AOS 4 - Reviewing Performance

• Proactive change occurs when the business self initiates the change process. Businesses do this to take advantage of opportunities or avoid future problems.

  Proactive change is generally implemented before any competing businesses have implemented a similar change process.
• Reactive change occurs when a business implements their change process in response to a situation or event. 

  Reactive change is generally implemented after competing businesses have already implemented a similar change process
• A business can implement two different approaches to change - proactive change or reactive change.
• Key Performance Indicators (KPIs) are sources of data a business can use to analyse its performance.

  
  

  KPIs can identify specific areas within the business where change is necessary and can be used to assess the success of an implemented change
• Key Performance Indicators:

  • Net profit figures
  • Percentage of market share
  • Rate of productivity growth
  • Rate of absenteeism
  • Level of staff turnover
  • Level of wastage
  • Number of sales
  • Number of website hits
  • Number of workplace accidents
  • Number of customer complaints
• Percentage of Market Share - Refers to the number of sales a business makes compared to the total industry sales for a particular good or service
• Net profit figures - Is calculated by subtracting the total expenses incurred from total business revenue earned, over a specific period of time.
• Rate of productivity growth - The change in the total output produced from a given level of inputs over time, expressed as a percentage.
• Number of Sales - The total number of goods and services sold by a business over a specific period of time.
• Number of Customer Complaints - The number of customers who notified the business of their dissatisfaction over a specific period of time.
• Rates of staff absenteeism - The average number of days employees are not present when scheduled to be at work, for a specific period of time.

  
  

  High Rate = Unmotivated and dissatisfied with working conditions.

  Low Rate = Highly motivated and high morale.
• Number of workplace accidents - Measures the amount of injuries and unsafe incidents that occur at a work location over a specific period of time.

  
  

  High = unsafe working environment

  Low = comfortable, safe, and efficient working environment
• Level of wastage - The amount of inputs and outputs that are discarded during the production process.

  
  

  High = more expenses and reduced profits

  Low = efficient and cost-effective production process
• Number of website hits - The amount of customer visits that a business’s online platform receives for a specific period of time
• Level of staff turnover - The percentage of employees that leave a business over a specific period of time and must be replaced.

  High = dissatisfied with management styles, pay, or working conditions.

  Low = satisfied with their pay and working conditions.
• Driving forces - Refer to factors that promote and support the change process at a business
• Owners

  • To fulfil their interests of increasing profit, owners will actively support change processes in order to benefit the business’ processes and performance.
• Managers

  • Managers are interested in achieving business objectives. If the change process supports achievement of business objectives, managers will support the successful change process through their management style and use of management skills.
• Employees

  • Employees are interested in job security and working conditions. If the change process will benefit these interests, then employees will act to support the change in occurring.
• Pursuit of Profit

  • Making a profit is a key objective of businesses. Businesses will be encouraged to successfully implement the change process if it will help them increase their profit through increasing sales or decreasing expenses.
• Reduction of Costs

  • Making a profit is a key objective of businesses. Businesses will be encouraged to successfully implement the change process if it will help them reduce their costs, therefore helping increase profit.
• Driving forces:

  • Owners
  • Manager
  • Employees
  • Reduction of costs
  • Pursuit of profit
  • Globalisation 
  • Technology
  • Innovation
  • Societal attitudes
  • Competitors
  • Legislation
• Globalisation

  • Refers to increased trade and interaction between countries.
  • When businesses expand their operations to overseas countries, this demonstrates how globalisation has acted as a driving force for their change as it has promoted the change process.
• Technology

  • Technology refers to the use of automated machinery and equipment such as automated production lines and robotics.
  • Supports change processes as businesses adapt their processes to take advantage of new developments.
• Societal Attitudes

  • Societal attitudes refer to the behaviours and beliefs of customers and the broader community.
  • These act as a driving force as businesses will implement change in response to changing attitudes in order to increase sales and profit.
• Competitors

  • Competitors refer to business rivals operating in the same industry.
  • Businesses will seek to effectively implement their change process in order to remain competitive against their rival businesses. Therefore, higher levels of competition can act to promote change.
• Legislation - As a Driving Force

  • Legislation refers to laws put into place by governments that must be followed by businesses.
  • When a government implements new legislation, this can act to promote a change process.
• Innovation

  • Innovation refers to developments and new ways of creating unique and improved products.
  • Can act as a driving force as businesses seek to create unique and improved products.
• Restraining Forces - factors that resist the successful change process at a business.

  • Managers
  • Employees
  • Time
  • Organisational inertia
  • Legislation 
  • Financial consideration
• Managers - As a Restraining Force

  • When the change process does not align with the interests of managers (job security, career progression), then they may act to resist the change from occurring. 
  • This may be done by not actively working toward the change, or keeping certain information from employees.
• Employees - As a Restraining Force

  • When the change process does not align with employees interests (job security, fair pay), then they may also act to resist the change process.
• Time - As a Restraining Force

  • The amount of time the business has to implement the change. If a business does not have a enough time, then it may rush the process and compromise its successful implementation. 
• Organisational Inertia

  • The tendency businesses have to maintain their established methods of operating (essentially becoming comfortable with the way they operate). 
  • If a business becomes too comfortable in their established methods of operating, then they are less likely to implement a change process.
• Legislation - As a Restraining Force

  • Legislation may resist a change process from occurring, as the business may need to apply for certain licenses and permits depending on the change they are implementing.
• Financial Consideration - As a Restraining Force

  • All change processes will incur some financial cost. If this financial cost is significant, then this may delay the change process from occurring as the business seeks to raise sufficient funds.
• Lewin's Force Field Analysis Theory

  • A model that outlines the process of determining driving and restraining forces for change. 
  • The theory aims to promote driving forces and reduce/eliminate restraining forces to ensure successful implementation of the change process.
• Lewins - Steps

  1. Identify the driving and restraining forces. 
  2. Weight or rank the forces based on importance. 
  3. Implement strategies to promote driving forces and reduce/eliminate restraining forces.  
  4. Evaluate effectiveness of strategies and adjust where necessary
• Porter’s Generic Strategies - States that there are two approaches a business can take to gain a competitive advantage.

  • Lower Cost
  • Differentiation

  A business may only adopt one of the approaches to Porter’s Generic Strategies
• Porters - Lower Cost

  • Involves gaining a competitive advantage by offering the product at a lower price relative to competitors.
  • e.g. the "Home Brand" Products at Coles

  A business may achieve the lower cost approach through:

  • Mass producing items to take advantage of economies of scale*
  • Utilising global considerations (i.e. global sourcing of inputs, overseas manufacturing)
• Lower Cost - Pros / Cons

  
  

  Advantages

  • Appeals to price conscious consumers, helping increase market share.
  • Focussing on economies of scale supports lower costs and increased efficiency.

  Disadvantages

  • Decreased customer loyalty as customers are likely to switch to a cheaper product if it becomes available.
  • Not viable for all businesses if they cannot achieve economies of scale (i.e. brands that make personalised products).