Business Management Unit 3&4
Task Words:
Found in the key skills
Key skills
• define, describe and apply relevant business management concepts and terms
• analyse case studies and contemporary examples of business management
• interpret, discuss and evaluate business information and ideas
• apply business management knowledge to practical and/or simulated business situations
Unit 3: Managing a business VCE Business Management 2017–2021 16
• analyse and discuss management styles and management skills necessary for successful business management
• evaluate management styles and management skills and their appropriateness for a range of business situations
• propose and justify management strategies for developing corporate culture.
Unit 3: Managing a business
AOS1 – Outcome 1
Key Knowledge
1. Types of businesses including sole traders, partnerships, private limited
companies, public listed companies, social enterprises and government business
enterprises
Sole Trader
Definition of key term – Business owned and operated by one person
Explanation – The sole trader or owner is the person who provides all the finance, makes
all the decisions, and takes all the responsibility for the businesses’ operations. The
owner and the business cannot operate as a separate legal entity – that is, the owner
and the business are regarded as the same. This responsibility is known as unlimited
liability – the business owner is personally responsible for all the debts of their business.
Example – The local milk bar, pizza shop, or dry cleaning store.
Screen shot from book
Partnership
Definition of key term – A partnership is a business owned by two or more people. Most
partnerships have a maximum of 20 partners but there are exceptions such GP’s and
Stockbrokers (up to 50 partners), and solicitors and accountants (up to 400 partners).
Explanation – A partnerships is also not a separate legal entity from its owners. Owners
are also subject to unlimited liability. A partnership can be made orally or in writing or by
implication (two people running the operation of a business). A written partnership
agreement is not compulsory but is worthwhile is disputes arise.
A silent or sleeping partner is one that is able to contribute financially to the business but
does not take part in the running of the business. Their main purpose is to add more
capital and finance.
A sole trader pays tax using their own tax file number, a partnership however has its own
tax file number and it lodges its own tax return. Once the ATO has assessed the tax
return, the profits are divided among the partners according to the partnership
agreement. Each partner adds their share of the profit or loss to their own personal tax
return.
Example – Local pub, Mario Brothers Plumbing, Pitcher Partners.
Screen shot from book
5. Management styles including autocratic, persuasive, consultative, participative and
laissez-faire
Autocratic – Do it the way I tell you
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Manager makes all the decisions, dictates work methods, limiting employee
knowledge on what needs to be done, and frequently checking employee
performance.
Provides clear directives by telling employees what to do, no employee input.
Motivates through threats and disciplinary action.
Controlling, expect compliance and obedience, give more negative and
personalised feedback.
Management style is centralised
Advantages:
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Can be effective in a time of crises when immediate compliance is needed. To
meet an unexpected deadline, and when speed is important. Or when staff are
new and lack skills and knowledge.
Directions and procedure are clearly defined; there is little uncertainty
Roles and expectations are clear
Control is centralised so time is used efficiently and probems solved quickly (no
employee input or consultation)
Disadvantages:
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Ideas are not encouraged or shared, so employees don’t get the opportunity to
develop their skills, and they don’t feel valued.
Job satisfaction decreases because a lack responsibility given to lower level staff
– this can lead to increased staff absenteeism and turnover
Workers compete for the praise and approval of managers so conflict can arise
An ‘us and them’ mentality may develop between staff and management
because of a lack of employee responsibility and input
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Persuasive
Consultative
Participative
Laissez-faire
Test your understanding (pg.46)
1. What is meant by Laissez-faire management style?
The Laissez-faire management style is where a manager has no central role in
the day-to-day running of the business. Employees themselves have full
responsibility over the decision making process and are accountable for the
results.
2. When might it be appropriate to use a laissez-faire management style?
A lassisez-faire management style is most appropriate with a workforce that is
generally highly skilled and experienced, and that work in an environment where
creativity and autonomy is encouraged through open communication and the
sharing of ideas.
3. List the main advantages and disadvantages of the laissez-faire management
style.
The main advantages of the laissez-faire management style include the following:
• Employees feel a sense of ownership, which can promote outstanding results.
• There is continual encouragement for creativity, which is conducive to a
dynamic working environment.
• Communication is completely open and ideas are both discussed and shared.
The main disadvantages include the following:
• There is a complete loss of control by management. No control or direction
means there is potential for misuse of the business’s resources, including time and
money, because these have been placed in the hands of the employees.
• This style can breed personal conflicts, where individuals do not cooperate or
wish to implement only their own ideas. In these cases, management is not there
todirect or negotiate.
• The focus on meeting business objectives can be easily eroded. Management
may find themselves with a failed business and nothing to manage.
4. Explain what is involved in choosing an appropriate management style for a
given situation.
The nature of the task, internal and external constraints, including time and
resources, the managers personality, experience, attitude, beliefs, and skills, and
the personalities, beliefs and skills of the staff all have to be considered when a
manager determines which management style will be the most effective in a
given situation. After analysing these important factors, the manager will decide
upon the style they believe is most effective and the one they feel most
comfortable with.
5. Left out for now
6. Alistair is the communications manager responsible for producing the company
annual report in six months. He is a highly experienced and skilled manager but is
working with a team consisting of many new employees. Outline the details of
each of the situational elements (the manager, the staff, the task and
constraints) in this scenario. What management style would you recommend
that Alistair use?
1. The manager is highly skilled and experienced.
2. The staff have little experience and skills.
3. The task is important for providing essential information on the company’s
progress towards achieveing organisational objectives.
4. The main constraint is time particularly when the workforce lacks experience
and skills, however the task has a full 6 months before it is due.
Considering the fact that the task has a lengthy time period before it is due, and that
staff are new and inexperienced, I believe the consultative management style would
be the best for management to adopt in this situation. Definition A consultative
management style is one where the manager recognises the importance of good
personal relationships among employees and consults with staff on certain issues before
making a decision. Management will set the objectives for the task, but will also seek
the opinions of employees throughout the decision making process, through open twoway communication channels, employees will be able to express and share their ideas
which will be vital in helping them develop their skill base and add valuable experience
to their repertoire. The consultative style can be a slower process considering the time
needed to consult staff, however the lengthy time before the task is due can cater for
consultation, and the significant experience and high skill base of the manager will help
direct the process as efficiently as possible, and effectively guide and support the
inexperienced staff. With the added input of employees, I believe the end result of the
task will have the potential to be of higher quality and thus receive a sound appraisal.
What is the BM structure for answering questions? Look it up on FB
“Minimising waste reduces the costs of production of the business, such as the costs of
waste removal, and also improves productivity across the operations area.” –
Productivity increases as a result of waste removal as a businesse’s operations are not
allocating time and resources to deal with the waste that is produced. Time and funds
are not wasted in disposing of the waste, recycling the waste, or selling it off, thus time
and resources can be re-allocated back into production processes.
The work cell approach relies on workers being able to do a variety of tasks, not just
one task. Give one advantage and one disadvantage associated with workers
becoming multiskilled.
With workers becoming multiskilled, efficiency can be enhanced because an individual
employee is able to complete different tasks consecutively, or one right after the other.
Time in handing over the task from one employee to another is saved, thus the
production process becomes leaner. The cost of one employee that can perform
multiple jobs is a cost saving as opposed to hiring multiple employees to complete
different jobs.
One disadvantage to multiskilled employees is the increased threat of stress which can
lead to errors in production and a subsequent reduction in the quality of a final good or
service. …..
Why do you think work cells would rely more heavily on teamwork than individual
achievement?
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Work cells are designed to encourage working teams of employees to work
on the same or similar tasks simultaneously. This way, jobs are completed in
less time and a higher quality output is more likely to occur as more people
are able to engage in the quality control process. Jobs will generally take
longer when completed on an individual level, and it’s more likely that errors
in production will be missed, and or stall the production process.
Organisational change – Great episode of Four Corners that includes organizational
change and also mentions of leadership style (management style). Episode on 21/11/18
7.4 The principles of the Learning Organization (Senge)
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Businesses are dynamic learning entities that are constantly adapting and
improving into the business they want to be.
Peter Senge theorised that these organisations are businesses where
managers and staff are continually seeking to expand their capacity to
achieve the results they desire.
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These businesses encourage new patterns of thinking and operating, resulting
in the aspiration of the business becoming more open-ended
By constantly seeking change, a business is evolving and continually learning
in an effort to improve.
5 Principles necessary to generate learning organisations:
Systems Thinking:
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Corner stone of the learning organisation
It is the ability to see the big picture
Personal Mastery:
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Organisations learn only through individuals that learn. Individual learning
does not guarantee organisational learning. But without it no organisational
learning occurs.
It involves the people within the organization developing proficiency - that is
the ability to undertake continual learning or development to continually
show improvement and movement towards the goal or vision the person has
set for themselves. This can be achieved through training and development,
performance, management and appraisal, as well as career progression.
If individuals are able to continually improve then they may be less resistant to
change as they may feel that change can get them closer to the vision they
hold for themselves.
Mental Models:
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Are deeply ingrained assumptions and generalisations that influence how we
understand the world and how we take action (behave)
Mental models require businesses and individuals to look inside themselves to
drive change
Businesses need to be able to scrutinise what they do, and then act upon
what they learn.
For this to occur, it is necessary that people learn new skills, and the
organisation fosters such change.
Mental models encourage businesses to go beyond internal politics through
openness and honesty and the sharing of responsibility
Building shared vision:
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It’s the capacity to hold a shared picture of the future we seek to create
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Individuals who adopt this shared vision will see the long-term picture of the
business and so a commitment to the business and to learning will further
develop
A shared vision will motivate all members of the business
It will encourage risk tasking, experimentation, and foster innovation
A genuine shared vision will see individuals excell and learn, not because
they are told to, but because they want to.
Leaders who seek to build a shared vision require principles and guiding
practices that will move their workers vision from a personal vision to a shared
vision.
Dictating the vision from leaders may be counter-productive, because a
shared vision will foster genuine commitment and enrolment rather than
compliance
People must come to this shared vision themselves, through learning, a desire
to extend themselves and through being innovative
The opportunity to talk, share, communicate in a clear and honest manner
will reinforce the vision among believers and spread the vision further
Team Learning:
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The process of aligning and developing the capacities of a team to create
the results it’s members truly desire
This concept builds on Personal Mastery and Shared Vision – but these are not
enough
When teams learn together, the business will achieve improved results. Most
importantly, members will grow more rapidly than could have occurred
otherwise.
Team learning starts with dialogue – communicating openly, through the
capacity of team members to suspend assumption and enter genuine
‘thinking together’.
Leading the Learning Organisation:
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In a learning organisation, leaders are designers, stewards, and teachers.
They are responsible for building a business where people continually expand
their capabilities to understand complexity, clarify vision and improve shared
mental models.
Traditional organisational leadership (set direction of business, make key
decisions, and energise staff) according to Senge is seen as individualistic
and is a non-systemic model of leadership. Senge says people that work for
these traditional leaders are seen to have a sense of powerlessness, and lack
personal vision, and an inability to master the forces of change.
Leader as designer
The policies, strategies and systems are the key area of design. The first task of the
designer is to design the governing ideas of the business — the purpose, vision and core
values by which the business should operate. The leaders’ task is to design the learning
processes whereby people throughout the business can deal with the issues they face
and develop their mastery in the learning disciplines described above.
Leader as steward
The notion of a leader as steward is that stewardship involves a commitment to, and
responsibility for the vision, but it does not mean that the leader owns it. Leaders are
stewards of the vision. Their task is to manage the vision for the beneft of others — they
have to learn to listen to other people’s vision and to change their own where
necessary.
Leader as teacher
The concept of a leader as teacher is not about ‘teaching’ people how to achieve
their vision. It is about fostering learning for everyone. Such leaders help people
throughout the business develop systemic understandings. Leaders must create and
manage tension, especially around the gap between vision and reality.
Test your understanding questions
3. Why do you believe it is important to build a shared vision for a business?
A shared vision is important for a business because it provides the long-term
picture of the business for its employees. The idea is that individuals within the
business will align their own individual vision with the businesses shared vision, and
they will then form a genuine commitment to the business’s performance. If
employees adopt the shared vision, they are more motivated, encouraged to
take risks, experimental, and think more innovatively, which will in turn enhance
the quality of the output for the business.
6 Explain the link between the five disciplines as explained by Peter Senge. In
your response, describe why systems thinking is considered the cornerstone of
the five disciplines.
Explain – give some ideas about, make a suggestion
Describe - Use words to show appearance, function, process, events or systems.
Provide a thorough description, emphasising the most important points. You are
not being asked to make judgements.
Answer on PC
7 Explain the three roles of leadership in a learning organisation and distinguish
them from the traditional role of a leader.