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    494,

    INSTITUTE OF BANKERS OF SRI LANKA

    INSTITUTE OF BANKERS OF SRI LANKA

    Diploma in Banking & Finance Examination September 2010

    Management & Organization (91)

    Instructions to CandidatesI. Do NOT open this question paper until instructed to do so.2. Read the instructions on the cover of the answer book.3. Time allowed 3 hours4. The Paper consists of 6 questions. Section A consists of one question carrying

    40 marks. Section B consists offive questions carrying 20 marks each.5. Answer the question in Section A and Three (03) questions from Section B.

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    Section A

    All candidates must answer Question 1I. Shaking up the Giant - Not Just a Fairytale at EDS

    Electronic Data Systems (EDS) is a giant in computer outsourcing - a term used to describe whena company turns over its data processing activities to a third-party company. And you'd think thata company in a high-tech field dealing with computer networks and sophisticated data-processingactivities would be relatively open to change and flexible. However, change has not come easy tothe giant.

    EDS was founded in Dallas by Ross Perot and sold to General Motors in 2000. From its earlydays, company has grown to over $8.5 billion in annual revenues and currently is a star divisionat General Motors (GM). EDS's expertise is in processing data for other companies, and they'rethe best in the world at it. But drastic changes in the market place were occurring, and EDS had totransform its way of doing business in order to become more customer oriented. And this requireda major overhaul in employees' mind-sets.The culture at EDS, like that at many service companies, had always been that an employee's jobwas to do things and make changes in response to a customer's request. The new customerfocused culture was going to require more than making adjustments for customers.Instead, employees would now have to anticipate what customer was trying to do. Especially, thisdemanded a change in employees from being order receivers in a traditional top-down corporatehierarchy to being team members who had a significant amount of authority, responsibility,control, and decision-making power to deal with customers. So, how did they do it - how was thegiant's culture transformed?One of the most important things that EDS did was to tell everyone - not just sales people, butengineers and product designers and receptionists - in the organization that they were going tohave to be "people person". But telling employees to "be something" or "do something" isn'tenough. As a manager, you have to set an example and that's exactly what EDS managers did.Working in teams, they set up meetings with clients, took them out to dinner, and expendedintense effort in getting to know the customers. Their actions showed the seriousness of thecompany's commitment to focusing on customers. [n addition, managers shared informationopenly with employees about the company's financial status and condition, market conditions andindustry trends. In this way, employees were aware of the opportunities and challenges that facedthe company. Finally, the employees were told that performance appraisals and rewards weregoing to be based on the strength of their relationships with their customers.Changing an organization's culture is never easy. Yet EDS has been able to transform itself into amore nimble and responsible company. And the company's continued dominance of its industryis not just a fairytale ending!Source: Adapted from Robbins P. Stephen & Coulter Mary (1998), Advanced Management

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    Based on the above case study, you are required to:(a) Explain how EDS could have continued to be highly profitable and successful if it had

    used more conservative, incremental changes. (10 marks)(b) Identify and explain the possible challenges EDS's management might have to face when

    enacting the change in culture and possible ways of overcoming same. (10 marks)(c) Discuss the strategic importance of developing a customer-focused culture. (20 marks)

    (Total Marks 40)

    Section BAnswer 3 questions in this section.2. Strategic Human Resource planning is now being effectively used to identify human resource

    gaps and then use to fill those gaps in advance.(a) Define 'human resource gaps' and explain how strategic human resource planning helps

    to fi II thelse gaps. (10 marks)(b) Discuss the importance of strategic human resource management for an organisation.

    (10 marks)(Total Marks 20)

    3. The process of strategic management is sometimes defined as comprising strategic analysis,strategic choice and strategic implementation.(a) Describe each of these three stages and comment on their inter-relationship. (10 marks)(b) Explain various types of strategic management models which could exist in anorganisation.

    (10 marks)(Total Marks 20)

    4. An organisation is seeking your advice to create a team-oriented approach to productivelymanage its activities. Develop a report advising the management on team development processand possible Iimitations for successful team bui Iding.

    (20 Marks)

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    5. Discuss the impact of recent developments and changes in information technology on;(a)(b)

    Decision Making and Problem SolvingCo-ordination and control

    (10 marks)(10 marks)

    (Total Marks 20)

    6. There is no one best wayorganisational designing.

    of designing an organisation. Explain different approaches to(20 Marks)

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    ..

    INSTITUTE OF ~ R S OF SRI LANKADiploma in Banking and Finance Examination September 2010

    Management and Organization (91)Suggested Answers

    Section A1.

    (a) Define Change:Change can be defined as an alteration in the people, structure and technology.There are two types ofchange:(i) Incremental cbange

    This type of change occurs slowly in a systematic and predictable way and isoften associated with change as it emerges within the organization. It involvestine-tuning and making adjustments to procedures that will improve efficiency of .organizational performance, but which will not fundamentally alter theorganization. Most organisational changes tend to be of this type.(ii) Discontinuous/fundamental change

    This type of change is sometimes referred to as transformational or fundamentalchange. It can be defined as large ~ s c a l e change that is marked by rapid shift instrategy, structure or culture. The forces of external pressures which couldthreaten the continued existence of a tirm often bring about discontinuous changeand the result is often a major strategic shift..Benefits ofincremental change:* There can be less resistance from employees to adapt to the new change in ways

    of doing things* Provides opportunity to make necessary adjustments in the work processes andprocedures as it suits best through employee participation and involvement.* Build credibility among other stakeholders since it provides gives' enough time torecognize stakeholder needs* Less administrative and other overheads. Change initiatives are embedded intothe existing system.* Change process gives continuous feedback. Therefore, change initiatives aremore efficient.

    (10 marks)

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    (b) Challenges of introducing the new culture could mainly revolve around resistance tochange. This can happen at different levels, including the individual and organisationallevel.(i) At an individual level, security and comfort arising from familiarity and habit asa source of resistance to change.

    Security associated with economic factors and status can be another cause ofresistance.(ii) At organisational level, well-defined structures, rules and procedures can lead toresistance to change.

    The lack of resources to commit to new projects can also hinder change.Consideration of stakeholder interests also leads to resistance.

    Overcoming such chaBenges:Kotter and Schlesinger (1979) suggest a range of different approaches to deal withresistance to change:(i) Education and commitment

    Resistance can be reduced by communicating with employees and help them seethe logic of change.(ii) Participation and involvement

    Make change decisions participatory, so that it is difficult to resist a changedecision in which employees participate.

    (iii) Facilitation and supportChange agents can offer a range of supportive efforts to reduce resistance.Employee counselling and therapy, new skills training, or short paid leave ofabsence might facilitate adjustment.

    (iv) Negation and agreementDeal with potential resistance to change by exchanging something of value for areduction in the resistance.

    (v) Manipulation and cooptationThis is attempting to influence. Twisting and distorting facts to make themappear more attractive, withholding information, and creating false rumours oruse of grapevine to get employees to accept.

    (vi) Explicit and implicit coercionUsing direct threats or force on resisters. This gives similar results as in the caseofmanipulation. However, this can be illegal.

    (10 marks)

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    (c) A customer-focused culture can help OS build a sustainable competitive advantagethrough quality customer service, differentiated products and innovation.Sustainable competitive advantage is based on unique capabilities and core competencieshelps an organization create a unique market position. The sources of competitiveadvantages are;* must add value to customers .* should be unique and rare* should be inimitable* and non-substitutableOrganization culture can be a source of competitive advantage due to above criteria.

    Following are done at EDS in building a customer -focused culture:* change of employee mind-set to be customer focused* Employees are trained to be 'people-persons'* Higher customer responsiveness* Employees work as a team'" More empowerment and autonomy to take decisions* Open communication.. Linking customer oriented behaviors and results with performance appraisal

    A customer -focused culture can have an influence on Structure, Technology and People.These changes can help an organization to achieve its strategic objectives and goals.(i) Structure - organisation structure need to be more decentralized and lesscomplex and formalized in order to increase customer responsiveness. When anorganisation increases customer responsiveness, it helps to satisfy customerneeds much faster than competitors.

    When creating a customer -focused culture, jobs are also redesigned in such away that employees have more authority and control over decision making inorder to anticipate, identify and satisfy customer needs.

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    (ii) Technology - change in culture required change in work processes, methods, andinfrastructure and facilities used. Therefore, new technology needs to beintroduced in order to bring about higher level of customer service. The higherthe technological know-how an organisation adapts, faster is its decision makingprocess and therefore, customer responsiveness. Competitive factors likeinnovation often come from technological know-how. Automation can replacemost jobs. This can help reduce overheads and cost as well as increase the speedof delivery of service. Computerization helps management to take strategicdecisions more accurately and speedily. '

    (iii) People - new change of employee behavior help establish the changes made atthe structural and technological level. Employee mind-set mainly reflects thecustomer responsive culture. Training, perfonnance management and rewardingcan facilitate the development of customer oriented behaviours and actions.People become the main source of competitive advantage in a business.Therefore, play a strategic role in bringing about a change that adds value tobusiness. (20 marks)

    (Total Marks 40)Section B

    2. (a)Human Resource Gap:(i) Labour as key resource input into an organization (along with other resourcessuch as raw material, finance, land and machinery etc.)(ii) A gap between the future expected level of labour resources and the presentlyexisting resources considering the new recruitment and retirement.(iii) Resource gaps can be positive or negative - an excess or a deficit is given.(iv) Skill or resource need.How strategic human resource planning helps to fill the HR gaps:Essential part of HR planning is to identify HR gaps and proposing ways to fill the gaps.Once the gaps are identified, the manager can understand the nature and magnitude of thegaps.(i) HR deficit ean be filled with new recruitments or retaining(ii) HR surplus can be addressed by disposals, redeployment, golden handshakeprogrammes etc.The corporate plan should develop a clear and explicit link between their business andhuman resource plans and so integrates the two more effectively.HR strategies should then be focused to effectively bridge the HR deficit and surpluses.It allows for much better control over staffing costs and numbers employed.

    (JOmarks)

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    (b) Discuss the importance of strategic Human Resource Management for anorganization.(i) HRM strategies support the achievement of business objectives(ii) HRM has both people and business orientation - increase individualaccountability for objectives, motivate staff and hence stimulate performance(iii) HRM support business strategy development and efficient implementation.eg: growth, consolidation, increasing competitive advantage through quality(iv) Developing a performance-oriented culture, through empuwerment; involvementand team working(v) Develop commitment and performance- oriented organizational culture(vi) HRM help build a sustainable competitive advantage through people

    (lOmarks)(Total Marks 20)3.

    (a) Strategic analysis:This means identifYing the conditions prevailing in both the internal and externalenvironment and the e f f e c t ~ of these conditions on the organization. The followingmatters will need to be addressed:(i ) SWOT n ~ l y s i s Oi) Competition analysis(ii i) Customer analysis(iv) Cultural.analysis(v) Social analysis

    Strategic choice:The process of strategic selection involves the following steps:(i) Define the company's mission or overall objective(ii) Derive the company's goals and objectives from the mission(iii) Develop strategies by which these goals and objectives could be met

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    Strategic implementationHaving fonnulated strategies and plans it only remains to implement them. This willalmost certainly involve changes to the way things are done if the process of strategicmanagement has followed through from first principles.. Areas in which theimplementation of strategies is likely to cause changes are:(i) The organization structure(ii) The organization's culture(iii) The quality of all outputs(iv) Attitude towards innovation, entrepreneurship(v) The degree of control exercised over subordinates, given new emphasis oninnovation.After implementation, effectiveness of strategy implementation must be reviewed on acontinuous basis. Therefore, strategic review can be considered as the next step ofstrategic management process. Once implementation is reviewed for its effectiveness theprocess goes back in the cycle of strategic analysis and new strategies developed andimplemented. Hence, strategic management is a continuous process, of which each stageis inter-linked. Each stage has its inputs to other.

    (lOmarks)(b) Strategic management model refers to the pattern or mode of strategic management.According to the strategic management model, a number of steps are taken to achieve theobjectives of a company. Different strategic management models are chosen by variouscompanies according to their conveniences.

    There are four types of strategic management models:(i) Rational systematic model

    This model explains how intended or deliberate strategies are formulated for theorganization using a very rational and systematic process of strategic decisionmaking(ii) Descriptive model

    This model explains that strategies are emerged as a pattern of collectivebehaviour of the organizational members over a period of time.(iii) Prescriptive model

    Thjs model explains that strategies come into existence through a combination ofrational processes as well as a pattern of behaviour which can be called as craftedstrategies.(iv) Situat ional model

    This model explains that strategies come in to existence as a result of situationalfactors which are called as spontaneous strategies and accidental strategies.(lOmarks)

    (Total Marks 20)6

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    4.Report should be in a report format and includelollowing points:Team development stages according to Tuckman:(i) First stage - forming

    The members meet and decide the purpose of the team and how it will operate. At thisstage the 'team' is no more than collection of individuals who are finding out about oneanother and about the task, although objectives may be unclear. This stage is wasteful,time consuming although essential since the prospective team members are not at this'itagt: comfortable with each other.

    (ii) Second stage - stormingThe phrase 'storming' is deliberately referenced to this stage which is characterised byconflict. Previous ideas, attitudes and behaviour is challenged and often rejected. There iscompetition for roles within this team. If the individuals come through this stage then astronger team wi! [ result.

    (iii) Third stage - normingAt this stage the norms under the team will operate are established. The team is settlingdown. Members experiment with ideas and test the reactions of the team ciS a whole.At this stage the team will estabiish patterns of behaviour, levels of trust and the methodsby which decisions will be taken.

    (iv) Fourth stage - performingAt this stage the team is complete and able to perfonn to its full potential.Difficulties with team roles, individual conflict and problems of adjustment have beenresolved.

    (v) Fifth stage - adjourningStage at which' group members complete their tasks and go back to their previouspositions. Some groups may continue to maintain informal relationships and still operateas a group.Limitations on successful team building:When a new team is established there is a need to ensure that everyone shares the samegoals and objectives. Somehow, there arc specific blockages or limitations to successfulteam building. These need to be recognised and steps taken to overcome them.Blockages occur when:(i) There is poor or ineffective leadership from supervisors or senior management.(ii) Objectives set by management are unclear and are therefore often rejected by

    team members who are uncertain as to the task before them.(iii) Ineffective or unsound work methods or procedures, resulting from unclear orconfused objectives.

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    (iv) Team members are unresponsive and not committed to the project or taskassigned due to personal aspirations.

    (v) There is a general lack ofmotivation both within the team or from management.(vi) Meetings of the team are unproductive or demoralised, time is seen as wastedinstead of getting on with the task in hand.(vii) Low creativity and little attempt at problem solving because the team mix isincorrect.(viii) Lack of achievement within the team members or leadership resulting inuncertainty and confusion.(ix) Conflict within the team resulting from poor team construction andmisunderstanding on team roles.

    (20 Marks)5.

    (a) (i) Speeds up communication between individuals In an organization, thereforedecisions can be made more quickly.

    (ii) Data can be analysed more extensively, thereby allowing better quality decisionsto be made.

    (iii) Supply chain management can be improved through the use of 'just-in-time'techniques i.e the cost of holding stock and the lost opportunities.

    (iv) Monitoring and controlling of organizational performance is facilitated bydevelopment in IT.(v) IT can bring about increase in productivity, in the services and manufacturingsectors.

    (10 marks)(b)

    (i ) Many organizations have used IT to develop closer relationships with theircustomers(ii) Improved IT has allowed firms to improve the way they manage their supplychain(iii) Performance standards can be managed more effectively(iv) Organizational planning is facilitated by development in IT(v) IT has helped to develop more flatter & flexible organization structure

    (10 marks)(Total Marks 20)

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    6. Organization designing involves developing an effective and efficient organizational structure forsuccessful implementation of the plans of the organization. Hence, it attempts to match the.appropriateness of the structure to its objectives, strategies and culture of the organization.Different approaches to management (classical, human relations, systems and contingency) haveadopted various methods in designing the organization. However, appropriateness of the methodsof designing will depend on many factors such as nature of the environment, type of theorganization, nature of the products and services, nature of the market, types of objectives andstrategies, type of organizational culture. All these methods have their own advantages anddisadvantages. Hence, one can argue that there is no one best way of designing an organization.Main methods of organizational designing:

    :(i) According to Classical School

    Max Weber. Taylor, Fayol, Urwick thought that there was a 'best way'. They believed ina bureaucratic or hierarchical structure with many formal and rigid features. They arguedthat bureaucratic organizations flourish well in stable environments, and do not readilyadjust to rapid change. However, excessive specialisation, difficulties of communicationand high rigidness decreased the organizational effectiveness and efficiency.(ii) According to Human Relations School

    This method emphasised that improvement to the structuring of organizations could bebrought by introducing less fonnalities and increasing subordinate participation. But, likethe classists, they also believed that there is one 'best design' which is related toinvolvement and participation. However, they ignore the influence of externalenvironment on the structure of the organization.(iii) According to Contingency Approach

    This method suggests that there is no best design, but that organization structure willdepend on the particular circumstances in which the organization confronts. The mostpopular contingency variable include external environment, objectives and strategies,organizational tasks and systems, technology, culture and people.(20 Marks)

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