Team Leading Level 2
Understand business
Understand organisational structures
Explain the differences between the private, public and voluntary sectors.
Private – These are owned and are profit making organisations, with decisions coming from one person or a board dependent on the size of the organisation.
Public – these are government financed and controlled at a central level or local level. Finance for these organisations comes directly from government and taxes.
Voluntary – These are not-for-profit organisations and are usually charitable trusts. Although the relationship between voluntary/third sector organisations and public sectors is narrowing as governments commission more of the third sector into their work in the public sector.
Explanation of three features and responsibilities of different business structures.
Organisational feature structures can be:
•Matrix
•Functional
•Product
•Customer
•Geographic.
Responsibilities of each structure can include:
•Matrix – has both vertical and horizontal reporting lines and so means that different people can work together over several different groups. The issue with this can be when one person has to take direction from 2 different managers/leaders and then decide how work is prioritised.
•Functional – structure of this group is by different functions performed e.g. HR, operations etc. The advantages of this are that groupings are separated by expertise. However this can mean that each group operates in isolation and does not take into account other aspects of the organisation.
•Product – this is headed up by one main person who oversees all aspects of the related product, meaning each product can be treated individually without impacting on the other products being delivered.
•Customer – done to ensure that specific customer expectations are met by a customised approach to service e.g. NHS
•Geographic – better supports logistics of different customer demands and needs. Reporting lines are normally upward to a central overseeing person.
Explain the relationship between an organisation’s vision, mission, strategy and objectives.
The vision gives the organisation’s overall purpose and goals and is usually uplifting and positive in order to inspire. The vision links into the mission as the mission is the overriding direction and purpose for an organisation. The mission is short term and has primary objectives; this is the foundation of an organisation’s strategic plan. It is also the foundation for the strategic planning process, which then feeds into setting the standards for the organisation and the objectives of what needs to be done in order for the organisation to achieve its mission.
Understand the business environment.
Describe the internal and the external influences on a business.
internal influences can be:
•Management changes
•Staff morale
•Financial changes
•Resource changes
•Cultural changes.
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external influences can be:
•Competitor threat
•Economic changes
•Industry changes
•Legislative changes
•Government change.
Explain the structure and use of a strength, weakness, opportunity and threat (SWOT) analysis.
A SWOT is a structure planning tool that can be used to identify the strengths, weaknesses, opportunities and threats involved with running a business.
Strength and weaknesses of SWOT are:
•can help to determine changes that need to be made
•financial position of an organisation
•good use of technology
•knowledge of workforce
•level of morale
•direction from senior management.
Opportunities and threats of SWOT are:
•is based on external environmental factors e.g. growth or reduction in local trade, charges levied by local government, local activities such as long term development work in area.
Explain why change can be beneficial to business organisations.
Change can be beneficial by: increasing business, ensuring staying ahead of competitors by embracing technology and innovation, increasing productivity and staff morale, increasing sales and revenue.
Explain the health and safety responsibilities that every organisation has.
Organisations’ responsibilities need to include:
•to lead on Health & Safety from the top e.g. board, directors etc
•to include Health & Safety on the agenda at board meetings
•establish effective downward communication systems and management for Health & Safety
•integrate good Health & Safety decisions into business matters
•engaging the workforce to promote and achieve safe Health & Safety conditions
•provide high quality training
•have effective upward communication
•identify and manage Health & Safety risks
•having access to competent advice
•monitoring and reviewing Health & Safety.
Describe sustainable ways of working:
Not printing unnecessary documents, encouraging car sharing, offering flexible working hours, making good use of recycling and training staff on how to work sustainably, use “the cloud” for storage of documents, virtual working to reduce office space and carbon emissions.
Activity: Give examples of ways in which you work in a sustainable way. What improvements could be made?Explain how legislation affects the management and confidentiality of information
Explanation as to how legislation affects the management and confidentiality of information can be:
•information being passed onto third parties without prior consent or knowledge
•deleting personal data and information after it has been used e.g. staff personal details being shredded once the employee has left the organisation (Data Protection Act)
•ensuring that sensitive data is stored so that only authorised personnel can have access to it.
•supplying information to staff and customers under Freedom of information Act.
Understand the principles of business planning and finance within an organisation
Explain the purpose, content and format of a business plan
The purpose of a business plan - what the organisation is trying to achieve or become and how it will take to achieve its objectives, including how it will allocate task and timelines for these.
Explanation of the content and format of a business plan - executive summary, description of the business – what it is, products and services offered, the market it operates in, situational audit e.g. where the organisation is currently, aims and objectives, strategy and tactics that can be used, plans - e.g. marketing, operational, management and organisation, forecasting e.g. sales, financials including data and financial requirements.
Explanation of the format of a business plan - this depends on the presentation context but can be a summary to interest potential investors etc. See above as the content information also forms an appropriate format.
Explanation of the business planning cycle
A plan in a logical sequence that aids the task of company planning. The plans focuses on establishing operational plans that will ensure that the production process is smooth from start to finish. The business plan also ensures that all levels within the organisation can work in tandem in order to benefit the company. The cycle begins with assessment of the company, identifying what the business is about, its goals and where it will operate. This helps to start the planning cycle and then enables the operation processes that then enable the completing process.
Explanation of the purpose of a budget
3 aspects to be mentioned – forecasting for income and expenditure, a decision making tool and finally a business performance monitor.
DEFINITION of 'Budget' An estimation of the revenue and expenses over a specified future period of time. A budget can be made for a person, family, group of people, business, government, country, multinational organization or just about anything else that makes and spends money.
Explanation of the concept and importance of business risk management
This can include: risk management identifies, assesses and prioritises risks and unforeseen events within a business. This is important as the organisation needs to be able to realise its future objectives. If risk management is not carried out, then the likelihood could be that direction will be lost.
Explanation of the type of constraints that may affect a business plan
size of the market, the demand within the market, supply availability, competitors, finance availability, skills, qualities and experience of employees, quality and direction of management teams.
Define a range of financial terminology.
Definitions of a range of financial terminology: price spread, long term loans, beta (measure of risk related to finance), long term debt and long term finance.
business financial terms definitionssource
acid test
A stern measure of a company's ability to pay its short term debts, in that stock is excluded from asset value. (liquid assets/current liabilities) Also referred to as the Quick Ratio.
assets
Anything owned by the company having a monetary value; eg, 'fixed' assets like buildings, plant and machinery, vehicles (these are not assets if rentedand not owned) and potentially including intangibles like trade marks and brand names, and 'current' assets, such as stock, debtors and cash.
asset turnover
Measure of operational efficiency - shows how much revenue is produced per £ of assets available to the business. (sales revenue/total assets less current liabilities)
balance sheet
The Balance Sheet is one of the three essential measurement reports for the performance and health of a company along with the Profit and Loss Account and the Cashflow Statement. The Balance Sheet is a 'snapshot' in time of who owns what in the company, and what assets and debts represent the value of the company. (It can only ever be a snapshot because the picture is always changing.) The Balance Sheet is where to look for information about short-term and long-term debts, gearing (the ratio of debt to equity), reserves, stock values (materials and finsished goods), capital assets, cash on hand, along with the value of shareholders' funds. The term 'balance sheet' is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term 'double entry' - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. The Balance Sheet does not show how much profit the company is making (the P&L does this), although pervious years' retained profits will add to the company's reserves, which are shown in the balance sheet.
budget
In a financial planning context the word 'budget' (as a noun) strictly speaking means an amount of money that is planned to spend on a particular activity or resource. This is typically over a trading year, although budgets apply to shorter and longer periods, and may refer to costs allocated to projects of flexible timescales. An overall organizational plan usually contains the budgets within it for all the different departments and costs held by them. The verb 'to budget' means to calculate and set a budget, although in a looser context it also means to be careful with money and find reductions (effectively by setting and maintaining a lower 'budgeted' or reduced level of expenditure). The word budget is also more loosely used by many people to mean the whole organizational business or operating financial plan. In this context a budget means the same as a plan (and a business plan, or an operating plan or trading plan, etc). For example in the UK the Government's annual plan is called 'The Budget'. A 'forecast' in certain contexts means the same as a budget - either a planned individual activity/resource cost, or a whole business/ corporate/organizational plan. A 'forecast' more commonly (and precisely in my view) means a prediction of performance - costs and/or revenues, or other data such as headcount, % performance, etc., especially when the 'forecast' is made during the trading period, and normally after the plan or 'budget' has been approved. In simple terms: budget = plan or a cost element within a plan; forecast = updated budget or plan. The verb forms are also used, meaning the act of calculating the budget or forecast.
capital employed
The value of all resources available to the company, typically comprising share capital, retained profits and reserves, long-term loans and deferred taxation. Viewed from the other side of the balance sheet, capital employed comprises fixed assets, investments and the net investment in working capital (current assets less current liabilities). In other words: the total long-term funds invested in or lent to the business and used by it in carrying out its operations.
cashflow
The movement of cash in and out of a business from day-to-day direct trading and other non-trading or indirect effects, such as capital expenditure, tax and dividend payments.
cashflow statement
One of the three essential reporting and measurement systems for any company. The cashflowstatement provides a third perspective alongside the Profit and Loss account and Balance Sheet. The Cashflow statement shows the movement and availability of cash through and to the business over a given period, certainly for a trading year, and often also monthly and cumulatively. The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial.
cost of debt ratio (average cost of debt ratio)
Despite the different variations used for this term (cost of debt, cost of debt ratio, average cost of debt ratio, etc) the term normally and simply refers to the interest expense over a given period as a percentage of the average outstanding debt over the same period, ie., cost of interest divided by average outstanding debt.
cost of goods sold (COGS)
The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = gross profit. Effetively the same as cost of sales (COS) see below for fuller explanation.
cost of sales (COS)
Commonly arrived at via the formula: opening stock + stock purchased - closing stock.
Cost of sales is the value, at cost, of the goods or services sold during the period in question, usually the financial year, as shown in a Profit and Loss Account (P&L). In all accounts, particularly the P&L (trading account) it's important that costs are attributed reliably to the relevant revenues, or the report is distorted and potentially meaningless. To use simply the total value of stock purchases during the period in question would not produce the correct and relevant figure, as some product sold was already held in stock before the period began, and some product bought during the period remains unsold at the end of it. Some stock held before the period often remains unsold at the end of it too. The formula is the most logical way of calculating the value at cost of all goods sold, irrespective of when the stock was purchased. The value of the stock attributable to the sales in the period (cost of sales) is the total of what we started with in stock (opening stock), and what we purchased (stock purchases), minus what stock we have left over at the end of the period (closing stock).
current assets
Cash and anything that is expected to be converted into cash within twelve months of the balance sheet date.
current ratio
The relationship between current assets and current liabilities, indicating the liquidity of a business, ie its ability to meet its short-term obligations. Also referred to as the Liquidity Ratio.
current liabilities
Money owed by the business that is generally due for payment within 12 months of balance sheet date. Examples: creditors, bank overdraft, taxation.
depreciation
The apportionment of cost of a (usually large) capital item over an agreed period, (based on life expectancy or obsolescence), for example, a piece of equipment costing £10k having a life of five years might be depreciated over five years at a cost of £2k per year. (In which case the P&L would show a depreciation cost of £2k per year; the balance sheet would show an asset value of £8k at the end of year one, reducing by £2k per year; and the cashflow statement would show all £10k being used to pay for it in year one.)
dividend
A dividend is a payment made per share, to a company's shareholders by a company, based on the profits of the year, but not necessarily all of the profits, arrived at by the directors and voted at the company's annual general meeting. A company can choose to pay a dividend from reserves following a loss-making year, and conversely a company can choose to pay no dividend after a profit-making year, depending on what is believed to be in the best interests of the company. Keeping shareholders happy and committed to their investment is always an issue in deciding dividend payments. Along with the increase in value of a stock or share, the annual dividend provides the shareholder with a return on the shareholding investment.