May 2009 Examinations Managerial Level Paper P5 – Integrated Management Question Paper 2 Examiner’s Brief Guide to the Paper 14 Examiner’s Answers 15 The answers published here have been written by the Examiner and should provide a helpful guide for both tutors and students. Published separately on the CIMA website (www.cimaglobal.com/students) from mid-September is a Post Examination Guide for the paper which provides much valuable and complementary material including indicative mark information. © The Chartered Institute of Management Accountants. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recorded or otherwise, without the written permission of the publisher.

Business Management Pillar

Managerial Level Paper

P5 – Integrated Management

21 May 2009 – Thursday Morning Session

Instructions to candidates

You are allowed three hours to answer this question paper.

You are allowed 20 minutes reading time before the examination begins during which you should read the question paper and, if you wish, highlight and/or make notes on the question paper. However, you are not allowed, under any circumstances, to open the answer book and start writing or use your calculator during this reading time.

You are strongly advised to carefully read all the question requirements before attempting the question concerned (that is, all parts and/or sub-questions). The requirements for the questions in Sections B and C are contained in a dotted box.

ALL answers must be written in the answer book. Answers or notes written on the question paper will not be submitted for marking.

Answer the ONE compulsory question in Section A. This has nine sub-questions on pages 2 and 3.

Answer ALL THREE compulsory questions in Section B on pages 4 and 5.

Answer TWO of the three questions in Section C on pages 6 to 8.

The list of verbs as published in the syllabus is given for reference on the inside back cover of this question paper.

Write your candidate number, the paper number and the examination subject title in the spaces provided on the front of the examination answer book. Also write your contact ID and name in the space provided in the right hand margin and seal to close.

Tick the appropriate boxes on the front of the answer book to indicate which questions you have answered.

P5 –

Inte

grat

ed M

anag

emen

t

TURN OVER

2

SECTION A – 20 MARKS [the indicative time for answering this section is 36 minutes] ANSWER ALL NINE SUB-QUESTIONS

Instructions for answering Section A: The answers to the nine sub-questions in Section A should ALL be written in your answer book. Your answers should be clearly numbered with the sub-question number and ruled off so that the markers know which sub-question you are answering. For multiple choice questions you need only write the sub-question number and the letter of the answer option you have chosen. You do not need to start a new page for each sub-question.

Question One 1.1 Which ONE of the following is part of the planning phase of a project?

A Determining the project schedule

B Milestone reporting

C Undertaking feasibility studies

D Establishment of project scope (2 marks)

1.2 The integrity based approach to ethics emphasises which ONE of the following?

A Punishing ethical violations

B Compliance to detect misconduct

C Guiding values and behaviours

D Acting in one’s own self-interest (2 marks)

1.3 An activity or process that is needed to meet a customer’s minimum requirement is

referred to as:

A Core competence

B Threshold competence

C Threshold resource

D Unique resource (2 marks)

May 2009 3 P5

1.4 The person who provides the resources for a project is known as:

A The project manager

B The project sponsor

C The project team member

D The project user (2 marks)

1.5 Calculate the float time for a project activity if the earliest start time is day 5, the latest

finish time is day 22, and the total time needed for the work is 14 days.

(2 marks)

1.6 State TWO reasons why the matrix structure is often viewed as being the most suitable for project work relating to new product development.

(2 marks)

1.7 Describe briefly the norming phase of group development.

(2 marks)

1.8 Identify THREE functions that organisational objectives perform.

(3 marks)

1.9 Identify THREE areas covered in the Combined Code “principles” of Corporate

Governance in relation to directors.

(3 marks)

(Total for Section A = 20 marks)

Reminder All answers to Section A must be written in your answer book. Answers to Section A written on the question paper will not be

submitted for marking

End of Section A Section B starts on the next page

TURN OVER

P5 4 May 2009

SECTION B – 30 MARKS [the indicative time for answering this Section is 54 minutes] ANSWER ALL THREE QUESTIONS - 10 MARKS EACH

Question Two B Company produces snack and confectionery products and employs 250 people, most of whom work as factory operatives. A year ago, J was appointed as the day shift manager of the factory. A major part of this role is the responsibility for dealing with human resource issues. In the last year there has been a rise in the number of problems in the factory, including employees constantly arriving late for work, and abusive and aggressive behaviour between employees. This is now impacting on the productivity and performance of the factory.

J is finding that far too much of his time is taken up with trying to resolve the various human resource issues and he has been accused of not treating people fairly. Recently, an employee has taken out a grievance against J regarding how he behaved towards him during a disciplinary interview. The company does have disciplinary and grievance policies set out in the employees’ handbook, but J has not been following these procedures.

J has reluctantly decided that he needs advice on how best to handle discipline in the factory and particularly on how to carry out disciplinary interviews

Required: (a) Distinguish between a disciplinary issue and a grievance.

(4 marks)

(b) Recommend what J should do when carrying out disciplinary interviews. (6 marks)

(Total for Question Two = 10 marks)

Section B continues on the opposite page

May 2009 5 P5

Question Three Q is a design and engineering company that has developed through the amalgamation of smaller businesses. The majority of the work undertaken by Q Company is project based and involves some complex project work and the coordination of sub-projects. However, the way the company has grown has resulted in a range of different project management practices being used in the various parts of the company. Projects tend not to be managed effectively and efficiently, particularly in terms of consistency of reporting and access to project information. Members of project teams complain that too much time is spent searching for paperwork. In addition, the project teams are often unclear on project progress and consequently there are delays in dealing with problems. All these factors undermine project performance.

T has recently joined Q Company and is surprised by the haphazard approach to project management and the fact that project management software is not used by the company. He has decided to put together a case to persuade the Managing Director to invest in such software and for it to become a requirement for all project teams to use it.

Required: Describe how project management software could help Q Company to better manage its projects, with reference to the various stages of the project life cycle.

(Total for Question Three = 10 marks)

Question Four XTX Company, established 15 years ago, is in the business of designing, manufacturing and retailing sportswear and training shoes. It currently holds the licence to design the kits for both the national football and rugby teams of H country, where it is based.

Although these licences are potentially highly profitable, the company is currently facing difficult trading times as a result of the economic downturn and rises in manufacturing costs. Its manufacturing overheads are escalating out of control and although D, the Managing Director, has always had a commitment to manufacturing in XTX’s home country, he is trying to work through some difficult business decisions about the future strategic development of the company.

He is reflecting on whether it would make business sense to outsource all manufacturing activities and focus on design and retail. He is now considering the possibility of outsourcing all manufacturing activities to country L, where costs are significantly lower. In other words, he is assessing the make or buy decision, which forms the basis of transaction cost theory where organisations choose between hierarchy or market solutions.

Required: Discuss the factors D will need to consider in making his decision on whether or not to outsource the manufacturing activity. Your answer should make reference to transaction cost theory.

(Total for Question Four = 10 marks)

(Total for Section B = 30 marks)

End of Section B Section C starts on the next page

TURN OVER

P5 6 May 2009

SECTION C – 50 MARKS [the indicative time for answering this section is 90 minutes]

ANSWER ANY TWO QUESTIONS FROM THIS SECTION – 25 MARKS EACH Question Five P has recently been appointed as the Chief of Police for S City Police Force. She has spent the first six weeks in her new role meeting with employees and representatives from the different communities that her Police Force serves. Many different views and priorities are emerging, but P has observed that her colleagues have no clear direction and have very different views on what the prime purpose of the Police Force should be. There seems to be many inconsistencies in the priorities and objectives of the Police Force.

P feels that it would be beneficial to develop a vision and mission for S City Police Force. She has decided to run a series of events at which the vision and mission will be discussed with different stakeholder groups, including external stakeholders, as well as employees. However, P recognises that these events may be viewed with some cynicism, with some colleagues commenting that these ideas may well be appropriate for profit-making organisations, but not relevant to the Police Force.

P is also concerned that whilst S City Police Force has a strong culture, this is in fact creating barriers to the effectiveness of the way work is done and the willingness of employees to accept the changes she feels are needed. She realises that, in attempting to change the culture, she is likely to meet with resistance and it will not be an easy task. As a first step, she feels that she needs to gain a better understanding of the features of the existing culture.

Required: (a) Distinguish between the terms vision and mission.

(3 marks)

(b) Explain the points P could use to convince colleagues of the benefits of developing a mission for S City Police Force.

(7 marks)

(c) Explain why culture is an important concept and discuss a framework model P could use in order to gain a better understanding of the various aspects that contribute to S City Police Force’s existing culture.

(15 marks)

(Total for Question Five = 25 marks)

Section C continues on the opposite page

May 2009 7 P5

Question Six N is the project manager of a major construction project contracted to deliver a new stadium for V city. The stadium will be used for multiple purposes, including sports such as football and rugby matches, as well as for musical events.

The project is a complex one, and N not only has to coordinate the various contractors involved in the building work, but also manage the expectations of the different interested parties to the project. Whilst there are a number of risks and uncertainties associated with the project, meeting the completion date for the stadium is critical since it needs to be ready to host the final of the Rugby World Cup. As with most construction projects, the company that N works for will receive stage payments for construction work. It will also be subject to financial penalties, linked to both the time of completion of the various stages and also quality requirements.

Required: (a) Explain to N the various ways that the risks and uncertainties associated with the

construction project can be managed. (15 marks)

(b) Explain the different kinds of negotiations N is likely to be involved in as project manager of the construction project.

(10 marks)

(Total for Question Six = 25 marks)

Section C continues on the next page

TURN OVER

P5 8 May 2009

Question Seven F has recently been appointed to the position of Finance Director for P Pharmaceutical Company. This is an internal promotion. F has worked for the company for over 15 years and has built up a wealth of knowledge and experience from the various roles that she has previously performed. She is delighted with the opportunity to take on the role and the greater authority and responsibility she will have for the department’s activities that goes with her new position.

However, three months into the role, F is feeling very stressed as a result of the different demands on her time. Her diary is full of meetings, and her open door policy means that there is a stream of people constantly coming into her office and interrupting her. She is also overwhelmed by the number of emails that she has to deal with and internal reports that she is expected to read. She is, however, finding it difficult to relinquish some of the jobs she did in her previous role. She has retained her role on a number of committees that she was involved with before her promotion and is reluctant to give any up, despite finding it difficult to attend any of the meetings.

In a recent conversation with her mentor, F discussed how stressed she was feeling, and that she felt she did not have time to devote to the more strategic aspects of her role. In response, he suggested that she could perhaps delegate more of her work to the finance team.

Required: (a) Explain the concept of delegation and explain how F and her staff would benefit if she

delegated more of her work. (13 marks)

(b) Identify time management techniques and describe how they could help F.

(12 marks)

(Total for Question Seven = 25 marks)

(Total for Section C = 50 marks)

End of Question Paper

May 2009 9 P5

[This page is blank]

P5 10 May 2009

[This page is blank]

May 2009 11 P5

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS A list of the learning objectives and verbs that appear in the syllabus and in the question requirements for each question in this paper. It is important that you answer the question according to the definition of the verb.

LEARNING OBJECTIVE VERBS USED DEFINITION

1 KNOWLEDGE

What you are expected to know. List Make a list of State Express, fully or clearly, the details of/facts of Define Give the exact meaning of

2 COMPREHENSION What you are expected to understand. Describe Communicate the key features

Distinguish Highlight the differences between Explain Make clear or intelligible/State the meaning of Identify Recognise, establish or select after

consideration Illustrate Use an example to describe or explain

something

3 APPLICATION How you are expected to apply your knowledge. Apply

Calculate/compute To put to practical use To ascertain or reckon mathematically

Demonstrate To prove with certainty or to exhibit by practical means

Prepare To make or get ready for use Reconcile To make or prove consistent/compatible Solve Find an answer to Tabulate Arrange in a table

4 ANALYSIS How you are expected to analyse the detail of what you have learned.

Analyse Categorise

Examine in detail the structure of Place into a defined class or division

Compare and contrast Show the similarities and/or differences between

Construct To build up or compile Discuss To examine in detail by argument Interpret To translate into intelligible or familiar terms Produce To create or bring into existence

5 EVALUATION How you are expected to use your learning to evaluate, make decisions or recommendations.

Advise Evaluate Recommend

To counsel, inform or notify To appraise or assess the value of To advise on a course of action

P5 12 May 2009

Business Management Pillar

Managerial Level Paper

P5 – Integrated Management

May 2009

Thursday Morning Session

May 2009 13 P5

The Examiner for Integrated Management offers to future candidates and to lecturers using this booklet for study purposes, the following background and

guidance on the questions included in this examination paper.

Section A – compulsory Question one consists of 9 objective test sub-questions designed to cover the breadth of the Integrated Management syllabus.

Section B – compulsory Question two examines candidates’ understanding of the difference between discipline problems and grievance issues. It also examines candidates’ ability to recommend what should be done when carrying out disciplinary interviews. It is taken from syllabus Section C, Management of Relationships and addresses the learning outcome “Recommend ways to deal effectively with discipline problems”.

Question three requires candidates to demonstrate their understanding of the benefits of project management software and their ability to describe the different benefits with reference to the different stages of the project life cycle. It is taken from syllabus Section B, Project Management and addresses the learning outcome "Identify methodologies and systems used by professional project managers".

Question four is designed to assess candidates’ understanding of transaction cost theory in making decisions on outsourcing. It is taken from syllabus Section A, The Basis of Strategic Management, and addresses the learning outcome “Discuss concepts in contemporary thinking on strategic management". Section C – two questions from three Question five (a) (b) and (c) are all taken from syllabus Section A, The Basis of Strategic Management. (a) and (b) examine candidates' understanding of the concepts of vision and mission and the benefits of a mission for a particular organisation. They address the learning outcome “Explain the process of strategy formulation”. Question five (c) is designed to examine candidates’ appreciation of why culture is an important concept and their ability to use a framework to help understand the various aspects that contribute to the culture of an organisation. It addresses learning outcome “Evaluate different organisational structures”.

Question six is taken from syllabus Section B, Project Management. Requirement (a) examines candidates' comprehension of risk and uncertainties associated with project work. It addresses learning outcome “Produce a basic project plan, recognising the effects of uncertainty and recommending strategies for dealing with this uncertainty, in the context of a simple project”. Requirement (b) examines candidates’ ability to explain the different kinds of negotiation within the context of a project. It addresses the learning outcome “Identify structural and leadership issues that will be faced in managing a project team”.

Question seven is taken from syllabus Section C, Management of Relationships. Requirement (a) requires candidates to demonstrate their understanding of both the concept of delegation and the benefits derived from delegating. It addresses the learning outcome “Explain the concepts of power, bureaucracy, authority, responsibility, leadership and delegation”. Requirement (b) requires candidates to evidence their awareness of time management techniques. It addresses the learning outcome “Demonstrate personal time management skills”.

May 2009 Brief Guide P5 14

The Examiner's Answers for Integrated Management SECTION A

Answer to Question One 1.1 A

1.2 C

1.3 B

1.4 B

1.5 3 days

1.6 Many projects are often interdisciplinary and require staff and resources from a number of different functional areas, hence a matrix structure would be most appropriate. It can improve decision making by bringing together a wide range of expertise cutting across functional boundaries and encouraging lateral cooperation and communication.

1.7 In this phase of group development, conflict is resolved and guidelines and standards

of behaviour to which members of the group will conform, are established.

1.8 Any three from: Planning Responsibility Integration Motivation Evaluation

(Could also include measurable goals/targets, guide direction, facilitate goal congruence, control, provide basis for tactical and operation objectives.)

1.9 Should have an effective board Clear division of responsibilities between chairperson and chief executive Board balance of executive and non executive members

Could also include: Clear and formal procedure for appointing new directors All directors should submit themselves to re-election regularly The Board of Directors should meet regularly The Board should be supplied with enough information to enable it to carry out its

duties Directors remunerations

May 2009 15 Examiner’s Answers P5

SECTION B

Some of the answers that follow in Section B and Section C are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike.

Answer to Question Two Requirement (a) Disciplinary action requires a manager to use authority to deal with situations whereby an employee has committed some offence, for example continual defective or inadequate work performance, breaking safety regulations, refusing to carry out a legitimate work assignment or poor attitude towards others. In the case of B Company, constantly arriving late for work and the aggressive behaviour would constitute offences requiring disciplinary action.

In contrast, grievance occurs when an individual feels that he/she is being wrongly treated by colleagues, supervisor or manager. This could be in terms of being bullied or picked upon or discriminated against in some way. J’s behaviour during a disciplinary interview made an employee feel that he had been treated inappropriately, and hence has a grievance against J.

Requirement (b) Preparation for the disciplinary interview is an important first stage. J should firstly gather the facts about the particular case concerning the alleged violation and ensure the disciplinary procedures of B Company have been followed. For example, he should establish whether an informal oral warning has been given, the employee concerned has been given notice of the interview, has been informed of the complaint against him and of his right to be accompanied by a colleague.

During the interview J should explain its purpose and outline the charges regarding the offence in an unambiguous manner, so the employee is clear on the reasons for the action. J should go on to explain B Company’s position with regard to the disciplinary issues involved. He should then explain the company’s expectations of the individual with regard to future behaviour, for instance, there should be no repetition of the offence, or performance must improve.

J should explain the reasons for the penalties and explain that an entry will be made in the employee’s personnel record of the formal warning. A record of the interview should be kept in the employee’s staff file for formal follow-up review, and in case of any future necessary action. There should be clear warning given about the consequences of his failure to meet the improvement targets or continuation of inappropriate behaviours. The appeals procedure should then be explained. Finally, J should summarise the proceedings.

Examiner’s Answers P5 16 May 2009

Answer to Question Three It is recommended that Q Company should, in the first instance, purchase an “off-the-shelf package, such as Microsoft Project.These packages would provide the following features that could assist in the project work undertaken by Q Company at the various stages of the project life cycle.

During the first stage of the project, i.e. defining and initiating the project, software can be used by Q Company in undertaking contingency planning and “what if” analysis, allowing project managers to understand the effects of different scenarios. Project management software enables the various scenarios to be calculated relatively quickly and easily than would be the case manually.

In the planning phase, project management software will also make project planning easier for Q Company, in that it will allow the project manager to define the different activities that need to be performed. It can help in the production of detailed project planning documentation and has functions that would assist project managers in the planning of work scheduling. It will also help in the allocation of resources, setting start and completion dates using network diagrams to show the critical path of activities and Gantt chart for resource planning. These can be produced automatically once the project data is input. It will also be possible for project managers to schedule recurring tasks, to set priorities for tasks and to specify ‘must end by’ and ‘no later than’ dates for activities. These functions would also help project managers in Q Company to try different combinations of using different levels of resources and changing deadlines, hence better able to determine the optimum project plan and review relationships between tasks.

During the implementation phase or during project performance, the software could help in a number of ways. It would seem that some of the projects undertaken by Q are complex in nature and involve a number of sub projects and deal with large amounts of data which frequently change during the implementation phase. Project management software is particularly helpful in handling multiple projects and thecomplexity often associated with large projects, particularly if there are many variables. Re-planning can be done quickly, for example estimates may change many times during the project but project management software can produce revised schedules very quickly, and the changes can be reflected in the project plan immediately. Any changes to task lists will automatically create new schedules for the project.

The software facilitates resource planning which should enable the most effective use of the various resources, ensuring during project performance that there are the correct staff levels, equipment and material at the right time. The graphics package will provide visual displays of the usage and availability of resources. This will assist project managers in identifying where there are surplus resources or too few resources.

During the project performance phase, budget and control features of project software will assist Q Company in monitoring and control. For example, actual costs can be quickly compared with budget costs, at both the level of individual activity and for a project as a whole. This will encourage constant tracking of progress, since actual times can be captured and then comparisons made against planned progress enabling project managers to investigate any problem areas without delay.

The software allows both standard and tailored progress reports to be produced. The quality of the documentation will be high, and reports can be extracted and shared with the project team, and other interested stakeholders. This will help in the reporting on progress to the different project stakeholders and will encourage and facilitate constant progress checking. It will also help both in terms of access to information by the project teams, but also with co-ordination of activities and project review.

At the completion stage of the project life cycle, the software can be used by Q Company to produce the completion report, since all information on costs and time will have been captured during the life of the project.

May 2009 17 Examiner’s Answers P5

Answer to Question Four

XTX Company is facing increasing overhead costs, particularly in its manufacturing activities and it is now searching for ways to improve its efficiency. The decision on whether or not to continue to manufacture sportswear and training shoes can be assessed using transaction cost theory whereby the company examines its processes to see if any can be performed at lower cost by external contractors.

Essentially, transaction cost analysis involves examining the way in which XTX resources are organised for manufacturing sportswear and training shoes, with a focus on how best economic efficiency can be gained. It suggests that whilst asset specificity may drive vertical integration, outsourcing activities that are not core should be considered by the company.

The foundation of the theory is a development of the ‘make or buy’ decision. Proposed by Williamson, the theory suggests that an organisation such as XTX can choose between two mechanisms to control and carry out its operations in production or the delivery of service. The two mechanisms are hierarchy or markets.

Hierarchy solutions occur when management decides to own the assets or employ staff directly, in other words internalise transactions. The policies and procedures of the company are used to control resources and their performance. This is the way XTX Company currently operates in that it is currently organised as a vertically integrated organisation, doing as much as possible in-house, for instance, the design, manufacturing and retailing of its sportswear and training shoes.

In contrast, market solutions are when management decides to buy in the use of assets or staff capability from outside under the terms of a contract. This involves an increased reliance on the market and as such the organisation will incur transaction costs. The proposal to outsource the manufacturing of the sportswear and training shoes would suggest that D, the Managing Director, is considering a shift from hierarchy solutions to market solutions. The proposal is based on the assumption that the downstream manufacturing activity can be provided at lower transaction costs by markets.

In making his decision, the Managing Director must assess the costs beyond just the unit cost of manufacturing sportswear to include also the cost of control. In other words, he needs to factor in the transactions costs which are those costs associated with performing a transaction with the companies to which the manufacturing is being outsourced. The increased reliance on outside manufacturers should take into consideration the costs connected with managing the transactions and operating under the terms of the contract. These include additional costs such as those associated with manufacture, specifying what is required, writing and managing the contract, co-ordination, enforcing the contract, and communications with manufacturers.

Whilst the market solution should enable XTX Company to benefit from having access to manufacturing at a lower production cost with partner organisations, there are some issues regarding outsourcing of which D should be aware of. In making his decision, D must investigate whether there are likely to be any problems of, for example, control, security and asset specificity. He should consider the extent to which manufacturers could exploit the vulnerability of XTX, particularly if it uses just one manufacturer as its main supplier. D should also bear in mind potential consequences of dealing with manufacturers in L country which could impact on XTX’s corporate image. In addition, are there any issues regarding the control over the production of the licensed football and rugby strips, for example manufacturers producing counterfeit copies of the football and rugby kit once they have the designs. D should also consider the impact of possible currency fluctuations on the cost.

Examiner’s Answers P5 18 May 2009

SECTION C Answer to Question Five Requirement (a) The vision relates to the desired future state of S City Police, and the aspirations for the organisation, whereas the mission is what it does and who the organisation is for, in other words its raison d’etre. It is concerned with the overriding purpose and reflects the core values of the organisation in line with the values and expectations of the various stakeholders. The mission will essentially provide a broad statement of the purpose of the S City Police Force’s basic function in society in terms of the services it provides. It will also be concerned with the scope and boundaries of the organisation.

Requirement (b)

Developing a mission is just as relevant for a public sector or non profit making organisation as for a profit making organisation. Given that a mission is concerned with why an organisation exists, it should help in specifying the scope and boundaries of S City Police Force’s activities. This should help in providing clarity of purpose which is currently problematic.

The mission will play an important role in the planning process, in that objectives should be set that support the mission. The benefits of developing a mission for S City Police Force is that it would help in providing a basis for consistent planning decisions. It could assist in translating the organisation’s purposes and direction into objectives suitable for assessment and control. The mission is an essential element in the definition of what constitutes a strength or weakness of S City Police Force. It could also act as a benchmark by which plans are judged and should help to ensure consistency in decisions and the evaluation of possible future strategies.

It would also help in establishing clarity on the Force’s goals and ethics. The values incorporated in the mission should relate to the culture and should capture the basic, perhaps often un-stated beliefs of the people who work for S City Police Force.

A mission could help in improving the understanding and support from key groups outside the organisation and hence could help to provide a consistent purpose between the different interest groups and stakeholders connected to S City Police Force.

The mission could be embodied in a mission statement which could be reproduced and used on different communications medium to reinforce the key elements of the mission. Requirement (c) Organisational culture is important since it will have a significant impact on the behaviour and actions of S City Police Force’s employees. It will affect the way employees respond to change and, ultimately, how the organisation performs. This is because culture involves the basic assumptions and beliefs that are shared by the members of an organisation that operate subconsciously. It is often referred to as the “glue” that binds the organisation together, or more simply “the way things are done around here”. Because culture is the taken for granted ways of doing things and routines that develop over time, it contributes significantly to how employees respond and behave in relation to the issues that they face.

The beliefs that underlie culture specify what is important and need to be shared by everyone in the organisation and so it is essential that they are reinforced and widely accepted. This leads to the development of norms of behaviour. The problem with a strong culture is that the norms of behaviour underlying the culture may no longer fit with the changing needs of the organisation, as identified by P.

Culture is difficult to observe, identify and control, but one framework P could use to better understand the different aspects of S City Police Force’s current culture is McKinsey’s seven

May 2009 19 Examiner’s Answers P5

S framework. This can be used to highlight the hard and soft aspects of organisations that can influence culture. For example:

Systems – this element relates to how organisations get things done, for example the formal and informal procedures that will ensure the Police Force operates effectively.

Structure is concerned with having an appropriate structural form to support the Force’s business, and the co-ordination between different areas.

Strategy relates to the actions that are planned in response to environment change in order that the Force can achieve its objectives.

Style relates to the management and leadership which will be critical to the Force because this will convey what is important.

Skills are the key capabilities of the Force. If there is a change in terms of priorities and focus, this may mean that new skills need to be acquired and other skills may become redundant.

Shared values/super-ordinate goals are the guiding beliefs of employees in the Force as to why it exists. Conflict may occur in S City Police Force if the objectives and priorities change but the shared values do not coincide with the change.

Staff are the people in the organisation who will have their own priorities.

The systems, structure and strategy elements of the seven S framework represent the hard or overt aspects of the Police Force’s culture. The softer/covert elements are style, staff and skills. S City Police Force could use the seven S framework to determine the existing aspects of culture which need to change.

(An alternative approach to understanding the different aspects of culture would be to use the different layers of culture, i.e. visible artefacts, beliefs/values, basic assumptions, or alternatively the organisational iceberg framework could be used or Johnson & Scholes Cultural Web.)

Examiner’s Answers P5 20 May 2009

Answer to Question Six

Requirement (a) The construction project to build the stadium will be susceptible to risks and uncertainties but there is a range of techniques that N could use to identify risk and put in place policies to eliminate or reduce these risks and manage for uncertainties.

There are different types of risk. Some risks are quantifiable and can be established using statistical analysis of past occurrences. The probability of a given loss can then be multiplied by its likely cost. Some risks are unquantifiable which makes them more uncertain and difficult to manage. There is also socially constructed risk, which is an aspect of human psychology. In other words, people tend to be poor at the rational assessment of risk, downplaying some and being over-concerned about others.

N should take an overview of the construction project in order to establish what could go wrong during the project’s life cycle and the possible consequences. The five stage process of risk management could help N. This would involve him:

• Identifying and recording risks, for example, in a project risk register • Assessing risks and recording this assessment • Planning and recording risk strategies • Carrying out risk management strategies • Reviewing and monitoring the success of the risk management approach

There are a number of different strategies that could be employed by N to minimise or manage possible risks associated with the construction project, for example:

• Avoidance, whereby N would look to identify the factors that might give rise to risk and remove these factors where possible.

• Reduction or mitigation would require N to appreciate that the potential for risk cannot be removed but analysis has been undertaken to reduce the incidence and/or its consequences.

• Transference, whereby the risk is passed on to someone else, for example an insurer.

• Absorption, where the potential risk is accepted in the hope that the incidence and consequences can be coped with, if necessary.

It is important that N realises that risk management is a continuous process throughout the life of the construction project and procedures must be in place to regularly review and reassess the risks documented in the risk register.

Uncertainty is more difficult to evaluate, and hence N should use contingency planning which involves constructing a number of scenario plans for each risk identified. This would then allow N to look at the project network incorporating each different alternative. It would also allow N to switch to the appropriate plan when the contingency is needed. N could add artificial slack into risky activities, known as buffering, to reduce possible penalties for non-completion of stages on time.

N could also make use of the PERT techniques in the planning phase to help account for uncertainty. This in essence is a form of network analysis of the construction project, but is designed to account for uncertainty.

For each activity an optimistic, most likely and pessimistic estimate of times is made on the basis of past experience or guesswork. These estimates are then converted into a mean time and a standard deviation. It should then be possible to:

• Establish the duration of the critical path using expected times • Calculate a contingency time allowance

This contingency time allowance, stated in a number of standard deviations will indicate the probability of completion within the total time allowed, including a contingency. This technique would help N, particularly since the project could face penalties for non-delivery of certain stages.

May 2009 21 Examiner’s Answers P5

Requirement (b) Negotiation is the process of satisfying the project’s needs by reaching agreement or compromise with others. N, as the project manager, will need to negotiate on a number of different project issues during the life of the construction work. In delivering the project, N has to rely on people over whom he may have no direct authority, for example the sub-contractors.

The project management triangle of time, cost and quality is a useful framework to consider the areas in which N may need to use his negotiation skills to enable the needs of the project to be met. In addition, N will need to negotiate on project priorities, resources, schedules and people issues.

Some specific examples of negotiations N might be involved with are provided below:

N may need to negotiate around issues of cost, for example on setting the budgets in the planning phase and actual expenditure as the construction project progresses, with the project sponsors.

N may find that he needs to negotiate on the time schedules and the timing of various activities, to ensure the deadlines are met. The construction project is time critical in terms of completion date.

N might also need to negotiate on the availability of resources, for example financial resources in terms of funding for the project. This could also be in terms of human resources, i.e. members of the project team, and also equipment needed for the project in order to meet the target date of the stadium being ready to host the Rugby World Cup final. For example, increased labour may be needed to complete critical stages of the build. N may need to negotiate with the different contractors regarding changing the order of certain activities and the time taken in order to meet key milestones in the build linked to stage payments.

There could also be the need to negotiate on quality issues as the build goes ahead, trading off between quality, cost and time. It is likely that the stadium will need to achieve certain specified standards required to meet health and safety regulations. However, this could result in N having to negotiate on the priorities of the project, for example completion on time, or ensuring quality standards are achieved.

Negotiation to resolve disputes between team members might also arise, regarding their roles and responsibilities during the life of the project, particularly between the different groups working for the various contractors.

Examiner’s Answers P5 22 May 2009

Answer to Question Seven Requirement (a) Delegation is the process of assigning tasks and granting authority for their accomplishment. The delegation of tasks can only occur if F herself has the authority to delegate in her role as Finance Director. It would involve F in giving her subordinates the authority to carry out certain aspects of her job. Whilst F could give her subordinates the discretion to make decisions within a certain sphere of influence or carry out tasks, she would still remain fully accountable for the decision or tasks undertaken by her subordinates.

Rosemary Stewart, in discussing effective management, makes the point that managers will not have sufficient time to fulfil their primary roles unless they know how to delegate.

Delegation could bring about a number of benefits for both F and her subordinates including the following:

It will enable the staff within the finance department to gain experience of problems and to take on responsibility. It can be used as a way of assessing the likely performance of an employee at a higher level, and enhance employees prospect for advancement. In this sense, delegation is a way of training staff and preparing them for promotion.

One of the most important benefits of delegation is that it can have a positive impact on motivating staff. Hertzberg found that encouraging employees to take on responsibility is a motivating factor in enhancing job satisfaction and can promote better work. Delegation can help satisfy employees’ higher level needs by giving them more involvement in decision making processes.

Delegation can assist with employee development and self evaluation, since subordinates can be tested under actual conditions. There will be a continuous assessment of staff and this should increase motivation as people are given authority to undertake more demanding jobs. Delegation can encourage the development of specialist expertise.

Delegation could also bring decision making closer to the situations that require them, and potentially improve the decisions since they are being made by those with most knowledge of the problem involved.

Delegation would help F in making the best use of her time. Time is a limited resource and clearly the stress F is experiencing appears, in part, to be due to the excessive demands on her time. It is important that she uses her time to the maximum advantage. Delegating activities, which can be done just as well by her subordinates, will give her more time to do the strategic aspects of her role, making more profitable use of her time. In a sense, this is sound economics, in that successful delegation benefits F and the other employees, enabling all to play their respective roles in improving the effectiveness of the finance function. It should lead to an overall improvement in the strength of the workforce, giving subordinates greater scope and opportunities to develop their knowledge and abilities.

Requirement (b) Time management involves planning to make the best use of time with the desired aim of helping individuals become more efficient and effective. Not managing time can result in stress at work and poor performance as in the case of F. There are some specific techniques that could help F in improving her time management; for example monitoring and planning of the use of time, the allocation of priorities and the scheduling of target tasks and events to be completed.

F could develop her skills in planning and prioritising, and be more willing to delegate. She needs to define her work priorities by clarifying what her new role as Finance Director is and what will constitute excellent performance. F could start to keep an activity list to see how she currently spends her time, perhaps by keeping a diary or log of how long she is spending on different activities. This would help her to identify the non value adding activities she is involved in. She might find she is spending too much time on tasks which she could delegate, for example, giving tasks to members of her team, such as reading reports and then providing her with a summary of key issues. F might also find that she is involved in too many activities which are not central to her role, for instance her membership of committees.

May 2009 23 Examiner’s Answers P5

In addition, she may want to review her open door policy, since perhaps too much time is being used on talking to her colleagues on non important or non urgent issues. F would be advised to block chunks of time in her diary when she can focus on report reading and leaving space for strategic thinking, and not operate the open door policy during this time. F should try to complete tasks with a minimum of interruptions, concentrating on a particular task in hand rather than being interrupted by her colleagues, impacting on her concentration.

F could invest in e-scheduling tools such as electronic diaries and scheduling packages. Scheduling should help F to understand what she can realistically achieve with her time and leave her with enough time for the things that she must absolutely do. It would also help minimise possible stress by over committing herself to others, which would seem is having a detrimental effect on her own performance.

She could compile a ‘to do’ list, prioritising the tasks in order of importance and urgency according to deadlines. Urgent tasks often have short term consequences, whereas important tasks are those with longer term implications. If F concentrates on the urgent jobs, this may be at the detriment of those that are important. Important and urgent tasks should get top priority; urgent but not important tasks should be done soon, but with as little time as possible spent on each. F should start important tasks as soon as she can. Tasks that are neither urgent nor important should go to the back of the queue.

Other practical aspects of time management would include reviewing her task list, perhaps every morning or before leaving work in the evening and working on one task at a time, crossing off completed tasks.

Examiner’s Answers P5 24 May 2009