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Part 1 Examination – Paper 1.3 June 2006 Answers

Managing People
1 All organisations of whatever size need to understand and address the issues of the relationship between various levels of
management, especially the nature, source and limitations of authority, responsibility and delegation. Understanding responsibility,
delegation and authority is fundamental to the practice of management. Professional accountants should be able to show an
understanding of the problems and challenges associated with these concepts of management. Students are not expected to
remember definitions verbatim, but they are expected to show an understanding of the inherent logic contained in these concepts,
and to demonstrate a clear distinction between the two main concepts of authority and responsibility.
(a) There are many explanations of what managers do. The most widely understood approach is that of Henri Fayol, who said
that managers perform five duties, to forecast and plan, to organise, to command, co-ordinate and control. Managers are
ultimately responsible for the efficient use of the organisation’s resources and are accountable to the organisation’s owners.
At Flavours Fine Foods, the owners (the Jones brothers) must recognise this reality and allow the managers to manage.
It used to be said that a manager did his or her job by getting others to do theirs. In many ways this sums up the role of the
supervisor. However, management must ensure that supervisors understand organisational objectives and must make clear
the powers and limits of the supervisors’ authority. Supervision is an important and integral part of the task and process of
management.
The role of the supervisor is critical because of direct contact with and responsibility directly for the work of others. The
supervisor is unique; he or she is the interface between management and the workforce and is the direct link between the
two, being in direct physical contact with non-managers on a frequent basis. Supervisors are in the front line of management
and see that others fulfil their duties, resolve problems first hand and often quickly, direct the work of others and enforce
discipline. In addition, they often must have direct knowledge of health, safety and employment legislation and have authority
for negotiation and industrial relations within the department.
(b) (i) RESPONSIBILITY is the liability of a person to be called to account for their actions and results, and is therefore an
obligation to take some action to discharge that responsibility. Unlike authority, responsibility cannot be delegated. There
is however some discussion on the extent to which this statement is true: the idea that responsibility cannot be delegated
is too simplistic. Any task contains an element of responsibility. It is the idea of accountability and the direction of
responsibility that is the relevant concept and is the problem at Flavours Fine Foods; ultimate responsibility resides with
the owners. It is self evident that it is impossible to exercise authority without responsibility because this could lead to
problems of control and therefore undesirable outcomes for the organisation. However, the superior (the owner) is always
ultimately responsible for the actions of his or her subordinates. The key element here is the recognition of discretion by
virtue of the person’s position. This underlines the doctrine of absolute responsibility; the superior is always ultimately
accountable.
(ii) AUTHORITY is the scope and amount of discretion given to a person to make decisions by virtue of the position held
within the organisation. The authority and power structure of an organisation defines the part each member of the
organisation is expected to perform and the relationship between the organisation’s members so that its efforts are
effective. The source of authority may be top down (as in formal organisations) or bottom up (as in social organisations
and politics). In the scenario, authority is from the top and should be delegated downwards.
(iii) DELEGATION is giving a subordinate the discretion to make decisions within a certain, defined sphere of influence.
Therefore the superior must possess the authority to delegate. The key element here is discretion and the level of
authority within a specific sphere which is behind the problems at Flavours Fine Foods. Authority should be clearly
delegated as appropriate to the managers and, through them, to the supervisors.
(c) (i) Without delegation, formal organisations could not exist. Without allocation of authority, responsibility and delegation, a
formal organisation cannot be effective. They are critical aspects. Managers must delegate because of the size and
complexity of the organisation (certainly an issue for Flavours Fine Foods). Delegation can help overcome the physical
and mental limitations of staff, managers and supervisors and it allows management to attend to other matters since
routine tasks and decision making can be passed down. However, superiors must call subordinates to account and co-
ordinate their activities.
(ii) Effective delegation can be achieved by assigning agreed tasks to the subordinate, ensuring that resources are allocated
and by specifying expected performance levels and ensuring that they are understood. In addition, it is necessary to
ensure that the subordinate has the ability and experience to undertake the tasks by maintaining frequent contact and
ensuring that the subordinate has authority to do the job. Sufficient authority must be delegated to fulfil the task. This
authority in turn may be specific or general; the scenario suggests that the authority of the managers and supervisors is
specific. The subordinate should not refer decisions upwards, and the superior should not expect this. In addition there
should be no doubts over boundaries; they must be clearly defined as to who holds what authority and who accounts
to whom. Therefore there must be clarity as to departmental functions and individual authority, which is at the root of
the problem at Flavours Fine Foods.
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(iii) Problems with delegation are threefold. Firstly, reluctance from managers who are afraid of losing control, who fear that
subordinates may carry out the work badly and who are resentful of subordinate development. Secondly, there is the
problem of lack of confidence, lack of self confidence in the manager and often a lack of confidence in the subordinates.
Thirdly, there are problems of trust; that is the amount of trust the superior has in the subordinate and the trust that the
subordinate feels the superior has in him or her.
(iv) Problems with delegation can be overcome by careful selection and training, an open communication system, the
establishment of an appropriate control system and a system that rewards effective delegation.
2 All organisations of whatever size have to work in a co-ordinated way to ensure that the objectives laid down are achieved.
However, for effective co-ordination to take place, the structure must be correct and understood. Very often, managers know the
structure but cannot explain its significance or appropriateness.
(a) The structure of an organisation is often depicted as a chart. The structure explains the communication pattern, the linking
mechanism between departments, tasks and individuals, the co-ordinating mechanism that ensures the entire organisation
is working toward the same objective, and who is in control of the organisation’s activities and at what level in the
organisation.
(b) The strategic apex is the highest level of the organisation and is therefore the highest level of management. This part ensures
that the organisation’s mission is followed and manages the relationship with the environment.
The operating core is the part that represents the productive activity of the organisation, gathering inputs and, through
conversion, turns them into outputs.
The middle line represents that part of the organisation where the middle managers operate. The role of this part is to turn
the instructions of the strategic apex into activities for the operating core.
The technostructure includes the staff who provide a technical or supportive activity but which are not a part of the core
activities. This part of the organisation includes the engineering, accounting and human resource departments.
The support staff carry out the ancillary activities that are neither part of the core nor the technostructure. Support staff have
no role in the direct activities of the organisation: these activities include catering and public relations.
(Students may draw the appropriate diagram)
3 The interview is extensively used for the selection of new employees and in many cases is the only method of selection. However,
interviews have been criticised for failing to identify appropriate candidates suitable for the organisation. It is essential therefore
that professional accountants recognise both the problems and opportunities that the formal selection interview presents.
(a) The purpose of the selection interview is to find the best possible person for the position who will fit into the organisation.
Those conducting the interview must also ensure that the candidate clearly understands the job on offer, career prospects and
that all candidates feel that fair treatment has been provided through the selection process.
In addition, the interview also gives the opportunity to convey a good impression of the organisation, whether the candidate
has been successful or not.
(b) (i) The face to face interview is the most common form of interview. In this situation the candidate is interviewed by a
single representative of the employing organisation.
The advantages of such interviews are that they establish an understanding between the participants, are cost effective
for the organisation (only one member of the organisation’s staff is involved) and, because of the more personal nature,
ensure that candidates feel comfortable.
The disadvantages are that the selection interview relies on the views and impression of a single interviewer that can
be both subjective and biased. In addition, the interviewer may be selective in questioning and it is easier for the
candidate to hide weaknesses or lack of ability.
(ii) Panel interviews are often used for senior appointments and consist of two or more interviewers.
The advantages of such interviews are that they allow opinion and views to be shared amongst the panel. They provide
a more complete and coherent approach, hence problems of bias inherent in face to face interviews can be reduced.
They may also be appropriate where an individual with specialist or technical skills has to support the interviewer in
relation to assessing the technical competencies of the interviewee.
The disadvantages are that panel interviews can be difficult to control, interviewers may deviate or ask irrelevant
questions and they can be easily dominated by a strong personality who is able unduly to influence others. In addition,
such interviews can often result in disagreement amongst the panel members.
8
4 All organisations need appropriately trained employees. Due to the nature of modern business, especially the professions, much of
this training is internal and often on a one to one basis. Accountants as managers should therefore be able to understand the
different approaches to training and which of them is the most appropriate and cost effective for the training requirements of the
organisation.
(a) Computer based training can be inexpensive and is based upon user friendly interactive computer programs designed to
enable trainees to train on their own and at their own pace.
(b) Coaching involves the trainee being assisted by another, experienced employee. It is a specialised, systematic learning
programme based on communication, defined targets and continuous learning. It encourages constructive feedback between
the trainee and trainer.
(c) Mentoring, not to be confused with coaching, involves training on a wider range of activities, often aimed at career
development of employees at supervisory or management level. The trainee is provided with a development programme and
is under close supervision. The mentor should not be the trainee’s immediate supervisor or manager.
(d) Job rotation is an important training method and is often also seen as a means of motivation. It involves moving the trainee
from one job to another and is therefore more suitable for lower level employees. The trainee is required to do different jobs
in logical succession, thus broadening experience and gaining a picture of the organisation’s wider activities.
(e) Job instruction is a one to one method of training through which the trainee is shown how to fulfill a task and then allowed
to get on with that task. It is a systematic approach to training involving immediate supervision and by allowing the trainee
to complete the task is a cost effective way of training.
5 The way in which managers’ duties are undertaken can significantly influence the satisfaction that employees derive from their
work. Abraham Maslow suggested that individuals have a hierarchy of personal needs which are identifiable, universally applicable
and can be satisfied in the workplace. Understanding this concept provides guidance to management as to the appropriateness of
motivational techniques.
(a) Maslow’s theory of motivation is a content theory. Its basic idea is that each individual has a set of needs which have to be
satisfied in a set order of priority.
Maslow suggested that individuals have five needs:
Self-actualisation
(or self fulfilment)
Esteem needs
(or ego)
Social needs
Safety needs
Physiological needs
These needs are arranged in a hierarchy of importance and movement is upwards, from physiological needs to self-
actualisation. Any individual will always want more; each need must be satisfied before the next is sought. However – and
critically so far as motivation in the workplace is concerned – a satisfied need is no longer a motivator.
The theory is usually presented in the shape of a triangle, with physiological needs at its base and self-actualisation at its
apex. The triangle shape has a clear significance. As an individual moves up toward the apex, the needs thin out, that is
physiological needs are far greater than self-actualisation needs. For many individuals, reaching social needs is often the
highest need to be satisfied. The theory is sometimes presented as a staircase; again with self-actualisation at the top. This
second diagrammatic form reflects the application of the theory to more modern situations, where it can reasonably be
assumed that those within the organisation have already achieved physiological and safety needs. For such individuals, social
and esteem needs may well be greater.
Physiological needs are the basic survival needs which, although part of the theory, probably have less relevance today. These
needs are usually seen as food, shelter (which is sometimes noted as a safety need), warmth and clothing.
Safety needs are the desire for security, order, certainty and predictability in life and freedom from threat.
The above two so-called ‘lower order needs’ dominate until satisfied.
Social needs are the gregarious needs of mankind, the need for friendship, relationships and affection. This is often seen as
the desire to be part of a family.
Esteem needs are the desire for recognition and respect, often associated with status, especially in the modern world.
Self-actualisation (self fulfilment) is the ultimate goal. Once this state is achieved the individual has fulfilled personal
potential.
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However, later work by Maslow has suggested that there are two additional needs; freedom of enquiry (free speech and
justice) and knowledge (the need to explore and learn). These additional needs are a further development of social needs and
recognise the changing nature of modern life.
(b) This theory is based on the idea that the goals of the individual and the organisation can be integrated and that personal
satisfaction can be achieved through the workplace. It also assumes that individuals will achieve self-actualisation through
their role in assisting the organisation to achieve its objectives. It follows therefore that work is the principal source of
satisfaction.
The theory’s practical application is that managers should recognise that subordinates’ needs are always evolving and
increasing, so continued attention to increasing the employees’ personal development, opportunities for advancement and
recognition of achievement are essential to keep them motivated.
6 To get the best out of people, managers need to have effective communication skills. Professional accountants as managers need
to understand the difference between aggressive and assertive behaviour. Often an exchange of communication can be interpreted
as a belligerent response from an employee. However, a slight difference in approach can communicate different feelings and
achieve a more positive result.
(a) Aggressive behaviour is competitive and directed at defeating someone else. It is standing up for oneself at the expense of
other people. It is defending one’s rights but doing so in such a way that violates the rights of other people. Aggressive
behaviour ignores or dismisses the needs, wants, opinions, feelings or beliefs of others.
Characteristics of aggressive behaviour include excessive ‘I’ statements, boastfulness, and the individual’s opinions expressed
as fact, threatening questions or postures from the individual, sarcasm and other throw-away remarks and a constant blaming
of others.
Aggressive behaviour can be self defeating. It may cause such antagonism in the others in the organisation that they will
refuse to co-operate or work with the person showing aggressive behaviour.
(b) Assertive behaviour on the other hand is based on equality and co-operation. It involves standing up for one’s own rights
and needs but also respects the rights and needs of others. It is not overbearing or aggressive but can be described as clear,
honest and direct communication.
Assertive individuals defend their rights in a way that does not violate another individual’s rights. They express their needs,
wants, opinions, feelings and beliefs in direct and appropriate ways.
Characteristics of assertive behaviour include statements that are short, clear and to the point, distinctions made between fact
and opinion, suggestions weighted with advice and evidence. Constructive criticism is the norm and offered without blame
or assumptions. Questions to establish the wishes, opinions and thoughts of others are used as ways of getting around
problems. There are no ‘ought’ or ‘should’ conditions, the first statement is often held, the individual’s own feelings are
expressed and not those of others. Assertive behaviour can be successful if it displays a willingness to deliver a mutual
compromise as an aid to achieving a clear objective.
10
Part 1 Examination – Paper 1.3 June 2006 Marking Scheme

Managing People
1 (a) Explanation of the differences between the manager and supervisor

Five marks for the manager
Eight marks for the supervisor
(One mark for a specific reference to the interface role) Up to 13 marks
(Maximum for part (a) 13 marks)
(b) Explanation of:
(i) responsibility Up to 4 marks
(ii) authority Up to 3 marks
(iii) delegation Up to 3 marks
(Maximum for part (b) 10 marks)
(c) Explanation of:
(i) the need for delegation Up to 3 marks
(ii) achieving effective delegation Up to 6 marks
(iii) problems with delegation Up to 4 marks
(iv) how to overcome problems Up to 4 marks
(Maximum for part (c) 17 marks)
(Total for question 40 marks)
2 (a) Description of the term ‘organisational structure.’

(One mark per factor identified) Up to 5 marks
(b) Explanation of Mintzberg’s five organisational components.
(Two marks per component) Up to 10 marks
3 (a) Explanation of the purpose of the selection interview

(One mark per factor identified) Up to 4 marks
(b) Explanation of the advantages and disadvantages:
(i) The face to face interview Up to 6 marks
(ii) The panel interview Up to 5 marks
(in each case, one mark per factor)
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4 (a) Explanation of computer based training Up to 3 marks

(b) Explanation of coaching Up to 3 marks
(c) Explanation of mentoring Up to 3 marks
(Maximum for part (c) 3 marks)
(d) Explanation of job rotation Up to 3 marks
(Maximum for part (d) 3 marks)
(e) Explanation of job instruction Up to 3 marks
(Maximum for part (e) 3 marks)
5 (a) Explanation of Maslow’s theory Up to 10 marks

(Two marks per step)
(b) Application of the theory Up to 5 marks

6 (a) Explanation and examples of aggressive behaviour Up to 8 marks

(b) Explanation and examples of assertive behaviour Up to 7 marks
12

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Part 1 Examination – Paper 1.3 June 2006 Answers

Part 1 Examination – Paper 1.3 June 2006 Marking Scheme

1 (a) Explanation of the differences between the manager and supervisor

2 (a) Description of the term ‘organisational structure.’

3 (a) Explanation of the purpose of the selection interview

4 (a) Explanation of computer based training Up to 3 marks

5 (a) Explanation of Maslow’s theory Up to 10 marks

(Maximum for part (b) 5 marks)

6 (a) Explanation and examples of aggressive behaviour Up to 8 marks

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