliomanagement, and risk assessment. ○ Financial Markets and Institutions: Focuses on theoperation and regulation of financial markets and institutions. Financial Instruments and Markets E ○ quity: Ownership in a company, represented by stocks. ○ Debt: Borrowed funds, represented by bonds or loans. ○ Derivatives: Financial contracts whose value is derivedfrom an underlying asset. 8.5.3 Financial Statements Purpose of Financial Statements ○ T o provide stakeholders with a clear picture of the company's financial health, performance, and cash flows. ○ Essential for decision-making, assessing financial stability, and forecasting future financial conditions. Types of Financial Statements ○ C ash Flow Statement: Divided into operating, investing,and financing activities. It provides insights into the liquidity and financial flexibility of a company. ○ Income Statement: Also known as the profit and lossstatement, it shows revenues and expenses, leading to net income or loss. ○ Balance Sheet: Lists assets (current and non-current),liabilities (current and long-term), and shareholders' equity. 8.5.4 Cash Flow Statements Purpose and Importance ○ C ritical for managing a business's liquidity and ensuring it can meet short-term obligations. ○ Helps in budgeting and planning, allowing businesses to forecast future cash needs and identify potential shortfalls. Components of a Cash Flow Statement ○ O perating Activities: Cash flows from the core businessoperations, including cash receipts from sales and cash payments for goods and services. ○ Investing Activities: Cash flows related to the purchaseand sale of long-term assets, such as property, plant, and equipment. ○ Financing Activities: Cash flows from transactionswith the company's owners and creditors, including issuing and repurchasing shares, paying dividends, and borrowing or repaying debt. Analysis and Interpretation ○ P ositive cash flow from operating activities indicates a company's ability to generate sufficient revenue to cover expenses. ○ Negative cash flow from investing activities is common in growing businesses as they invest in new assets. ○ Financing activities provide insights into the company's capital structure and financial strategy. 8.5.5 Income Statement Purpose and Structure ○ T he income statement measures a company's financial performance over a specific period, such as a quarter or a year. ○ It helps stakeholders understand the profitability and operational efficiency of the business. Key Components R ○ evenue (Sales): Total income generated from the saleof goods or services. ○ Cost of Goods Sold (COGS): Direct costs attributableto the production of goods sold, including raw materials and labour. ○ Gross Profit: Revenue minus COGS. It indicates theprofitability of the core business activities. ○ Operating Expenses: Includes selling, general, andadministrative expenses (SG&A), such as salaries, marketing, and office expenses. ○ Operating Income: Gross profit minus operating expenses,representing the profit from core business operations. ○ Non-Operating Income/Expenses: Includes interest income,interest expenses, gains or losses from asset sales, etc. ○ Net Profit (Net Income): The bottom line, representsthe overall profitability after all expenses and incomes are accounted for. Key Metrics Derived from the Income Statement ○ E arnings Before Interest and Taxes (EBIT): Operatingincome, a measure of operating performance. ○ Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA): A proxy for cash flow from operations. ○ Net Profit Margin: Net profit divided by revenue,indicating the percentage of revenue that translates into profit. 8.5.6 Balance Sheets Overview balance sheetprovides a snapshot of a business'sfinancial position at a specific point in A time, detailing what the business owns (assets) and owes (liabilities), along with the owner’s equity. The balance sheet's heading includes the phrase “as at,” indicating it reflects the financial status at a particular moment. This financial statement is crucial for assessing a business'snet worth(equity) and overall financialstability. Purpose of the Balance Sheet M onitoring Debt and Equity: The balance sheet helpsbusiness owners monitor the levels of debt and equity, enabling them to make informed decisions about financing and investments. Financial Position Evaluation: By comparing balancesheets from different periods, owners can evaluate changes in financial position, helping them understand trends and make future plans. Structure of a Balance Sheet The balance sheet is typically divided into two sections: . A 1 ssets (left side): Items of value owned by the business. 2. Liabilities and Owner’s Equity (right side): Obligationsto outside parties and the residual interest of the owners. his layout can be presented in theT-format, whereassets are listed on the left and T liabilities and owner’s equity on the right. Thenarrativeformat, more common in Year 12 studies, presents the information in a single column. Components of a Balance Sheet 1. Assets ○ Definition: Items of value owned by the business thatcan be quantified in monetary terms. ○ Classification: Current Assets: Assets expected to be used or convertedinto cash within one year. Examples include: Cash: Liquid assets available for immediate use. Accounts Receivable: Money owed by customers for goods or services already delivered. Prepaid Expenses: Payments made for services or goodsto be received in the future. Stock (Inventories): Goods available for sale. Non-Current Assets: Assets with a useful life extendingbeyond one year. These include: Land and Buildings: Real estate owned by the business. Fixtures and Fittings: Furniture and equipment usedin the business. Intangible Assets: Non-physical assets like goodwill, trademarks, patents, and copyrights. These assets are valuable despite not having a physical form, often representing brand value or intellectual property. 2. Liabilities ○ Definition: Debts and obligations the business owesto outside parties, which must be settled in the future. ○ Classification: Current Liabilities: Debts payable within one year,such as: Accounts Payable: Money owed to suppliers for goodsand services received. Bank Overdrafts: Short-term borrowing from banks. Credit Card Debts: Balances owed on business creditcards. Accrued Expenses: Expenses incurred but not yet paid. Non-Current Liabilities: Long-term debts due beyondone year, including: Mortgages: Loans secured by property. Leases: Long-term rental agreements for property or equipment. D ebentures: Long-term securities yielding a fixed rate of interest. Retirement Benefit Funds: Obligations to pay employees upon retirement. 3. Owner’s Equity ○ Definition: The residual interest in the assets ofthe business after deducting liabilities. It represents the owner's investment in the business. ○ Components: Owner’s Capital: Initial and additional investmentsmade by the owners. Retained Profits: Profits reinvested in the businessinstead of being distributed to owners. The Balance Sheet Equation he balance sheet must always balance, meaning: Assets = Liabilities + Owner’s Equity. T This equation underlines that the resources owned by the business are financed either through borrowing (liabilities) or through the owners' funds (equity). Importance and Uses L iquidity Assessment: Determines the business's abilityto meet short-term obligations. Financial Stability: Indicates the business’s capacityto sustain operations over the long term. Performance Comparison: Enables comparisons acrossdifferent periods and against industry standards. Investment Analysis: Helps assess the return on investmentfor owners and potential investors. 8.5.7 Assessing the Role of the Income Statement and the Balance Sheet Income Statement P urpose: Provides a summary of revenues, expenses,and profits over a specific period. It helps determine the profitability and operational efficiency of a business. Key Metrics: ○ Revenue: Total income generated from core operations. ○ Net Profit: The bottom line, indicates the profitafter all expenses. Balance Sheet P urpose: Offers a snapshot of the business's financialposition at a specific time, detailing assets, liabilities, and owner’s equity. Key Metrics: ○ Net Worth: Total assets minus total liabilities. ○ Liquidity: Assessed by comparing current assets tocurrent liabilities. ○ Financial Leverage: Evaluated by examining the ratio of liabilities to equity. Combined Analysis Income Statement: Reveals how effectively a businessgenerates profit from its operations. Balance Sheet: Indicates the financial stability andcapacity to continue operations. It provides insights into whether the business can cover its debts, manage its assets efficiently, and generate a return on equity. 8.6 Human Resources uman resources (HR) are critical to a business's success, as they involve the management H of employees—the business's most valuable asset. The HR management process includes recruitment, training, employment contracts, and the separation of employees, whether voluntary or involuntary. uman Resource Management (HRM): H HRM is the effective management of the formal relationship between employers and employees. It encompasses various activities, including recruitment, training, and maintaining employee relations. Successful HRM contributes to improved profit, growth, and market share by leveraging employees' skills and dedication. Key Components of HRM 1. R ecruitment and Selection: This involves identifying staffing needs, recruiting suitable candidates, and selecting the best individuals for the job. The process includes job analysis, creating job descriptions and specifications, and choosing between internal and external recruitment methods. 2. Training and Development: HRM includes training employees to enhance their skills and capabilities. Development involves continuous learning and career progression opportunities, ensuring employees grow alongside the business. 3. Employment Contracts: These are agreements that outline the terms and conditions of employment. They provide clarity on job roles, responsibilities, compensation, and other essential aspects of the employment relationship. 4. Employee Separation: The process of employees leaving the business, either voluntarily (resignation, retirement) or involuntarily (dismissal, retrenchment). Managing separation effectively ensures fairness and compliance with legal requirements. Case Studies A GL Energy: AGL views its employees as their greatest asset, focusing on employee engagement, diversity, and inclusion. The company prioritises creating a healthy work environment and maintaining a balance between business success and employee well-being. A LDI: ALDI has been recognised as an employer of choice, emphasising high-quality induction and training programs. The company fosters a unique culture, offers career development opportunities, and provides market-leading remuneration and benefits. Recruitment Methods Internal Recruitment: Filling positions with current employees. This method is cost-effective and promotes career advancement within the company. However, it may limit the pool of candidates and the potential for fresh ideas. External Recruitment: Involves hiring individuals from outside the organisation. It can bring new perspectives and skills but may incur higher costs and require more time. 8.6.2 Training and Development Purpose O bjective:The primary goal of training and developmentis to enhance the skills and abilities of employees, which contributes to both their personal growth and the overall growth of the business. This process ensures that employees are well-equipped to handle their current job responsibilities and adapt to new challenges as they arise. New Employees:New hires may need varying levels oftraining depending on their prior experience. This initial training helps them understand their roles, the company culture, and the specific skills required for their job. Existing Employees:Continuous training for existingemployees is essential to keep their skills updated. This ongoing development helps them stay competitive, meet new job requirements, and advance in their careers. Training vs. Development T raining:This involves structured programs designedto enhance the efficiency and effectiveness of employees in their current roles. Training focuses on specific skills and knowledge needed to perform tasks and improve productivity. Development:Development is broader and focuses onpreparing employees for future roles and responsibilities. It includes activities that build deeper knowledge, enhance skills, and provide new experiences, often aligning with the employee's career goals and the company's strategic objectives. Importance L ong-term Change:Training and development aim forlasting improvements in employees' skills, knowledge, attitudes, and behaviors. This holistic approach not only enhances individual performance but also contributes to the overall success of the business. Competitive Advantage:A well-organized and well-presentedtraining program can help a business maintain a competitive edge. By investing in employee development, ompanies can ensure they have a skilled and motivated workforce capable of c driving innovation and maintaining high performance levels. Benefits Employee Benefits: ○ Promotion and Self-improvement Opportunities:Trainingprograms provide pathways for employees to advance their careers and improve their personal skills. ○ Improved Job Satisfaction:Enhanced skills lead tobetter job performance, which can increase job satisfaction and morale. ○ Adaptability:Training helps employees adapt to changeswithin the organization and the industry, making them more resilient to market shifts. ○ Future Employability:Continuous learning increasesan employee's value in the job market, enhancing their career prospects. Employer Benefits: ○ Higher Productivity:Well-trained employees can performtheir tasks more efficiently, leading to higher productivity levels. ○ Cost Reduction:Effective training can lower costsrelated to labor turnover, errors, accidents, and absenteeism by ensuring employees are well-prepared and motivated. ○ Capable Workforce:A comprehensive training programcreates a more skilled and flexible workforce, which can better handle organizational changes and crises. Case Study: Rainbow Meats E xample:Frank Russo, owner of Rainbow Meats, attributesthe success of his business to continuous staff training. His approach includes providing cooking classes for employees, enabling them to offer customers valuable advice on recipes and meat cuts. This not only enhances customer service but also ensures that employees feel valued and motivated, contributing to the overall growth and sustainability of the business. Case Study: Tata Consultancy Services (TCS) G lobal Top Employer:Recognized for high standardsin employee offerings, TCS has been awarded the Global Top Employer certification multiple times. This recognition highlights the company’s commitment to providing excellent training and development opportunities. Training Methods:TCS uses a variety of methods todeliver training, including internal social networks, online training modules, virtual labs, and traditional classroom sessions. This multi-faceted approach ensures that employees have access to training that fits their needs and schedules. Digital Reskilling:Faced with rapid digital transformation,TCS overhauled its learning and development approach, resulting in over 390,000 employees being trained in new digital technologies. This extensive reskilling effort significantly reduced the company's turnover rate and equipped employees with up-to-date skills critical for the company's success in a fast-evolving tech landscape. Types of Training and Development O ff-the-job Training:Employees are trained away fromtheir usual work environment, often at specialized training institutions such as universities or technical colleges. This type of training is useful for gaining new qualifications or specialized knowledge relevant to the industry. On-the-job Training:This method involves employeeslearning specific skills within their working environment, using the actual equipment and resources they will use on the job. Training is often provided by experienced co-workers or managers and may occur during regular work duties or in a dedicated training space. Action Learning:Employees learn by tackling realworkplace problems. Companies like NAB and IBM use this approach to enhance problem-solving skills and practical application of knowledge. Competency-based Training:This type of training identifiesthe specific skills employees need to develop to meet job requirements. It focuses on both the strengths and areas for improvement, commonly used in fields such as medical education. Corporate Universities:Businesses partner with academicinstitutions to create specialized training programs. Examples include partnerships formed by companies like Coles and Qantas to ensure their employees receive industry-relevant education. Online Training (eLearning):Training delivered throughelectronic devices, allowing employees to learn at their convenience. This method is cost-effective, reducing training expenses and minimizing time away from the workplace. 8.6.3 Employment Contracts Definition E mployment Contract:A formal, legally binding agreementbetween an employer and an employee outlining the terms of employment. It includes the expectations, responsibilities, and rights of both parties, ensuring clarity and legal protection. Components of Employment Contracts G eneral Terms:Typically include adherence to companypolicies and procedures, job title, start date, and name of the immediate supervisor. Specific Duties:Detail the employee's responsibilities,hours of work, pay rates, and leave and superannuation arrangements. These must comply with the National Employment Standards and relevant awards or enterprise agreements. Common Law Rights and Obligations D evelopment:Created by courts and tribunals, commonlaw evolves through judicial decisions based on case facts and precedents. Employer Obligations:Include providing work, payingincome, ensuring reasonable care for employee safety, and complying with industrial relations legislation. Employee Obligations:Include obeying lawful and reasonablecommands, using care and skill, and acting in good faith in the employer’s interests. Minimum Employment Standards H ours of Work:Full-time employees generally work35-38 hours per week. Extra hours require special compensation. Parental Leave:Entitlement to 12 months unpaid leavefor the birth or adoption of a child. Flexible Work for Parents:Parents or caregivers canrequest flexible working arrangements after 12 months of continuous employment. Annual Leave:Four weeks for full-time employees,with part-time employees receiving a pro rata amount. Casual employees typically do not receive annual leave. Personal, Carer’s, and Compassionate Leave:Full-timeemployees receive ten days of paid leave per year; part-time employees receive a pro rata amount. Community Service Leave:Includes jury duty and emergencyservice roles, typically unpaid but can include make-up pay for jury service. Public Holidays:Employees are paid for public holidayswithout being required to work, unless agreed otherwise. Workplace Information:Employers must provide a ‘FairWork Information Statement’ to all new employees. Notice of Termination and Redundancy:Employees areentitled to minimum notice periods or pay in lieu, except for fixed-term, casual, or probationary employees. Long Service Leave:Permanent employees are entitledto long service leave after a qualifying period, which varies by occupation and industry. Awards D efinition:Legally binding agreements setting outminimum wages and conditions for groups of employees. Advantages:Provide a baseline for pay and conditions,ensuring fairness. Disadvantages:Can be inflexible and may not recognizeindividual productivity. Enterprise Agreements D efinition:Collective agreements at the workplacelevel between an employer and employees (or their union), improving on award standards. Advantages:Greater employee involvement and empowerment,potential for improved pay and conditions, and flexibility tailored to both employer and employee needs. Disadvantages:Time-consuming negotiation processand administrative complexity. Approval:Requires submission to the Fair Work Commission,ensuring compliance with laws and that employees are better off than under relevant awards. Individual Common Law Contracts A pplication:Usually for highly paid professionalsearning above the high-income threshold. These contracts do not need to include award conditions and are enforceable through courts like any other legal contract. Example:Employees negotiate directly with employersfor conditions specific to their roles, providing greater flexibility and customization compared to standard awards or enterprise agreements.
