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-forprofit in their orientation,
provide and important
source of employment.
What do all organisations have in
common?
Purpose
Comprise two or
more people
People
Distinct purpose, usually
expressed as a set of
goals that an organisation
wishes to accomplish
Structure
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
Total assets – own
substantial assets (millions)
Employee base – employs
more than 200 employees
Total revenue – earns
substantial gross income
(millions of dollars
revenue)
Number of business
locations –locally,
nationally or globally
Large Scale Organisations
may have one or more of
these characteristics
Profits – has substantial
gross profits
Large Size of operations –
operate using a multiple
factories, branches, stores
Market share –
commands a large
percentage of the
marketplace
Other Characteristics
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 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.
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.
 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
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
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
Public Sector
Type
Examples
Objectives
Features
Revenue Source
Government
Department
∙Australian Tax
Office (ATO)
∙Department of
Foreign Affairs
and Trading
(DFAT)
∙Australia Post
∙Vic Roads
∙To provide
services
∙They are not
expected to
make a profit
∙Responsibility lies
with the relevant
level of
government
(local/state/federal
)
∙While essentially
owned by the
government, they
are often selffunded and must
manage their own
operations.
∙Government
revenue –
mostly from
taxation
Government
Business
Enterprise
(GBE’s)
∙To provide a
service and
to pursue
profit
∙Primarily from
the user-pay
services they
provide
Private 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 shareholders, 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.
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%
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.
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
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).
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.
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)
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.
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
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
 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