Outcome 2 Part A
• Wednesday March 19th
• 20 marks
• 5 mins reading
• 50 minutes writing
• Chapter 2
• (2.1, 2.2, 2.3, 2.5, 2.11 only – NOT the
Outcome 2: The internal environment of LSO
• What do I need to study?
• 2.1 Different management structures
• 2.2 Three basic types of management structure
• 2.3 Corporate culture and its development
• 2.5 Policy development and its applications
• 2.11 Ethical and socially responsible management of the
• Check study design for key areas and skills
2.1 Different management structures
• A management structure refers to the ways in which parts of
the organisation are formally arranged to achieve its
• A management structure outlines the way in which parts or
areas of the organisation are formally linked together.
Structure links management, employees and management
• Shows the key positions of responsibility & accountability.
• Lines of communication.
• The possibility of career paths
• Ensures tasks are not duplicated.
• Roles, power, authority
Changes in organisational structure
• Clear trend recently towards flatter organisational
• Rapid advances in technology
• Increased pressures on LSO’s to compete against
• Flatter organisational structures allow faster adaptations
to changes in consumer needs and market decisions because
fewer managers need to approve decisions.
Traditional hierarchical approach
• Very hierarchical or bureaucratic
• (Number of layers of management with power being centralised on top)
• The higher up the organisation an employee goes, the more power and
responsibility they have.
• With so many layers of management, this type of hierarchy can be
inefficient, especially if decisions have to go through each level of
management for approval.
Flatter Management (organisational) structure
• Have become more common.
• Decreasing middle management.
• Development of more team orientated approach.
• Fewer levels of management & employees take on more
• More delegation of tasks taking place.
• Flexibility to give employees a wider range of experiences by
moving them into different depts at same level.
• Span of control – number of employees being supervised. The
number of people for whom a manager is directly responsible
• Chain of command – (the line of authority) to determine
reporting and accountability. System that determines
responsibility, supervision and accountability of members of
• Unity of command – principle that states that each employee
within an LSO should report to only one supervisor.
• Top management is involved in strategic planning (3-5
years). Its responsibilities include; Monitoring entire
organisation. Devising and revising mission and vision
• Middle management is involved in tactical planning (1-2
years). Its responsibilities include; Translating corporate
objectives into specific projects. Developing operational
plans. Supervising front line management.
• Front line management is involved in operational planning
(day to day). Its responsibilities include; Supervising
employees and operations
Management Structure - Functional Structure
– Functional model is where employees are grouped into
departments according to the tasks they perform;
management functions. Eg operations, marketing & human
resources. (Traditional structure)
– Feature – sets clear lines of authority & responsibility as
the chain of command extends directly from manager to
– Feature – allows for specialisation of tasks so that
employees can develop their skills and experience in a
particular type of work.
– Feature – Organisation split into separate depts. With
related occupations found in each.
• Defined career pathway for employees
• Provision of good opportunities for skill and knowledge
• Efficient use of resources; time, labour
• Lack of flexibility and cooperation due to bureaucratic
• Narrow departmental focus
• ‘empire building’ behaviours among personnel in
departments; gaining and keeping control over something (ie.
resources, human resources, finances)
Management Structure - Divisional Structure
– Divisional model is where employees are grouped into
divisions based on products, geographic area, processes or
– Features – used by organisations producing a range of
different products or services.
– Features – Teams are organised into divisions that relate
to end product or services provided by the LSO.
– Feature – the ability to segregate large sections of the
company’s business into semi-autonomous groups.
• Direction of expertise at specific customers, products, regions and
• Encouragement of cooperation between departments
• Greater flexibility in adapting to environmental changes
• Reduced benefits of economies of scale due to duplication of tasks
• Potential to promote rivalry between divisions
– Matrix model is a combination of the functional and
divisional models where employees are grouped into
project teams and organised by function and division
• Enhanced flexibility; operations can be altered quickly
• Enhanced communication; cooperation and teamwork
• Enhanced decision making; project teams become a critical
source of information
• Pooled expertise; best environment for problem solving
• Decisions made in project teams can undermine line
• Employees are reporting to more than one manager and this
can lead to a bigger chance of conflict
VCAA EXAM 2010
Ms West has just purchased a designer clothing and
manufacturing company. She would like to expand the company
and start exporting.
Compare two potential management structures that would
assist Ms West to achieve these aims. Which management
structure would you recommend to Ms West? Justify your
choice. (6 marks)
VCAA Question 3 2010 examiners report
Typical management structures selected by students for comparison included the following.
Divisional/Geographic – staff are organised in departments based on division; for example, products (T-shirts,
socks, hats), customers (men, women, children), geography/region.
Functional – Human Resources, Operations, Finance, Marketing, Research and Development.
Matrix – combines specialisation with function and division focusing on a project over a period of time.
The following is an example of a high-scoring response.
A management/organisational structure is the way in which managers, employees and
functions are arranged within an organisation. One management structure is a functional
structure, this is where employees are divided by function (Human Resources, Financial
management, Marketing etc) and each function has a manager.
A different management structure is a matrix structure, this is a horizontal and vertical
structure where teams are formed across functional/departmental lines to work on a
project or solve a problem. The two structures are similar in that they both have
functional departments with managers at the’ top’ of the structure. They are also similar
as they have functional departments which allow for specialisation. The two structures are
different in that a matrix structure involves teams across functions, where as functional
structure does not.
A matrix structure will also have more managers than a functional structure as there will
be a manager for each team as well as each department. I would recommend that Ms West
use a ‘matrix’ structure at her designer clothing company. This is because a matrix
structure is more flexible than a functional structure, it also has a greater organisation
focus, rather than purely a functional focus, which means employees, will strive to achieve
both function specific and organisation –wide objectives. Additionally, Ms West could form
a team to discuss the expansion of the company and a team to focus on how and where the
company should export. For any problem that arises, or any new venture Ms West would
like to do, Ms West can for a team to work on specifically that task.
• vertical communication
• no duplication of tasks
• upholds unity of command
• centralised decision making
• task specialisation
• inflexible for expansion
• expertise focused on one
• high level of labour
• horizontal and vertical
• duplication of tasks
• does not uphold unity of
• decentrallised decision
• flexible for expansion; add
• pooled expertise; most
• multitasking; inefficiencies
and high wastage
• vertical communication
• duplication of tasks
• upholds unity of command
• centraslised decision making
• task specialiastion
• flexible for expansion; easily
able to add divisions
• expertise focused on one
• high level of labour
VCAA EXAM 2008
Australian Mineral Resources (AMR and Jerrilderi Mining have been
negotiating a merger with the aim of achieving economies of scale. The Chief
Executive Officers (CEOs) of the two mining companies have been in discussion
over the past three months.
• The focus of these discussions has been
• The potential problems of merging two well-established companies with
• The possible structure of the new entity
• The content of a joint mission statement
• The adoption of a single planning process at the three levels
A. Define mission statement (1 mark)
B. Define management structure (1 mark)
C. Describe the key features of a matrix management structure
D. Identify and describe the three levels of planning (4 marks)
E. Discuss two indicators of corporate culture the
organisation would have considered (4 marks)
VCAA 2006 EXAM
Southern Furniture Ltd’s mission statement reads
Southern Furniture Ltd is a leader in the manufacturing of household furniture. Our mission is to meet
customer needs with the highest quality products and services. This will support the profitability and the growth
expectations of our shareholders. We care about the future of our environment and we support programs that protect
The CEO, Mr Gomm, and his senior managers have developed a strategic plan for the next five years. The intention of this
plan is to inform all staff within the organisation that changes have to be made.
The strategic plan includes the following objectives.
• increase market share by 25% in China (an identified growth area)
• reduce materials waste by 5% per year
• achieve and maintain ISO 9000 accreditation
• increase productivity by 8% through the use of new automation/technology
In addition, Mr Gomm also announced there would be a review of the current organisational structure to assess whether it is
Mr Gomm informed Susan Wu, Human Resource Manager, that the following strategies must be put into action.
• the firm will adopt enterprise bargaining agreements
• current staff will need to be retrained to use the latest technology
• training of staff will now be outsourced
e. Identify and justify an appropriate management structure that will assist the organisation to
achieve its strategic plan. (2 marks)
Question 2 (2012 VCAA exam)
• Glass Transport is a long-established bulk transport provider, which has recently taken a
decision to invest in becoming a national parcel delivery service. The opportunity that CEO
Catherine Glass seized on arose from fast-growing online sales. In order to build the
expanded business, a signiﬁcant number of new staff will be required. Some of these staff
could be relocated from the bulk transport division and some will need to be recruited.
Service standards will need to be set and new vehicles purchased. Further decisions will
be made to determine whether parcel pick-up from residential and business premises will
be offered. The major existing competitor in parcel delivery is a government-owned postal
service. Its business of delivering mostly letters is declining because of emails and
texting. Its delivery infrastructure is mostly suited to letters, not parcels. The growing
parcel sector is a highly proﬁtable business opportunity for the organisation that ‘gets it
right’. As Glass Transport is becoming more complex in its service offerings, Ms Glass is
considering changing the management structure of her organisation.
a. Discuss an appropriate management structure for Ms Glass’s expanding business.
Examiners Report Question 2 - 2012
Appropriate management structures could include
• functional: employees are grouped according to the task they perform, which allows for
specialisation and improves productivity through well-trained staff, career paths and
economies of scale. However, it may also lead to a lack of flexibility and cooperation,
narrow departmental focus and the possibility for empire building
• divisional: employees are grouped according to product, service, customer, geographic
region or type of business entity. This allows for greater flexibility to adapt to
environmental changes; direction of expertise is at specific customers, products, regions
and processes; and it allows for the encouragement of cooperation between departments.
However, there is also the possibility of duplication of work, reducing benefits of
economies of scale and rivalries between division
The following is an example of a high-scoring answer.
An appropriate management structure that Ms Glass could employ would be the divisional
structure. This is a structure where employees are grouped together regarding the product or
service, geography or process they undertake. As Ms Glass’s company is incorporating a new
aspect of parcel delivery, she can divide the organisation into the bulk transport division and
the parcel delivery service. This enables each area of the organisation to focus on its own
service that it provides rather than having one operations manager for two fairly different
operations. This focus means greater efficiency and effectiveness is able to be delivered in
each of the different operations as each division will develop expertise in their area. This will
however, create some duplication of work in some areas such as finance and human resources
and she also must ensure that the company remains one company as although it is separated
into two major divisions they are still both part of Glass Transport
• What does this term mean?
• Elements (how can it be observed??
• Positive or negative? How can you tell?
• Benefits of having good corporate ethical & socially
• How can you develop it in the future?
• Indicators that HR managers could use to evaluate
• Causes of change in corporate culture.
• Corporate culture refers to the values, attitude,
expectations and beliefs within an organisation. The
corporate culture of each organisation is unique.
• Organisations try to ensure that the culture is positive as it
impacts on the whole organisation.
• Each organisation develops its own particular way of doing
things. The style or character of an organisation is
consequently reflected in its culture.
• Corporate culture can be revealed officially in the policies,
objectives or slogans of an organisation. It can also be seen
in the unwritten or informal rules that guide how people in
the organisation behave, such as the way staff dress, the
language staff use and the way that staff treat each other
Elements of a corporate culture
• Values. The LSO’s basic beliefs, shared among its
employees. Eg honesty, hard work, teamwork, quality
customer service, employee participation and innovation.
• Symbols. These consist of events or objects that are used
to represent something the organisation believes to be
important. For some LSOs, competitive sports are a key
feature of the organisation's culture. Other organisations
have encouraged employee development and loyalty
through the use of training and development programs.
• Rituals, rites and celebrations. These are the routine
behaviour patterns in an organisation's everyday life.
Regular social gatherings can be held to help develop a
sense of belonging among employees who normally work in
small teams during the week.
• Heroes. Successful employees who reflect its values
and, therefore, act as an example for others
Creating and maintaining corporate culture can be done by
management in the following ways;
• Setting an example for lower level employees of how to
behave and treat others
• Recognising and rewarding behaviour and action that is in
line with desired culture
• Hiring and training staff in line with the desired culture
• Communicating to staff what the desired culture is
• Providing a clear mission and vision statement
Examples of positive culture in LSO’s
• Open communication.
• Allowing employees and front-line managers to have input into decision-
making and taking on board the suggestions and feedback of
• Recognising employees through ‘employee of the month’ awards,
• Social gatherings and other activities and through the use of language
when staff and managers communicate all influence culture.
• Treating employees respectfully and ethically, with policies to back
this up, as employees know what their rights and responsibilities are
and that they will be treated fairly because appropriate policies and
procedures are in place
Indicators that HR managers could use to evaluate
• Staff turnover
• Staff absenteeism
• Employee presentation
• Results of staff survey responses to
measure their level of satisfaction
• Level of participation in employee
Corporate culture can change/ impact due to;
• Corporate culture will change over time as changes are made
• Corporate culture will change as the organisation becomes older
and more established
• Corporate culture can change if management has a different
approach; different expectations and standards
• Corporate culture can change if employees bring attitudes and
approaches from previous work environments
Changes in structure (mergers)
• Corporate culture will change to fit the new organisation
• Laws, economic conditions and changes in work practices can
change corporate culture positively or negatively
Case scenario: possible impact of a takeover on the
• For employees, the initial period after the takeover might
be confusing as they could be uncertain about which policies
and procedures they are to follow, which could affect the
corporate culture in a negative way.
• The need to change the management style of the
organisation. If the styles and approaches are different in
each organisation, then this would need to be changed or
adapted in the newly acquired organisation. If the
management styles are very different, this will impact on
the shared values of management and the employees at,
particularly if they have had a people-oriented approach to
management and are then required to adopt a more task-
• Can you think of others???
2011 VCAA EXAM
A. In the foyer of the head office of Southern Industries hangs a sign
that states ‘Employees are our most important resource. If we look
after our staff everything else will take care of itself’.
Define the term corporate culture. (1 mark)
B. Describe one way management can develop an organisation’s corporate
Strategies HR managers could implement to
develop corporate culture
• Recruit & select employees that best fit current
• Clearly communicate goals & direction
• Develop new uniforms, logos, advertising campaigns.
• Review rewards Management programs to encourage
motivation & involvement in org.
• Offer social activities and community service
programs to improve camaraderie.
Benefits of positive corporate culture includes;
• Lower levels of staff turnover
• Increased retention of staff
• Increased levels of staff satisfaction
• Increased employee and organisational productivity
• A policy is a written statement detailing processes, procedures,
rules and regulations that must be observed in a given situation
• Policies reflect the organisation’s mission and vision
• Provide governing principles that mandate or constrain the
actions of people within the organisation
• A policy guides a member of an organisation about what they are
expected to do in a given situation
• Policies establish expected standards of and guidelines for
• Ensure that in a given situation what happens is within
boundaries of what is expected
• Examples of policies include an anti-bullying or a uniform policy
in an organisation.
• Procedures are the steps taken to implement the policy and put it
in into practice.
• A complaints policy, for example, would state what is included and
contains the sections making up the policy. The procedure would set
out how a complaint is lodged, the required forms to be completed,
and what the possible outcomes are. It puts the policy into
• Effective policies are;
• Plainly expressed so everyone understands them and
implementation is effective
• Clearly communicated so everyone is aware of their existence,
potential and actual changes to them
• Often introduced by training employees and management about
procedures to be followed within a policy and reason for policy
Examples of policies
• Equal opportunity, health & safety, smoking
• Paid parental leave, health & safety, environment
• Internet use, email policies
• Compliance in trade practices, anti competitive behaviour
• Waste policy
• Early childhood, job sharing
• Road funding, safer roads
• Corporation salary, corporate social responsibility
• Dress code, training & development, bullying
• The policy development process involves the following steps;
Steps to policy development
• People become aware of the need for a new policy or the need to change
an existing policy
Research and analysis
• Research is conducted into policies of competitors, trading partners and
organisation’s that are known to have ‘best practice’ to determine possible
• Assessment of what is needed in the new or updated policy is conducted
• Stakeholders are informed of possible impending policy change and why
change is required
• Draft policy or policy amendment is prepared considering stakeholder
views and input
Draft policy is posted
• Draft policy is made public and stakeholders are invited to give feedback
• Necessary changes are made
• Appropriate level of approval is obtained
• Was the policy effective?
2011 VCAA EXAM
• Jason Green is an Operations Manager who has just moved from
an organisation that provides Internet services to an
organisation named Trendsetters, that manufactures clothing.
His supervisor has indicated that one of his first tasks is to
work with the Human Resource Manager to update the firm’s
employee relations policies. Jason is concerned about making
changes too soon after he arrives.
• Define the term policy. (1 mark)
Managing ethical issues in the internal environment
• Ethics can be defined as a set of moral principles and values
that an organisation develops for people to follow. It is
often an internal focus.
• Ensuring employees are treated fairly and are recognised in
a number of ways for their achievements.
• Having policies in place that are designed to develop
employees and provide them with career opportunities.
• Costly and time-consuming; however, in the longer term a
company gains and maintains well-trained and loyal
Social responsibility is the accountability of the business towards
its stakeholders and how the organisation can contribute to
society beyond its products and services
• Contributing to the local community. Eg working with local
businesses and providing sponsorships and scholarships for
people in the local community, sustainability
• These programs require financial, personnel and time outlays;
however, in terms of developing good relationships with its
external stakeholders, these actions are examples of the social
responsibility in practice..
REMEMBER KEY TASK WORDS
• Compare (similarities & differences)
• Discuss (look at both sides of an issue)
• Justify (give reasons why)
• ALSO a reminder you must always define key terminology even
if question does not specify.
• Identify, explain, link (to case study)