U4: AOS1: Reviewing Performance – The Need For Change Flashcards
Business change
An alteration to a business in behaviours, policies and practice and work environment.
Why do businesses change?
Due to alterations in their internal or external environments such as the economy, customers, employees, competitors and technology.
Scales of business change
Incremental and Transformational
Proactive change
Foreseeing change and making alterations before external impacts effect business
Reactive Change
Letting the business environment impact the business and making changes afterwards.
Key Performance Indicators
Set of data that allows a business to determine whether it is meeting its business objectives
How can a KPI be used?
Can be used to evaluate the success of the change
What must a KPI be to be useful?
Relevant, Valid, Reliable, Deliever useful information and comparative
List all 10 KPIs
-Percentage of market share
-Net profit
-Rate of productivity growth
-Number of sales
-Number of website hits
-Rate of staff absenteeism
-Level of staff turnover
-Level of wastage
-Number of customer complaints
-Number of workplace accidents
List all 5 Financial and Marketing KPIs (Unit 2)
-Percentage of market share
-Net profit
-Rate of productivity growth
-Number of sales
-Number of website hits
List all 2 HR KPIs (Unit 3 AOS2)
-Rate of staff absenteeism
-Level of staff turnover
List all 3 operations KPIs (Unit 3 AOS3)
-Level of wastage
-Number of customer complaints
-Number of workplace accidents
Why do businesses use KPIs?
-To evaluate how they have been performing against their set business objectives
-Allows the business to determine whether resources are being used properly
-To see if budgets and forecasts are being met or exceeded.
KPI 1: Percentage of Market Share
-A business’s total sales in the industry
-Some industry sectors dominated by a few large companies
-A niche industry may have a large % of the market
KPI 2: Net Profit
-Total revenue minus total expenses over a period of time
-Used to access if expenses are too high or revenue too low
KPI 3: Rate of Productivity Growth
-Productivity is ability to increase outputs from given level of inputs over a period of time
-Based on productivity increase from year to year
KPI 4: Number of Sales
-Amount of goods and services sold in a specific time frame
-The number of sales will enable business to know if its meeting sales forecasts and if change decisions are needed in the short or long term
KPI 5: Rate of Staff Absenteeism
-Number of days staff not present when scheduled at work for a specific period
-Absent staff is a cost for the business.
-May indicate declining morale, poor corporate culture
How to reduce staff absenteeism
-Track absences
-Include support programs
-Strong return to work policy and programs
-Eliminate workplace stress
-Offer workplace flexibility
KPI 6: Level of Staff Turnover
-Number of staff leaving per year and have to be replaced
-Means cost for business
-This can impact productivity and business reputation
-Staff often the difference in competitive edge of a business
Ways to reduce staff turnover
-Competent and highly trained managers
-Provide clear expectations and KPIs
-Provide support
-Utilisation of management styles and strategies that include people in decision making
-Provide training
KPI 7: Level of Wastage
-Amounts of inputs and outputs discarded during production process
-Indicates lean and effective processes and business efficiency
-Remember TIMWOOD
-Low waste will decrease costs and use of non-renewable resources
-High waste increases time and amount of raw materials required.
KPI 8: Number of Customer Complaints
**-Amount of customers who have notified the business of disatisfaction
**-Indicates how customers view the business and the quality of the product or service
-May reduce reputation of business and effect future sales and revenue
-High complaints would indicate business not meeting market needs and expectations
-Complaints can come from various sources such as social media
KPI 9: Number of website hits
-How many people and potential customers have sent a request to a web server
-There are a number of analytical tools businesses can use to measure website traffic
-Data that can be collected:
Vistitors, % of new vs returning vistitors, how did they find out, av. time spent
KPI 10: Number of Workplace Accidents
-Amount of injuries and unsafe incidents over a period.
-An insight if a business view OH&S as important.
-Can occur because of: Poor equipment, poor staff training, unsafe work practices
Benefits of increasing safety
-Decrease in work disruptions
-Derease time and production lost
-Enhance reputation of business
-Increase morale and loyalty
Lewin’s Force Field Analysis Theory
A model to promote discussion and planning to determine if a business should proceed with a proposed change.
-Driving and restraining forces: when driving forces are more dominant or balanced, change is more likely to be successful.
-4 Principles
Principles of Lewin’s Force Field Analysis Theory
Weighting, Ranking, Implementing a response, Evaluating a decision
Weighting (Lewin’s Force Field Analysis Theory)
Leaders or managers may need to identify driving and restraining forces and provide them with a number according to how important they are percieved to be
Ranking (Lewin’s Force Field Analysis Theory)
The considerations or forces are placed in order from the most important to least important
Implementing a response (Lewin’s Force Field Analysis Theory)
Once a business has weighed up the factor, it then makes a decision
Evaluating a response (Lewin’s Force Field Analysis Theory)
Once a decision has been made, the business must continue to monitor the situation to ensure that the decision was correct
Advantages of Force Field Analysis
-Helps identify forces for and against change
-Provides a clear path to reduce restraining forces
-Assists with planning
-Encourages stakeholder involvement
Disadvantages of Force Field Analysis
-Relies on individual perceptions and judgements, which can introduce subjectivity and bias, potentially skewing the results
-Difficult to effectively assign values to each of the forces
-May not identify all forces, causing unforeseeable effects during implementation of the change
List Driving Forces for Change
Competitiors
Managers
Employees
Legislation
Pursuit of profit
Reduction in cost
Globalisation
Technology
Innovation
Societal attitudes
Owners (Driving force for change)
-Have a vested interest in business
-Anticipate and act upon trends or change that could impact the business
Managers (Driving force for change)
-Have influence and provide strategic direction for the change or implement the change themselves
-Must be prepared and prepare the leadership team for proactive change.
Employees (Driving force for change)
-Change is more successful is employees support and are willing to implement it
-A participative management style can encourage employees to suggest change themselves
Competitors (Driving force for change)
-Businesses must be aware of what their competitor is doing, and be ready to respond.
-If the business proactively changes before competitors, this can give them a competitive advantage
Legislation (Driving force for change)
-Businesses have to change their operations based on laws passed.
-Cannot be ignored
Pursuit of Profit (Driving force for change)
-Implementing changes in an effort to increase sales/profit
-May include improving quality, or creating a strategy to cut back on expenses.
Reduction of Costs (Driving force for change)
-Pressure of costs can lead to change
-Outsourcing, reviewing loans
Globalisation (Driving force for change)
-Process of increasing interdependence between countries
-New markets, resources influence change
Technology (Driving force for change)
-A business needs to adapt to new technology
-Must have updated technology to ensure efficiency.
Innovation (Driving force for change)
-If a business fails to innovate it is likely to be left behind
-Developing a niche or competitive edge lets a business reach markets that haven’t been monopolised by large corporations
Societal Attitudes (Driving force for change)
-Changes in attitudes can drive changes in businesses to keep up with opinions, values and lifestyles
Restraining Forces for Change
Managers
Employees
Time
Organisational Inertia
Legislation
Financial Considerations
Managers (Restraining Force for Change)
-May be a blocker or may stop change
-Active resistance: refusing to implement it
-Passive resistance: Failing to actively support it
-May be concerned about resistance from employees or understand the change
Employees (Restraining Force for Change)
-Some employees are likely to resist the changes suggested by management
-Business must make sure to properly explain the changes
-Employees may have emotional reactions
Time (Restraining Force for Change)
-Business may not have enough time to respond to a change
Organisational Inertia
-Stable businesses with little change are less likely to respond to changes.
-Resource regidity: unwillingness to invest
-Routine Rigidity: an inability to change the patterns and logic of the business
Legislation (Restraining Force for Change)
-Unexpected, expensive or difficult to implement law changes can impact a business’s response.
Financial Considerations (Restraining Force for Change)
-lack of money can impact the changes of a business
Porter’s Generic Strategies
Frameworks for strategic business planning
-low cost and product differentiation
-One main strategy, but not just one
How to choose a generic strategy
1- Carry out SWOT
2- Carry out five force analysis
3- Compare both and determine which strategy could reduce or manage powers
4- Decide on which approach is most appropriate
Five Force Analysis
Supplier power, buyer power, competitive rivalry, threat of substitution, threat of new entry
Reduced Cost Strategy
Where a business has minimised its expenses, resulting in customers being attracted by the cheaper price.
1- Reduce production costs
2- Charge lower prices
Steps to achieve Lower Cost
**1- Assest Utilisation **(using resources more efficiently)
2- Reducing Operating Costs
3- Reducing costs of supplies
4- Control all department costs (Admin, Marketing, Logistics)
Lower Cost Strengths
-Strong competitive advantage in markets with ‘price conscious’ customers
-Price flexibility
-Economies of sale
-Barrier to entry
Lower Cost Weaknesses
-Potentially lower customer loyalty
-Customers may associate lower price with lower quality
-Standardised goods not unique goods
Differentiation
Where a business selects one or more features that customers in the market consider important and develops a uniqueness in order to attract and keep customers
-Research, development, innovation
-Effective marketing promotion
-High-quality, products and service
Differentiation Strengths
-Strong competitive advantage in markets with ‘brand loyalty’.
-Can change premium pricing as the cost is not such an important consideration to customers
-Can work with large businesses who have money to create a brand image.
-Can work with small businesses who create a unique point of difference
