© The Chartered Institute of Management Accountants 2006

May 2006 Examinations Managerial Level Paper P5 – Integrated Management Question Paper 2 Examiner’s Brief Guide to the Paper 11 Examiner’s Answers 12 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 the end of September 2006 will be a Post Examination Guide for this paper, which will provide much valuable and complementary material including indicative mark information. 2006 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.

P5 2 May 2006

Business Management Pillar

Managerial Level

P5 – Integrated Management

25 May 2006 – 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, make annotations 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 sub-questions). The question requirement for Sections B and C is contained in a dotted box.

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

Answer ALL three compulsory questions in Section B on pages 4 to 6.

Answer TWO of the three questions in Section C on pages 7 to 9.

Write your full examination number, 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.

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May 2006 3 P5

SECTION A – 20 MARKS [the indicative time for answering this section is 36 minutes]

ANSWER ALL EIGHT SUB-QUESTIONS Question One 1.1 Corporate appraisal involves

A evaluating strategic options.

B communicating the mission.

C identifying strengths and weaknesses.

D implementing strategy.

(2 marks) 1.2 A project management maturity model is used to

A control the project.

B identify opportunities for continuous improvement.

C determine project risk.

D assess the feasibility of a project.

(2 marks)

Instructions for answering Section A: The answers to the eight 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.

P5 4 May 2006

1.3 Which of the following can be used to describe the homogeneity of objectives and thinking in group work?

A The Abilene Paradox

B Risky shift

C Group polarisation

D Groupthink (2 marks)

1.4 Which of the following project stakeholders is the person who provides the resources for a

project?

A Project sponsor

B Project manager

C Project owner

D Project customer (2 marks)

1.5 Identify four benefits of corporate governance.

(4 marks) 1.6 In one sentence, explain the purpose of Work Breakdown Structure.

(2 marks)

1.7 Draw the framework that can be used to classify the different ways of managing conflict, labelling the axes. Use the framework to show where the two approaches, collaborating and avoiding, should be located.

(4 marks)

1.8 Identify two ways in which project risk can be classified.

(2 marks)

(Total for Section A = 20 marks)

End of Section A Section B is on the next page

May 2006 5 P5

SECTION B – 30 MARKS [the indicative time for answering this Section is 54 minutes]

ANSWER ALL THREE QUESTIONS - 10 MARKS EACH Question Two M is a member of the Finance Department of L Company. She joined the company two years ago on its management development programme and is currently studying for the CIMA examinations.

A keen and enthusiastic member of staff, M likes to get involved in different aspects of work and is always volunteering to be involved on various committees. She is always ready to chat to her colleagues who pass by her desk and is known as the social events organiser for the department. M likes to be seen to be helping other people and is an expert on the internet, spending a significant amount of her time searching out different websites. However, at her appraisal interview a few weeks ago, M was surprised that her manager, P, raised concerns over the fact that she often appeared to be rushing her work to meet deadlines, and that it had been noted that she often arrived at meetings late. P also made the observation that whilst M’s reports are always carefully researched and very well presented, much of the information is not relevant to the tasks that she has been given. P suggested that M needs to improve on how she manages her time.

Required: Explain how time management techniques could help M become more efficient and effective in her work.

(Total for Question Two = 10 marks)

P5 6 May 2006

Question Three H Company designs and manufactures sports equipment and is currently positioned as the market leader in the industry. However, whilst operating in a growth market there are new competitors entering the market with innovative new product offerings. The Marketing Director is aware that to retain market leader position the company must improve its practices involved with New Product Development (NPD), and the time taken to get from the product idea to launch needs to be much quicker. The company has a functional structure with the Marketing Director heading up the marketing function and the R&D Director heading up the function responsible for research and product development. In addition there are separate functions for Production, Human Resources, Finance, Sales and IT. The Marketing Director feels that the functional structure is impeding the company’s NPD. Having recently read an article on organising for NPD, he is proposing that the best way to manage the process is to adopt a project management approach. This will involve introducing a matrix structure and the use of cross functional teams. However, at a recent meeting of the functional heads, the Research and Development Director said that, in his experience, the potential difficulties in using a matrix structure for project management offset the benefits.

Required: Describe the advantages and disadvantages for H Company of using a matrix structure in project management work for New Product Development (NPD).

(Total for Question Three = 10 marks)

May 2006 7 P5

Question Four T is seeking investment funds for his new venture to open a chain of fast-food restaurants. Despite the competition in this sector, having undertaken market research amongst his target market, T is convinced that he can succeed with his fast-food concept. He is currently in the process of putting together a business plan which will outline his strategy to enter the market place. Having recently attended a seminar on what to include in a business plan, T remembers that he will need to determine what the critical success factors (CSFs) for his business are, but he is confused about how these differ from core competences.

(Total for Section B = 30 marks)

End of Section B

Section C is on the opposite page

Required: (a) Explain why T needs to determine the CSFs as part of the development of his strategy

and how they differ from core competences.

(6 marks)

(b) Identify what the CSFs might be for T’s chain of fast food restaurants.

(4 marks)

(Total for Question Four = 10 marks)

P5 8 May 2006

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 X Company is a manufacturer of non alcoholic soft drinks and has a well established position and brand recognition in country Z. The potential for future growth in country Z is, however, limited, with the market reaching saturation. One option for expansion is to move into new markets in other countries offering its existing product range.

The business development team is evaluating this option and is currently working on proposals to sell the company’s range of drinks in country Y. One possible strategy to achieve market entry that the team is investigating is through a joint venture with a company that is already established in country Y, and is in the drinks distribution business.

The Board of X Company has given the business development team the task of undertaking a feasibility study to explore the viability of the proposed strategy. As part of the feasibility study there needs to be some assessment of industry competition and the attractiveness of the market in country Y. The feasibility study also needs to assess the cultural compatibility of the ways of doing business in country Y compared to how X Company currently operates in country Z.

Required: (a) Advise the business development team on how Porter’s five forces model could be

used to assess industry competition in country Y.

(15 marks)

(b) Discuss how Hofstede’s research could be used to assess the compatibility of X Company’s strategy with the culture of country Y.

(10 marks)

(Total for Question Five = 25 marks)

May 2006 9 P5

Question Six The main agenda item at the meeting of the Executive Board of C Hospital is to discuss the new pay and reward system. The hospital needs to make changes to the existing pay systems to respond to government requirements to reform reward systems as part of its pay modernisation agenda. The aim is to harmonise the payments systems for different categories of workers in the hospital on to one pay scale. This will mean that there is one pay scale for all employees of the hospital including nurses, physiotherapists, radiographers, technicians and support staff (i.e. cleaners, porters, and kitchen staff). The rationale for the new system is to achieve greater flexibility, to assist in recruitment and retention of staff and to reward people for their contribution to the achievement of hospital targets, The hospital has twelve months in which to design and implement the new system in order to meet the government target of May 2007. There is a huge amount of work that will need to be undertaken to deliver the new system, and a number of different stakeholders to satisfy. At the meeting of the Board there was some discussion concerning who should be responsible for undertaking all tasks and activities associated with the development of the new system. The Human Resource (HR) director proposed that a project manager should be appointed and a project team set up. Whilst he would expect some members of his HR team to be part of the team, he is adamant that although his staff are responsible for administering the current payroll system and dealing with staff enquires about pay and rewards, designing a new pay system should not form part of the “business as usual” work for the HR department.

Required: (a) Describe the attributes of the proposed project in C Hospital that distinguish it from

‘business as usual’ work. (10 marks)

(b) Produce an outline of the different stages in the project to design and implement a new pay and reward system for C Hospital.

(15 marks)

(Total for Question Six = 25 marks)

P5 10 May 2006

Question Seven D Company is a manufacturer of electrical components, supplying the car industry. As a result of the downturn in the demand for its products and in response to difficult operating conditions in its existing market, the company is currently going through a major restructuring. It is anticipated that the restructuring plan will involve the consolidation of some business activities which will result in a number of staff having to move to different areas of the company. This could mean re-location to different sites, and other staff being made redundant. While employee relations have in the past been good, the management of the company is aware that employees and their trade unions which represent their interests will be resistant to the changes that need to be made. The first stages of change will require skilful negotiation between the management and unions on a range of issues relating to the movement of staff jobs, the proposed job losses and, specifically, the criteria for redundancy and the redundancy package. The company recognises the potential impact of the changes on staff morale and intends to implement a programme of research amongst staff to gain feedback on the way the change process is managed.

(Total for Section C = 50 marks)

End of Question Paper

Required: (a) Discuss the role of negotiation in the management of change in D Company, making

reference to the different stages involved in the negotiation process. (13 marks)

(b) Identify the methods that could be used to collect information on staff attitudes towards the changes, explaining for each method the issues that need to be considered when planning the research.

(12 marks)

(Total for Question Seven = 25 marks)

May 2006 11 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 8 objective test sub-questions designed to cover breadth of the Integrated Management syllabus. Section B – compulsory Question two examines candidates’ understanding of time management techniques and requires them to use information from a scenario to explain how such techniques can help in improving efficiency and effectiveness at work. It is taken from syllabus Section C, Management of Relationships and addresses the learning outcome “Demonstrate personal time management skills”. Question three is designed to test candidates’ ability to describe the advantages and disadvantages of using a matrix structure in project management work. It is taken from syllabus Section B, Project Management and addresses the learning outcome “Identify structural and leadership issues that will be faced in managing a project team”. Question four examines candidates’ ability to explain the concept of critical success factors (CSFs) and to distinguish between CSFs and core competences. It is taken from syllabus Section A, The Basis of Strategic Management and addresses the learning outcome “Apply tools for strategic analysis appropriately". Section C – two questions from three Question five requirement (a) is designed to examine candidates’ ability to advise on how Porter’s 5 forces model can be used to assess industry competition, applying the model to a scenario situation. It is taken from syllabus Section A, The Basis of Strategic Management and addresses the learning outcome “Evaluate competitive situations and apply this knowledge to the organisation”. Requirement (b) tests candidates’ appreciation of Hofstede’s research on cultural compatibility. It is taken from Section A, The Basis of Strategic Management and Section C, Management of Relationships, addressing the learning outcomes “Evaluate different organisational structures” and “Discuss the importance of national cultures on management style”. Question six is taken from syllabus Section B, Project Management. Requirement (a) is designed to examine candidates’ understanding of the attributes of a project. It addresses the learning outcome “Identify a project and its attributes ". Requirement (b) tests candidates’ ability to produce an outline of the different stages of a project using information from the scenario. It addresses the learning outcome “Produce a basic outline of the process of project management”. Question seven is taken from syllabus Section C, Management of Relationships. Requirement (a) examines candidates’ ability to discuss the role of negotiation in the management of change. It addresses the learning outcome “Discuss the roles of negotiation and communication in the management process both within an organisation and with external bodies”. Requirement (b) tests candidates’ understanding of the methods that can be used to collect information on staff attitudes. It addresses the learning outcome “Identify methods of conducting research and gathering data as part of the managerial process”.

P5 12 May 2006

The Examiner's Answers for Integrated Management SECTION A Answer to Question One 1.1 C 1.2 B 1.3 D 1.4 A 1.5 Reduces risk Improves access to capital markets Demonstrates transparency Demonstrates social accountability (Other benefits that could be mentioned include: stimulates performance; improves

leadership; enhances marketability of goods and services.) 1.6 The purpose of work breakdown structure is to divide a project into work packages with

defined deliverables and responsibilities.

May 2006 13 P5

1.7 High Collaborating Focus on one’s own interests Low Avoiding High Low Focus on other’s interests 1.8 Project risk can be classified in a number of ways, for example quantitative risk and

qualitative risk. (Note: while the question asks for two examples, there are other ways in which risk can

be classified, for example external risk, internal risk, socially constructed risk, technical risk.)

P5 14 May 2006

SECTION B Answer to Question Two Time management essentially 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 lead to stress at work and poor performance, as such it is an important management skill. The underlying principle of time management is to create or find time that did not previously exist, using techniques such as monitoring and planning the use of time, the allocation of priorities and the scheduling of target tasks and events to be completed. There are a number of steps that M could take to improve her time management skills. First, she needs to adopt a set of values towards time management. For example, she could learn from her past mistakes, identifying where her time has been lost on unproductive activities. She could develop her skills in planning and prioritising, and be more willing to ask for help. There are some more tangible actions that can help M in improving time management. She needs to define her work priorities by clarifying what her job is and what constitutes excellent performance. M could start to keep an activity list to see how she currently spends her time, perhaps by keeping a diary or log on how long she spends on different activities. This would help her to identify the non value adding activities she is involved in. For example, she might find she is spending too much time in her unofficial role, perhaps she is a member of too many committees and spends too much time on non job related activities such as chatting and surfing the net. Having worked out what she needs to do, M could draw up an action plan. Scheduling should help M 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 not over committing herself to others, which it would seem is having a detrimental effect on her own performance. M should learn how to schedule her activities by looking at the time available and planning how she will use it to achieve the tasks identified. This would involve compiling a ‘to do’ list each week of tasks that must be completed. She can then prioritise 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. The danger is that M might concentrate on the urgent jobs to 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 as possible time spent on each. M should start important tasks as soon as she can. Tasks that are neither urgent nor important should go to the back of the queue, in M’s case this might be the amount of time she spends surfing the internet. M should decide on the personal time management tools that she could use to help her to better manage her time, such as a paper organiser. She could check to see if L Company uses e-scheduling tools such as electronic diaries and scheduling packages. 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. M should try to complete tasks with a minimum of interruptions, concentrating on a particular task in hand rather than breaking off for chats with colleagues, interrupting her concentration. However, to balance this she should allow herself specific breaks for personal time and social activities. Whilst all the above points should help M, there are two provisos. The first is that M does not spend an excessive amount of time on making lists and scheduling. The second is that she implements her plan!

May 2006 15 P5

Answer to Question Three As the marketing director in H Company has noted, the ability to develop new products and get them to market quickly requires the co-operation of a range of individuals from various functions. H could fundamentally reorganise to form a matrix structure. This type of structure is based on a dual chain of command and is often used as a structure in project management. In the case of H Company it would involve establishing a cross functional team to design and develop new sports equipment products. Each individual would have a dual role in terms of having functional responsibility as well as membership of a project team. For instance, an individual could belong both to the marketing function and to the NPD project. Employees would report both to a functional manager and a project manager. As the Marketing Director suggests this structure does bring a number of benefits to NPD project work. The matrix structure is particularly suited to a rapidly changing environment, such as that facing H Company, creating flexibility across the project, with the aim of speedy implementation. It can improve the decision making process by bringing together a wide range of expertise to the new product development process, cutting across boundaries which can be stifled by normal hierarchical structures. Lateral communication and cooperation should be improved. From an employee perspective it can facilitate the development of new skills and adaptation to unexpected problems, broadening a specialist’s outlook. While there are benefits the Research and Development Director is also correct in his view that there are downsides to the matrix structure. One of the main problems is associated with the lack of clear responsibilities and potential clashes and tensions between the different priorities of the project tasks and the specialist function. Employees may end up being confused by having to report to two bosses and deciding whose work should take precedence. There is also the question of who should do the appraisal of their performance? The complexity of the matrix structure can often make it difficult to implement. Inevitably conflicts will arise due to the differences in the backgrounds and interests of staff from different functional areas.

P5 16 May 2006

Answer to Question Four Requirement (a) The identification of critical success factors is a key part of the strategy development process since they will help to determine the resources and competences needed to achieve competitive advantage. They are important in establishing where T's business must excel to outperform the competition and as such CSFs are crucial elements of the firm’s business strategy. Customers will value product/service features to a greater or lesser extent and so it will be critical to the development of T’s business idea to understand which features are of particular importance. CSFs relate to those product or service features that are particularly valued by a group of customers, and can be used to distinguish between the offerings of potential providers. In summary, CSFs are those factors where performance requirements will be fundamental to T’s competitive success and identifying the skills processes and technologies that support them. Core competences are closely related to CSFs since they are the distinctive group of skills and technologies that enable an organisation to provide a particular set of benefits to customers. In other words, the things that T's business must do well and be difficult for competitors to imitate in order to deliver on the critical success factors that will give it competitive advantage. Requirement (b) In terms of a chain of fast food restaurants the critical success factors might include: • Convenience of location • Speed of service

• Friendly service • Variety in menu

May 2006 17 P5

SECTION C Answer to Question Five Requirement (a) Any assessment of the level of competition and the attractiveness of the market in country Y depends on the competitive forces likely to be faced by the proposed joint venture between X Company and a company already established in the drinks distribution business in country Y. Porter's five forces model is a useful framework for assessing the competitive forces at work in a particular industry and can be used to help management decide whether the industry is an attractive one to enter. Porter's model brings together the following five competitive forces: • Threat of new entrants/barriers to entry • Bargaining power of suppliers

• Bargaining power of buyers

• Threat of substitute products/services • Competitive rivalry It is the collective strength of these forces that will determine the profit potential in the soft drinks industry in country Y. It would only be a sensible strategic decision for X Company to enter country Y if the forces are relatively weak and the potential returns are high. The information from the analysis would also help in identifying the factors driving profitability and inform the competitive strategy needed. X Company will be a new entrant so it needs to assess the potential barriers to entering the industry in country Y. These might include issues associated with gaining access to distribution channels. If the established firms in country Y have strong links with distributors, then this could make it difficult for X Company to get its soft drinks to the market. However, the fact that it is seeking to enter the market in a joint venture with a drinks distribution company already established in country Y could help minimise this barrier. Another possible barrier to entry is product differentiation. If the established firms have strong brands it may be hard for a new entrant to rival these. X Company will also have to assess government policy in country Y to determine whether there are any legal or bureaucratic factors to deter foreign businesses entering the marketplace. From this information X Company will need to assess whether entry barriers are high, moderate or low. Bargaining power of suppliers is primarily related to the power of suppliers to raise their prices to the industry. Power will increase where the supply is dominated by a few firms, or suppliers have proprietary product differences. It is unlikely that the supply of raw materials and resources needed for the production of drinks will be concentrated in the hands of a few suppliers; therefore supplier power to the soft drinks industry will be relatively low. The bargaining power of buyers is gained through their ability to either gain products/services at lower prices or get improved product quality. It also depends on the size and number of buyers. Power will be greater when buyer power is concentrated in a few hands and when products are undifferentiated. In the case of X Company, it will need to determine who its buyers are but assuming these are the consumers, as individual buyers they will have relatively little bargaining power. Buyer power is increased when there are low switching costs, in other words where moving to a different supplier involves little risk. This would be the case in terms of buying soft drinks, from the perspective of the end consumer, because they are relatively low value purchases.

P5 18 May 2006

Pressure from substitutes is where there are other products that satisfy the same need. In the case of soft drinks, it is probable that there will be high threat of substitutes in the industry since there are many alternative drink products available in most markets. In the soft drinks industry the rivalry amongst existing competitors will be influenced by the number of firms operating in the industry, and industry growth rates. If there are numerous organisations, particularly multinational companies with strong brand images already operating in country Y and there is low industry growth then this will not be an attractive market for X Company. If however, in contrast, the rivals are relatively small domestic producers with a poor brand image the market could prove to be attractive. Requirement (b) Just as an organisation develops its own corporate culture which will influence its strategy and its way of doing business, countries show international differences in how they view the world and develop their own cultures in terms of values and basic assumptions. This is an important concept since it will impact on the ways in which people behave at work and the way in which things are done in organisations. The effect of different environments is a key factor in determining the cultural compatibility of organisations moving into new territories. A mutual understanding of the different cultures will influence the effectiveness of working relationships and the management styles adopted. Hofstede's research was developed to explain national culture by mapping different cultural characteristics. The outcomes from the research suggest that countries can be classified according to the four dimensions in which national culture varies and that might influence business behaviour. The dimensions are power distance; uncertainty avoidance; individualism; and masculinity. A country can be classified on these dimensions on a continuum from high to low. • Power distance is the extent to which a society accepts that power in organisations is

distributed unequally. In countries with high power distance, managers tend to make autocratic decisions and subordinates do what they are told rather than being involved in decision making.

• Uncertainty avoidance is the degree to which members of society feel uncomfortable with risk, uncertainty and ambiguity and feel threatened by unusual situations. High uncertainty avoidance will mean risk taking is discouraged and organisations will tend to rely heavily on rules and regulations so that people know what they are doing.

• Individualism versus collectivism is the extent to which people are supposed to take care of themselves and be emotionally independent from others (individualism), to one in which people prefer a tight-knit social framework based on involvement (collectivism).

• Masculinity relates to the degree to which masculine values predominate. For example, focus on power, achievement, assertiveness, and material success as opposed to the stereotypical feminine values of relationships, modesty, sensitivity and concern for others.

These factors need to be considered when developing strategies in a cross cultural context since Hofstede argues that countries differ significantly in their ‘score’ on these dimensions. For instance, on the basis of Hofstede’s work it has been argued that the Japanese are more collective, cautious, and authoritarian than Anglo Saxon countries. The implication of this is that Japanese methods of management may not work well in these countries and vice versa. X Company could use Hofstede’s work to help in the appraisal of cultural compatibility of the proposed strategy to enter country Y through joint venture. The comparison should not only take account of the two organisations, but also the cultural differences between consumers in X Company’s existing markets and the consumers in country Y. If the two countries have significant cultural differences along all four dimensions, the joint venture might not be an attractive proposition.

May 2006 19 P5

Market development strategies often fail because while financial assessments are sound, insufficient attention has been placed on cultural factors. Answer to Question Six Requirement (a) Projects are generally defined as having a number of characteristics or attributes that differentiate them from ‘business as usual’ work. They can be characterised as having a lifecycle, since projects tend to pass through a number of phases, starting with the identification of need, followed by the development of a solution, implementation and completion. A project is usually undertaken for a specific purpose to accomplish an objective or goal through a set of interrelated tasks and as such is a temporary process. It will have a clearly defined start and end time and will usually be determined in terms of the scope, schedule and cost. The objective of the project for C Hospital will be the design and implementation of the pay and reward system that achieves the desired outcomes of greater flexibility, aids recruitment and retention, and rewards staff for their contribution in achieving hospital targets. The project will be focussed on the tasks needed to design and implement the new pay and reward system by May 2007. All tasks must be scheduled to meet this pre-determined end date imposed by the government. The project will have a budget allocated to deliver its objectives and must plan within this budget for costs and resources needed. It will have a project sponsor that is the individual or group who will provide the funds for the project. In the case of the pay and reward project this will be the Hospital Board. A key feature of a project is that it is unique, in other words it is a non-repetitive activity and does not usually involve routine work. While the hospital HR team are responsible for administering the current pay system, this is an ongoing activity with recurring tasks, but the design of the new system will be a one off activity. A project will often cut across organisational and functional lines. In this case it will probably include members of the HR team, but also representatives from other staff groups such as nurses, physiotherapists, radiographers, technicians and support staff. Requirement (b) The project management process for the design and implementation of a new pay and reward system will involve the following stages: Initiation and Identification of Need The initial phase of the project is the identification of a need or problem that must be resolved. In the case of C Hospital, the need is driven by the requirement to respond to government demands to modernise the pay and reward system. At this first stage the development of the primary purpose of the project and the establishment of its goals and objectives must be determined. It is at this stage that the key individuals who will form the project team will be brought together. For the C Hospital’s pay and reward project, this may include members of the HR team, IT team and Finance team, along with representatives of the different employee groups and union/staff association representatives. The scope of the project will need to be determined, along with the objectives and expectations and project deliverables.

P5 20 May 2006

There will be some parameters and constraints that the project will have to work within, for example resource availability, budget, and time-frame, in C Hospital’s case this will be May 2007. It is at this stage that feasibility analysis should be undertaken to consider the potential benefits and costs of proceeding with the project. However, in this particular case, the government’s requirement to reform pay and rewards means that the hospital management has no choice but to go ahead with the project. Planning Planning involves defining the resources required to undertake and complete the project. It is about determining how the project team will achieve its objectives within the constraints of time, budget and resources. At this stage a schedule of the different activities that will need to be undertaken to design and implement the new pay and reward system will be devised and a budget developed. During the planning phase the team may use techniques such as work breakdown structure, Gantt charts and network analysis techniques to help in the scheduling of the different activities that will need to be undertaken and milestones identified. Executing/Implementation This stage involves the actual performance of the project, resulting in the accomplishment of project objectives. It requires the skill of the project manager to keep team members focused on the project tasks, coordinating project team members that will result in achieving project deliverables. As work is carried out progress meetings will be held. It will be important during this phase to involve the various stakeholders so that any objections can be taken on board and considered as the development of the new scheme emerges. Controlling Controls should be put in place in order to measure the project’s progress and assess if milestones are being achieved. It there are deviations from the plans it will be necessary to determine whether corrective action is needed. This could lead to re-planning, which may in turn lead to goal definition change. For C Hospital the deliverable is clear and non negotiable since it is being imposed by government. However, there may be some flexibility in how the outcomes are achieved. Completing and Closure This is the final stage, and involves ensuring that the project is completed and conforms to the latest definitions of what needs to be achieved and meets the customer specification. In this last stage of the project there are various activities that should be carried out in addition to confirmation that the project deliverables have been met. For C Hospital the key deliverable is that all staff is on the new pay system by May 2007. The closure phase will involve the handover of the project to the hospital’s management and more specifically to the HR department for its administration. It also will involve the disbanding of the project team, including an audit of the learning from the project that could assist in the management of future projects.

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Answer to Question Seven Requirement (a) Negotiation involves argument and persuasion in order to strengthen one’s own case by undermining the opposition. It occurs when there is no established set of rules for resolving the conflict and parties are committed to search for an agreement rather than fighting openly. Negotiation is often necessary within organisations to resolve conflicts of interest between two or more parties which have arisen because the parties have different objectives. It has, over time, become a useful and civilised way of settling disputes. In earlier times industrial disputes often resulted in industrial sabotage by workers and sometimes physical violence between workers and their employers. In the case of D Company it is likely that conflicts will arise as a result of the restructuring proposals which will involve the need for the relocation of staff and possible redundancies. These conflicts may be resolved through negotiation between management and the unions who are representing employees. The process of negotiation between employers and trade unions is often referred to as ‘collective bargaining’ and involves at least two parties with a defined interest. Without any negotiation the result could be that the union calls for industrial or strike action which could have a detrimental impact on the company’s future survival. Approaches to the negotiation process can be through focussing initially on each side’s primary objectives, rather than becoming distracted by minor negotiating points at an early stage. It is necessary to maintain some flexibility within the negotiation process and for both parties to be prepared to settle for what is ‘fair’. It is important to listen to what the other side wants and to make an effort to compromise so that both sides can attain their goals. However, this is often where negotiation can fail because of the tensions between the different objectives that can never coincide. This could occur for D Company since the union’s main objective will be to keep jobs, whilst the organisation may see no alternative to job cuts if it is to survive in the long term. It is likely that in the first stages of negotiation that the union will reject the proposals as unacceptable and will prepare its negotiation strategy. While the union will not want to agree to job losses it might recognise that they are inevitable and concentrate instead on persuading management to provide generous severance pay above the legal minimum and compensation for staff who are being asked to relocate. D Company management will have anticipated such a reaction and should have its negotiation strategy worked out. The ideal will be to achieve a win-win outcome where both sides achieve enough of their objectives to be satisfied with the end result, trading-off wins and losses so that each side get something in return for everything it concedes on. Win-lose or lose-lose outcomes are in no ones best long term interest. It is suggested that effective negotiation between D company and the trade union should go through the following four stages: • Preparation which involves both parties gathering information and insight to the problems

in order to understand the constraints acting on the negotiating parties. Who is involved in the negotiation, what the concerns of each party are and what the goal of the negotiation is will need to be determined. Another key feature at this stage is to determine the time for negotiation.

• The opening phase of negotiation involves both sides presenting their starting positions to one another. It is at this stage that the greatest opportunity is present to influence the other side.

• The bargaining phase is where both parties will aim to narrow the gap between the two initial positions to persuade the other party that its case is so strong that the other must accept less than it had planned. This might, in the case of D company, be on the total number of job losses, or the financial arrangements for redundancy. The union will want the best for its members, whereas the management may be constrained by the financial position of the company.

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• The closing phase of negotiation represents the opportunity to capitalise on the work that has been done at the earlier phases. It is at this stage that agreement is reached. The outcomes from the agreement should be publicised and implemented.

Important tactics for negotiation are to use questions effectively so as to control the situation; the use of persuasion; and not to weaken your case inadvertently. During the negotiation process, particularly in the case of negotiations surrounding the restructuring in D Company which are likely to be formal in nature, it is important from time to time to test that both sides understand clearly what is being proposed and what stage the negotiations are at. Requirement (b) There are a number of different techniques that could be used to gather information on staff attitudes towards the changes brought about by the restructuring in D Company including open meeting with groups of employees and meetings with employee representatives. Formal methods of research could also be undertaken, for example in-depth face-to-face interviews, or a staff attitude survey. While there are advantages and disadvantages associated with each method, it should be recognised that the atmosphere in the company is likely to be highly charged and that the research process could provoke rumour and anger on the part of the workforce. In view of the circumstances, it might be appropriate for the management of the company to first consult with employee representatives/union officials about the objectives of the research. If in-depth face to face interviews were undertaken with a sample of staff this would allow for detailed qualitative information to be collected. A critical issue will be to determine who should conduct the interview, for example it may be that the company should employ external researchers to undertake the interviews, who are not directly connected to the decisions to restructure, and hence can maintain some objectivity. In addition, decisions would need to be made on whom to interview. This must be carefully thought through given the nature of the changes, so for instance, should the sample include those who will be moving jobs and those who are being made redundant. Other more practical issues would be about when and where to hold the interview. A set of relevant questions that should be asked about the change process needs to be identified in order that the information collected is helpful in informing the management of D Company on staff reactions to the change process. Before the interviews take place the appointed interviewers must determine how they are going to record the information, for example, by taking notes or alternatively taping the interview. However, they must maintain the anonymity of the interviewee, otherwise staff may be reluctant to give honest answers. The interviewer also needs to plan how to analyse the information collected from the face-to-face interviews. The benefits of this approach to collecting information is that a high response rate should be achieved and it is not constrained by pre-planned questions. This means that other important issues on attitudes towards the change could emerge through the interview process. Another method that could be used to collect information on attitudes towards the changes would be to undertake a survey amongst staff using a questionnaire. This would allow for information to be collected from a large number of staff and the results can be analysed in a quantitative way. This would enable D Company to determine in percentage terms how satisfied/dissatisfied staff are with various aspects of the change process. The factors that will need to be considered if this approach is used concern the tone, length and style of the questionnaire. The key objectives of the research need to be clear in terms of the areas relating to change that the management want to gain feedback on. These areas will then need to be translated into a set of structured questions.

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Other factors would be the timescale allowed for the survey, how to encourage people to respond and how the responses will be analysed. The main disadvantage of this approach to collecting feedback is that response rates can be low. This could well be the case in D Company, why would staff want to take part in such a survey, particularly if they are being made redundant? D Company may find that a combination of techniques, open meetings, in-depth interviews and a quantitative survey, may be the best approach; however, this does of course depend on the time and budget available for undertaking the research.