BSB51915 Diploma of Leadership

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BSB51915 Diploma of Leadership
and Management
BSBPMG517
Manage operational plan
Learner guide & workbook
Table of Contents
………………………………………………………………………………………………………………………………… 2
Table of Contents ………………………………………………………………………………………………………… 2
………………………………………………………………………………………………………………………………… 3
Disclaimer ………………………………………………………………………………………………………………….. 3
Copyright …………………………………………………………………………………………………………………… 3
Feedback……………………………………………………………………………………………………………………. 3
About the Business Services Industry ………………………………………………………………………………………… 4
Defining Qualifications………………………………………………………………………………………………………………………. 4
DeliveryandAssessmentofQualifications …………………………………………………………………………………….. 5
Qualification Training Pathways …………………………………………………………………………………………………………. 5
Foundation Skills………………………………………………………………………………………………………………………………. 5
Australian Core Skills Framework (ACSF)……………………………………………………………………………………………… 5
Performance Criteria Element 1…………………………………………………………………………… 10
Develop Operational Plan………………………………………………………………………………………………………………… 10
Activity One: Planning the Operational Plan ……………………………………………………………………. 30
Key Points Element 1 ……………………………………………………………………………………………. 31
Performance Criteria Element 2…………………………………………………………………………… 34
Plan and Manage Resource Acquisition……………………………………………………………………………………. 34
Notes ………………………………………………………………………………………………………………………. 62
Key Points Element 2 ……………………………………………………………………………………………. 64
Performance Criteria Element 3…………………………………………………………………………… 66
Monitor and Review Operational Performance………………………………………………………………………… 66
Activity Three – Testing the Theory ……………………………………………………………………………….112
Key Points Element 3 ……………………………………………………………………………………………113
Disclaimer
This resource has been developed to assist assessors when considering the requirements of the
BSBPMG517 – Manage operational plan
Although the information presented in the resource is accurate to the best of their knowledge, the
authors cannot guarantee that every statement is without flaw of any kind.
Therefore, the authors disclaim all liability for any errors, or for any loss or other consequences
resulting from any individual relying on or acting upon any information in this resource.
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About BSB Business Services Training
Package

“The purpose of
education is to
replace an empty mind
with an open one.” Malcolm
Forbes

About the Business Services Industry
The BSB Business Services Training Package covers a diverse range of industries
and occupations. Business Services covers a range of cross-industry functions
and services supporting the commercial activities of all industries.
Defining Qualifications
When units of competency are grouped into combinations that meet workplace
roles, they are called qualifications. These qualifications are aligned to the
Australian Qualifications Framework (AQF). Each qualification will have
’packaging rules’ which establish the number of core units, number and source
of elective units and overall requirements for delivering the qualification.
DeliveryandAssessmentofQualifications
RTOs must have the qualifications (or specific units of competency) on their
scope to deliver nationally recognised training and assessment. RTOs are
governed by and must comply with the requirements established by applicable
national frameworks and standards. RTOs must ensure that training and
assessment complies with the relevant standards.
Qualification Training Pathways
A pathway is the route or course of action taken to get to a destination. A training
pathway is the learning required to attain the competencies to achieve career goals.
Everyone has different needs and goals, and therefore requires a personalised and
individual training pathway.
Foundation Skills
Foundation Skills are the non-technical skills that support the individual’s
participation in the workplace, in the community and in education and training.
Australian Core Skills Framework (ACSF)
This Assessment meets the five ACSF core skills as described in the Foundation Skills
mapping.
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Introduction

“Knowledge
is of no value unless you put
it into practice.”
Anton Chekhov

This unit standard BSBMGT517 Manage Operational Plan covers the skills
and knowledge required to develop and monitor implementation of the
operational plan to provide efficient and effective workplace practices
within the organisation’s productivity and profitability plans,
management at a strategic level, systems and procedures requirements to
be developed and implemented to facilitate the organisation’s
operational plan.
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This unit applies to individuals who manage the work of others and
operate within the parameters of a broader strategic and/or business
plan.
This manual is broken up into three Elements.
They are:
1. Develop Operational Plan
2. Plan and Manage Resource Acquisition
3. Monitor and Review Operational Performance
There are activities throughout this workbook. These require the
Learners to think about their experience or reactions, or to try and
complete some research through reading or accessing the Internet.
The activities will also help Learners towards completing the
Assessment Task by assisting them to think about issues involved in
the Assessment Tasks.
Learners will then be asked to complete an Assessment Pack for this
unit of competency. The information contained in this workbook will
assist them. These tasks can be completed as they work through the
workbook, rather than leaving it all to be completed at the end of
their study.
Finally, at the end of this workbook you will find a list of useful
resources that you may use for further information. You will need
to have access to an Internet terminal. Throughout the text, there
are references to websites for further information and for some
activities.
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This unit contributes the attainment of National Certificates.
An Operational Plan (OP) is a detailed plan used to provide a clear
picture of how a team, section or department will contribute to the
achievement of the organisation’s strategic goals.
It is important to understand the difference between an ‘operational
plan’ and a ‘strategic plan’. The strategic plan sets the direction for
the organisation, devises goals and objectives and identifies a range
of strategies to pursue so that the organisation might achieve its
goals. The strategic plan is a general guide for the management of
the organisation according to the priorities and goals of
stakeholders. The strategic plan DOES NOT stipulate the day-to-day
tasks and activities involved in running the organisation.
On the other hand the operational plan DOES present highly detailed
information specifically to direct people to perform the day-to-day
tasks required in the running of the organisation. The management
and staff in an ornganisation should frequently refer to the
operational plan in carrying out their everyday work. The operational
plan provides the what, who, when and how much:
• What – the strategies and tasks that must be undertaken
• Who – the persons who have responsibility of each for the strategies/tasks
• When – the timelines in which strategies/tasks must be completed
• How much – the financial resources allocated to complete each
strategy/task Operational planning is the topic of this unit of competency.
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ELEMENT 1:
Develop Operational Plan
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Performance Criteria Element 1
Develop Operational Plan
Research, Analyse and Document Resource Requirements and Develop an
Operational Plan in Consultation with Relevant Personnel, Colleagues and
Specialist Resource Managers
Business Planning
Business planning attempts to bring a new idea to fruition within an
organisation. Such a plan needs to be divided up into sections which
allows the business managers to understand what you are trying to
do and the direction that you will take in order to get there. You
will find an example on the simulated business Bounce Fitness
website (http://bounce.precisiongroup.com.au/) under the
Documents tab.
1.1 Research, analyse and document resource requirements and
develop an operational plan in consultation with relevant
personnel, colleagues and specialist resource managers
1.2 Develop and/or implement consultation processes as an integral part
of the operational planning process
1.3 Ensure the operational plan includes key performance
indicators to measure organisational performance
1.4 Develop and implement contingency plans for the operational plan
1.5 Ensure the development and presentation of proposals for resource
requirements is supported by a variety of information sources and
seek specialist advice as required
1.6 Obtain approval for the plan from relevant parties and explain the
plan to relevant work teams
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Strategic objectives are long-term organisational goals that help to
convert a mission statement from a broad vision into more specific
plans and projects. They set the major benchmarks for success and
are designed to be measurable, specific and realistic translations of
the mission statement that can be used by management to guide
decision-making. Strategic objectives are usually developed as a
part of a two- to four-year plan that identifies key strengths and
weaknesses and sets out the specific expectations that will allow the
company or organisation to achieve its more broad-based mission or
vision statement.
Operational objectives are daily, weekly or monthly project
benchmarks that implement larger strategic objectives. Operational
objectives, also called tactical objectives, are set out with strategic
objectives in mind and provide a means for management and staff
to break down a larger strategic goal into workable tasks. For
example, achieving the strategic goal of a 25 percent increase in
sales revenue requires the completion of the operational objective
to develop and execute an effective advertising strategy along with
other operational objectives. As with strategic objectives,
operational objectives should be measurable and specific, though
their focus is narrower.
The most important difference between a strategic and an
operational objective is its time frame; operational objectives are
short-term goals, while strategic objectives are longer-term goals.
Strategic and operational objectives also function differently in
practice as strategic objectives are still usually too broad to serve as
a specific set of daily tasks or weekly projects. Operational
objectives, on the other hand, are specific and short term enough to
be considered usable in everyday time and asset allocation.
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Even though strategic and operational objectives are
substantially different, it is important to recognise that they are
closely related. An organisation is unlikely to achieve a strategic
objective if it fails to effectively translate it into workable
operational objectives. At the same time, operational objectives
will lack cohesion with each other and with the overall
organisational mission if they are not designed to affect the
achievement of strategic objectives. Put simply, strategic objectives
only become useful when translated into operational objectives and
operational objectives are only effective when designed to serve a
strategic objective. An OP sits at the bottom of the totem pole; they
are the plans that are made by frontline, or low-level, managers. All
operational plans are focused on the specific procedures and
processes that occur within the lowest levels of the organisation.
Managers must plan the routine tasks of the department using a
high level of detail.
Operational Plan Models and Methods
Operational plans can be either single-use or ongoing plans.
1. Single-use plans
These plans are intended to be used only once and include
activities that would not be repeated and often have an
expiration date. Creating a monthly budget and developing a
promotional advertisement for the quarter to increase the
sales of a certain product are examples of single-use planning.
2. Ongoing Plans
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Plans that are built to withstand the test of time are called
ongoing plans. They are created with the intent to be used
several times and undergo changes when necessary. Outlining
an employee’s performance goals for the year would be
considered an ongoing plan.
Policies, Practices and Procedures
Developing an operational plan begins with understanding the
organisation’s policies, practices and procedures that directly relate
to the OP. These could include Purchasing policies, policies relating
to preferred suppliers, quality policies and many others. You will find
many business policies and procedures on the simulated business
website of Bounce Fitness (http://bounce.precisiongroup.com.au/)
by clicking on either the Policies or Procedures tabs.
Resource Requirements
There are two types of resources that are used – human resources and
physical resources.
1. Physical Resources
Physical resources are any resource that you can buy, feel and
touch. In order to account for these, make a list of everything
that you need and try to make a list of the costs of each. This
can allow you to account for how much the production
processes are likely to cost. The major types of resources are
as follows (along with their associated costs):
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Premises	Rent; rates; service costs (heating, lighting, cleaning, security) and structural alterations
Equipment	Costs of purchase, hire or lease; insurance, running costs (service, repair)
Vehicles	Costs of purchase, hire or lease; insurance, road tax; running costs (service, repair)
Raw Materials	Purchase cost (investigate discount for bulk orders), cost of storage (any special requirements for refrigeration or hazardous substances)

2. Human Resources
As well as the physical resources, you must account for the cost
of those people that exist within the organisation. You will be
spending a lot of money on wages, salaries and other forms of
remuneration – this may in fact be a huge part of your
budgetary expenses. However, often people forget to account
for the cost of actually acquiring new staff members (which
in itself can be a significant expense). These costs include:
• Advertising in newspapers and other media
• The time and organisation associated with recruitment
• The cost of running interviews and associated testing
• Insurance.
Each of these costs may be significant when you are
introducing new processes into a business, which may require
new staff to be employed. Try to be as accurate as you can with
any costing that you make. Look back on previous processes of
recruitment and selection and attempt to determine how
much they cost you
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Capital
Now that you have an indication of the resources that you may need
to make your plan a reality, it is time to determine exactly how much
money you will need and how you might fund it. Financing the plan
can be accomplished in a number of ways, so you need to look at
the types of costs that make up your budget.
First, consider your fixed costs. This is the cost of actually acquiring
the new equipment that you will need to make the plan happen.
What land, buildings and machinery might you need? Then you need
to consider those variable costs that allow you to actually put the
plan into action on an ongoing basis. This might include wages,
power, rent, telephone and any other working expense. These need
to be covered by your initial financing until such a time that the
organisation actually begins to pay its own way. At that point it will
fund itself. So you need to look for that breakeven point.
Your budget should be broken down into monthly or quarterly
periods, which allow you to step back and look at how different
times of the year may affect your expenses. Winter for example may
require extra power for heating in the factory or shop. However
training expenses are likely to be greatest during the first month or
two, and after that, will reduce significantly.
Forecast the amount of money you expect to bring in on a monthly basis
and compare this to your expenses. If you are not expecting to make a
profit, this is capital that will need to be funded in some way to get the
operation off the ground.
When you are preparing a new plan you may want to paint as rosy a
picture as you possibly can. You want people to say, that looks great,
let’s do it! However from a business planning point of view this can
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be a recipe for disaster. If you over promise and under deliver you
are going to be left wanting or needing more resources to actually
get the plan back on track.
This means that it is better to be realistic about where you expect
costs to be rather than promise too much and find yourself short of
essential resources during the crucial initial months. Use your
resources wisely and ensure that you have enough so you are not
begging for more.
Budgets
A budget is an estimation of the revenue and expenses over a
specified future period of time. A budget is a microeconomic
concept that shows the trade-off made when one good is exchanged
for another.
A surplus budget means profits are anticipated, while a balanced
budget means that revenues are expected to equal expenses. A
deficit budget means expenses will exceed revenues.
Budgets are usually compiled and re-evaluated periodically.
Adjustments are made to budgets based on the goals of the
organisation. In some cases, organisations are happy to operate at a
deficit, while in other cases, operating at a deficit is seen as
financially irresponsible.
The budget is management’s quantitative expression of plans for a
forthcoming period. Budgets are prepared at various levels of an
organisation. The Master Budget is the overall financial plan for a
given period and includes operating and financial budgets.
Operating budgets show the organisation’s planned sales and
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operating expenses. Financial budgets reflect financing plans such a
borrowing, leasing and cash management.
When done properly, budgeting can serve as a planning and control
system. The organisation’s goals and performance objectives are
documented in financial terms. Once formulated, these plans are used
throughout the year. Monthly performance reports compare budgeted
results with actual results. To control operations, management can
examine the performance reports and take necessary corrective actions.
The role that effective budgeting plays in the management of a business
is best understood when it is related to the fundamentals of management.
The many existing definitions of business management can be expressed
in terms of five major functions:
• Planning
• Organising
• Staffing
• Directing
• Controlling.
Management must first plan. The plan is executed by organising,
staffing and directing operations. To control operations,
management must institute appropriate techniques of observation
and reporting to determine how actual results compare to plans.
Budgeting is primarily concerned with the planning and controlling
functions of management.
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Timeframes
There are also two timeframes that must be considered – current and
projected. ‘Projected’ is what will be needed in the future for a given
period.
When you are writing an operational plan, it is important to consider
a number of factors regarding your business. You might look at
financial performance, market environment, inventory, the product
mix that you are offering, and more. The products and services on
offer are of particular importance to most plans in business.
Businesses exist to sell products or services, so being sure that you

outline the way that a product plan	will impact on the way that
products or services are offered is critical. A plan may involve new products being introduced, old products being discontinued or even
the	mix of products on offer being altered. If any of these are

present in your plan, you need to examine the impact that they
will have on the plan’s introduction.
You also need to convey information on each major issue that you
foresee within the plan. Your reader wants to know that you have
carefully considered the implications of the plan and how they may
impact on how the market perceives your products and services.
So it is extremely important that you can demonstrate to the reader
you have considered these. Think about things such as personnel
needs, resourcing requirements, and changes to machinery, the
need to employ contractors, and more… The more that you can
detail to your end user about the performance of your organisation
and the way that the plan will impact on this performance, the more
favourable the plan as a whole will seem.
Drafting the Operational Plan
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An operational plan should exist for the same length of time as the
strategic plan but should be reviewed regularly to make sure
progress is being made towards achieving the objectives. If
necessary, priorities can be revised.
Operational plans usually include:
• Strategies
How will the objectives in the strategic plan be achieved?
• Actions
What are the key actions that need to be undertaken (in detail) to
achieve each strategy?
These should be prioritised to give an indication of which actions
need to be completed at which stage of the plan.
• Timeframes
What are the due dates for each action?
• Resources
What are the financial, material and human resource
implications for the organisation?
• Responsibility
Who is responsible for completing the actions?
• Performance Indicators
How will we know if we have successfully completed each action?
• Risk Management
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What is the possibility that elements of the plan will be
unsuccessful? How can we manage this?
• Communication Plan
How will we communicate the plan to ensure maximum benefit?
• Review of Plan
How will we ensure that the plan remains current and will be
monitored for progress?
Develop and/or Implement Consultation Processes as an Integral Part
of the Operational Planning Process
The process of consultation is an extremely important concept in the
context of managing an organisation. Organisations exist to create
value for stakeholders and consultation is a process by which the
management of the organisation aims to better understand the
needs, wants and expectations of stakeholders, so that value can be
created.
Consultation should include all relevant personnel, colleagues and
specialist resource managers, employees at the same level or more
senior managers, other managers, work health and safety
committee/s and other people with specialist responsibilities,
supervisors and or union or employee representatives.
Consultation is an active process in which management opens formal
and informal communication channels with its stakeholders.
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These formal and informal communication channels might include:
• Open meetings e.g. stakeholders are invited to come to an open meeting or
a series of meetings
• Surveys e.g. stakeholders are invited to complete a survey (paper or online type)
• Focus groups e.g. a select cross-section of stakeholders, small in number,
are invited to attend a meeting or series ofmeetings
• Invitation to send a written response e.g. stakeholders are invited to submit
comments in writing on a proposal or plan
• Informal meetings e.g. organisation management might mingle with people
at an event and canvass certain ideas to see what response they get
• Email/intranet communications, newsletters or other processes and devices
which ensure that all employees have the opportunity to contribute to team
and individual operational plans
• Mechanisms used to provide feedback to the work team in relation to
outcomes of consultation
• Meetings, interviews, brainstorming sessions.
The purpose of consultation is three fold:
• To invite stakeholders to provide advice to the management of the
organisation about their needs, wants and expectations. In other words, tell
the organisation what value it wants and how it can provide this value.
• To invite stakeholders to comment on management plans which provide the
value stakeholders are seeking.
• To address any concerns that stakeholders may still have and that
management has not taken into account when developing its strategic
and operational plans.
There is a widespread view that if a plan is conceived without proper
consultation with stakeholders then it has far less chance of succeeding.
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There is a clear need for anyone responsible for developing a plan to
consult with everyone who will be affected by the plan. For example, a
budget for any area of organisation operation should not be set without
consultation with people who work in that area of operation. Likewise,
management should not construct a plan for a new program without
consulting with people who are likely be program users.

Setting an operational plan
organisation because:

without consultation disadvantages the

• A lack of consultation fails to take advantage of all available knowledge and
expertise
• A lack of consultation makes people feel left out and creates negativity
toward the emerging plan.
Ensure the Operational Plan Includes Key Performance
Indicators to Measure Organisational Performance
What Are Key Performance Indicators (KPIs)?
Key performance indicators are tools that are used to provide a
quantitative measure of performance against predefined targets.
They represent the critical factors that must be met for a project to
be considered successful. The actual measures that you use may
vary significantly from organisation to organisation, but there are
some key measures which are commonly used, such as:
• Achievement of a certain level of sales
• Achievement of a certain level of customer satisfaction
• Achievement of a specific rate of return.
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Your KPIs need to be an accurate reflection of your organisation’s
mission and vision. Without this alignment, you may find that you
are unable to conclusively show that your plan is actually working
in the interests of the organisation as a whole. KPIs are generally
medium to long term in nature – as projects are difficult to show as
being successful in the long term – and they definitely need to be
measurable and have an element of being time-based so you know

when they have been achieved. Let’s look
statements in a little more detail:

at each of these

• Align with Organisational Goals
Think about overall performance goals carefully. If your
organisation has an overall goal of being a socially equitable
organisation you may have measures that examine charitable
contributions reaching 5% of profit or environmental
performance measures. An organisation whose key focus
is on being highly profitable will need measures of after tax
profit and shareholder equity. A non- profit will have different
goals and indicators than will a for-profit organisation. The
indicators must be relevant to the work the organisation is
undertaking
• Are Measurable
As well as your key indicators being focused on goals, they
actually must be able to be measured. The value in any indicator
is its ability to show you where you are working well and where
problems exist. This can only be done by ensuring that each
measure selected is quantifiable and can actually be measured
in some way.
Saying that you want to be the most popular organisation in
Australia is a lofty goal, but one which is not able to be easily
quantified. Adding an actual measure such as ‘To have 95% of
people in Australia recognise our logo’ is a goal that can be
measured through survey methods.
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• Are Consistent
KPIs must also be consistent. You cannot change the way you
define profit from ‘before tax profit’ to ‘after tax profit’ on a
whim as this will make a huge difference when it comes to
comparing your results from year to year. KPIs should change
as little as possible from one period to the next. Any change
should be minor; if you are continually moving the bar the
organisation will have difficulty in actually reaching it, as all the
plans behind the KPI will have to change to meet the new goals.
KPIs need to be SMART.
What Do I Do With Key Performance Indicators?
Now that you have developed an effective set of KPIs for your
organisation – ones that are consistent, measurable and align with
Business College at International House
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organisational goals – you can begin the process of measuring and
evaluating your overall performance. The KPIs give the staff and
management within your organisation clear guidance about where
you need to head and what you need to do to be successful. The
KPIs should be displayed prominently, so that all staff are kept
abreast of what they need to be striving for to achieve the
organisational objectives. This allows you to ensure that everything
your staff do is focused on meeting or exceeding those KPIs.
Develop and Implement Contingency Plans for the Operational
Plan
Planning is all about looking at what you want to happen and making
sure that it does. No matter how well you plan, there will always be
issues that crop up that will take you off track and things that you
need to work on to make sure that you achieve all your goals.
Because a plan involves things that have not happened yet, they also
include areas where you have had to assume certain information.
What if the assumptions you based your plan on never eventuate?
What do you do then? What if the bank doesn’t give you a loan? What
if interest rates rise too quickly? What if your factory burns down?
What if …?
Contingency planning is all about asking “What if?” It asks you to consider
what could potentially happen to evaluate the risk of it occurring and the
impacts if the worst does happen and use this as a way of planning around
the events should they occur.
So, let’s look at an example. You ask the bank to lend you money to
allow you to put your plan into action. Your calculations show that
an interest rate of 6.5% would allow you to make a profit and at 7%
Business College at International House
RTO Code: 91109 CRICOS 02623G
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you could still break even. What would you do if the interest rate the
bank charges increases to 9%? What impact would this have and how
would you work around it?
Contingencies occur all the time in business; it is the planning you
do to get around the situation which is most important. Consider
your SWOT analysis and look at the weaknesses and the threats in
particular. These will show you where contingencies might occur. A
major new business opening up in your market is a threat which you
may need to write a contingency plan around – how will you react
to this situation? Add heavy promotion? Reduce prices on key
lines?
Financial contingency problems can be added into your financial
statements by adding relevant comments or by having a set of
financial figures that reflect the lowest possible figures as well as the
most likely. Your discussion and action plans within your business
planning documents could also reflect this information. You might,
for example, add comments to your staffing sections about certain
situations and how you would react in them. You might say that if
the market changes you may need an extra 2 staff to achieve your
desired results and comment on the financial implications of such
a situation. Contingency planning is useful, but often you cannot look at
everything. There are too many things that can go wrong and you need to
consider:
Those things that are most likely to happen.
Those things that could potentially have the highest level of impact on the
plan as a whole.
Ensure the Development and Presentation of Proposals
for Resource Requirements is Supported by a Variety of
Business College at International House
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Information Sources and Seek Specialist Advice as
Required
Once you have your information, you are ready to draft your plan.
You will find an example of an Operational Plan on the simulated
business website of Bounce Fitness under the Documents /
Administrative tab. The actual design and order of your plan may
vary significantly from this, depending on the actual work that needs
to be undertaken. In fact, in some organisations they can be called:
• Action plans
• Annual plans
• Management plans
• Tactical plans.
Additionally, your organisation may have a format of its own that
they require you to use. If this is the case, you must comply.
The business world can be a tremendously complex environment.
When you consider that this environment is further complicated by
continuous legislative change the challenges of constructing,
implementing and appropriately managing a plan over time cannot
be understated. Seeking the advice of specialists can provide the
knowledge and expertise that will assist you on the path to
achievement.
Obtain Approval for Plan from Relevant Parties and Ensure
Understanding among Work Teams Involved
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Most organisations require that approval is gained before plans can be
implemented. This approval may come from management teams, the
board of directors or council. Organisations also need to report to external
authorities such as various regulatory or government agencies; for
example, the Australian Taxation Office.
To allow stakeholders to understand the key issues and how it
should impact on the organisation, a presentation of the plan
provides an opportunity for feedback and adjustment prior to final
submission. In presenting a plan, verbal agreement or ‘agreement in
principle’ can often be reached subject to some adjustments.
Operational plans should be formally signed off by people with the
delegated authority. Signed copies should be kept on file as a formal
record and provided to the appropriate parties responsible for
implementing the plan.
When it comes to getting approval, style can be as important as
substance. Think about how you can carefully usher your idea
through the approval process. Before you present an idea or
request resources for approval, it’s a good idea to test it with
those responsible for giving the green light. This can also bring to
light questions or comments that need addressing before the plan is
implemented. Once you’ve tested the waters, you can set up more
formal meetings with key stakeholders to ask for their support.
These meetings serve three purposes:
• They build the necessary buy-in for your idea.
• They demonstrate to your stakeholders that you’re interested in their opinions.
• They help you improve and expand on your idea — it’s possible that these
stakeholders will see something in your idea that you didn’t.
Business College at International House
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The more you understand your audience’s feelings about your proposal,
the better you can prepare to get it approved.
How you respond to questions and concerns will play a large role
in your success or failure. Before you give your presentation, think
through what possible concerns your audience may have. Don’t
marginalise the people who will pull apart your idea. Instead,
develop concise, honest responses to each of the tactics they may
use. By doing this in advance, you build your self-confidence and can
avoid getting anxious when people challenge your idea.
Tailor the specifics of your presentation to your audience. How does
your idea benefit them? Shape your presentation so that it speaks
directly to those benefits and the ways that your audience will reap
them.
Focus on one or two main points and avoid getting hung up on trying
to prove how much you know. Be judicious in how much data and
analysis you present. Overly detailed presentations can distract your
audience, making them feel inadequate and possibly antagonistic for

not being able to follow along. You may also simply run out
time. Even if your audience asks for more detail, be sparing.

Focus on answering each question as simply and straightforwardly as
possible. If you get a question that is off-topic or potentially
derailing, you can answer the question you wished the person asked
instead.
Principles to Remember
Do:
• Meet with important stakeholders in advance of needing their formal approval
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
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• Position your idea in terms of the benefits your audience stands to gain
• Answer questions concisely and confidently.
Don’t:
• Assume that your audience will believe it’s a good idea just because you do
• Overwhelm your audience with detailed analysis or specifics
• Get defensive or angry when people challenge your idea.
Activity One: Planning the Operational Plan
Work as a team to complete an operational plan for the construction
of Noah’s Ark. Labour will be supplied by Noah and his wife and their
three sons, Ham, Shem, Jepheth and their wives.
Use the chart following to record your plan. You have 30 minutes.

Activity – What is
to be done?

Objective –
Why will we
do it?

Resources –
Where will it
be done?

Procedures –
How will it be
done?

Responsible
Person – Who
will do it?

When?

KPI

True	False
Q	The most important difference between a strategic and an operational objective is its time frame; operational objectives are short-term goals, while strategic objectives are longer-term goals.

• Always research, analyse and document resource requirements and develop an
operational plan in consultation with relevant personnel, colleagues and specialist
resource managers
• Develop and/or implement consultation processes as an integral part of the
operational planning process
• Ensure the operational plan includes key performance indicators to measure
organisational performance
• Develop and implement contingency plans for the operational plan
• Ensure the development and presentation of proposals for resource requirements is
supported by a variety of information sources and seek specialist advice as required
• Obtain approval for the plan from relevant parties and explain the plan to relevant
work teams
Business College at International House
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3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
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Q	Strategic objectives are specific and short term enough to be considered usable in everyday time and asset allocation.
Q	Fixed costs are the costs of actually acquiring the new equipment that you will need to make the plan actually happen.
Q	Your performance indicators need to be an accurate reflection of your organisational mission and vision.
Q	Operational objectives are still usually too broad to make sense as a specific set of daily tasks or weekly projects.
Q	Physical resources are any resource that you can buy, feel and touch.
Q	When it comes to getting approval, style can be as important as substance. Think about how you can carefully usher your idea through the approval process.
Q	Consultation should include all relevant personnel, colleagues and specialist resource managers, employees at the same level or more senior managers, other managers, work health and safety committee/s and other people with specialist responsibilities, supervisors and or union or employee representatives.
Q	Contingencies rarely occur in business; it is the the situation planning which youisdo to mostget importan around t.
Q	Business planning attempts to bring a new idea into fruition within an organisation.

Business College at International House
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Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
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ELEMENT 2:
Plan and Manage
Resource Acquisition
Business College at International House
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Performance Criteria Element 2
Plan and Manage Resource Acquisition
In this section, we are going to look carefully at how you will resource
your new operational plan. We will look at your staff and your
physical resources. When you are working to find the right staff for
your organisation, you are spending money that will actually make a
significant difference to the way your business operates. Your staff
will be the people who actually make a difference to your
organisation and its ability to implement your plan.
Develop and Implement Strategies to Ensure that Employees are Recruited
and/or Inducted within the Organisation’s Human Resources Management
Policies, Practices and Procedures
Policies and Guidelines
Policies are written by organisations to ensure that staff and
stakeholders act responsibly and make rational, well-informed
decisions. They help it to be consistent in its approach to decision
making and problem solving across the organisation’s locations if
appropriate. In order for staff and stakeholders to understand their
2.1 Develop and implement strategies to ensure that employees are
recruited and/or inducted within the organisation’s human
resources management policies, practices and procedures
2.2 Develop and implement strategies to ensure that physical
resources and services are acquired in accordance with the
organisation’s policies,
practices and procedures
2.3 Recognise and incorporate requirements for intellectual property
rights and responsibilities in recruitment and acquisition of
resources and services
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responsibilities within the organisation, it is very important that
policies and procedures are adopted and clearly communicated to
everyone.
Procedures are developed to assist and guide members in the
workplace in relation to policy implementation. Procedures are also
intended to complement the development of local workplace
policies and protocols.
A policy is a formal statement of a principle or rule that members of
an organisation must follow. Each policy addresses an issue
important to the organisation’s mission or operations.
A procedure tells members of the organisation how to carry out or
implement a policy. Policy is the ‘what’ and the procedure is the ‘how to’.
Policies are written as statements or rules. Procedures are written as
instructions, in logical steps.
Hiring
When the volume of work becomes unmanageable, you may decide
to employ staff to help out. You may also find that new plans require
additional staffing to meet the new demand for labour. But do you
really need to hire? First, ask yourself if you need to hire someone
or whether you just need to be more organised and efficient.
New hires can be expensive to an organisation. You may see the need
for a new staff member, but you will need to think carefully about
whether the extra money being spent is actually justifiable. Think
Business College at International House
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3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
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about how much you will pay the new staff member and consider
whether the amount of payment they will receive is justifiable in
terms of the benefits that they will actually bring into the
organisation. If they will bring in more than their salary takes out,
you will be able to better justify the spending than if the opposite
were true. Look at your plan and ensure that you consider within it
the cost of hiring the new staff member to your organisation.
Check your budget and make sure you actually have the resources to
bring this person in to your organisation. Could the money be used
more effectively within other sections of the organisation? Will you
need to make cuts somewhere to be able to hire this new staff
member?
Comparing the cost of hiring a new staff member against the benefits
that they will bring, can be a very difficult thing to actually calculate.
However, look at their specific role and compare the tasks that they
would do against the costs of those tasks and whether they could be
done by someone else.
Getting the right people in your organisation is much more than just
placing an ad in the newspaper and hoping that special person
applies. It can be a significant task in itself and one which has major
implications to the way that your organisation functions and the
ability for your plan to meet the KPIs that you wrote. By carefully
considering the process of bringing new people into your
organisation you can ensure that your plan will be executed in a
more effective way.
There are a number of key considerations that must be made when you
are hiring new staff into the organisation:
• Do you actually need someone?
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Think carefully about whether you do need to hire someone. This will
mean you need to go through the entire process and then spend
money on that new salary. Think about whether you actually need
this person or whether it is something that can be delayed until a
later date. You might also consider other options such as contractors
and temporary staff.
Questions to ask when considering hiring new staff:
○ With an extra employee, would you have more time to market your
services and expand your business?
○ Would an extra employee give you more time to produce more products
or serve more clients?
○ Would an extra employee enable you to give your customers more
efficient service or quicker delivery, resulting in more customers?
• Obligations Relating to New Staff Members
Training, WHS, taxes, doing payroll, supervision, protective
equipment must all be provided or arranged.
Do you need someone:
• Part-time
A part-time employee works on average less than 38 hours per
week. They usually work regular hours each week and are
entitled to the same benefits as a full-time employee, but on a
pro rata basis.
• Casual
A casual employee has no guaranteed hours of work. They usually
work irregular hours and don’t get paid sick or annual leave. Their
employment can be terminated without notice.
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• Intern
An intern is generally a student or trainee who works, sometimes
without pay, in order to gain work experience or to satisfy the
requirements of a qualification. Unpaid work experience and unpaid
internships that are not vocational placements are okay as long as
the person isn’t in an ‘employment relationship’.
• Fixed term or contract workers
Fixed term or contract employees are hired for a fixed period of time,
for example, for a specific project, or to replace an employee on sick
leave or parental leave.
• Apprenticeships and traineeships
Apprentices are generally training to be tradespeople, while
trainees are generally learning the skills of a non-trade
occupation. Both involve a registered training agreement,
practical work and learning skills both on and off the job. Rates
of pay are covered by an award or agreement.
• Commission only payment
Some employees, rather than being paid a wage or salary, are
paid a commission, or a percentage for each sale made.
Sometimes employees are paid a retainer (an agreed fixed
amount) plus a commission.
Best Methods to Employ New Staff with the Essential Skills
Once you have made the decision to hire a new staff member, you

need to decide	the tasks and roles that you want that new staff
member to undertake while they are	at work and under your new

plan. It is very useful here to be quite specific about the roles that
you wish them to undertake in your business. This is known as job
analysis and requires you to carefully think through the process of
hiring a new staff member by looking at the role you want them to
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undertake and the core skills that they will need in order to
undertake that position.
You will need a job description for the new position and a person
specification so that you can be sure that you have the right people
doing the right job. Now that you understand the role that the
individual will be undertaking, think through the way in which you
will let people know that there is a position open and that they can
apply for it.
In order to carry out a job analysis, you should examine the following areas.
1. Identify the tasks performed and the skills required. This should be written
using action verbs, so that the tasks performed are clear and easy to
understand. The tasks should be specific, and include the precise skills
required to carry out the job.
2. Examine why the tasks are performed as they are. What is the relationship
between those tasks and the other tasks in the organisation?
3. Identify the major activities involved and whether they are repetitive or
irregular, and in what sequence they are carried out.
4. Identify the core competencies required in the job. What are the minimum
skills required to do this job?
5. Identify the duties according to the degree of difficulty and their
importance to the project or function.
6. Look at the major areas of responsibility for the work involved.
7. Look at the environmental and social implications of the job. Are the
required tasks carried out under heat, noise or any other factor? Is the job
carried out by an individual, team or is shift work required?
There are many ways in which you can advertise a new position or opening.
You may decide to place the job advertisement initially internally
using noticeboards, email, staff newsletters or on your company’s
website. At the same time or perhaps after internal notification you
may publish the job advertisement in trade publications,
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newspapers, with a recruitment agency, on online social media sites
or with commerical job boards such as Seek and Gumtree. Decisions
regarding the placement of the job advertisement will depend on the
nature of the position, and the likely difficulty in attracting suitable
applicants.
Once you’ve chosen the most appropriate medium for your
advertising, you’re ready to draft an advertisement. You have
prepared a job description and this is the time to use it. You can
use main points from your job description in your ad and save
yourself some time trying to figure out what to say. Your job
advertisement must be well written, and convey as much relevant
information as is needed to gain the attention of potential
candidates.
There are also other methods of recruting, including:
• Personal Recruiting
This involves approaching people you know and asking if they
are interested in a specific position within the organisation.
• Using a Recruitment Agency
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Head hunters and recruitment agencies often have many CV’s
on their books and so can be used to find people who fit a
position well.
Screening Job Applicants
You have advertised a position and are flooded with applications.
You now need to find an appropriate method for sorting thorugh
the large pool of applicants. Having a process in place to sort the
suitable from the unsuitable is very important. This process should
Business College at International House
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allow you to quickly determine those people who are suitable
applicants and those who are not.
Ensure that every applicant who sends in an application receives
some form of response from you – even if it is to say they have not

been successful. People need
trying to get a job.

to know where they stand when

Work out a suitable way of sorting through your applicants. Look
for key signs such as:
• Achievement
The level of achievement in the past best indicates future
performance. Look for upward movement in the positions held, as
this is a good indicator of positive performance.
• Stability and Career Direction
How frequently has the applicant made career changes?
Frequent job changes may be an indicator of instability when
making your decisions. Make a shortlist of people who you
would like to interview to gain more information from. Try not
to make this shortlist too long, as this can add to the time it takes
to undertake the interviewing process.
• How to Decide between Applicants
Will you use an application form, or could you rely solely on a
CV submitted by the applicant. Is there specific information
you want to gather that might not be in a normal CV? If so,
consider a supplementary application form.
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Candidate Interviews
Finalise a shortlist of candidates who you will invite into the
organisation to interview. These individuals are those who you feel
have the most potential and who you believe fit the position
profile best. The interview process allows you to probe into the
candidate’s experience and achievements more closely.
An important aspect of the interview process is the schedule you prepare
for conducting the interviews. You need to allow plenty of time for the
interviews, and time between interviews during which you can discuss
and evaluate each applicant.
Most interviews cover similar information, so it can be quite useful to
divide your interviews into distinct sections such as:
• Establish Rapport
The first stage involves making the interviewee feel comfortable with
the interview. Greet them in a positive manner, smile, shake hands
and outline the interview briefly.
• Information Gathering
The next stage is the meat of the interview and involves gathering all
relevant information together. Verify the information from the CV
and ask open-ended questions encouraging the interviewee to
provide any information they feel would be useful for you to know.
• Give Information about Your Organisation
The interview is also a chance for the interviewee to ask
questions about the organisation. Encourage them to ask
questions and be open with the answers that you give.
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• End the Interview
To conclude the interview, thank them for their time and interest in
the organisation. State the next steps and how soon they will hear
back from you.
○ The Interview Process
How many people will you interview? Who will conduct the
interviews? Where will the interviews be conducted and what
questions will you ask during the interview process.
› Background checks
• Will you contact every referee?
• What questions will you ask them?
• Will you run any other checks during the process, e.g. criminal
refernce checks?
› Decision-Making Process
What criteria will you consider and which will be the most
important for your decision-making process?
› After Selection
What paperwork needs to be completed? How will you
induct them into your organisation and what training will
you offer to your new hires?
Induction
When a new employee starts with an organisation they need to be given
the opportunity to take part in an effective induction process.
An effective induction process helps ensure that employees:
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• Become productive more quickly
• Understand the organisation’s policies and procedures
• Understand the performance standards of the job
• Stay with the organisation (reduced turnover)
• Understand the health and safety issues relating to their workplace
• Understand the organisational culture.
Induction programs should be structured to ensure that each employee
receives the information they require when they start work. Some
organisations have a documented induction process that includes
induction manuals and copies of relevant policies and procedures.
Each induction program should be specific to the needs of the
organisation and the new employee. However, the following is
usually covered in an induction program:
• Introduction by team leader or direct manager, to team members and other
employees
• Organisational chart
• Organisational culture
• Team roles and responsibilities
• Standard operating procedures (SOP), performance standards and
expectations of new employee
• Organisational guidelines which govern and prescribe operational functions
such as the acquisition and management of human and physical resources
• Undocumented practices in line with organisational practices
• Work times
• Layout of the business
• Security issues and access
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• WHS procedures.
It is important to ensure that you are aware of your organisation’s
induction process before new employees start. By inducting your
employees properly you will find that they contribute more
effectively to your team.
On the website of the simulated business Bounce Fitness, you will find a wide
range of recruitment and induction documents under the tabs Policies,
Procedures and Documents.
Develop and Implement Strategies to Ensure that Physical Resources and
Services are Acquired in Accordance with the Organisation’s Policies, Practices
and Procedures
Purchasing is the business function that is responsible for buying raw
materials, parts, machinery, supplies, and all other goods and services
used in the production system
– from paper clips to steel bars, industrial robots to computers.
The purchasing department is responsible for all machinery, raw
materials, supplies and services used by an organisation. Without an
appropriate strategy, purchasing can become overwhelming.
The first step to successful purchasing strategy development is
linking strategy to organisational objectives. To accomplish this,
strategy development must be a formal process. It is suggested
that a formal steering committee can identify specific steps, such as
market analysis, milestones, and deliverables. The result will be a
strategy with well-defined goals. An example is negotiating a single
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source, three- year agreement that lowers total cost by 20 percent.
This type of strategy can then be further developed and
implemented with appropriate procedures and processes.
This strategy of establishing purchasing against organisational goals
involves making sure that every staff member in your organisation is
familiar with the way that things need to operate and ensuring that
they understand how this strategy will bring about benefits for them.
Purchasing strategies need to be aligned with overall organisational
strategies because if they are not there will be difficulty in achieving
your purchasing goals. So by demonstrating this to your staff they
are in a better position to understand why you are doing what you
are doing. For example, let’s say that you decide to use a single
supplier for all of your office supplies. You can demonstrate how
this will reduce shipping costs and will result in greater discounts
being offered. As you develop purchasing strategies you need to
consider carefully how the changes you make will impact on the
actual decisions being made within the organisation. The more
benefits you can show, the more support for the strategy there is
likely to be.
This synergy between organisational and purchasing strategy can be
quite difficult to achieve. This may be because different functions
within an organisation operate to quite different goals, but finding
a common thread (such as cost reduction) can be the key to this
integration. Think for example of where your service delivery aim is
aiming to provide greater levels of customer satisfaction. If you can
demonstrate that ‘just in time’ purchasing strategies will lead to
quicker delivery times, you can link purchasing methods and
strategies to your customer service goals and objectives.
Attempt to build a set of purchasing priorities within the
organisation. Look for areas where purchasing strategies can in fact
lead to efficiencies in other parts of the organisation. The greater
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you can show the organisation working as a whole, rather than as
disparate functions, the more you will be able to build commitment
towards the specific strategies. Working across functions within an
organisation (especially for purchasing which does tend to cross a
number of different functions within any organisation) is very
important in looking for these strategies which assist multiple
functions. Think again about your preferred supplier example. This
can help a number of key strategies that your plan may have – for

example if you need the best support for your systems by	a given
supplier, if you ensure they are your sole supplier, they are more
likely to	offer a benefit such as premium support. The major

difficulty with such a program of strategy lies when you are looking
at functions where there are not significant links into other
functions. Here, you may find it quite difficult to find the strategic
advantages associated with cross-functional strategies.
Linking to Supply Chain Objectives
Once you have found these important links within your operational
plan between overall strategies and the strategies associated with
specific purchasing programs, you need to take things one step
further and develop these strategies in ways that support the entire
supply chain within the organisation. Think about how the decisions
you make will impact future decision making. Does your technology
purchasing support your office becoming the office of the future –
by having alliances with organisations that will enable you to build
systems that are effective into the future? Building these alliances
with specific suppliers can be particularly useful in that they allow an
organisation to offer you their insights and new offerings and you
can communicate your needs to specific staff within the
organisation. Large companies may have the ability to drive product
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developments in their supplier if there is a strong enough pull from
them in terms of their needs.
Success Factors
Like any strategy or plan, purchasing needs to address those factors that
it considers critical enough to be seen as being KPIs. How do you know
your purchasing strategy is working and how can you be sure that your
purchasing is meeting its cross-functional goals? Look to build solid
relationships with suppliers and even the supplier’s suppliers in order to
build this strong relationship and allow you to determine when success is
being achieved.
Success in terms of purchasing is more than just the price you are
paying, it is the total cost of your purchasing and this can include
costs associated with freight, wait and lead times, loss of sales, and
many other factors. Look at how you will measure success – is it just
the cost or will you need to look at the longer term before you can
show your strategies as being successful. Will you need to look
beyond the initial investment in your major purchasing to a point in
the future where the plan is completely paid back before success can
be properly determined?
We mentioned that purchasing strategies are cross-functional in
nature. They involve more than just the purchasing staff. Working
with other departments is critical. Some of the more common
systems and departments that interact with purchasing include:
• Human Resources
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The human resources department will provide you with the right
people to run your purchasing department. They can assist you
in finding people with the right skills, experience and knowledge
to drive your purchasing strategies and achieve the desired
results.
• Information Systems
Purchasing systems often rely heavily on information technology to be successful
– particularly where some systems need to be used by a wide range
of users. Bringing your IT department on board to support any such
system is critical to success.
• Organisational Structure
The structure within your organisation must operate in such a
way as to facilitate the acquisition of staff and provide for the
flow of information between departments.
• Measurement Systems
Success factors need to be carefully considered, so the impact of your
purchasing strategy can be monitored.
How Far Will It Go?
Your operational plan will rely on purchasing methods in some form or
another. The greater the reliance on resources within a plan, the more
critical the success of purchasing strategies will be. Physical resources and
purchasing become most critical when you are looking at a manufacturing
organisation – where ensuring supplies are available in the right place at
the right time can mean the difference between an order being made and
an order being lost.
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Purchasing is a process. It needs to have a specific series of steps
which must be made in order for things to happen correctly. You
might look at evaluating this process to ensure it runs smoothly
within the organisation, or you might try to shift the processes that
are currently in place to ensure they better meet your overall
strategy goals. You may need your purchasing staff to work
alongside others within the organisation to better understand their
specific processes before purchasing processes can be written.
Understanding how manufacturing is completed can drive the
methods used to purchase inventory, for example.
Every industry is also different. Lead times vary greatly depending on
the type of product or supply you are sourcing and having an
understanding of how these are brought to market can be very
important in writing supply strategies. Technology is also constantly
changing, so understanding the impact specific technologies may
have in the process is also important. Think about the difference
between purchasing a new computer network and a new desk as an
example. One manufacturer is constantly changing their product so
staying up to date is extremely important. The other will not change
quickly at all.
Types of Purchasing Decisions
We have already addressed how to develop strategies for
purchasing. Let’s now take this one step further and look at the four
major types of purchases that you are likely to make.
• Small Purchases
This includes any type of purchase that is made within a
department – rather than by a purchasing officer. You will
generally pay for these types of purchases using petty cash and
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the purchases will generally be for amounts less than about
$100 (or whatever your petty cash allowance is). It will be up to
the individual manager to decide on a supplier, to place the
order and to manage the process.
• Regular Purchases
In regular purchases, the buyer in the purchasing department
buys goods and services on behalf of the requesting
department. Although the procedures for these various classes
of purchases generally cover getting the goods and services to
the requesting departments, the accounting department can
pay for the items only after it has been notified by the
requesting department how much of the supplied items are of
the requested quality.
• Large Unique Purchase Methods
One of the key functions of the purchasing department, or
purchasing officer is building an interface between the
technical specialists in the department or workgroup needing a
resource and the suppliers who could potentially supply it. In
these types of purchases, price is often not the deciding factor
in the selection of an appropriate supplier. Instead, you will look
at the ability to deliver quality goods and services on a timely
basis and to meet the unique technological and business needs
of your organisation or specific operational plan.
• High Volume Continuous Supply Methods
When materials are purchased in high volume to be
continuously supplied throughout the month or year,
purchasing officers tend to issue requests for quotations to
several potential suppliers. When a supplier is selected (based
on price, quality and ability to supply at desired levels) a
blanket purchase order that covers the materials to be
purchased for the entire year is issued. The authorisation for
this level of purchase should come directly from the need for the
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materials in the production budget. These are often prepared
months in advance and cover long periods of time.
Recognise and Incorporate Requirements for Intellectual Property Rights and
Responsibilities in Recruitment and Acquisition of Resources and Services
Intellectual property rights are the rights given to persons over the
creations of their minds. They usually give the creator an exclusive
right over the use of his/her creation for a certain period of time.
Industrial property can usefully be divided into two main areas:
1. Trademarks
One area can be characterised as the protection of distinctive
signs, in particular trademarks (which distinguish the goods or
services of one undertaking from those of other undertakings)
and geographical indications (which identify a good as
originating in a place where a given characteristic of the good
is essentially attributable to its geographical origin).
The protection of such distinctive signs aims to stimulate and
ensure fair competition and to protect consumers, by enabling
them to make informed choices between various goods and
services. The protection may last indefinitely, provided the
sign in question continues to be distinctive.
2. Design
Other types of industrial property are protected primarily to
stimulate innovation, design and the creation of technology. In
this category fall inventions (protected by patents), industrial
designs and trade secrets.
The social purpose is to provide protection for the results of
investment in the development of new technology, thus giving the
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incentive and means to finance research and development
activities.
A functioning intellectual property regime should also facilitate the
transfer of technology in the form of foreign direct investment, joint
ventures and licensing. The protection is usually given for a finite
term (typically 20 years in the case of patents).
While the basic social objectives of intellectual property protection
are as outlined above, it should also be noted that the exclusive
rights given are generally subject to a number of limitations and
exceptions, aimed at fine-tuning the balance that has to be found
between the legitimate interests of right holders and of users.
Legislation
Legislation is the act of making or enacting laws. When people talk
about ‘the legislation’, they mean a law or a body of laws. The
legislation in a state or territory are the laws enacted specifically
to control and administer the state or territory.
Regulations
Regulations are the way that the legislation is applied. They are
generally very specific in nature, and are also referred to as ‘rules’
or ‘administrative law’. These are administrative ‘rules’ that
describe rights and allocate responsibilities. They can take many
forms such as being legal restrictions established by a government
authority, a self-regulating mechanism for an industry such as a
trade association, social regulations such as ‘norms’, co-regulation
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or market regulation. They are actions of conduct imposing sanctions
such as a fine.
Every organisation is subject to various laws, regulations and Codes of
Practice requirements. You must make yourself familiar with all of those
relating to your organisation and its production. All workplaces are subject
to:
• Work Health and Safety Act 2011 (WHS Act)
Work Health and Safety (WHS) legislation is designed to ensure
a safe and healthy workplace, and to reduce the number of
injuries in the workplace by giving all staff responsibilities.
Employers, self-employed people, those in control of work
premises, machinery and substances, designers,
manufacturers, suppliers and workers all have obligations with
regard to workplace health, safety and welfare.
Although it differs in detail from state to state, in general
Australian WHS legislation is aimed at:
○ Providing and maintaining a safe working environment and safe systems
of work
○ Providing information to employees in relation to health, safety and
welfare in the workplace.
Employees also have responsibilities under the health and safety laws including:
○ Following instructions and rules in the workplace
○ Working and behaving in ways which are safe and do not endanger the
health and safety of anyone in the workplace.
You can be disciplined by your employer or be prosecuted under the
health and safety law in your State or Territory if you do not comply.
WHS Regulations
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WHS is regulated by Commonwealth, state and territory
government bodies. General information on their roles and
responsibilities can be found at the following relevant website:
Workplace Harassment, Victimisation and Bullying
Workplace harassment, victimisation and bullying are abuses or
misuses of power characterised by aggressive behaviour or
actions that intimidate, humiliate and/ or undermine a person
or group. Power can be exercised at an organisational level, or
occupation of any position having standing within the

organisation, organisational	knowledge	or	experience,
gender,	age	or	physical	power. Workplace harassment,

victimisation and bullying are unacceptable and are not to be
tolerated under any circumstances. They may cause emotional
damage, reduce morale and subsequently the loss of trained
and talented employees.
Federal and state anti-discrimination/equal opportunity laws
protect you from harassment and victimisation including: age;
breastfeeding or pregnancy status; career status; disability or
impairment; gender identity; being a union member (or not);
sexual activity; marital status; sexual orientation; physical
features (not including ‘accessories ’ like tattoos or piercing);
political activity or belief; race; religious belief; gender.
Harassment is behaviour that another person does not want and
does not return and or offends, embarrasses or scares that person.
Harassment refers to behaviour towards an individual or group
of individuals, that may or may not be based on any of the
above attributes and could be defined as ‘the repeated less
favourable treatment of a person by another or others in the
workplace, which may be considered unreasonable and
inappropriate workplace practice. It includes behaviour that
intimidates, offends, degrades or humiliates
…’ (ref. An Employer’s guide: Workplace Bullying, Queensland
Department of Employment, Training and Industrial Relations, 1998)
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in circumstances where a reasonable person would have anticipated
the possibility that the other person would be offended, humiliated
or intimidated by the conduct.
Often harassment in the workplace involves a misuse of
power. This might be a person in authority who intentionally
undermines, humiliates or destroys the confidence and selfesteem of an individual or group. Harassment may occur
between people of any gender.
Under federal and state legislation unlawful harassment occurs
when someone is made to feel intimidated, insulted or
humiliated because of their race, colour, national or ethnic
origin; sex; disability; sexual preference; or some other
characteristic specified under anti-discrimination or human
rights legislation. It can also happen if someone is working in a
‘hostile’ or intimidating environment.
Sexual harassment is behaviour of a sexual nature that is
unwelcome, unsolicited and unreciprocated. The gender and
sexual orientation of the perpetrator or victim is irrelevant.
Examples of Harassing Behaviour
Harassment may be subtle or overt and includes, but is not limited
to, the following forms of behaviour:
○ Abusive and offensive language or shouting
○ Constant unreasonable criticism about work or performance, often
about petty or insignificant matters
○ Deliberate exclusion, isolation or alienation of a staff member
○ Allocation of humiliating or demeaning tasks, or sabotaging a person’s work
○ Setting of impossible deadlines with unrealistic expectations of work
○ Spreading gossip or false and malicious rumours with an intent to cause
harm to a person
○ Sarcasm or ridicule
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○ Threatening gestures or actual violence
○ Inappropriate comments about personal appearance
○ Electronic harassment such as through email, SMS
○ Hazing or bastardisation (such as harmful or humiliating initiation rituals).
Victimisation occurs when a person does an act, or threatens
to do an act against a person because:
○ They have made a complaint (complainant) or are associated with a
person who has made a complaint under this policy, or
○ They have had a complaint made against them (respondent) or are
associated with a person who has had a complaint made against them
under this policy.
Bullying is a form of harassment. Bullying behaviour is based
on the misuse of power in human relationships. From an
occupational health and safety perspective, workplace bullying
is defined as: repeated, unreasonable behaviour directed
towards a person or group of persons at a workplace, which
creates a risk to health and safety.
‘Unreasonable behaviour’ is behaviour that is offensive,
humiliating, intimidating, degrading or threatening. It includes, but
is not limited to:
○ Verbal abuse
○ Initiation pranks
○ Excluding or isolating employees
○ Giving a person the majority of an unpleasant or meaningless task
○ Humiliation through sarcasm, or belittling someone’s opinions
○ Constant criticism or insults
○ Spreading misinformation or malicious rumours
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○ Setting impossible deadlines
○ Deliberately changing work rosters to inconvenience certain employees
○ Deliberately withholding information or resources that are vital for
effective work performance
○ Manipulating the impression of others to split the work group into taking sides
○ Displaying written or pictorial material which may degrade or offend
certain employees
Examples of bullying include yelling, abusive language,
continually criticising someone, isolating or ignoring someone,
imposing unnecessary pressure with overwork or impossible
deadlines and sabotaging someone’s work, or their ability to do
their job by withholding vital information and resources.
Additional information for managers and supervisors related
to workplace harassment can be found in the ‘Prevention of
Workplace Harassment Advisory Standard 2004’ guidelines
which are at https://www.qld.gov.au/law/your-rights/
workplace-rights/harassment-and-bullying/ and also at the
following website:
http://www.safeworkaustralia.gov.au
• Fair Work Act 2009
The Fair Work Commission (FWC), formerly known as Fair Work
Australia (FWA), is the Australian industrial relations tribunal
created by the Fair Work Act 2009 as part of the Rudd
Government’s reforms to industrial relations in Australia.
FWC’s functions include the setting and varying of industrial
awards, minimum wage fixation, dispute resolution, the
approval of enterprise agreements, and handling claims for
unfair dismissal. It is the successor body to the Australian
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Industrial Relations Commission, though it also performs
functions previously performed by the Workplace Authority and
the Australian Fair Pay Commission.
FWC is an independent body with the power and authority to
regulate and enforce provisions relating to minimum wages and
employment conditions, enterprise bargaining, industrial action,
dispute resolution, and termination of employment.
The Fair Work Act is an attempt to create a more national system
for regulating industrial relations in Australia. Each state has
the discretion to hand over some or all of their industrial
relations powers to the Commonwealth, and should a state
decide to refer their powers to a centralised and national
industrial relations system, all the employees of that state
would effectively be covered by the national Fair Work Act. This
new national body has taken over the roles of the Australian
Industrial Relations Commission (AIRC) in matters of workplace
disputes and industrial actions. It is also involved in the process
of determining national industrial relations policies, including
setting minimum wages and regulating the award system. Since
the introduction of the Fair Work Act, all states except Western
Australia have referred their powers to the Commonwealth.
http://www.fairwork.gov.au
• Industrial Relations
The national industrial relations system (governed by the Fair Work
Act 2009) covers private sector workers in all states except Western
Australia. Awards and enterprise agreements must also be met.
Internet guides to industrial relations:
○ Best practice guide: A guide for young workers http://www.fairwork.gov.au
○ Employment law legislation http://www.aph.gov.au
○ Industrial Law http://www.worldlii.org
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○ Hot Topics: Employment and the Law http://www.austlii.edu.au
○ Young workers and students http://www.fairwork.gov.au
○ Free Web Law – University of Sydney Law Library
http://www.library.usyd.edu. au
• Privacy Act 1988
The Privacy Act 1988 (Privacy Act) is an Australian law which
regulates the handling of personal information about
individuals. This includes the collection, use, storage and
disclosure of personal information, and access to and correction
of that information. The Privacy Act includes:
○ 13 Australian privacy principles that apply to the handling of personal
information by most Australian and Norfolk Island Government agencies
and some private sector organisations
○ Credit reporting provisions that apply to the handling of credit-related
personal information that credit providers are permitted to disclose to
credit reporting bodies for inclusion on individuals’ credit reports.
The Privacy Act also:
○ Regulates the collection, storage, use, disclosure, security and disposal of
individuals’ tax file numbers
○ Permits the handling of health information for health and medical
research purposes in certain circumstances, where researchers are unable
to seek individuals’ consent
○ Allows the Information Commissioner to approve and register enforceable
app codes that have been developed by an app code developer, or
developed by the Information Commissioner directly
○ Permits a small business operator, who would otherwise not be subject to
the Australian privacy principles (apps) and any relevant privacy code, to
opt-in to being covered by the apps and any relevant app code
○ Allows for privacy regulations to be made.
http://www.oaic.gov.au/privacy/privacy-act/the-privacy-act
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• Environmental Issues
Modernisation and commercialisation have created problems
for the environment. Everything from air and water quality to
denuding of forests is affected. Various countries have laws to
protect their environments, but others do not. All projects are
subject to environmental influences and these should be
determined in the early stages to allow appropriate measures
to be built into the project and budget.
http://www.abs.gov.au/ausstats/abs@.nsf/mf/4602.0.55.001
Notes
Activity Two
Purchasing strategy development is often cited as a trend facing
management professionals. Ask yourself the following questions to help
determine if the foundational building blocks are in place in your
organisation to successfully address purchasing strategy development.
Discuss the following with your training group.
• What training or qualification do purchasing and supply management
professionals in your organisation need so that they can make educated
decisions about the purchasing strategy as it relates to the supply market?
• How does senior management demonstrate active support for the
implementation of new purchasing strategies?
• Does the organisation possess common goals and measures which the
strategy will clearly support? What are they?
• Are tactical activities automated or handled by internal users so that
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purchasing and supply management professionals can devote the necessary
time to strategic initiatives?
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Key Points Element 2
Element 2 – ‘True’ or ‘False’ Quiz

True	False
Q	The hiring decision should be based solely on how much extra revenue a new staff member would allow you to bring in.
Q	Hiring an employee should be considered an investment by your business.
Q	When looking to hire staff – you needadditional to carefully consider help to achieve your if you need goals. any
Q	After deciding to hire someone, you need tothe determine person to exactly what do for youryou business. want
Q	Purchasing is a business function that is responsible for buying raw materials, parts, machinery, supplies, and all other goods and services used in the production system.
Q	Interviews should be conducted ‘off the cuff’.
Q	Purchasing strategies do not need to be communicated.
Q	Purchasing strategy must link to organisational objectives.
Q	Small purchases are often made from petty cash.

• Develop and implement strategies to ensure that employees are recruited and/or
inducted within the organisation’s human resources management policies, practices
and procedures
• Develop and implement strategies to ensure that physical resources and services are
acquired in accordance with the organisation’s policies, practices and procedures
• Recognise and incorporate requirements for intellectual property rights and
responsibilities in recruitment and acquisition of resources and services.
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Element 1: TITLE
ELEMENT 3:
Monitor and Review
Operational Performance
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Performance Criteria Element 3
Monitor and Review Operational Performance
Develop, Monitor and Review Performance Systems and Processes to Assess Progress in
Achieving Profit and Productivity Plans and Targets
Productivity measures the efficiency of a person, machine or
organisation to produce useful outputs (goods and services).
Productivity in a time period is usually measured as follows:
3.1 Develop, monitor and review performance systems and
processes to assess progress in achieving profit and
productivity plans and targets
3.2 Analyse and interpret budget and actual financial information to
monitor and review profit and productivity performance
3.3 Identify areas of under-performance, recommend solutions and take
prompt action to rectify the situation
3.4 Plan and implement systems to ensure that mentoring and coaching
are
provided to support individuals and teams to effectively, economically
and safely use resources
3.5 Negotiate recommendations for variations to operational plans
and gain approval from designated persons/groups
3.6 Develop and implement systems to ensure that procedures and
records
associated with documenting performance are managed in accordance
with organisational requirements
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Productivity = Quantity produced / Amount
of resources used To simplify this even
further:
Notice that there are two sides to the productivity equation – the amount
of production and the amount of resources used. Productivity varies with
the amount of production relative to the amount of resources used. The
productivity of each resource can and should be measured. For example,
measures such as the following could be used to determine productivity:
Methods of Calculating Productivity
• Capital
Number of products produced divided by the asset value
• Materials
Number of products produced divided by dollars spent on materials
• Direct Labour
Number of products produced divided by direct labour-hours
• Overheads
Number of products produced divided by dollars spent on overheads.
Such measures are not perfect. For example, the measure for
materials productivity includes price. This is generally not desirable,
but there is no other practical way to combine the many different
units of measurement for the diverse materials used in production.
Although such measures of productivity have their shortcomings,
Business College at International House
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they do provide a starting point for tracking productivity so that
managers are aware of productivity trends.
In the past when labour cost was the predominant cost of
production, productivity was only measured by the output per hour
of direct labour. Today however there is a need to look beyond
merely direct labour costs and develop a multi-factor perspective.
Our view of productivity must be towards improving the productivity
of all the factors of production – labour, capital, materials and
overhead.
The trouble with measuring productivity by output direct labour
hours only is that the productivity of one factor can be increased
simply by replacing it with another factor. For example if a factory
that previously bought castings and machined them in-house
decides to purchase the castings pre-machined, then the company
can lay off skilled workers and sell the machine tools. What happens
to productivity? Output will remain the same, but the number of
workers will fall, so labour productivity will increase. Capital
productivity will also increase, because investment will be less and
production levels will be unchanged. But materials productivity will
decline because the value of purchased materials will increase
while productivity levels will not change. So by simply looking at one
aspect of the productivity equation you are getting a false view of
the overall productivity of a business. You should combine a number
of productivity measures in order to fully understand the
productivity of the firm with regards to its resource use.
In order to establish whether or not your current production
process is operating at its most efficient for your business, you
need to establish review systems against which you can compare
your current performance. Any variances between your ‘ideal’
results and your ‘actual’ results should be carefully examined to
determine the reason.
Business College at International House
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Earlier in the development process you examined the need to
develop measurable objectives. It is at the review stage where these
measures become increasingly important. These objectives can be
used as a form of ‘ideal result’; that is a result which is closest to a
situation which would be the best you could hope for given the
current resources being used. You may also find it useful to obtain
historical data on productivity within your firm; this may assist in
making the objectives you are striving for more realistic. Although
it is impossible to get data from your competitors to use as a means
of analysis, you may be able to obtain industry wide figures from the
trade association which covers your industry – these may be useful
in establishing how well you compare to similar companies.
You then use the formula mentioned earlier to determine the actual
productivity of your firm. You may decide to sample productivity at
various stages of the production process, and over a number of
different days, in order to get a wider view of current productivity
rather than just a snap shot of the situation at one certain point.
Look at conducting regular reviews of productivity. You may decide
to conduct such an analysis once a month, or even more regularly.
The key to remember is that you are gathering actual data on the
productivity of your firm.
The final stage is to compare the actual results with your desired
results and evaluate how well you are meeting the current objectives
of your organisation in terms of productivity. You should determine
the variance in terms of a percentage difference from where you
want the organisation to be on each productivity measure. The
higher the percentage figure obtained, the worse the variance is. Of
course there are two types of variance figure you can obtain,
negative variances and positive variances.
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Positive variances occur when you are performing above the level of
productivity you set in your firm’s objectives. This is generally a
positive sign that your production processes are working as they
should. Take care to ensure that the productivity measure isn’t
masking other problems as discussed in the previous section. If you
find positive variances, make sure you are not overspending in some
areas. It may be that your objectives can be altered to reflect this
greater level of productivity within your organisation.
Negative variances are by their very nature indicative of a problem
within the production process. You should seek to immediately rule
out causes such as the initial objective being set too high and then
further analyse the data to establish the cause of the variance.
Review the findings with members of the production team where the
fault was found, and seek input from those team members as to why
the variance may have occurred.
After reviewing negative variances, you may find there is room for
improvement within the current processes. In these cases, seek to
make recommendations that will assist in bridging the gap between
what is expected and the actual results found in the process. This
may include recommendations for new technology being
introduced, or the implementation of better methodologies for
handling certain processes.
Constantly reviewing the production processes is vital as it means
that you can ensure the productivity levels that you desire are
firstly achieved, and once you have achieved the desired levels,
these are maintained. Review the production processes on a regular
basis, to ensure that the productivity level is being maintained.
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Improvements and Incentives
Productivity within your organisation is dependent on both the
machinery that you utilise and upon the staff within that
organisation. If productivity is not as high as you would have hoped,
you may find it useful to implement incentive schemes. These
schemes generally reward your employees by paying them based
upon their work performance. Although incentive pay schemes have
generally diminished in popularity recently, their use is still common,
particularly in well-established firms, and those firms where
tradition dictates incentive pay. Some firm’s overseas go as far as
having pay cheques affected by ‘production allowances’. These
allowances are based on the production of the work team during
the month. There are two general types of incentive schemes used,
bonuses (based on either group or individual productivity) and
piecework.
The first step of this process is to determine the percentage
performance for each worker during the pay period. This is found
using the formula:
Productivity = (Units produced * Labour per unit) / Number of minutes worked
Next, the worker’s performance is applied to the worker’s hourly pay base:
Actual hourly pay = Hourly pay base * Performance
Finally, the worker’s pay for the period is computed:
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Worker pay = Number of hours worked * Actual hourly pay
This method of determining pay can be based upon performance of either
the individual or of the whole group in which an individual works.
Piece Rate Plans
These plans determine worker’s pay by computing a standard
payment for each unit of output at each operation.
Operation piece rate = (Hourly base rate * Operation labour standard) / 60 minutes
This piece rate (dollars/unit) is then multiplied by the units
produced by a worker to compute the pay for the period. Incentive
pay schemes for workers are carefully watched over by workers,
unions and management. Elaborate and precise work measurement
systems have evolved to compute the labour standards used in these
systems. Precision is demanded because it is the workers’ wallets
that are being affected.
Some organisations allow workers to participate in the development of
cost-cutting programs. Workers and work groups are subsequently
rewarded on the basis of the incentive rates worked out in these
management-worker committees. The savings are shared between
workers and the companies. These group systems are believed to
promote co-operation between workers and management in increasing
productivity.
System Review
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The next stage of the work development process is to begin a review
of the system you have in one place, and from this review determine
the system’s effectiveness and whether any improvements need to
be made. Earlier in the process, you established relevant objectives,
and criteria for acceptable performance. To review your system, you
need to gather information that will enable you to ascertain whether
or not you have met the required performance criteria.
Work measurement involves using various techniques to obtain
direct measurement of the work. This is particularly useful for
assessing the ‘up’ or ‘downtime’ of a system, or looking at how
accurate data obtained is. This direct measurement can be
conducted in a number of ways, and the methods used should be
stated within the review procedure. It is only useful for gaining
objective information, such as whether a particular product is
produced up to a required standard. Samples are the most common
method of work measurement, as you are able to take the completed
sample, and use this to evaluate against the specifications, to
determine whether it is meeting quality standards and the like.
There are numerous methods that you can use to measure
performance. The methods selected will vary significantly, however
some of the most common include the following:
Methods of Measuring Performance
1. Observation
There may be times when you need to observe how a
particular user performs a task. In these cases observation is
a useful method to adopt. It is particularly useful to measure
compliance with set procedures, where you can ask a user to
Business College at International House
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perform a given task, and then assess how well they perform
the task against the set procedure.
2. Surveys
Surveys can be useful to gain an understanding of how
people feel about the work plans or methods, or what they
like and don’t like about it. They are most useful because the
results are generally structured, and this enables
measurement and comparison.
3. Feedback
Feedback is a process that involves seeking the opinions of
those involved in the work process. You may interview them,
or simply ask them for feedback. This feedback should tell you
how they feel about the operation of the work methods and
processes. You should seek feedback from managers,
supervisors and other workers, to gain a broad understanding
of how they feel about the process that you have
implemented.
The information that you gain from all of the above sources can be
used to evaluate the effectiveness of the system. You can do this
by comparing the review results to the planned objectives.
The methods used to gather information should be aimed directly
at obtaining the type of information required to determine whether
your objectives are being met. For example if one of the objectives
that you set for your work plan was to ensure that staff are satisfied
with their work, you should attempt to identify methods that will
gather feedback such as interviews, and surveys. However, if you are
looking at the rate of defects, you will use work measurement
techniques to obtain the right information.
Once you have obtained the right information, you need to compare
this against the plans that you set, back at the beginning of the
Business College at International House
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process. One useful means of doing this is to create a table. In one
column you should list the performance measures and criteria that
you have established for your work process. There may be many of
these depending on the complexity of the objectives you set. In the
next column you should list the actual results from your system
review, that is the information you obtained from the review
methods above. In the final column you should evaluate required
and actual performance against each other, in order to determine
whether or not you have met the required standards. You should
record whether or not it was met and the degree of variance from
actual results if you did not meet the minimum requirements.
Once you have evaluated the system, you should identify any
areas where improvements could be made. These improvements
should be in the form of a series of recommendations. These should
be the course of action that you believe is most appropriate for your
organisation to make to improve the work plans. Whenever your
system does not meet the required standards or objectives (as set by
the performance measures and criteria you developed earlier) you
should establish one or more recommendations in order to correct
this problem. These recommendations should be concrete, and
include a practical course of action, that management should
consider in order to address the given problem.
After you have drawn your conclusions from the given data, you
will be left with a list of conclusions that state whether or not your
organisation’s system has met the required standards. For each
performance criteria that has not been met, you should begin an
analysis of why the criteria was not met. In order to achieve this, you
may need to seek input from internal and external consultation.
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Where you have such performance gaps, it is important to attempt
to establish a cause, and you may find that the cause is related to
other parts of the organisation, rather than simply being a fault with
the system. It is crucial when looking at gaps in performance that you
establish cause and effect relationships. What this means is that you
have found a performance gap, and this is the effect of some cause.
You need to be able to determine that cause, and demonstrate
“Progress has little to do with speed, but
much to do with
direction.”
Source Unknown
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that the cause definitely has a detrimental effect on the system as a
whole. If you are unable to establish this, your recommendations
may be seen as a costly way of fixing a non-existent problem.
The improvements that you decide to make should be recommended
based on a number of factors. You should consider them in detail
before recommending them, and your consideration should include
an analysis of:
• Operational Implications
Operational implications are another important consideration.
How will the changes that you decide to make influence the
organisation’s procedures and policies? Will any additional
training need to be provided? Think carefully about how the
changes you are recommending will affect other parts of the
organisation, and how things are done.
• Risk
Whenever a new system is introduced into an organisation, or when
changes are made, there is always an element of risk. You should
consider risk when you are making recommendations. What is the
risk that the recommendation will cause further problems? Think
through the risk, and determine whether the reward (in terms of
actual improvements) outweighs the risk of its implementation
within the existing system.
• Feasibility
How feasible are the improvements, given the budget and
resources that you have been allocated. Does your organisation
have the expertise to appropriately implement the system? Can
the improvement actually be made to work given the current
state of the organisation?
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If the recommendations that you make will require changes to the
actual work plan itself, it is important that you establish timelines
for this to happen. It should be implemented in a timely fashion,
rather than allow current problems to exist in the system any longer
than they have to. You also need to carefully document changes,
ensuring that all staff are aware of them, and know where they can
find details of the changes if they require this information.
Analyse and Interpret Budget and Actual Financial Information to
Monitor and Review Profit and Productivity Performance
Budgets
One of the objectives of budgeting is to provide a base against which
actual performance can be measured. This is only worth doing if
action will be taken as a result. In too many organisations the
production of results compared to budget is seen as the end of the
process. If no action is taken on the basis of management accounts
then there is little point in producing them and even less point in
wasting management time discussing them.
By identifying progress from a preceding position we are better
informed regarding the effects of our actions and have a clearer
understanding of the effect of any future action we take. Knowing
how much is being spent each month enables a manager to consider
whether action needs to be taken to spend more or less in the future.
This process is only worthwhile if the budget is realistic.
Analysing variances against an unrealistic budget is pointless.
Business College at International House
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However, in a well-run organisation the comparison between actual
and budget is used as the basis for deciding the appropriate action.
Positive variances occur when you are performing above the level of
productivity you set in your firm’s objectives. This is generally a
positive sign that your production processes are working as they
should. Take care to ensure that the productivity measure isn’t
masking other problems as discussed in the previous section. If you
find positive variances, make sure you are not overspending in some
areas. It may be that your objectives can be altered to reflect this
greater level of productivity within your organisation.
Negative variances are by their very nature indicative of a problem
within the production process. You should seek to immediately rule
out causes such as the initial objective being set too high and then
further analyse the data to establish the cause of the variance.
Review the findings with members of the production team where the
fault was found, and seek input from those team members as to why
the variance may have occurred.
After reviewing negative variances, you may find there is room for
improvement within the current processes. In these cases, seek to
make recommendations that will assist in bridging the gap between
what is expected and the actual results found in the process. This
may include recommendations for new technology being
introduced, or the implementation of better methodologies for
handling certain processes.
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
Constantly reviewing the production processes is vital as it means
that you can ensure the productivity levels that you desire are
firstly achieved, and once you have achieved the desired levels,
these are maintained. Review the production processes on a regular
basis, to ensure that the productivity level is being maintained.
What Causes Budget Variances?
There are generally four key reasons for budget variances and it is
important that good managers recognise the differences, as the
action required may be completely different in each case. The four
reasons are:
1. Faulty Arithmetic in the Budget Figures
It is possible that there is an error in the budget. This includes
errors of commission or duplication as well as pure arithmetic.
One action is to make a note to ensure it does not happen again
when the next budget is being done. Other action depends on
the error. Assume the budget stated no overdraft would be
necessary and it now appears one is required because the
sales forecast was used to predict cash inflows rather than
the debtor payments. There are two options: Go to the bank
and ask for an overdraft, or take some other action to improve
cash flow to stay within the budget cash figure. The original
budget numbers will need to be changed to reflect the new
circumstances and future reporting should be against the
revised budget (often called a reforecast or latest estimate).
Action is required but it may not be within the area where the
error was made.
Do not simply say: “There’s a hole in the roof but we can’t fix it
because we haven’t got a budget for repairs!!!”
2. Errors in the Arithmetic of the Actual Results
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It is possible that the actual results have been reported
wrongly. This includes the use of the wrong category, omission
of costs, double counting of income etc. One well known way
of staying within budget is to throw away any invoices received
from suppliers, or charge them to someone else’s account
code. This sort of deliberate action makes a nonsense of
budgetary control and must be avoided. The corrective action
once this is discovered is to prevent it happening again.
Improvements in management education and/or control
procedures are recommended.
One extra consideration is that in order to correct the error the
cumulative results will need to be corrected. This means either
putting through a correction in the next period, which will
then also be wrong, or adjusting the past results to correct
the error. Failing to note that the correction can cause
misleading results can lead to wrong decisions being made.
Do not simply say: “The accounts figures are always different from
ours so we ignore them and keep our own records.”
3. Reality is Wrong
Sometimes the Actual results are useless as an indicator. A
strike or natural disaster will have an impact on results. This
does not mean that the budget process in future should include
an allowance for this happening again. (However in large
organisations it is normal to allow for the impact of a disaster
centrally as a contingency even if it is not budgeted at
operating unit level). If necessary, insurance should be taken
out. If business is disrupted for two weeks, then it is pointless
to compare the remaining two weeks of the month against a
full month’s budget. Produce a realistic budget for the next two
weeks and compare this with the actual to establish true
performance under normal circumstances.
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Do not simply say: “The variances are distorted because of. so it’s not my
fault.”
4. Differences between Budget Assumptions and Actual Outcome
This is the key issue and the one which involves the use of
variance analysis techniques. Remember that all budgets
contain errors in the assumptions. No one knows the future
outcome for certain. The important thing is not to apportion
blame by looking backwards, but to look forwards and take
action to improve the future in the light of experience. The
action to be taken depends on the circumstances. However,
punishing deviation from budget is the best way of destroying
the budget process. Managers will spend up to budget, conceal
data, and make the actual fit the budget in order to avoid
blame. This is particularly true in large multi-national
organisations. The emphasis must be on what can we do
about it, rather than why the results are different.
Do not simply say: “We are under budget, who can we blame?”
How Are Variances Calculated
There are two important rules:
1. The level of variance analysis should be decided by the needs of the
decision maker, not at the convenience of the reporter.
2. The budget must always be flexed for volume changes to produce realistic
variances.
Example

Budget	Actual
Sales Volume	100	90
Sales Value	1,000	990
Variable Costs	500	495

Fixed Costs	200	210
Profit	300	285

The Finance Director wishes to blame someone for the fact that
volume is down by 15.
“It is obvious who is to blame. Sales are below target and fixed
costs have not been controlled.” So many management
meetings are run like this that it seems a shame to point out
that they are a waste of time.
Proper Variance Analysis
This requires some thought and some simple calculations. It has 4 stages:
1. Flexing the Budget
In the example it is futile to compare the actual variable costs
with the budget. To do so suggests that the manager is doing
better than budget, but actual volume is below budget so costs
should be lower. It is vital to produce a revised budget to use
for comparison. This does not mean that the original
budget is useless. It merely means that in order to analyse the
‘15’ difference it is important to start by removing the impact
of volume changes on the various headings which are affected
by it.

Original Budget	Revised Budget	Actual
Sales Volume	100	90	90
Sales Value	1,000	900	990
Variable Costs	500	450	495

Fixed Costs	200	200	210
Profit	300	250	285

This recalculates the budget using actual volume but budget
prices and shows that the expected profit for 90 units is 250.
Thus the impact on profit is a reduction of 50 and this can be
identified as Sales Volume Variance $(50). A common
convention is to put unfavourable variances in brackets.
Now the other variances can be calculated.
2. Analysing the Variances

Original Budget	Revised Budget	Actual	Variances
Sales Volume	100	90	90
Sales Value	1,000	900	990	90
Variable Costs	500	450	495	(45)
Fixed Costs	200	200	210	(10)
Profit	300	250	285	35

We now have a valid set of budget data to compare against
actual. The variance on Sales can only be due to Price. This is the
Sales Price Variance of $90.
The Variable costs require further investigation:
Assume that the original budget was to use 2.50 metres of
material for each sales unit and that each metre was expected
to cost $2.00. This gave a Budget figure of 100 x 2.50 x $2.00 =
$500
The Actual result included a price of $2.75 per metre but only 2.00
metres were used per sales unit. This gave an actual figure of 90 x
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2.00 x $2.75 = $495. This needs to be compared against the Flexed
Budget figure of 90 x 2.50 x $2.00 =
$450.
To identify the cause of the variance of $(45), we need to
separate the price impact from the usage impact.
Price
We expected to pay $2.00 per metre; however we did pay $2.75 per metre.
Each of the 180 metres we bought cost $0.75 extra. 180 x (2.00 – 2.75) =
$(135)
This is the Materials Price Variance $(135)
Usage
We expected to use 225 metres in total to make 90 units;
however we did use 180. At the Budget price of $2.00 we
saved ……$2.00 x (180 – 225) = $90
This is the Materials Usage Variance $90
On fixed costs we expected to spend $200 but we did spend $210. The
Fixed Cost Variance is $(10)
Summarising the Variances

Sales Volume	(50)
Sales Price	90
Materials Price	(135)
Materials Usage	90
Fixed Costs	(10)
(15)

Actual	Budget	Variance
Units	120	100	20
Average Price per Unit	$10	$10.50	$(0.50)
Sales A	$720	$500	$220
Sales B	$480	$550	$(70)
Total	$1,200	$1,050	$150

The $150 favourable variance could be analysed as:
Sales Volume 100 – 120 = 20 x $10.50 =210
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Sales Price $10.00 – $10.50 =
$(0.50) x 120 = (60) Or if separate
analysis by product were required
Sales Volume
For A 80 – 50 = 30 x $10.50 = 315
For B 40 – 50 = (10) x $10.50 = (105)
Sales Price
For A $ 9.00 – $10.00 = $(1.00) x 80 = (80)
For B $12.00 – $11.00 = $ 1.00 x 40 = 40
Sales Mix
For A 80 – 50 = 30 x $10.00 – $10.50 = (0.50) = (15)
For B 40 – 50 = (10) x $11.00 – $10.50 = 0.50 = (5)
Since only the last of these is a value adding activity, the first three
are only worth doing if step 4 is taken in time to help future results.
This may mean the first three steps have to be done fast even if that
reduces their accuracy.
The same analysis can be done for costs within products or at
margin level. There are also approaches that derive the averages
based on the percentage the product formed of the total. In all cases
the approach adopted should be designed to help the manager
make decisions. Thus from the example above the variable costs and
margins would need to be calculated to identify if the results of the
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manager of A’s tactics of lower price to gain more volume was
‘better’ than those of the manager of B’s
Identify Areas of Under-Performance, Recommend Solutions and
Take Prompt Action to Rectify the Situation
The FairWork Ombudsman website provides information on
appropriate management of under-performance issues. The
following is taken from that site.
What is Underperformance?
Underperformance or poor performance can be exhibited in the following ways:
• Unsatisfactory work performance, that is, a failure to perform the duties of
the position or to perform them to the standard required
• Non-compliance with workplace policies, rules or procedures
• Unacceptable behaviour in the workplace
• Disruptive or negative behaviour that impacts on co-workers.
Underperformance is not the same as misconduct. Misconduct is
very serious behaviour such as theft or assault which may warrant
instant dismissal. In cases of misconduct employers should seek
specific advice about how to proceed before taking any action.
What are the Reasons for Underperformance?
There are many reasons why an employee may perform poorly. Some of
the common reasons include:
• An employee doesn’t know what is expected because goals and/or
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standards or workplace policies and consequences are not clear (or have
not been set)
• Interpersonal differences
• There is a mismatch between an employee’s capabilities and the job they are
required to undertake, or the employee does not have the knowledge or skills
to do the job expected of them
• An employee does not know whether they are doing a good job because
there is no counselling or feedback on their performance
• Lack of personal motivation, low morale in the workplace and/or poor work
environment
• Personal issues such as family stress, physical and/or mental health
problems or problems with drugs or alcohol
• Cultural misunderstandings
• Workplace bullying.
Underperformance should be dealt with promptly and
appropriately by an employer, as employees are often unaware
they are not performing well and so are unlikely to change their
performance. Best practice employers understand that issues that
are not addressed promptly also have the potential to become more
serious over time. This can have a negative effect on the business as
a whole as it can affect the productivity and performance of the
entire workplace.
Helpful Hints
Dealing with underperformance can be challenging and confronting for
employees and employers alike, but it does need to be addressed.
Managers need clear procedures, organisational support and the courage
and willingness to manage the issue.
Provide training to managers on how to handle underperformance
issues. It may be helpful to include role play workshops in the
training material so that managers can learn how to approach
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matters in real-life scenarios. Well trained managers are better able
to identify and address issues of underperformance.
If performance problems arise, it is crucial that they be resolved early. The
longer that poor performance is allowed to continue, the more difficult a
satisfactory resolution becomes, and the more the overall credibility of
the system may suffer.
Not every underperformance issue needs a structured process.
Explore other options for improving performance, such as the use
of continuous feedback.
Remember that for performance management to be successful, the
culture of the business should be one which encourages ongoing feedback
and discussion about performance issues in open and supportive
environments.
How to Manage Underperformance
A clear system for managing underperformance is good for both a
business and its employees.
Best practice employers are aware that ineffective performance
management can dramatically reduce the level of performance in a
workplace. Employees that perform well can lose motivation if they have
to carry the burden of poor performing colleagues. Also, most employees
who are not performing well would like to improve.
Negative attitudes to performance management, or a lack of
credibility with the process, can be an indication of an inadequate
performance management system. A consistent approach to
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performance management provides opportunities to address
problems and generate effective solutions. A successful
performance management process is one that supports the
workplace culture and is accepted and valued by employees.
Here is an easy to follow step by step guide to managing underperformance.
Step 1 Identify the Problem
It is important to understand the key drivers of
performance or underperformance within the workforce.
It is also important to correctly and specifically identify
the problem. Some common reasons for
underperformance are identified later.
Step 2 Assess and Analyse the Problem
The employer should determine:
• How serious the problem is
• How long the problem has existed, and
• How wide the gap is between what is expected and what is
being delivered.
Once the problem has been identified and assessed, the
employer should organise a meeting with the employee
to discuss the problem.
The employer should let the employee know the
purpose of the meeting in advance so they can
adequately prepare for the meeting.
The employee should be allowed to bring a support
person of their choice or a union representative to
the meeting. Employers working at best practice will
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inform the employee that they can bring a support
person as a matter of process.
Step 3 Meet with the Employee to Discuss the Problem
It is important that the meeting takes place in private
and in an environment that is comfortable and non

threatening,
interruptions.

away

from

distractions

and

The employer should begin by holding a discussion
with the employee to explain the problem in specific
terms. From this conversation, the employee should
be able to clearly understand:
• What the problem is
• Why it is a problem
• How it impacts on the workplace, and
• Why there is a concern.
The employer should discuss the outcomes they wish to
achieve from the meeting.
The meeting should be an open discussion and the
employee should have an opportunity to have their point
of view heard and duly considered. The employer should
listen to the explanation of why the problem has
occurred or to any other comments the employee makes.
When having this type of meeting, it may be useful in
facilitating discussion to refer to recent positive
things that the employee has done to show them that
you also recognise and appreciate their strengths.
Key points for employers to remember when
holding the meeting are to:
• Talk about the issue and not the person
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• Explore the reasons why there is an issue
• Clarify details
• Stay relaxed and encouraging, and
• Summarise to check your understanding of the situation.
And, when discussing shortfalls in any area, it is
important to check that the employee:
• Is aware that it is a task that is required of them
• Has been shown what is required,
• Understands the gap between what is happening and what
is required.
Step 4 Jointly Devise a Solution
Where possible, it is important that a solution is
jointly devised with the employee. An employee who
has contributed to the solution will be more likely
to accept and act on it.
When working out a solution, the employer should:
• Explore ideas by asking open questions
• Emphasise common ground
• Keep the discussion on track
• Focus on positive possibilities, and
• Offer assistance, such as further training, mentoring,
flexible work practices or redefining roles and
expectations.
A clear plan of action should be developed with the
employee to implement the solution. This can be in
the form of a performance agreement or action plan.
A performance agreement or action plan can:
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• Reflect an understanding of performance expectations and
what is to be achieved over the specified time period
(performance improvement milestones)
• Clarify roles and responsibilities of the employee
• Include strategies for training and career development
• Include timeframes for improvement (these may vary
depending on the issue and needs of the business, however
it is important to give an employee adequate time to improve
their performance)
• Reinforce the value and worth of the role being performed.
A date should be set for another meeting with the
employee to review progress and discuss the employee’s
performance against the agreed action plan.
The employer should keep a written record of all
discussions relating to underperformance in case
further action is required. Generally, it may also be
used as evidence if legal action is taken about the
matter.
Helpful hint
When devising a solution, make sure it is clear and
easy to follow and does not rely on ‘performancemanagement speak’. Use everyday language to avoid
alienating both managers and employees. For
example, if terms such as ‘KPIs’ (Key Performance
Indicators) aren’t part of everyday language, don’t
use them in performance discussions and
agreements.
Step 5 Monitor Performance
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The employer should monitor the employee’s
performance and continue to provide feedback and
encouragement.
A meeting to review and discuss the employee’s
performance should be held even if there is no
longer an issue. This enables both parties to
acknowledge that the issue has been resolved. The
employer should provide both positive and negative
feedback to the employee and should work with the
employee to ensure that performance
improvements are sustained.
More serious action may need to be taken if the
employee’s performance does not improve including
further counselling, issuing formal warnings and
ultimately if the issue cannot be resolved,
termination of employment.
Termination of Employment
If an employee’s performance does not improve to an acceptable
standard, termination of their employment may be an option.
Employers cannot dismiss their employees in circumstances that are
‘harsh, unjust or unreasonable’. What is harsh, unjust or
unreasonable will depend on the circumstances of each case.
However, it is important to be fair to employees particularly when it
comes to termination of employment. They should be given reasons
for dismissal and an opportunity to respond to those reasons.
Importantly, employers with fewer than 15 employees (based on a
simple headcount) will be covered by special dismissal arrangements
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which are different to those that apply to larger businesses. The
special arrangements that apply to employers with fewer than 15
employees are:
• Employees will need to have worked for the business for 12 months in
order to be eligible to make a claim for unfair dismissal, and
• If a small business employer strictly follows the small business fair dismissal
code and the dismissal of their employee is not harsh, unjust or
unreasonable, then the dismissal will be deemed to be fair. It is best
practice to follow the code and fill out the small business fair dismissal code
checklist at the time an employee is dismissed and you should keep the
checklist with your records as it will assist you if an employee makes an unfair
dismissal claim.
You should also ensure that you provide the employee with their
entitlements such as their notice of termination and any annual leave
that they have accrued.
Common Performance Issues
The following provides a summary of common issues faced by
employers and employees when managing performance and
identifies key ways to improve performance management systems
in the workplace.
Common Performance Issues
Issue:
• Employee does not undertake work as required, showing signs of apathy
and laziness.
• Employee does not appear to understand job requirements or directions.
Possible Causes:
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• Job content and design
• Inappropriate job fit
• Personal or external issues.
Actions:
• Begin with informal performance discussion
• Be clear about the performance requirements and expected contribution
of the role to the work of the business.
• Focus on interest in work tasks, and how they might be improved.
• Explore options for opportunities in other areas of thebusiness, if possible.
• Refer to counselling service if personal circumstances are impacting performance.
Issue:
• Employee will not follow directions or perform tasks as required.
Possible causes:
• Failure to understand what is required
• Inability to perform tasks
• Personal issues.
Actions:
• Begin performance improvement process starting with informal discussions
around what is required in the position. Look at possible options for training
and development if a skill deficit is identified.
• Commence formal performance management process if no improvement
forthcoming.
Issue:
• Employee fails to acknowledge they are underperforming.
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Possible causes:
• Performance issues have not been adequately explained
• Process has not been adequate applied.
• Employee does not accept management assessments.
Actions:
• Re-establish expected outcomes, use evidence of how performance has
failed to meet expected standards, explain the impact of this on the success
of the business.
• If necessary commence formal performance management process.
Issue:
• Employee does not complete work tasks to the required standard.
Possible causes:
• Lacks the required skills and capabilities.
Actions:
• Identify training and development opportunities as a part of performance
improvement plan.
• If employee fails to develop required skills, progress through performance
management process to possible options such as reassignment of duties, or
transfer to another area to achieve a better job fit (if possible)
• Review recruitment practices to ensure appropriate selection decisions are
being made.
Issue:
• Employee is cynical of work environment and tasks, bringing negative
opinions to the work environment.
Possible causes:
• Has become disillusioned with work environment
• Fails to understand value of work being undertaken.
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Actions:
• Establish team culture based on respect and support.
• Re-establish role of the position, and the value of outcomes delivered by
the organisation.
• If possible, explore opportunities for career transition and movement.
Issue:
• Employee is regularly absent without cause.
Possible causes:
• Job content and design
• Inappropriate job fit
• Management style
• Personal or workplace issues.
Actions:
• Identify cause behind absenteeism
• Explore possible strategies for job redesign, job fit, changes to working
arrangements, management of health issues.
• Re-establish expectations of attendance.
Checklist for Employers when Managing Underperformance
• Ensure employees clearly understand what is expected of them
• Clearly identify and then assess the problem
• Organise a meeting with the employee to discuss the problem
• Give the employee time to prepare for the meeting
• Allow the employee to bring a support person to the meeting
• Conduct the meeting in a private, non-threatening, comfortable and quiet location
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• Define and explain your concerns to the employee in specific terms
• Give the employee a genuine opportunity to respond before considering
your actions
• Where an employee’s performance is suffering due to the employee’s
personal circumstances, refer the employee to professional help or
counselling
• Clearly outline the improvement required and the consequences of
continued poor performance
• Devise a solution with the employee to improve performance
• Develop an action plan which includes performance improvement
milestones and time frames for further review
• Schedule another meeting to review the employee’s performance against
the agreed action plan
• Document all discussions, including actions to be taken
• Monitor the employee’s performance and continue to provide feedback
• Follow any steps set out in an applicable industrial instrument (such as a
modern award or enterprise agreement), the employer’s policies and
procedures and the employee’s employment contract concerning
performance management
• For small business, know and comply with the Small Business Fair Dismissal
Code (available through the Fair Work website).
Further information is available at http://www.fairwork.gov.au/aboutus/policies-and- guides/best-practice-guides/managingunderperformance#underperformance.
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Plan and Implement Systems to Ensure that Mentoring and Coaching
are Provided to Support Individuals and Teams to Effectively,
Economically and Safely Use Resources
Coaching and Mentoring for Improvement
Up to this point, we have examined the process of improving your
plan. However there may be times when it is not your plan that is at
fault – rather it is your staff whose performance may be causing
the plan to falter. What can you do in these circumstances?
• Coaching
Coaching is a process whereby an employee is provided with
feedback – this feedback is of a specific nature and is intended
to assist the employee in finding ways of improving their current
levels of performance.
• Mentoring
Mentoring is used to help employees who show promise – but
that promise is not backed up by performance – this often is
due to personal problems, lack of confidence or motivation. The
mentor is an individual who is more experienced at the job and
who can offer a place to turn to for guidance and assistance.
• Training
If a problem is related to lack of knowledge in a specific skill –
training becomes a very important tool. Training is used to
improve skills or knowledge in a specific area – but of course if
the problem lies elsewhere – for example a lack of motivation –
training will not be a great deal of help.
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Negotiate Recommendations for Variations to Operational Plans
and Gain Approval from Designated Persons/Groups
Because few projects run exactly according to plan, procedures and
strategies should be established for managing changes to the
original project plan that may arise from:
• Variations to or refinement of stakeholder or organisational requirements
• The eventuation of risks identified in the project brief
• Project targets being exceeded
• Unforeseen difficulties.
Control mechanisms may include but are not restricted to:
• Reporting procedures (eg. project variation report)
• Documentation (e.g. contract variation form)
• Corrective actions (e.g. contingency plan).
• Authorisations.
Examples of authorisations:
• The Project Manager may vary milestones by up to one week without
further approval.
• Non-labour budget expenditure on the project is to be in accordance with
expenditure delegations and approval processes relevant to the General
Manager Corporate and Executive Services office budget.
• On task time for each working group member can be varied as necessary to
achieve specific deliverables.
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Your control mechanisms should allow the project team or project
manager to respond quickly to a variety of scenarios, varying in their
extent and causes, and their impact on project timeframes, budget
or quality.
For most minor changes (such as minor variations to user
requirements and minor variations in timeframe usually longer
rather than shorter), a simple process for reporting, and negotiating
variations will suffice to keep the project on track. You may wish
to develop a Project Exception Report, or a similar document to
record any changes that occur throughout the project.
For more significant project risks (such as major funding or political
obstacles, changes to the project objectives, or shifts in the
organisation’s understanding of the problem), a contingency plan
should be developed as part of project risk management during the
project planning stage.
Develop and Implement Systems to Ensure that Procedures and
RecordsAssociated with Documenting Performance Are
Managed in Accordance with Organisational Requirements
Monitoring Activities
Organisations will usually undertake one of two types of monitoring
activities to understand how the organisation is performing and to
identify those areas which require further attention. Monitoring
will only be useful if a number of criteria are met. These are:
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RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
• Clearly defined objectives
• Adequate resources to carry out the monitoring
• Appropriate performance measures
• Senior management support for using results to improve performance
• Regular review of objectives and indicators to make sure they remain relevant.

Two types of monitoring activities are
performance monitoring.

compliance monitoring and

1. Compliance Monitoring
Accurate, up-to-date records of the organisation’s compliance
activities should be maintained to assist in the monitoring and
review process and demonstrate conformity with the
compliance program.
Organisations can monitor their compliance by:
• Benchmarking against previous records management self-assessment
surveys or audit results to assess improvements or to identify issues of
non- compliance
• Undertaking a compliance audit using internal auditors or an external
party to provide an independent assessment of the organisation’s
records management program, practices and systems.
2. Performance Monitoring
Performance monitoring involves an in-depth analysis of a
process or project, to determine whether it is efficient and
effective. It involves developing criteria, conducting
interviews and examining documentation to determine how
the process or project is conducted.
Organisations typically measure performance to determine if
a process or practice is effective and whether objectives or
targets are being met, and therefore whether performance is
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
satisfactory. Measuring performance allows the organisation
to not just measure whether an outcome is being achieved,
but how well or the degree of satisfaction of the outcome; in
this way it is a ‘qualitative’ form of measurement. Performance
measurement can also assist the organisation to determine
how capable it is, and whether current practices and the
organisation’s capability can be extended to new practices or
processes.
This type of monitoring can be undertaken as part of an internal
audit process. Performance monitoring activities can range from
monitoring:
• Overall performance of the organisation’s records management program
• Recordkeeping by business units, workgroups or individuals
• Records management processes
• Records management systems
• Delivery of records management services by service providers
• Assessing the records management capability of the organisation.
Performance monitoring can also include targeted assessments of
recordkeeping, for example assessing high risk business areas to
ensure that records are being created and captured, and that
records are adequate (i.e. are the records being created and
captured adequate for providing evidence of the business of the
organisation?).
The starting point for some performance monitoring activities
may be the identification of a business issue/problem. The
organisation can analyse the problem using the relevant tool
and develop a solution which may involve updating processes
or developing new processes.
Organisations can monitor their performance by:
• Conducting assessments using the plans, goals and objectives of the
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
records management program
• Assessing feedback from clients of the services provided by the records
management program
• Benchmarking against standards such as as/ISO 15489 and standards
issued by related industry bodies.
• Assessing the level of understanding and use of records management
policies and procedures by staff
• Assessing progress against the organisation’s storage and disposal plan
• Conducting an internal audit of recordkeeping and/or management of records
• Conducting detailed reviews of high risk business areas to confirm that
records are being created and captured into the recordkeeping system.
Organisations may also seek independent or external performance
monitoring of their organisation’s recordkeeping and management of
records, for example, auditors can undertake both performance and
compliance monitoring.
Recordkeeping Failures
Usually performance monitoring should be incorporated into regular
activities of the organisation’s records management program and
the objectives for monitoring should fit with the objectives of the

program and the organisation’s business plans and are
start of the yearly planning cycle.

set at the

However, there may also be times when particular recordkeeping
events, for example, work to address critical recordkeeping failures,
create the need for special monitoring. These events may be due to
monitoring processes, audit reports by an auditor, lack of
compliance with legislative or industry requirements or matters
raised informally by staff or members of the public.
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
The performance monitoring stages outlined below can be followed
in these instances. Whether part of regular monitoring activities or
special purpose monitoring, it is important to target your objectives
and measures at the issue to be addressed.
Using Risk Analysis to Prioritise Activities
Assessing the business of your organisation, determining the high risk
business processes and the records created as part of these processes
could be a good starting point for identifying performance objectives and
for determining what performance measures you need. Alternatively you
may prioritise monitoring activities by identifying areas of possible risk of
recordkeeping failure, such as failure to create records or unauthorised
disposal.
Steps in Monitoring Recordkeeping Performance
There are several steps that are generally used for establishing a
monitoring program for recordkeeping.
1. Setting Performance Objectives
Clearly define performance objectives and their relationship
to the objectives of the records management program.
Planning documentation for the records management
program (ie. the action and strategic planning documentation)
should set out the objectives of the program for the period
of time covered by the plans. These objectives could relate
to very different aspects of the program, including the quality
of records management services, to ensuring the creation and
capture of records across the organisation.
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
2. Developing Performance Measures
Performance measures are the measures by which you assess
whether you have met, or have gone some way towards
meeting, your objectives. They can be a mixture of
quantitative and qualitative measures but should be scoped to
fit your objectives and resources for monitoring. It is no use
having 25 measures requiring daily data collection if you
don’t have the time to collect the data or to analyse and
make use of the results. Don’t waste resources collecting
elaborate statistics that are never used.
3. Collecting the Data
Do not make obtaining information about performance an
onerous task. It should be part of the routine management
processes carried out as part of the records management
program. Where specific activities do need to be carried out,
e.g. customer surveys, make sure that the purpose of these
activities is clearly defined and well understood, and that they
happen only as often as is necessary.
4. Analysing Results
Having carried out the monitoring, you need to analyse the
information you have collected. Check results against current
performance targets. It is useful to also review performance
against the performance of the records management program
in previous years so that you can monitor trends in your
services.
If you are getting poor performance results, analyse the
records management program elements to find out the cause.
Be aware that sometimes the real causes can be beyond the
control of the program.
5. Implementing Performance Improvements
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
This is an important stage in the performance measurement
process – there is no point monitoring if you are not going to
do anything with the results.
Having identified the gaps and the causes of problems then
develop strategies to fix these. These may be ‘quick wins’ or
may need to be factored into your longer term planning.
Use the information to report to management and to feed into
future planning and review cycles. This is where ‘soft’ factors
may come into play with issues of change management,
influencing senior managers to secure adequate resources, to
support necessary changes or to upgrade tools.
Having the hard data to back up your analysis will be useful in
securing management support. This also reinforces the link to
planning, as objectives for the records management program
should be closely aligned to higher-level corporate objectives.
6. Reporting and Review
Don’t forget this stage. As with any part of a program, you need
to make sure that your monitoring activities are focused on
the aspects of recordkeeping and the records management
program that you need to know about. Do not monitor
something just because you always have done so in the past.
Note: Trend data is very useful in demonstrating improvements
over time or causes for concern over time. This relies on
consistently measuring the same activity over time using the same
criteria. Keep these long term measures under review to ensure
that they are still relevant to your performance planning.
The improvements that you decide to make should be recommended
based on a number of reasons. You should consider them in detail
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
before recommending them, and your consideration should include
an analysis of:
• Operational Implications
Operational implications are another important consideration.
How will the changes that you decide to make influence the
organisation’s procedures and policies? Will any additional
training need to be provided? Think carefully about how the
changes you are recommending will affect other parts of the
organisation and the way things are done.
• Risk
Whenever a new system is introduced into an organisation, or when
changes are made, there is always an element of risk. You should
consider risk when you are making recommendations. What is the
risk that the recommendation will cause further problems? Think
through the risk, and determine whether the reward (in terms of
actual improvements) outweighs the risk of its implementation
within the existing system.
• Feasibility
How feasible are the improvements, given the budget and
resources that you have been allocated. Does your organisation
have the expertise to appropriately implement the system? Can
the improvement actually be made to work given the current
state of the organisation?
If the recommendations that you make will require changes to the
actual work plan itself, it is important that you establish timelines
for this to happen. It should be implemented in a timely fashion,
rather than allow current problems to exist in the system any longer
than they have to. You also need to carefully document changes,
ensuring that all staff are aware of them, and know where they can
find details of the changes if they require this information.
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
Activity Three – Testing the Theory
Jon’s wages are tied to his productivity. His base wage is $10 an
hour. This week he worked 42 hours, and his performance was found
to be 105% of the expected performance for a week. What should his
pay be?
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Do you think this form of incentive would improve performance in your workplace?
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Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Key Points Element 3
• Develop, monitor and review performance systems and processes to assess progress
in achieving profit and productivity plans and targets
• Analyse and interpret budget and actual financial information to monitor and review
profit and productivity performance
• Identify areas of under-performance, recommend solutions and take prompt action
to rectify the situation
• Plan and implement systems to ensure that mentoring and coaching are provided to
support individuals and teams to effectively, economically and safely use resources
• Negotiate recommendations for variations to operational plans and gain approval
from designated persons/groups
• Develop and implement systems to ensure that procedures and records associated
with documenting performance are managed in accordance with organisational
requirements.
Business College at International House
RTO Code: 91109 CRICOS 02623G
Level 1, 203 Clarence St, Sydney NSW 2000 | Floor 1, 237 Oxford St, Bondi Junction NSW 2022
3 Searcy St, Darwin NT 0800 | Level 6, 601 Bourke St, Melbourne VIC 3000
info@ihBC.edu.au| www.ihBC.edu.au
Element 3 – ‘True’ or ‘False’ Quiz

True	False
Q	Productivity = Amount of resources used / Quantity produced.
Q	Productivity can be used to measure performance in a range of areas.
Q	Productivity measures are not perfect.
Q	Productivity within your organisation is dependent on both the machinery that you utilise and upon the staff within that organisation.
Q	Worker pay = Number of hours worked * Actual hourly pay.
Q	The trouble with measuring productivity by output direct labour hours only is that the productivity of one factor can be increased simply by replacing it with another factor.
Q	Piece rates pay people based on their hours worked.
Q	Productivity within your organisation is dependent on both the machinery that you use and upon the staff within that organisation.
Q	The methods used to gather information should be aimed directly at obtaining the type of information required to determine whether your objectives are being met.
Q	Work measurement involves using various techniques to obtain direct measurement of the work.

“The world
rewards those
who take
responsibility
for their own
success.”
Curt Gerrish

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