E1 September 2012 answers

Operational Level Paper

E1 - Enterprise Operations September 2012 Examination The Examiner's Answers Note: Some of the answers that follow are fuller and more comprehensive than would be expected from a well-prepared candidate. They have been written in this way to aid teaching, study and revision for tutors and candidates alike.

These Examiner's answers should be reviewed alongside the question paper for this examination which is now available on the CIMA website at www.cimaglobal.com/e1papers The Post Exam Guide for this examination, which includes the marking guide for each question, will be published on the CIMA website by early October at www.cimaglobal.com/e1PEGS

SECTION A Answer to Question One Rationale Sub-questions 1.1. to 1.10 test candidates' knowledge of a wide variety of topics within sections A, D and E of the syllabus through the use of objective test questions (OTQs) in a conventional multiple choice format.

1.1

B

1.2

D

1.3

B

1.4

A

1.5

A

1.6

A

1.7

C

1.8

C

1.9

A

1.10

D

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

Answer to Question Two Requirement (a) Rationale This question examines learning outcome B2(b) 'discuss ways of organising and managing information system activities in the context of the wider organisation'.

Suggested approach • •

Identify the main advantages Briefly elaborate on each in turn

There are several significant advantages of maintaining an in-house IS function, five are listed below.

HR flexibility If the service is kept in-house there will be potential to use the posts within the function as part of human resource management policies such as career development across different business areas and job rotation.

Sharing of overheads If the service is kept in-house there will be sharing of central overheads by the IS function. If the service is contracted out then other services such as payroll and headquarters functions would be relatively more expensive to service users.

Local knowledge As part of the same organisation, the function should possess unique local knowledge; meaning that it understands local difficulties and needs better and is well placed to tailor the service to those requirements.

Commitment to the organisation As part of the organisation the in-house provision should be mindful of the organisational culture and ethos and have a greater affinity for and commitment to the organisation.

Avoids complex SLAs and transaction costs Potentially there should be less difficulty in agreeing and managing a ‘service level agreement’ (SLA) between the IS function and service users than if an outside contractor were involved. Normally small variations to service levels are likely to meet with a flexible response rather than a need to renegotiate terms and conditions. In addition expensive transaction costs and on-going monitoring associated with using an outside provider will be avoided.

(Note: Mention could also be made of issues such as service continuity and potential to develop the service as a source of strategic advantage, etc.)

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Requirement (b) Rationale This question examines learning outcome B2(b) 'discuss ways of organising and managing information system activities in the context of the wider organisation'.

Suggested approach • •

Explain both CAD and CAM Explain the benefits of each

Reduced material wastage Through precise design and pattern making CAD can reduce the amount of raw materials used and the incidence of off-cuts e.g. timber, metal, etc. This obviously also has beneficial effects environmentally and is particularly important where materials are sourced from non-renewable sources.

Simplified processes In addition to savings on materials, CAD can, through improved design, potentially simplify the processes involved in assembling products from manufactured parts. CAD and CAM are the keys to flexible manufacturing as they enable computerised machines to perform a variety of functions quickly and easily. This makes the organisation more customer-orientated.

Reduce errors CAD and CAM can eliminate human error in design and machining, so reducing costs of waste associated with traditional design and manufacturing processes.

Increased speed and labour cost savings By automating previously manual operations CAM can reduce the number of human labour hours involved in assembly, manufacture and packing, resulting in speedier operations and lowering labour costs.

Help meet customer requirements CAD and CAM provide flexibility to meet customer requirements more fully and eliminate mistakes and the need to return faulty goods; so improving customer relations and customer loyalty.

Requirement (c) Rationale This question examines learning outcome B2(b) 'discuss ways of organising and managing information system activities in the context of the wider organisation'.

Suggested approach • •

Describe MRP Explain how it might improve operations

Material Requirements Planning (MRP) is a planning and control system designed for organisations engaged in mass production.

Basis of technology driven approach MRP is a push-based system, pushing work through the system. Once in place, MRP can enable the computer system Manufacturing Resource Planning II to be adopted so enabling inventory control to match supply and demand.

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Reduced stock holding MRP can simplify inventory control and levels of stock holding might be reduced, thanks to precise planning so potentially improving both cash flow and company liquidity.

Help meet customer requirements MRP can contribute to increased customer service as there will be fewer delays through materials shortage. Similarly MRP can give a base for providing swift, reliable quotations where delivery times are important.

Enhance planning of operations The systemised planning that MRP brings means that there will be improved facilities utilisation and less time spent on hurrying emergency orders through (possibility of displacing other activities or incurring overtime payments, etc.).

Enhance supplier relationships Organisational relationships with suppliers should be enhanced through improved information sharing by identifying clear lead times and by fewer panic orders.

(Note: Mention could also be made of issues such as improved administrative efficiency, improved financial control and enhanced management decision making information, etc.)

Requirement (d) Rationale This question examines learning outcome D1(e) 'describe theories of consumer behaviour'.

Suggested approach • •

Identify the five stages Briefly describe each in turn

Problem/Need recognition The purchasing process is a problem solving process of how to satisfy a need or want. Crucially consumers do not so much buy goods or services as satisfy a demand or need through the purchase.

The first stage is that the consumer identifies that need or problem.

Information searching The second stage involves the consumer performing a search of various options to satisfy the identified need. This might be done informally through remembering past experience, talking to others or more formally by consulting directories, 'window shopping' alternatives or internet search engines.

Evaluation of alternatives This stage involves the consumer in comparing various brands and products in order that a choice might be made between the viable alternatives.

Purchasing decision Next the customer actually makes a purchase choice. The choice is only normally altered if (for instance) there is a temporary 'stock-out' or further information emerges about the alternatives which were rejected initially.

Post purchase evaluation Once the product or service has been purchased, the consumer assesses whether he/she is satisfied with the purchase decision. Consumers might relate these opinions to others or make product rating entries on the internet. This reflective process will help shape future purchasing behaviour.

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Requirement (e) Rationale This question examines learning outcome C1(c) 'explain the particular issues surrounding operations management in services'.

Suggested approach • •

Explain queuing theory Provide purposeful examples

Queuing theory is the study of waiting times through mathematical analysis of related processes. The theory enables a series of relevant performance measures to be calculated that can guide operations.

These measures might be converted into ratios.

Service organisations such as hospitals can benefit from the generation of these ratios in the following ways: •

The calculated average waiting times for a service once calculated can keep patients better informed. One example might be how long a particular patient may have to wait for a particular operation.

•

The expected number of patients waiting at a point in time can be determined. This can help hospital managers determine staffing levels and opening times e.g. for accident and emergency, drop in clinics, etc.

•

The probability of encountering the system that is either empty or full can be calculated, for instance arriving at a hospital department at either a busy or 'slack' time. Using this information demand can be smoothed by actively using appointment systems and recommending times of attendance.

•

It is possible, through the ratios generated through queuing theory, to undertake inter-hospital and intra-hospital benchmarking and ratio comparison so acting as a stimulus to improved processes, greater productivity and organisational improvement. In the same way information could be generated to aid policy decision making.

Requirement (f) Rationale This question examines learning outcome B2(a) 'discuss ways for overcoming problems in information system implementation'.

Suggested approach •

Identify five potential difficulties

Inefficient operations Systems operations may initially be slower and less efficient due to a lack of user confidence and/or unfamiliarity with the new system. This could impact negatively on customer service and hence damage external relations and impact negatively on sales, etc.

Mistakes This lack of confidence and unfamiliarity with the new system may lead to accidental errors in processing leading to information generated by the system being incorrect or misleading.

Staff anxiety and loss of morale Without knowledge and information there may be a fear of the new system’s effect on jobs. This could lead to anxiety and stress and a lowering of motivation. This could be costly to the organisation in terms of staff turnover or absence from the workplace (as a way of avoiding the new system).

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Disruptive behaviour If support and training are inadequate, staff may feel inadequate and be reluctant to use the new system, possibly continuing with old ways of operating or being uncooperative or confrontational with management. Conceivably deliberate errors in processing may occur and would represent the equivalent of an employee’s 'cry for help'.

A failure to realise the benefits of the new system Most systems are purchased or introduced only after some appraisal of the costs and the benefits weighed against one another. If support and training is inadequate then the benefits of the system may never be realised.

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SECTION C Answer to Question Three Rationale Requirement (a) examines learning outcome D2(a) 'explain the relationship between market research, market segmentation, targeting and positioning'. Requirement (b) examines learning outcome C2(d) 'illustrate a plan for the implementation of a quality programme'. Requirement (c) examines learning outcome C2(a) 'apply contemporary thinking in quality management'.

Suggested approach (a) • • •

Identify the potential advantages of market segmentation Relate to the scenario Discuss each advantage in turn

• • • •

Define quality standard ISO 9000 Describe the benefits of quality standard ISO 9000 certification Relate to the scenario Discuss the associated issues

•

Briefly discuss how the Production Manager's suggestion could benefit BC4 as part of an alternative Quality Control (QC) system Explain QC and the role of QC inspectors Identify the benefits that may be of relevance, given the scenario Briefly discuss each in turn

(b)

(c) • • •

Requirement (a) Market segmentation allows an organisation to focus on the subset of a market that has the greatest potential. There are clear advantages associated with the practice for BC4.

Develop appropriate marketing mix The idea of dividing a market into segments is to identify groups of potential consumers who have similar needs and will respond to a particular marketing mix in broadly similar ways. Unsurprisingly, the management consultant has identified this approach. Segmentation will allow BC4 to concentrate on the right blend of the elements of the marketing mix that best meets the particular needs of its segment. The overall aim is to deliver the right products to the right customers using the right delivery channel at the right price and segmentation can assist this aspiration. A clear focus on a segment can lead Bc4 to improve the suitability of the product in terms of design. It can also improve communication to the target segment(s) using advertising and other promotional activities that are most relevant.

More focused promotion of BC4’s products BC4 currently uses an undifferentiated (mass) marketing approach whereby it makes a product offering to the market as a whole. This approach is inefficient in many ways because much of the marketing effort is wasted on consumers who have no interest in purchasing the product and are unlikely to do so whatever the efforts put into promoting it. Instead the company can develop more efficient and effective methods of promoting existing products.

Easier analysis of customers Segmentation allows a company to gain a better understanding of customer needs, wants and other characteristics. A sharper focus allows the personal, situational and behavioural factors that

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characterise customers in a particular market segment to be better understood. This detailed knowledge will, in future, allow BC4 to respond quickly to any changes in what the target customers want and need.

Simplified operations BC4 currently tries to sell its product range to all potential customers, even though it is geographically difficult to fulfil obligations to customers in the north of the country. It may be that serving these customers is unprofitable and runs the risk of failing to meet customer requirements so damaging its reputation. Effective segmentation should lead BC4 to improve its operating efficiency, simplify what it does and avoid possibly unprofitable markets.

More effective use of resources Market segmentation offers the opportunity to an organisation to concentrate its limited resources on meeting the needs of consumers. The greatest return will be achieved by concentrating effort and resources in this way. By segmenting the market BC4 can focus on specific customer needs in the most efficient and effective way. Activities can be redirected to better serve its most likely customers.

The targeting of particular customer segments of the market should produce more sales and lower costs (as it may be possible to reduce overall expenditure on promotion and advertising). If properly managed, BC4 will be able to achieve a higher return for an unchanged or reduced marketing and sales budget.

Improved product design Segmentation offers the opportunity to design new products or redesign existing ones and work with customers within the chosen segment to reflect the design features they are looking for. In this way it may be possible to make product improvements, increase brand loyalty and decrease brand switching.

Better understanding of the competition By building a detailed knowledge of a single market segment BC4 will also develop an improved understanding of its competitors which serves this same segment group.

Better understanding of market Market segmentation means that sales potential can be more clearly understood and market potential more accurately estimated. Finding, understanding and focusing on the needs of customers can mean that BC4 has the opportunity to become a market leader within a carefully chosen segment.

More effective market planning Knowledge of market segments assists with marketing planning. The needs of the segment can be better understood and anticipated, leading to improved planning processes and more realistic plans being developed.

Requirement (b) The Managing Director feels that significant benefits to BC4 might arise through gaining the quality standard ISO 9000 certification. The International Standards Organisation (ISO) issues standards that are globally recognised, and that include the ISO 9000 series. ISO 9000 provides a systematic approach to managing business processes to produce products that conform to customer expectations.

Improved efficiency through standardised practices The management consultant has identified differing operating efficiencies both within and between BC4’s factories. By gaining ISO 9000 certification, BC4 will develop a system that should lead to standardised practices, greater productivity and the maintenance of consistently dependable processes. A consistent approach to policy documentation is a requirement including systems for control of products that do not conform to the agreed standard. The standardisation that BC4 will gain through certification will improve the efficiency of business processes and should reduce expenditure.

Elimination of inefficiencies The need to agree upon common modes of operating and standards to be achieved will allow BC4 to identify the most efficient processes so driving out bad practice and inefficient operations.

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Mechanisms for Quality Control The need for control of quality records (according to the standard 'at all locations where operations essential to the effective functioning of the quality systems are performed') means that once a recognised mechanism is in place an effective Quality Control (QC) mechanism can be established.

Compliance can readily be assessed by conformance of a particular operation to the agreed standard.

Improved management information As part of QC the standard allows a company flexibility to use those statistical techniques that would be most appropriate for its industry. This would force BC4 to adopt such techniques routinely in order to both correct that which does not comply to standard and to prevent poor quality occurring. These techniques and systems will improve business processes by improving decision making as managers can now base decisions on reliable information rather than rely on instinct.

A stimulus to continual improvement By seeking the international standard, BC4 will be constantly forced to focus on how it does business.

Unlike a training programme, this initiative is more than a one-off exercise or event. Periodic audits conducted by external independent auditors are a requirement of certification. This will keep the issue of quality permanently 'on the agenda'. The need to document every procedure and work instruction will make the way in which BC4 operates visible and in future enhanced if an improved method is identified. In this way, the system might stimulate continuous quality improvement leading to improved business processes, reductions in waste, improved product quality and cost savings.

Customer satisfaction The management consultant has identified a trend of increasing returned goods which require replacement or reworking and significant numbers of products returned as part of extended guarantee arrangements. This means that customers are not currently receiving products of the quality they expect. The standardised practices guaranteed by a company complying with ISO 9000 will mean that consistently dependable processes and products will help reverse this situation. Fewer returns and claims under guarantee should result in improved customer satisfaction.

Enhanced company reputation: loyalty and new sales If BC4’s customers are not currently receiving products of the quality they expect, this can be very damaging to the company’s reputation. Although customers are not demanding ISO 9000 certification, the outcomes arising from the process will improve customer satisfaction and customer loyalty, leading to repeat purchasing and improved sales. As the reputation of the company grows, new customers should be attracted through the recommendation of existing customers. Similarly, large organisations may have approved supplier lists that include only companies with ISO accreditation.

New sources of business might arise for BC4 once it has this accreditation.

Improved employee morale As BC4’s external reputation grows employees will be proud to be associated with the company. The fact that the standard implies a need for the workforce to take control of its processes and document its work processes will mean that it will feel valued. A key message for BC4 to emphasise is that quality is not the responsibility of one person; it is everyone’s responsibility. This shared responsibility should provoke a positive attitude throughout the organisation. Such an attitude should lead to an increase in employee morale and a positive organisational culture.

Enhanced company reputation: improved employer branding In addition, in a battle for talented workers, BC4 will be a more attractive organisation to join. So the accreditation could effectively improve employer branding.

Requirement (c) The MD appears to favour ISO 9000 accreditation but his production manager has advised him to employ dedicated Quality Control (QC) staff. The use of Quality Control (QC) inspectors in itself would only be effective as part of a full Quality Control (QC) system.

Potential for QC and subsequent ISO accreditation The use of dedicated QC inspectors is an example of a QC mechanism traditionally found in technical production processes. The QC inspectors’ task would be to compare the actual quality of the products

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produced with the expected or previously planned quality standard. Such QC mechanisms could form the basis of a later adoption of ISO 9000.

Sufficient for BC4’s needs ISO accreditation (like Total Quality Management and The European Quality Foundation model) is a Quality Assurance (QA) system. it should, however, be acknowledged that QA systems are in certain ways superior to quality control systems in that they attempt to create rather than control quality.

However, the use of QC inspectors and QC systems generally may suit BC4’s immediate needs more readily.

Speed and cost Obtaining certification under international quality standard ISO 9000 may benefit BC4 but it could take a great deal of time, effort and expense to introduce and then maintain it across the whole organisation. In many ways QC would be a quicker and potentially cheaper approach for BC4 to adopt. The significant trend of increasing returned goods would be readily picked up by the inspectors and savings made could conceivable pay the inspectors’ salaries.

Critical consideration of appropriate quality standards for BC4’s products Introducing QC inspectors would necessitate a critical consideration of appropriate quality standards for BC4’s products which is healthy. It would also involve identifying an aspect of the production process that is critical to the quality of production, then establishing warning limits and tolerances.

There would then be ongoing review and adjustment of the standard originally set.

Direct address of an organisational weakness The management consultant has confirmed that no systematic QC exists and differing operating efficiencies exist both within and between BC4’s factories. This should be seen as a strategic weakness of the organisation. The Production Manager’s suggestion might be seen as a directly addressing this matter.

Reduce external failure costs Taking remedial action where quality does not meet standard followed by immediate action to remedy any breach of the tolerance would reduce BC4's external failure costs.

A source of learning In addition to the other benefits valuable data would also be produced as part of the QC system which could act as a guide to preventing production errors in the future.

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Answer to Question Four Rationale Requirement (a) examines learning outcome A1(b) 'explain the emergence and importance of outsourcing and offshoring'. Requirement (b) examines learning outcome E2(a) 'explain the HR activities associated with developing the ability of employees'. Requirement (c) examines learning outcome E2(c) 'describe the HR activities associated with improving the opportunities for employees to contribute to the firm'.

Suggested approach (a) • •

Identify the issues that T42 should take account of as part of its considerations Describe each issue in turn

• •

Identify some benefits of introducing job rotation Relate these to the scenario

• •

Explain the factors Discuss each in turn

(b)

(c)

Requirement (a) For her next scheduled meeting with the Chief Executive, the Chief Operations Officer has agreed to investigate the potential for offshoring part of T42’s operations. Offshoring involves transferring some part of the organisation’s activities to another country.

Likely savings T42’s staffing costs as a proportion of turnover is higher than its competitors some of which are offshoring part of their activities. Generally, the main driver behind the trend in offshoring is in order to exploit differentials in wage rates. Such differentials in wage rates can be significant (often in the order of one tenth the level of the ‘home’ country). Even if the opportunity is offered, it is unlikely that all T42’s existing staff would wish to relocate to another country. This would therefore lead to the employment of new employees from another country. Offshoring could therefore be cost effective to T42 in terms of reduced wages. In addition, there may be potential to exploit low tax rates and other benefits in the host country.

Exchange rate effects Exchange rates between the home country and host country can be notoriously difficult to predict and could make financial projections of potential savings difficult. If the decision to offshore goes ahead there is a risk of exchange rates impacting adversely on costs of operations eroding likely savings.

Impact on workforce If the Chief Operations Officer’s investigation of the potential for offshoring part of T42’s operations were known by the workforce it could have a devastating effect on morale, motivation, goodwill and industrial relations. Given that no choice has been made over which services will be considered for offshoring, then damaging rumour and gossip would also occur. T42 needs to consider at what stage (if any) it communicates with staff in a way that minimises possible damaging consequences.

Choice of function to outsource What is known from the scenario is that T42 employs 'many' technicians who each have detailed specialist knowledge of different systems. In Charles Handy’s terms these workers would represent the 'operational core' of the organisation. This core is supported by sales personnel and call centre staff. The least risky part of T42’s operations to offshore would be its call centre operations as a noncore activity and also because many call centres are already offshored in other industries.

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Level of training T42 employs highly trained staff to ensure customers always receive the highest levels of reliability and technology. This seems to be the basis of T42’s competitive advantage and the company would not want this to be compromised as a result of offshoring. Any new employees required, as a result of offshoring (or outsourced offshore staff), would need to exhibit the same attributes.

Reliability A distinctive feature of T42’s operation is that its own technicians are available 24 hours a day, 7 days a week under existing arrangements. Again this aspect should not be compromised as a result of offshoring. (Time differences between the home and offshore partner countries in this case are not a difficulty).

Choice of host country: Language barriers T42’s choice of country to offshore to is important as language may be an important consideration.

Several of the BRIC economies invest heavily in educating their workforce in different languages to ensure that their workers have high levels of linguistic skills. If language becomes a barrier then customer service could be compromised.

Choice of host country: Political risk The likelihood of operations being disrupted by a change of foreign government or terrorist activity (for instance) needs to be factored into the decision making. Reference has also been made earlier to the volatile nature of some exchange rates. It is likely that these issues will help guide the choice of country to offshore activities to.

Choice of host country: Potential for new trade By establishing a base in another country, T42 will have a better understanding of local conditions and contacts and may lead to potentially new business from the host country.

Cultural differences Geert Hofstede, amongst others, researched the role of national culture within the organisation and identified five dimensions which he argued largely accounted for cross-cultural differences in people’s belief systems and values. Irrespective of the country chosen by T42 to offshore to, there will be cultural differences. These differences present a number of challenges for T42 including a need to understand and respect other cultures, and act accordingly. Thus cross-cultural management involves recognising behaviour which exists within both countries and cultures and understanding and improvement of the interaction between T42 and partners from different countries and cultures.

A need to establish service level agreements, etc.

There will be a need to establish service levels, performance targets and ratios in order to ensure that levels of service are maintained under offshored operations.

(Note: Mention could also be made of issues such as 24 hour enabled cover, a need to protect intellectual property, and a need to invest in team building in order to develop team cohesion, etc.)

Requirement (b) Job rotation involves moving employees from job to job within the organisation. For their next scheduled meeting T42’s Chief Operations Officer has agreed to investigate the potential for introducing job rotation amongst its technicians.

Overcome a strategic weakness It is a strength of T42 that each of its technicians is highly skilled and knowledgeable but it is a source of organisational weakness that an individual technician’s skill and knowledge is in only a few business systems. So although an individual technician’s knowledge may be deep it is also narrow which is unhealthy in a number of ways. It will mean, for instance, that technicians are restricted as to the number of clients they can currently deal with. This may be part of the reason why T42’s staffing costs as a proportion of turnover are higher than its competitors.

Effective staffing policy From a human resourcing perspective staffing policies should be designed to lead to a set of positive outcomes including high staff commitment and quality, and highly flexible employees. It seems from

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the scenario that T42 is quite 'flat' in terms of hierarchy and roles appear very specialised. It would therefore be difficult to involve technicians in job enrichment or job enlargement schemes. The most feasible mechanism to improve commitment, quality, and flexibility would be the use of job rotation.

Arranging for technicians to swap roles periodically will bring variety to their roles and increase their capacity to deal with a greater breadth of clients.

Expanded skill variety The number of different types of skills that are used by an employee to do a job (skill variety) enables employees to undertake a variety of tasks in their work. For T42 the use of job rotation will certainly enhance multi-skilling amongst technicians and lead to a more flexible workforce. This will give T42 more options in covering tasks when there are absences and holidays. It may be that the workload of technicians is currently uneven and the initiative could help distribute workload more fairly amongst all technicians.

Shape attitudes positively: readiness for change Job rotation would certainly break any possible feelings of inertia and complacency amongst T42’s technicians so that in future they should be more receptive to organisational challenges and changes in operation.

Shape attitudes positively: organisational commitment Job rotation can also lead to positive feelings towards the organisation. In T42’s case this might involve aligning technicians’ attitudes to the organisation more closely and, hopefully, T42 should obtain positive behavioural outcomes of increased effort, co-operation, involvement and organisational citizenship.

Encouragement for workplace learning T42 is a 'knowledge based' organisation and operates on the basis of having high quality employees.

Such organisations need processes of workplace learning in order that a capable and qualified workforce continues to produce a high quality service. Job rotation is one such mechanism that helps T42 achieve workplace learning.

Engagement and motivation Job rotation may prove to be a stimulus to individual technicians leading to engagement. If employees are more interested in the job as a result of the policy they will be more motivated and the organisation will benefit from staff commitment and retention and possibly enhancing employee productivity.

Breadth of perspective Job rotation gives each employee the opportunity to see how the different jobs within an organisation fit together. The difficulty at the moment is that each of T42’s technicians has individual knowledge that is deep but also narrow. This can lead to a rather insular view of work. Task significance involves how important the task is to others in the company, which is important in showing employees how the work they do fits in with that done in the rest of the organisation. If employees can see how their work affects others, they will attempt to do the best job they can whilst collaborating with others.

Breed healthy attitudes in the workforce Currently technicians work in silos. Job rotation is known for breaking these feelings. T42 employs many technicians who each have detailed specialist knowledge of different systems and a sales team which stays up to date on the different solutions available. Job rotation means that technicians will have a

broader perspective. It will also encourage new approaches to be tried out in the workplace.

Potential to reduce the staff training budget

T42’s Chief Executive has asked if economies could be made to the training budget. It may be that technicians are receiving 'too much' formal detailed knowledge of too narrow a range of systems. If on the job training (of which job rotation is one example) is introduced one benefit may be a reduction in the current training budget. 'On the job' training will only be effective however if existing employees have time to devote to the process, and are themselves competent and know how to impart the necessary skills.

(Note: Mention could also be made of issues such as improved team cohesion and a broader appreciation of jobs performed by colleagues and skill requirement, etc.)

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Requirement (c) The Chief Executive asked if economies could be made to the training budget and the Chief Operations Officer has agreed to review the current provision.

Outputs effectiveness The explicit input to training may be expressed as a level of budget (or an input) but when determining training provision there should be a concentration on the outputs or outcomes of the process. If T42 already has stated the aims of its commitment to training then the outcomes of the current provision should be measured against these aims. If no stated aims exist, senior management would do well to consider what they hope to achieve as a result of future training provision.

Budget level and level of provision Training can be seen as a formal, often short-term process. It can take place away from the workplace or 'on the job', or be a combination of both. It is likely that T42’s training budget, which the partner has drawn reference to, reflects training away from the workplace and may involve costs such as facilities hire and the use of training consultants. 'On the job' training by comparison is likely to have 'hidden costs' and will not be obvious within the overall budget. If the decision were taken to reduce the training budget then the lost training opportunities could potentially be compensated for to a degree by increased 'on the job' training.

Strategic Alignment T42’s stated business approach involves a belief in the need for the best system and high commitment through highly trained staff. T42’s technicians are indeed highly skilled and knowledgeable. This suggests that training is essential in order for the company to be competitive and meet its organisational goals. When deciding upon the training budget this will clearly need to be taken into account.

Productivity levels as a result of training Training is a process whereby the organisation attempts to increase an individual’s ability to better perform a particular set of tasks. In T42’s case the effectiveness of its workforce is dependent upon the competence it acquires. Well trained members of the sales force or technicians will be better placed to respond to customer demands and generate income. Indeed call centre staff also need to be competent, directing queries to the right personnel within the company.

Workforce commitment as a result of training In some organisations training is seen as a form of reward and motivation for employees. If this is the case within T42, then those staff engaging in training should be motivated, committed and therefore more productive. When deciding upon T42’s training budget, the level of workforce commitment derived as a result of the budgetary provision needs to be considered.

Workforce competence as a result of training If T42’s training budget is used effectively, participants should become more competent and confident employees. Not only should productivity levels improve as a result but, crucially, levels of workplace stress should reduce. A consequence of a confident happy workforce is reduced absenteeism and lower staff turnover (meaning less disruption and cost associated with recruitment and selection of replacement staff).

Support for other initiatives and processes Training adds cohesion to other organisational activities and these factors should be taken into account by T42 when deciding upon the training provision. For instance, training can be a direct result of honest collaborative staff appraisal processes or as part of an induction programme. Currently T42 is considering both offshoring and job rotation and, as a consequence, it is likely that more not less training will be required (e.g. in skills using other systems, cross-cultural appreciation skills, etc.)

(Note: Mention could also be made of issues such as the content of the existing training provision and its impact on budget required and morale of staff, etc.)

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