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ACCA paper 1 3 managing people 2004 answ 2

Answers



Part 1 Examination – Paper 1.3
Managing People
1

June 2004 Answers

Appraisal systems are often misunderstood and mismanaged, as in this scenario. Appraisals are central to human resource and
performance management and understanding their role, objectives, benefits and purpose is extremely important. Careful
preparation and understanding are required if the appraisal process is to be successful and worthwhile.
(a)

Appraisal systems exist to improve organisational efficiency by ensuring that individuals perform to the best of their ability,
develop their potential and earn appropriate reward. This leads in turn to improved organisational performance.
To successfully implement a performance appraisal system, the partners need to understand the basic and inter-linked
purposes of an appraisal system, which are threefold:
To measure the extent to which an individual may be awarded a salary or pay increase compared with his or her peers; the
Reward review component. The staff at Watkin Williams believe that this is why they should have appraisals.

To identify training needs and plan follow up training and development to enable the individual better to assist the organisation
to achieve its objectives; the Performance review component. This is the view of the partner Reg Watkin who wants to use
appraisal to link salaries with performance.
To aid the individual’s career development and succession by attempting to predict the type and level of work that the
individual is likely to be capable of in the future; the Potential review component. This approach needs some thought at
Watkin Williams, with the apparent unclear understanding by all concerned at Watkin Williams of the wider purpose of
appraisals.

(b)

(c)

(i)

Each employee at Watkin Williams could benefit by establishing what he or she has to do to further the objectives of the
organisation and thus feel more involved. The appraisal establishes key results which the individual needs to achieve
within a set period of time whilst also comparing the individual’s performance against a set and established standard.
The original reason for introducing appraisals at Watkin Williams was to provide a basis for remuneration whilst also
identifying training and development needs. Both are essential in an expanding and changing organisation.

(ii)

For Watkin Williams, the employer, the benefits are the identification of candidates for promotion and areas for individual
improvement. It will provide a basis for human resource planning, monitoring human resource selection processes
against results and perhaps most importantly from the case details, improve communication.

The appraisal system should be a well constructed scheme which is fair to both the individual and the organisation. The
scenario highlights a number of barriers which exist at the moment within Watkin Williams.
Chat – the appraisal interview is seen as an informal, loosely constructed and badly managed dialogue without purpose. It
is this that some of the staff wish to introduce, but it is as much of a danger to the appraisal process as any of the others.
This has been the approach at Watkin Williams and goes some way to explaining the misunderstanding and mistrust of the
appraisal scheme.
Bureaucracy – a system based on forms devised solely to satisfy the employer. Thus its main purpose, that of identifying
individual and organisation performance and improvement, is forgotten. This is not the case at Watkin Williams at the
moment, but is seen by some staff members as a reason to reject appraisals.
Confrontation due to lack of agreement on performance, badly explained or subjective feedback, performance based on recent
events or disagreement on longer term activities. In an expanding organisation such as Watkin Williams where performance
criteria are unclear, this is a serious barrier.
Judgement – the appraisal is seen as a one sided process based entirely on the manager’s or owner’s perspective. This is a
danger at Watkin Williams, some staff members are concerned that their appraisals will be based partly on the activities of
others.
Unfinished Business – the appraisal is not seen as part of a continuing process of performance management. Without clear
performance criteria at Watkin Williams, this threatens to be yet another barrier.
An Annual Event – the appraisal is seen as simply an event which sets targets annually that quickly become out of date.
Appraisals are best held more frequently. This again could be viewed negatively by the staff at Watkin Williams.

(d)

A formal appraisal interview is an integral part of appraisal and performance management. The appraiser should be the
immediate supervisor but in the case of the scenario it is one of the partners. Prior to the appraisal interview, the appraiser
undertaking the interview should have prepared the following documentation.
The required documents for an appraisal are the job description, a statement of performance or appraisal form and a record
book highlighting the employee’s performance. In addition, peer assessment and if appropriate, comments from clients and
customers (as might well be the case in the scenario) and the self assessment form issued to the employee prior to the
interview (which apparently is not the case in the scenario) might be useful. Finally, the human resources file on the employee
which should contain notes on the employee’s general personal attitude, including discipline issues such as timekeeping and
attendance should be available to the appraiser.

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(e)

The partner’s interview might be based on one of three approaches: The Tell and Sell Method. The partner explains to the
appraisee (the staff member) how the assessment is to be undertaken. The next step is to gain acceptance from the appraisee
of the evaluation and improvement plan. Human resource skills are important with this approach in order for the partner to
be able to provide constructive criticism and to motivate the appraisee. This has been the way the partners have approached
the appraisal interview thus far.
The Tell and Listen Method. The partner invites the appraisee to respond to the way that the interview is to be conducted.
This approach requires counselling skills and encouragement to allow the appraisee fully to participate in the interview. A
particular feature of this approach is feedback from the appraisee and with the current misunderstanding and mistrust, might
be an appropriate approach.
The Problem Solving Method. Here the partner takes a more helpful approach and concentrates on the work problems of the
appraisee. The appraisee is encouraged to think through his or her problems and to provide their own intrinsic motivation.
This might be the more appropriate approach in the current atmosphere at Watkin Williams.

(f)

After the interview, the partner and appraisee should agree on actions to be undertaken.
There needs to be an agreement between the partner and appraisee on the results of the appraisal and an agreed action plan
on improvement of the appraisee. This has not happened to date. There will have to be assistance and monitoring of the
appraisee in the future with arrangements for feedback on future progress.

2

Setting objectives for individual managers and departments can be difficult, the more so when individual and departmental
objectives must correspond with and follow the overall objectives of the organisation.
A Management by Objectives programme follows a logical and coherent structure:

3

Stage 1.

Define the main areas of responsibility and performance for each individual and department as appropriate. This is
often laid out as targets or schedules and is based on a measure of efficiency. Secondary targets are also included.

Stage 2.

Define and agree principal areas of activity where failure to succeed would damage the organisation’s overall
objectives.

Stage 3.

Define and agree means of measurement. This stage involves two separate issues. The first is to establish the criteria
by which performance will be measured. The second establishes the point at which the measurement of objectives
constitutes effective performance for which reward may be received.

Stage 4.

Define and agree some key result areas. These are normally no more than one or two critical areas.

Stage 5.

Decide upon an action plan and appropriate review periods. This will be itemised and contain details of action
required by the individual, the department and the management. Barriers will be identified and actions planned to
remove them.

Stage 6.

The annual performance review will be established at which time results will be compared to the principal areas noted
at step one and success in achieving objectives assessed.

Stage 7.

Objectives are revised and a new sequence of objectives begins.

The selection of the correct employee is fundamental to the success of an organisation. In the first instance, the application form
obtains information about a potential employee simply and in a number of different ways. However, the application form is often
poorly constructed, asks the wrong questions or fails in its function to assist managers and supervisors. These shortcomings can
be overcome through the use of selection tests.
(a)

Intelligence Tests are constructed to test a candidates general intellectual ability, his or her individual memory capability,
speed of thought and to test problem solving skills, sometimes through setting of a specific, time limited test.
Aptitude Tests are designed to measure an individual’s potential, measure mechanical ability, understanding and dexterity,
clerical ability and assess physical dexterity.
Competence Tests have one real aim, to measure the depth of knowledge learned by the individual in the past.
Personality Tests are designed to assess the skill of the individual in dealing with people, the individual’s leadership skills,
personal emotional stability and the individual’s ambition and motivation.

(b)

Despite the claims of the supporters of such tests, they are not foolproof and are subject to severe limitations. It is almost
impossible to exclude bias from such tests, different genders and cultures may for example, perform better in some aspects
than others. Despite claims that tests have in-built checks, it is possible for some candidates to guess at least some of the
answers. The test conditions are by definition artificial and there can often be no direct relationship between a person’s ability,
the test results and the ability to do the job required of the individual. It is possible to do well in such tests through coaching
and practice. They are non predictive and are expensive to administer. Interpretation of test results is a skilled task and this
adds to the cost and overall expense of recruitment.

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4

There are many forms of training, ranging from detailed, expensive external courses, to internal, relatively inexpensive forms of
training. Accountants as managers need to understand the benefits of training and to have an understanding of different internal
training methods.
(a)

The organisational benefits can be identified in a number of ways. The most important is the establishment of an appropriately
trained workforce, increasing employee knowledge whilst at the same time lowering waste and scrap costs and increasing
productivity. In addition, training can improve upon those skills which already exist, leading to improved job performance and
providing a pool of skills upon which the organisation can draw. Further benefits include greater staff commitment, which in
turn should require less need for detailed supervision whilst also increasing the value of the organisation’s human resources.
Finally, training can aid recruitment and selection planning.

(b)

For the individual, the benefits can be identified by increased motivation – the individual feels that he or she is of value to
the organisation – greater job satisfaction, enhanced promotion opportunities and an opportunity to increase remuneration.
Training leads to improved work methods and thus enhanced skills and abilities can be a means of matching individual goals
with those of the organisation. Improved social skills and opportunities can also benefit the individual and such newly
acquired skills could be useful in the long term.

(c)

(i)

Computer based training (CBT) sometimes referred to as Computer Assisted Learning (CAL) is a user friendly, hands on
self learning system that allows the trainee to learn at his or her own pace sometimes without direct supervision. This
type of training often involves the use of interactive pre-set programmes.

(ii)

Job rotation is aimed at developing employees’ wider experience and skills within the organisation. The trainee is moved
in succession from one job to another, thus broadening experience and making him or her aware of the range of skills
required within the organisation.

(iii) Work shadowing is often used to encourage employees with potential for promotion and is a straightforward, inexpensive
training method. It involves one employee ‘shadowing’ or assisting another – often a senior – to learn the skills involved
at a higher level.

5

A contemporary approach to leadership is to regard it as being made up of a number of different skills. This has been extended to
an approach known as ‘action centred leadership.’ This recognises that leadership occurs within three inter-related variables: the
task, the group and individual needs.
(a)

Leadership requires a number of different skills, including the ability to inspire confidence and trust, an understanding of the
task in hand and the ability to employ employees’ abilities and skills but also to recognise weaknesses. Clear and concise
communication skills are important, as is the ability to make and explain decisions. Fundamental to communication skills is
the ability to motivate both the individual and the team or group as a whole and perhaps most important of all, to create and
sustain a sense of encouragement and direction to meet the objectives of the organisation.

(b)

Action centred leadership is a process made up of three inter-related variables: the needs of the task, the needs of the group
and the needs of the individual. The leader needs to balance the relative importance of all three variables, however the
situation requires that relative importance be given to identifying and acting upon the immediate priority.

(c)

Action centred leadership requires recognition of three variables: task, group and individual needs.
Task needs are setting objectives for the team or group, planning and initiating the task or tasks, allocating responsibilities,
setting and verifying performance standards and establishing a control system.
Group needs involve team building so that mutual support and understanding is achieved, developing appropriate
independence within the group, setting agreed standards, providing training as required and appropriate and, most
importantly, establishing communication and information channels.
The leader needs to recognise the development of individual needs and achievement, motivation by recognition, the
encouragement of creativity, the delegation as far as possible of authority to encourage group support and to attend to any
problems or grievances.

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6

Understanding the problems of discipline in the employment situation are important management skills. Whilst it is important that
accountants as managers have a knowledge of motivation techniques, it is equally important that they are also able to recognise
the other side of motivation, that of discipline.
(a)

Discipline may be defined as a condition in the organisation in which there is orderliness, and in which organisational
members behave sensibly and conduct themselves in accordance with standards of behaviour acceptable to the organisation’s
members, goals and objectives.

(b)

(i)

Discipline may be positive in that the employee is encouraged to conform to good practices and acceptable behaviour
by being given training, and by the presence and consistent application of rules and procedures.

(ii)

Discipline may, on the other hand, be negative. This is the situation where actions may be taken to ensure that the
organisation’s members behave in an appropriate way. Such actions include punishment, deterrent or reformative
measures.

(c)

There are many occasions in the workplace when disciplinary situations arise. Management research indicates that some are
more frequent than others.
A disciplinary situation arises when absenteeism is seen as excessive and taken without good cause. Poor timekeeping in
terms of start or finish at work or at breaks is a common disciplinary issue, as is poor work performance such as high error
rates and inferior work, customer complaints or inaccuracy; especially important issues in the accounting context. At a more
personal level, negative attitudes toward work which influence the individual’s own work or the attitude or work of others,
such as noncompliance or deliberate violation of procedures, rules and regulations are another cause for concern.
Inappropriate appearance or behaviour is a special issue in accounting as is disregard of safety procedures and, more
profoundly, insubordination.
Increasingly, managers are faced with disciplinary problems which do not occur within the workplace. This is a difficult matter,
but if conduct away from the workplace impacts upon the employee’s conduct in work, then management must deal with the
problem within organisational disciplinary procedures.

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Part 1 Examination – Paper 1.3
Managing People
1

(a)

(b)

(c)

June 2004 Marking Scheme

Brief description of the three main components of an appraisal system.
(One mark each)

up to 3 marks
(Maximum for part (a) 3 marks)

Outline of the benefits of the appraisal from the viewpoint of:
(i)

The employees at Watkin Williams

(ii)

The employer – Watkin Williams

up to 5 marks
up to 5 marks
(Maximum for part (b) 10 marks)

Description of five main barriers to an effective appraisal
(One mark each)

up to 5 marks
(Maximum for part (c) 5 marks)

(d)

Description of the documentation
(One mark each)

up to 8 marks
(Maximum for part (d) 8 marks)

(e)

Description of three approaches to take in conducting the appraisal interview
(Three marks each)

up to 9 marks
(Maximum for part (e) 9 marks)

(f)

Explanation of follow up action

up to 5 marks
(Maximum for part (f) 5 marks)
(Total for Question 40 marks)

2

Description of seven stages in a Management by Objectives programme.
(Two marks per stage with one available for using examples)

up to 15 marks
(15 marks)
(Total for Question 15 marks)

3

(a)

Brief description of:
(i)

Intelligence Tests

up to 2 marks

(ii)

Aptitude Tests

up to 2 marks

(iii) Competence Tests

up to 2 marks

(iv) Personality Tests
(One mark for each characteristic)

up to 2 marks
(Maximum for part (a) 8 marks)

(b)

Brief outline of limitations of tests
(One mark for each limitation)

up to 7 marks
(Maximum for part (b) 7 marks)
(Total for Question 15 marks)

4

(a)

Brief explanation of the advantages for the organisation

up to 5 marks
(Maximum for part (a) 5 marks)

(b)

Brief explanation of the advantages for the individual

up to 4 marks
(Maximum for part (b) 4 marks)

(c)

Brief explanation of types of training
(i)

Computer based

up to 2 marks

(ii)

Job rotation

up to 2 marks

(iii) Work shadowing

up to 2 marks
(Maximum for part (c) 6 marks)
(Total for Question 15 marks)

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5

(a)

(b)

(c)

Brief outline of three skills of a leader
(Two marks each)

up to 6 marks
(Maximum for part (a) 6 marks)

Brief explanation of action centred leadership
(One mark each)

up to 3 marks
(Maximum for part (b) 3 marks)

Description of the three major goals
(Two marks each)

up to 6 marks
(Maximum for part (c) 6 marks)
(Total for Question 15 marks)

6

(a)

Description of ‘discipline’

(b)

(i)

Description of positive discipline

(ii)

Description of negative discipline

(c)

up to 3 marks
(Maximum for part (a) 3 marks)
up to 2 marks
up to 2 marks
(Maximum for part (b) 4 marks)

Examples of disciplinary situations
(Two marks for each example)

up to 8 marks
(Maximum for part (b) 8 marks)
(Total for Question 15 marks)

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