Performance Indicators

Question 1

Effectiveness

Answer 1

Effectiveness is the degree to which an organisation has achieved its stated objectives. If an organisation’s goal was to make profit, then improving pro t from one year to the next would be seen as effective.

Question 2

Efficiency

Answer 2

Efficiency refers to how well an organisation uses the resources needed to achieve a goal. The most efficient use of resources occurs when benefits are greater than the costs of resources employed.

Question 3

4 financial performance indicators

Answer 3

Net profit
Number of sales
Percentage of market share
Rate of productivity growth

Question 4

Net profit

Answer 4

Net profit is what remains when expenses are deducted from the revenue earned. An organisation that makes a profit is considered to have performed successfully.

Question 5

Number of sales

Answer 5

Measuring the number of sales helps an organisation evaluate its performance, especially its marketing strategies. Usually, an organisation will be satisfied with its performance when the number of sales increases over a period of time, even if it means lower profits in the short term due to higher marketing costs.

Question 6

Percentage of market share

Answer 6

This indicator is typically used in the Finance Management Function and refers to the proportion of the market share that a business has. It is calculated by dividing the organisation’s sales by the total sales of all organisations in the same market, expressed as a percentage.

Question 7

Rate of productivity growth

Answer 7

Productivity compares the amount of output produced to the amount of inputs (resources) going into production. Productivity is a measure of efficiency that is used by the operations and human resources functions. An indicator of productivity is the rate of productivity growth. This is the change in productivity in one year compared to that of the previous year. Growth in the rate of productivity indicates that the organisation is using resources more efficiently.

Question 8

4 non financial performance indicators

Answer 8

Customer and staff satisfaction
Level of wastage
Number of workplace accidents
Benchmarking

Question 9

Surveys

Answer 9

A set of constant question posed to staff, which allows them to express their feelings and opinions of working for the organisation. This is used within the Human Resources Function.

This involves a set of consistent questions being posed to customers about whether they are happy with the standard that the organisation is performing at and whether their needs are being meet. This is usually linked to the Marketing Function.

Question 10

Staff turnover

Answer 10

Staff turnover is a performance indicator that indicates how many staff leave an organisation over a specific time. High staff turnover indicates staff are unhappy or dissatisfied with the job or organisation, while low staff turnover can reflect that people are satisfied with their position.

Question 11

Number of customer complaints

Answer 11

Number of customer complaints refers to the amount of dissatisfied customers voicing their dissatisfaction through verbal or written forms. For example, the rise in customer complaints at Shackleton is the increase of customer dissatisfaction with the good or service.

Question 12

Level of wastage

Answer 12

All organisations have a production process that generates a certain amount of waste. This can be measured by the level of wastage. This performance indicator is used by the operations function. An organisation manages resources more efficiently by reducing waste, which can cut production costs.

Question 13

Number of workplace accidents

Answer 13

An unsafe workplace impacts on the productivity of the organisation for several reasons. Staff members who feel unsafe may not be motivated to perform harder, and accidents can actually stop production. If the number of workplace accidents falls then the workplace is most likely safer for employees. This is a performance indicator that is important to both the human resources and the operations function.

Question 14

Benchmarking

Answer 14

Many LSOs adopt the practice of benchmarking. This is not a performance indicator; it is a methodology that can be used to assess performance. Benchmarking occurs when an organisation evaluates its own performance by comparing it to that of other leading organisations known for their excellence. Benchmarking allows for a comparison to be made for a more accurate evaluation. An organisation might compare its performance with another organisation in the same industry or with a business in another industry with similar objectives.

Question 15

Performance indicators

Answer 15

Performance indicators are specific criteria used to measure the efficiency and effectiveness of the organisation’s performance. Large organisations use performance indicators (PIs) to precisely evaluate performance.

Question 16

Shackleton Pty Ltd is a large-scale business producing and installing state-of-the-art security systems.
Its headquarters is in Melbourne and it has numerous of ces across Australia. The organisation employs 1000 people. Shackleton has grown into a leader in its eld. Shackleton believes in using products of the highest possible quality to ensure that the customer has many years of problem-free use. Shackleton’s CEO, Zac Shackleton, believes that if he employs capable staff, they will motivate themselves to do a good job. However, last month Zac noticed a drop in productivity and a rise in the number of customer complaints. Zac knows he must act swiftly or face competitors gaining a larger market share. Discuss a management style that would best suit Zac in overcoming the drop in productivity that he
has identi ed.

Answer 16

Productivity is the level of outputs compared to the amount of inputs, and indicates efficiency and effectiveness. A management style is a way in which a manager communicates and their attitude towards making decisions. Zac could use an autocratic style of management, which is where the manager dictates the decision made with no employee input. It is a hierarchical, top-down form of communication and is effective in promoting hard work and efficiency. To tackle the drop in productivity, Zac could make the decision to implement a specific goal that is achieved by his employees. The centralised decision-making is suited to the nature of the situation, which if not attended to, could result in a decrease in profits and market share. By outlining concise and clear objectives for his employees, they would be able to work to a common goal, such as increasing the number of security systems installed each day, in order to increase productivity. A disadvantage of Zac implementing this style is that employees may feel devalued by their lack of input and ability to communicate in the decisions being made. It may also create a negative corporate culture where teamwork is not valued.

Question 17

Shackleton Pty Ltd is a large-scale business producing and installing state-of-the-art security systems.
Its headquarters is in Melbourne and it has numerous offces across Australia. The organisation employs 1000 people. Shackleton has grown into a leader in its eld. Shackleton believes in using products of the highest possible quality to ensure that the customer has many years of problem-free use. Shackleton’s CEO, Zac Shackleton, believes that if he employs capable staff, they will motivate themselves to do a good job. However, last month Zac noticed a drop in productivity and a rise in the number of customer complaints. Zac knows he must act swiftly or face competitors gaining a larger market share. Discuss a management style that would best suit Zac in overcoming the drop in productivity that he
has identified. Identify and explain two management skills that Zac could use to address the issue of customer
complaints.

Answer 17

One management skill is communication. This is the process of creating and exchanging information. Zac will need to communicate with customers and try to find the source of problems. Once identified, Zac will then need to communicate to staff the changes that must occur in the production of the security systems to ensure that these problems do not arise again.
To address the issue of customer complaints, Zac could use problem solving skills. This would enable him to identify and rectify the cause of the customer complaints, which may be the cost of the product. Once the problem is identified, Zac could choose a course of action to decrease the number of customer complaints. He would also need to evaluate the effectiveness of his implemented strategy to ensure it achieves the objective of minimising complaints.

Question 18

Shackleton Pty Ltd is a large-scale business producing and installing state-of-the-art security systems.
Its headquarters is in Melbourne and it has numerous offces across Australia. The organisation employs 1000 people. Shackleton has grown into a leader in its eld. Shackleton believes in using products of the highest possible quality to ensure that the customer has many years of problem-free use. Shackleton’s CEO, Zac Shackleton, believes that if he employs capable staff, they will motivate themselves to do a good job. However, last month Zac noticed a drop in productivity and a rise in the number of customer complaints. Zac knows he must act swiftly or face competitors gaining a larger market share. Discuss a management style that would best suit Zac in overcoming the drop in productivity that he
has identified.Zac is evaluating Shackleton’s management structure to see if it best suits the needs of the organisation.
Identify and describe an appropriate management structure for Shackleton. Justify how this
management structure best supports the organisation.

Answer 18

Shackleton could implement a functional management structure. In this structure, employees are grouped based on the activities and tasks they perform, and can be grouped into five broad categories: Marketing, Human Resources, Operations, Research and Development and Finance. The benefits of implementing a functional structure is that it allows a defined career pathway for employees in each department. It also allows for task specialisation, which would be extremely beneficial to Shackleton’s operations department as they strive to produce products ‘of the highest quality’. The functional structure would ensure each of Shackletons offices have highly skilled employees working in each functional department, leading to increased productivity and job effectiveness. The functional management structure can sometimes lead to narrow department focus, decreasing efficiency levels within the organisation. It would allow for Shackleton to take full advantage of ‘economies of scale’ as no work is being duplicated in the departments. There is a high level of accountability and would allow Shackleton to identify points of low productivity which can lead to a drop in profits.

Question 19

Shackleton Pty Ltd is a large-scale business producing and installing state-of-the-art security systems.
Its headquarters is in Melbourne and it has numerous offces across Australia. The organisation employs 1000 people. Shackleton has grown into a leader in its eld. Shackleton believes in using products of the highest possible quality to ensure that the customer has many years of problem-free use. Shackleton’s CEO, Zac Shackleton, believes that if he employs capable staff, they will motivate themselves to do a good job. However, last month Zac noticed a drop in productivity and a rise in the number of customer complaints. Zac knows he must act swiftly or face competitors gaining a larger market share. Discuss a management style that would best suit Zac in overcoming the drop in productivity that he
has identified. Explain two ways in which Shackleton can ensure that it is operating ethically in terms of the
management of its human resources.

Answer 19

As there may be future redundancies, termination and dismissals, which involve the termination of the employment relationship, Shackleton may need to provide appropriate exit services. These may include ongoing support for those staff who are leaving the company, possibly offering employment counselling or referrals to other organisation’s to assist the employees future employment endeavours. This would be ethical and socially responsible as it manages the mental and physical wellbeing of its departing employees.
One way that Shackleton can operate ethically in terms of its Human Resource Management (HRM) is by providing employees with assistance, training and development (Eg. funding extra training and multi-skilling programs, helping employees to achieve personal growth and development). By going above and beyond the minimum requirements for managing employees this would demonstrate that the organisation is socially responsible as it is committed to supporting its employees and helping them to grow. For example, Shackleton could offer employees free courses to upgrade their technological skills.

Question 20

Welham Consulting is a large accounting rm with an excellent reputation. Welham Consulting takes pride in hiring the best university graduates. It is also well known for paying its staff high salaries that are above the industry average. Despite this, staff turnover is unacceptably high and the Senior Manager believes that not all staff are working to their full potential. Explain, with reference to Maslow’s hierarchy of needs, why the high salaries at Welham Consulting do not appear to be motivating staff.

Answer 20

Maslow’s motivation theory is based on a hierarchy of five needs that include lower level extrinsic needs such as physiological and safety and security needs, as well as higher level intrinsic needs such as social, esteem and self-actualisation needs. Maslow emphasised that all employees have needs and will be motivated to achieve those needs. Once a need has been met, it is no longer a motivator and the employee continues to move up the hierarchy in the order of importance. It is in Welham Consulting giving high salaries to employees that only the first level on the hierarchy, physiological needs, have been satisfied. Maslow’s higher level needs such as esteem and self-actualisation needs do not state high pay as a motivating factor, but rather Welham should implement development opportunities and increased responsibility in order to motivate employees through satisfying their higher level needs on the hierarchy.

Question 21

Welham Consulting is a large accounting rm with an excellent reputation. Welham Consulting takes pride in hiring the best university graduates. It is also well known for paying its staff high salaries that are above the industry average. Despite this, staff turnover is unacceptably high and the Senior Manager believes that not all staff are working to their full potential. Identify and explain a practice or process from the maintenance phase of the employment cycle that may assist in improving employee performance at Welham Consulting.

Answer 21

Training involves the teaching of staff, which allows them to perform their roles at Welham by boosting skills and knowledge. Welham could offer employees on-the-job training where they work with colleagues in a regular ongoing manner as part of their daily duties. This could involve an experience staff member coaching, shadowing or mentoring other staff who aren’t performing to their potential. This will assist in improving staff performance at Welham as those who are underperforming will gain skills and knowledge, allowing them to perform more productively and effectively to ensure the best outcomes for the organisation.

Question 22

Explain how the management role of leading would be important in the management of staff in a large-scale organisation.

Answer 22

Leading involves inspiring staff towards the achievement of organisational objectives and includes communication, negotiation and motivation. This role is important in the management of staff at a large scale organisation as management must be able to motivate the employees towards the achievement of objectives. Leading helps ensure employees have a sense of direction and something to work towards which will provide them with the motivation that will improve their performance. This helps the organisation to achieve their objectives.

Question 23

The Human Resource Manager of Southern Industries needs to use performance indicators to assist him in monitoring staff morale.
Describe and justify two suitable performance indicators he could use to measure staff morale.

Answer 23

A performance indicator is a device used to measure the effectiveness and efficiency of an organisation.
One performance indicator that a HRM may use to measure staff morale is the level of staff absenteeism. This measures the number of employees over a period of time who take time off work. A high number may mean employees are not happy with conditions within the workplace and may indicate low staff morale. Whereas little absenteeism may indicate staff are satisfied with their position.
A second performance indicator that a HRM may use to measure staff morale may be the level of staff turnover. Staff turnover measures the number of employees leaving an organisation. A high number may indicate that staff morale is low and that they are unsatisfied with their job and working conditions and therefore leave the organisation. A low number may indicate staff morale is positive and employees are happy with their workplace conditions.

Question 24

Premium Meals on Demand is a newly established large-scale organisation. The organisation offers healthy prepacked meals delivered to customers’ homes. The organisation has expanded rapidly and has three factories where meals are cooked and packed. Orders must be placed at least 24 hours before delivery. Simon Smithers is the Operations Manager and has found that as demand for meals has increased, a number of issues have arisen. There has been a failure to deliver some orders on time, while a number of employees have complained about the lack of some ingredients and reported difficulties in meeting deadlines. Simon is worried about these emerging issues.
Identify and explain one performance indicator that premium meals on demand could use to measure the success of the organisation.

Answer 24

As Simon has had problems with productivity an appropriate performance indicator to use to measure the success of the organisation is the rate of productivity growth. Productivity compares the amount of output produced to the amount of inputs (resources) going into production. Productivity is a measure of efficiency that is used by the operations and human resources functions. An indicator of productivity is the rate of productivity growth. This is the change in productivity in one year compared to that of the previous year. Growth in the rate of productivity indicates that the organisation is better meeting deadlines and more delivered arriving on time. This would help Simon determine the severity of the productivity issues and evaluate the success of any strategies implemented to improve productivity.

Question 25

Apex Enterprises is a newly established advertising organisation. Its focus is on developing advertising campaigns for clients and on training staff in other organisations. The organisation employs 300 employees in the marketing, finance and human resource areas. The Human Resources department also provides training for other employees within the organisation. The newly appointed Human Resource Manager, Liam Jones, has been analysing the department’s performance. He is concerned about the high levels of staff turnover in the training team. Surveys and interviews of staff in this team found that many are unhappy with the employment conditions and career opportunities offered.

Explain two performance indicators, other than staff turnover, that Liam Jones could use to measure performance of the Human Resources Department.

Answer 25

Staff absenteeism is a non financial performance indicator that measures the amount of employees not going to work when they have been rostered on. This will help Liam evaluate the performance of the human resource department as if employees were motivated and had high morale they would be happy to attend work and absenteeism would drop.

Another indicator he could use is the rate of productivity growth. Productivity is a measure of efficiency, it consoled the number of outputs produced by a business to the number of inputs going in. The rate of productivity growth measures whether productivity is increasing or decreasing over a specific period of time. It could be used by Liam to evaluate the success of the human resource department as if employees were motivated and had high morale they would be working more productively thus raising the level of productivity at the organisation.

Question 26

Define benchmark

Answer 26

A level of quality or achievement used as a standard of comparison for others. A point of comparison used to evaluate success levels.

Question 27

Outline two likely stakeholders of an an LSO and explain why they may have a vested interest in their activities.

Answer 27

Employees have a vested interest in the large-scale organisation because they desire fair
working conditions and a fair wage. Employees are the people who work for an organisation.

Shareholders have a vested interest in the large-scale organisation because they want the
organisation to be successful and because they desire as much profit as possible from dividends. They are the people who have bought a share in a company. Buying a share in a company means you partly own it and you will receive a portion of the profits made.

Question 28

Why is increased employment beneficial for the Australian economy?

Answer 28

Individuals who are employed are more likely to contribute back to the Australian economy through the purchase of other goods and services. This means more people are earning money and able to afford more products thus increasing living standards.

Question 29

Explain why the ‘percentage of market share’ is important for a large-scale organisation.

Answer 29

Percentage of market share refers to the proportion of sales a business has out of the total sales in that industry or market. It is often expressed as a percentage. It is important as many wishes want to expand, become more competitive and take sales away from competitors. Percentage of market share is how this is measured. If a business is increasing its number of sales because of customers choosing to shop there instead of a competitor where they used to shop, their market share will increase.

Question 30

Discuss the advantages and disadvantages of using industry-wide awards rather than collective agreements as
a means of setting out workers’ terms and conditions.

Answer 30

Industry wide awards are when business’s use the awards made by the fair work commission to determine their conditions of employment. This is advantageous as it is usually a much cheaper option then a collective agreement where managers negotiate with employees to determine conditions of employment as employees often negotiate above the awards.

It is also far less time consuming as there is no time spent negotiating conditions with employees. Organisations simply have to follow what is laid out in the award which is very time efficient.

A disadvantage is that it doesn’t allow pay rises to be linked with productivity growth. Many business’s like to motivate their employees by offering pay rises for improved productivity. However this can’t happen when using awards as awards have set pay levels for each industry.

Another disadvantage is there is less flexibility to cater for requirements of individual workplaces and employees. Business’s cannot change pay rates for conditions individual to their workplace or employees because they have to follow the set pay rates.