A number of management theories and terminologies are used in the VCE Business Management Study Design 2023–2027. The following material is provided as an outline of some of the commonly referred to ones in this study design. The material is designed as teacher advice to guide the scope and context of content delivery but it is not designed as a specific glossary list to be learnt verbatim by students, nor is it meant to be a comprehensive expression of the terms, concepts or theories, and further reading of the source and referenced material is encouraged to gain a deeper understanding of each theory.
Corporate social responsibility
There are a number of definitions (some of which are included here) for ‘corporate social responsibility’, often abbreviated to CSR. In a broad sense CSR refers to a business’s initiatives to assess and take responsibility for the company's effects on environmental and social wellbeing. The term generally applies to efforts that go above and beyond what may be legally required by regulators or environmental protection groups, as well as ethical considerations regarding its workforce and their families.
The World Business Council of Sustainable Development definition of CSR
Corporate social responsibility (CSR) is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large.
International Organization for Standardization’s Guidance Standard on Social Responsibility, ISO 26000, published in 2010, says:
Social responsibility is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour that:
- contributes to sustainable development, including the health and the welfare of society
- takes into account the expectations of stakeholders.
Therefore, for the purposes of the VCE Business Management Study Design 2023–2027, CSR takes into account an approach that is both ethical and socially responsible. It is where a business goes above and beyond legal expectations required by regulators, to express concern for how its practices impact on the environment, societies’ health and welfare, and demonstrates an ethical concern for its workforce.
Examples of CSR behaviour include:
- reducing a business’s carbon footprint
- using only fair trade ingredients
- providing a flexible work atmosphere for its employees
- giving nonprofit organisations a portion of a business’s proceeds
- supporting community education through philanthropic donations of money or equipment
- making donations of time or money to charities
- lessening noise pollution from a factory
- allowing employees to volunteer their time for other nonprofit organisations
- ensuring the supply chain is also behaving with a CSR approach
- recycling paper use
- using renewable energy
- sponsoring local events
- employing local workers
- ethical marketing
- waste management.
Efficiency
This is a term used throughout the VCE Business Management Study Design 2023–2027. Students are not required to have an in-depth academic- or economic-based knowledge of productive, allocative, intertemporal or dynamic efficiencies. For the purposes of this study design, efficiency is about how well a business uses its resources (time, raw materials, labour, machinery, technology etc.) in producing a good or service. Therefore, it is a broad aim or objective; for example, to become more efficient so as to reduce waste of time or raw materials. Efficiency for the purposes of this study design is a related but separate term to productivity, which is concerned with the ratio of outputs to inputs, and can therefore be expressed as a measurement. The term ‘efficiency’ is also expressed as an objective in the VCE Business Management Study Design 2023–2027 Unit 3 Outcome 1 (that is, for a business striving to be more efficient with its use of raw materials).
Effectiveness
For the purposes of the VCE Business Management Study Design 2023–2027, effectiveness is the extent to which a business achieves its stated objectives. Unit 3 Outcome 1 expresses these stated business objectives as including: to make a profit, to increase market share, to improve efficiency, to fulfil a market need, to fulfil a social need and to meet shareholder expectations; therefore, this would include an assessment of whether these objectives have been achieved.
Strategies
The term ‘strategies’ is used a number of times in the VCE Business Management Study Design 2023–2027 (motivation strategies, performance management strategies, operations strategies, management strategies to respond to key performance indicators, high- and low-risk strategies). It is used as a generic term to represent any business solution to a problem or a course of action to take advantage of an opportunity.
A list of management strategies to respond to key performance indicators and / or seek new business opportunities is stated in Unit 4 Outcome 2 and includes: staff training, staff motivation, change in management styles or management skills, increased investment in technology, improving quality in production, cost cutting, initiating lean production techniques, redeployment of resources (natural, labour and capital), innovation, global sourcing of inputs, overseas manufacture and global outsourcing.
Considerations
The term ‘considerations’ is used throughout the VCE Business Management Study Design 2023–2027 (corporate social responsibility considerations, global considerations). The term is used to reflect concepts, themes, concerns etc. that business managers may commonly take ‘into consideration’ when making business decisions. These considerations may then lead to strategies being implemented by business managers to take account of them.
Proactive and reactive approaches to change
The term ‘proactive’ for the purposes of the VCE Business Management Study Design 2023–2027 refers to the intent for businesses to take action prior to a competitor taking it, or prior to poor key performance indicators data which requires a strategy response to this data. It is therefore about initiating strategies to seek new opportunities.
Whereas a ‘reactive’ approach to change refers to a business’s response to data such as key performance indicators (KPIs) indicating an area of the business that is not performing so strongly and requires addressing, or a competitor entering a new market which then requires a response from the business. The strategies the business initiates may be similar for both proactive and reactive approaches but it is the driving force for the implementation of these strategies that differs.
Contemporary business case study
This term appears throughout the study design and refers to a real-world business example drawn from the past four years. These examples can be drawn either from Australia or throughout the world. The purpose of the four-year framework is to keep the study current and engaging for students and applicable to the real world. The four-year duration extends back from the full year of that year’s VCE Business Management examination (for example, in the November 2023 VCE Business Management examination students can refer to business examples up to and including the full 2020 year (2020, 2021, 2022 and 2023).
Motivational theories
Motivation can be defined as the practices or factors that drive a person to perform at their best. There have been many studies of motivation resulting in theories that can be applied to the workplace and the VCE Business Management Study Design 2023–2027 focuses on three groups of these theories.
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Needs-based theories work on the principle that the satisfaction of needs leads to motivation. An example of this is Maslow’s Hierarchy of Needs Theory.
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Goal-setting theories work on the principle that the achievement of goals gives a sense of satisfaction that is motivational. An example of this is the theory developed by Locke and Latham.
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Contingency theories attempt to explain and understand the process by which motivation occurs. An example of this is the Four Drive Theory developed by Lawrence and Nohria.
Maslow’s Hierarchy of Human Needs Theory
One of the best known, and arguably the most influential theory of motivation, is the one developed and proposed by Abraham Maslow in the 1940s. Maslow reflected on the psychological nature of what drives human behaviour.
Maslow’s work was largely focused on human potential and the main focus of attention was on the concept of self-actualisation. He became, through that idea, a leading figure in the human potential movement of the 1960s (Shaw and Colimore 1988).
Maslow’s theory has an elegant simplicity and apparent logic. Humans are motivated by the driving force of unfulfilled physiological and psychological desires or needs.
There are essential logical premises to Maslow’s theory.
- There are five
universal types of human needs that can be observed and defined.
- There are
lower order needs and
higher order needs.
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Deficit principle – when an individual has unmet needs, these motivate the individual to pursue satisfaction. Satisfied needs do not motivate individuals.
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Progression principle – needs differ in terms of their primacy in driving behaviour. Lower order needs ‘trump’ higher order needs and must be satisfied first before progressing up to higher order needs. Hence the hierarchy.
Lower order needs can be seen to relate more to external/physical factors. Higher order needs become progressively more about internal / psychological factors (Schermerhorn et al. 2014).
Locke and Latham’s Goal Setting Theory
The key contributors to our understanding of goal setting are Edwin Locke and colleague Gary Latham (Locke, E and Latham, G 2002). Of key interest to Locke was the achievability of goals set and the power of goal setting as it influences motivation. Goals can be set in ways that increase or decrease motivation and performance.
Locke and Latham’s principles of goal setting are much richer than SMART goals and for the purposes of the VCE Business Management Study Design 2023–2027 teachers are encouraged not to use the SMART principles to replace Locke and Latham’s Goal attributes.
- Goal Attributes
- Challenge
- Achievable
- Clear and Specific
- Goal Mechanisms
- Direction – goal focus attention and action
- Effort
- Persistence
- Strategy development
- Feedback
- Goal Choice
- Goal Commitment
Nohria’s Four Drive Theory
One of the most contemporary theories of motivation is the Four Drive Theory, which was proposed by Harvard Business School Professors Paul Lawrence and Nitin Nohria in 2002.
The Four Drive Theory is based on recent understanding of neuroscience and reflects the pervasive role of emotions in affecting decisions and behaviour (McShane et al. 2014).
The four drives identified include:
- Drive to acquire
- Drive to bond
- Drive to learn
- Drive to defend.
There are parallels that can be drawn with Maslow and others; for example, social needs and the drive to bond.
This theory argues that the four drives each feed into an individual’s mental skill set, which is subject to social norms, personal values and past experience. In other words, drives influence goal-directed behaviour when an individual choses courses of action that are:
- socially acceptable (in an organisational context this includes cultural norms)
- consistent with their own values
- influenced by prior learning of what works and doesn’t work.
In this respect, the model is a contingency theory, since the impact of the existence of needs is moderated by the three individual factors.
References
de Brabander, Cornelis J and Martens, Rob L 2014, ‘Towards a unified theory of task-specific motivation’, Educational Research Review 11, pp. 27–44
Flake, Jessica Kay et al. 2015, ‘Measuring cost: The forgotten component of expectancy-value theory’, Contemporary Educational Psychology 41, pp. 232–244
Lawrence, PR 2011, ‘What leaders need to know about human evolution and decision making’,
Leader to Leader (60), pp. 12–16
Locke, EA & Latham, GP 2004, ‘What should we do about motivation theory? Six recommendations for the twenty-first century’, Academy of Management Review, 29(3), pp. 388–403
Locke, EA & Latham, GP 2002, ‘Building a practically useful theory of goal setting and task motivation: A 35-year odyssey’,
American Psychologist, 57, pp. 705–717
McShane, S, Olekalns, M & Travaglione, T 2012, Organisational Behaviour 4e: Emerging Knowledge, Global Insights, McGraw-Hill Education Australia
Robbins, S, Judge, TA, Millett, B & Boyle, M 2014, Organisational behaviour (7th edn) Pearson Higher Education Australia
Schermerhorn, J, Davidson, P, Poole, D, Woods, P, Simon, A & McBarron, E 2014,
Management: Foundations and Applications (5th Asia-Pacific Edition)
Shaw, R & Colimore, K 1988, ‘Humanistic Psychology as Ideology An Analysis of Maslow's Contradictions’, Journal of Humanistic Psychology, 28(3), pp. 51–74
Soper, B, Milford, GE & Rosenthal, GT 1995, ‘Belief when evidence does not support theory’, Psychology & Marketing (1986–1998), 12(5), p. 415
Turner, JH 1987, ‘Toward a sociological theory of motivation’, American Sociological Review, pp. 15–27
Wiley, C 1997, ‘What motivates employees according to over 40 years of motivation surveys’, International Journal of Manpower, 18(3), pp. 263–280
Wilson, PA 2013, The relationship between self-efficacy, self-esteem and locus of control with performance of senior noncommissioned officers (NCOs) in the army (Doctoral dissertation, ProQuest Information & Learning).
Lean management
Lean, as a management philosophy, is a way of thinking. It considers first and foremost what the customer is willing to pay for, or in other words, added value. Activities that do not add value to the end product or customer are defined as waste and should be reduced or eliminated to free up resources to be used for adding value.
Lean management evolved from
Lean manufacturing (also known as lean production) which is a production method aimed primarily at reducing waste of resources within the production system as well as response times from suppliers and to customers.
It was derived from Toyota's 1930 operating model ‘The Toyota Way’ (Toyota Production System, TPS). The term ‘Lean’ was coined in 1988 by John Krafcik, and defined in 1996 by James Womack and Daniel Jones to consist of five key principles: precisely specify value by specific product, identify the value stream for each product, make value flow without interruptions, let customer pull value from the producer, and pursue perfection.
Womack and Jones define Lean as ‘...a way to do more and more with less and less – less human effort, less equipment, less time, and less space – while coming closer and closer to providing customers exactly what they want’. They then translate this into five key principles:
- Value: Specify the value desired by the customer. ‘Form a team for each product to stick with that product during its entire production cycle’, ‘Enter into a dialogue with the customer’ (e.g. Voice of the customer).
- The Value Stream: Identify the value stream for each product providing that value and challenge all of the wasted steps (generally nine out of ten) currently necessary to provide it.
- Flow: Make the product flow continuously through the remaining value-added steps.
- Pull: Introduce pull between all steps where continuous flow is possible.
- Perfection: Manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continually falls.
Lean management takes these
Lean manufacturing principles and applies them to both manufacturing and non-manufacturing service businesses.
The principles of Lean have evolved into numerous different philosophies, principles and values. However, for the purpose of the VCE Business Management Study Design 2023–2027 students will study the four simplified principles of Lean Management:
- Pull – production of the good or service is only started when the customer places an order. The customer order ‘pulls’ at the production system with their demand.
- One-piece flow – the operations process focuses on one good or service at a time.
- Takt – the operations process seeks to create a rhythm whereby all the steps in the production of the good or service are synchronised to create a ‘continuous flow’.
- Zero defects – the operations process strives for perfection by continuously improving until it achieves zero defects.
References:
Ohno, Taiichi 1988, Toyota Production System: Beyond Large-Scale Production. CRC Press, ISBN 978-0-915299-14-0
Shingo, Shigeo1985, A Revolution in Manufacturing: The SMED System. Stamford, Ct.: Productivity Press
Womack, James P & Jones, Daniel T 2003, Lean Thinking: Banish Waste And Create Wealth In Your Corporation, Simon and Schuster, p. 10, ISBN 9781471111006
Womack, James P & Jones Daniel T 2003, Lean Thinking, 2nd Edn, ISBN 978-0-7432-4927-0
Lewin’s Force Field Analysis Theory
Force Field Analysis was created by Kurt Lewin in 1951. Lewin originally used it in his work as a social psychologist. Today, however, it is also used in business for making and communicating decisions on how to achieve goals and visions.
The idea behind Force Field Analysis is that situations are maintained by an equilibrium between forces that drive change and others that resist change. For change to happen, the driving forces must be strengthened or the resisting forces weakened so that the driving forces overpower the restraining forces and a new equilibrium point is established.
Step 1: Define your goal or vision for change.
Step 2: Identify forces for change.
Step 3: Identify forces against change.
Step 4: Assign scores – score each force according to the degree of influence each one has on the plan, and then add up the scores for each side (for and against).
Step 5: Analyse and apply – once the Force Field Analysis has been completed the business can then decide whether or not to move forward with the change based on whether the forces against change outweigh the forces for it; they also consider strategies to strengthen the driving forces or weaken the restraining forces so that successful change can occur.
Reference:
Lewin K (1951) Field Theory in Social Science, Harper and Row, New York
Porter’s Generic Strategies Approach (1985)
Porter’s theory relies on an understanding of two concepts. The first is that this is a generic strategy. In this sense ‘generic’ means that it can be applied to any business or industry. The second is that a business needs to identify and build on its strengths. These are competitive advantages and tend to be in two categories:
- Cost advantage / leadership
- Differentiation
Cost leadership
This is where managers decide that the business will aim to become the lowest cost producer of a product. In order to achieve this the managers may need to review their materials management strategies or consider the remuneration that is offered to employees. It could involve the implementation of new technology to produce products faster and with less waste, hence reducing the business’s costs (including labour costs).
Differentiation
This is where the business can make their good or service seem to have a unique point of difference from its competitors. ‘Differentiation can be based on the product itself, the delivery system by which it is sold, the marketing approach, and a broad range of other factors.’ If this point of difference is valued, their customers may be willing to pay higher prices for this product, rather than those offered by competitors at a lower cost.
Reference:
Porter, Michael E (1998 reprinted), The competitive advantage: Creating and sustaining superior performance. New York Free Press
Peter Senge – the Learning Organisation
Peter Senge wrote
The Fifth Discipline: The Art and Practice of The Learning Organization in 1990.
He defined a Learning Organisation as follows: ‘Learning organizations [are] organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.’
In this way, a business is able to transform with new ideas and a creative energy. His theory is therefore closely linked to corporate culture and developing a corporate culture that reinforces continuous improvement, values creativity, supports trial and error and reflects on current practice in order to develop better products, services and ways of doing things, where the whole business is focused on continuous learning and development.
Senge discusses the five disciplines that are necessary to generate a Learning Organisation. By ‘discipline’ he means theory and technique that must be studied and mastered to be put into practice.
Systems thinking
This is the Fifth Discipline according to Senge. ‘It is the discipline that integrates the disciplines, fusing them into a coherent body of theory and practice. It keeps them from being separate gimmicks or the latest organisation change fads. Without a systemic orientation, there is no motivation to look at how the disciplines interrelate. By enhancing each of the other disciplines, it continually reminds us that the whole can exceed the sum of its parts.’
Systems thinking relies on analysing the relationships that exist within an organisation. By doing this, and looking at the cause and effect of issues, the business can have long-term solutions rather than quick fixes. It is how managers can see the entire organisation, rather than small segments.
Personal mastery
This focus is on the individual employees in a business continuously self-improving. ‘Personal mastery is the discipline of continually clarifying and deepening our personal vision, of focusing our energies, of developing patience, and of seeing reality objectively.’ Senge considers that Personal Mastery reflects developing proficiency in work and becoming committed to life-long learning.
Mental models
‘These are deeply ingrained assumptions, generalisations, or even pictures or images that influence how we understand the world and how we take action. Mental models of what can or cannot be done in different management settings are no less deeply entrenched. Many insights into new markets or outmoded organisational practices fail to get put into practice because they conflict with powerful, tacit mental models.’
In order to generate a Learning Organisation, Senge believes that the Mental Models must be identified and if they are detrimental to the ideals of a Learning Organisation or will restrain a change process, then they need to be replaced with mental models that will have the desired effect.
Building shared vision
‘When there is a genuine vision (as opposed to the all-too-familiar "vision statement"), people excel and learn, not because they are told to, but because they want to. But many leaders have personal visions that never get translated into shared visions that galvanize an organization.’ Senge believes that there needs to be practices that transform an individual’s vision into a shared vision which encourages people to develop a Learning Organisation.
Team learning
‘Team learning is vital because teams, not individuals, are the fundamental learning unit in modern organizations…Occasionally, in business, there are striking examples where the intelligence of the team exceeds the intelligence of the individuals in the team, and where teams develop extraordinary capacities for coordinated action. The discipline of team learning starts with “dialogue,” the capacity of members of a team to suspend assumptions and enter into a genuine “thinking together”. When teams are truly learning, not only are they producing extraordinary results, but the individual members are growing more rapidly than could have occurred otherwise.’
This is an important discipline because it places emphasis on the team rather than the individual. The desired outcome of producing a Learning Organisation is more likely to be achieved if there is team learning.
Reference:
Senge, P 1990, The Fifth Discipline: The Art and Practice of The Learning Organization, Doubleday / Currency, New York.
Principles of Kurt Lewin’s Three Step Change Model
Lewin’s change model was first published in 1947. It was one of the first theories that provided businesses with a process to follow when implementing change. By today’s standards it might appear to be a little simplistic, but many of the change models that been developed since have a basis in Lewin’s model.
Unfreeze
Removing inertia and preparing stakeholders for the change. It involves breaking down the old way of doing things. It reflects the stage in Lewin’s Force Field Analysis where the driving forces have pushed through the restraining forces and have dominance.
Change
The process of transition. In this stage new processes or practices may be introduced to the business. Effectively, the change is put in place. Some support systems may need to be implemented to assist with the smooth transition.
Refreeze
Establishing a new stability and culture. This may require new policies to be introduced to reinforce the changed business so that it becomes the status quo. The culture should reflect the changed situation as well.
It is important to note that after completion of the process of change, the business should not remain in the new state forever. As managers monitor their business’s performance through KPIs, the need may arise for further change to be implemented. When this occurs, the change model can be used again for the new circumstances.
Reference:
Lewin, K 1942a, ‘Field theory and learning’ In Cartwright, D. (Ed.1952) Field theory in social science: Selected theoretical papers by Kurt Lewin (pp. 60–86), Social Science Paperbacks: London, England.