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The Examiner's Answers E1 - Enterprise Operations SECTION A Answer to Question One 1.1

D

1.2

A

1.3

B

1.4

C

1.5

B

1.6

B

1.7

A

1.8

B

1.9

B

1.10

B

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) Having decided to outsource its IS function, there are a number of issues the organisation needs to address, including: Communication with the current workforce There is a need to explain the rationale and timescale for outsourcing. There may be a need for redeployment of staff whose roles are displaced by the contractor and a readjustment of other roles. This may involve negotiation with unions or staff groups. Invite tenders for the work The organisation should invite tenders from reputable contractors and based on tender documentation. Briefing interested contractors will help ensure compliance with organisational

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ethical policies, procedures and practices. Clarification of the organisation’s arrangements should be included in formal planning, bidding and legal documents. Choice of contractual partner It is crucial to make the right choice of partner. Thorough evaluation and selection processes and criteria should be established and then followed. This will include background review of potential contractors (their performance, references, litigation history etc.). Establish working relationships/organisation There is a need to establish and maintain a strong client-contractor relationship in order that organisational needs are fully satisfied. The organisation should communicate and agree mutual roles and expectations. There should be easy contact through a series of relationships at various levels (e.g. key account manager, user level, executive level, etc.). An in-house expert is usually retained as the client contract manager. Briefing for chosen contractor The chosen contractor must understand the business process and the organisational culture so that a full induction is needed including introductions to users and other staff. Process of handover Phasing of handover should be decided, future of current IS staff decided, training of new staff. Establish and monitor cost A budget needs to be established and then carefully controlled. The budget may initially be lower than existing in-house IS costs but variations to the initial contract as circumstances change will involve additional costs and these need to be accounted for. Managing contract compliance and adherence to predetermined standards Tight contract specifications and systems for quality and performance monitoring will be required. To achieve this, performance criteria and review mechanisms will need to be established and agreed upon. It may be that a dedicated employee post will be required to ensure contract compliance (dependent upon the size of the organisation). Ensure satisfaction of user requirements Systems will need to be established to evaluate and monitor customer (user) satisfaction and results need to be discussed with the contractor. Agreement on necessary remedial action or adjustments to working practice will need to be negotiated.

Requirement (b) There are many dimensions to an organisation’s human resourcing function and IS and IT can be of great assistance in improving efficiency. Some examples are given below. •

Assisting HR planning. In order to construct robust HR strategies and plans, detailed planning processes require gathering of much information, and then carrying out operations such as costings, projections and the development of alternative options. Clearly applications offering spreadsheets, databases, web based enquiry and modelling applications would be highly valuable (IS).

Reward. Simplifying payroll operations. Organisations of any size rely on cashless pay (normally BACS transfer) in order to remunerate workers efficiently. Dedicated, sophisticated, software packages process can calculate and capture payroll information. This will help in paying employees accurately, providing data for management and fulfilling income tax requirements of governments (IS).

Recruitment and employer branding. When recruiting, IT can help by transferring electronic advertising copy to publishers quickly and accurately. A further consideration is to use the internet directly which could prove an effective and relatively low cost recruitment method (IT). An organisational website would be needed with links to recruitment possibilities and online application forms. An attractive website could also perform an important role in differentiating one organisation from another, so strengthening employer branding to appeal to potential recruits (IS).

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Assist in selection processes. Individuals undergoing selection for a job will perform certain processes, some of which have potential for automation (such as in-tray exercises, work simulation and completion of profiling questionnaires) (IS).

Legal compliance. Communicate HR and organisational policies to the workforce. An organisational intranet and use of emails can help an organisation’s human resourcing function improve communication with the workforce (IS). If the organisation is geographically dispersed it might also consider the potential for videoconferencing and teleconferencing (IS).

Workforce management. In addition to being an organisation’s most valuable resource, employees often represent the largest component of total expenditure. As such there is a need to manage the workforce effectively, including staff numbers, overtime levels, levels of illness and absence, etc. Dedicated HR management information systems (MIS) would be helpful in this respect (IS).

Dissemination of good practice and learning from mistakes. Much organisational knowledge is held by individuals, ‘soft’ by nature and not captured formally. For organisations wishing to disseminate good practice and learn from mistakes, particularly those aspiring to be learning organisations, Knowledge Management Systems (KMS) help in capturing and sharing such learning (IS).

Conflict resolution/disciplinary process. Complaints procedure online for staff to view (IS). Intranet for sharing of expectations and policies (IT).

A repository for organisational policies. Formal HR Policies and procedures (and consequent forms) may exist in hard copy but could effectively be held on the intranet of a Local Area Network. This material might be extended to include electronic capture of personnel details such as results of job analysis, job descriptions and person specifications. This would be a helpful reference point for existing employees and useful induction materials for new recruits (IT).

Staff development. A platform for the delivery of training content and material. Technology would allow some degree of distance learning and open learning to take place through, for instance, online access, use of material held on DVDs, etc. (IT)

Requirement (c) Distribution involves getting the right products to the right people at the right time, and can take a number of forms: •

Zero level. The distribution channel is short and the manufacturer/producer sells directly to the final customer. (For example, web sales or through own retail outlet).

One level. A manufacturer/producer deals with retailers who in turn act as intermediaries by dealing with the final customers. (For example, phone manufacturer which sells to phone wholesalers which sell to the public).

Two level. Where the supply chain is further extended, wholesalers become involved and there are several intermediaries between the manufacturer/producer and the ultimate customer. (For example, the extended chain involved in sales of items of clothing).

A manufacturer’s promotional activity will vary dependent upon the sort of distribution channel that operates. Marketing policies There are three marketing possibilities: • • •

Direct marketing “Push” marketing “Pull” marketing

Zero level distribution channel. Direct marketing from the manufacturer to the ultimate customer is possible. One example might be a farmer placing a “Produce for sale” board on the roadside outside the farm and selling from a farm shop on-site, a further example may be

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online trading, with promotion of the website address on other sites (e.g. by pay-per-click on Google). One and two level distribution channels involve two types of marketing: •

‘Push’ marketing: the task of selling goods to final customers rests with wholesalers and retailer intermediaries in particular. The emphasis of the manufacturer’s promotional activity is to persuade intermediaries to promote its products to the end customer at the expense of competitor products. Activity might include personal selling, trade promotions and wholesale discounts, meaning that ultimate consumers are rarely aware of this activity. Manufacturers are said to “push” products towards the consumer.

‘Pull’ marketing: the emphasis of the manufacturer’s promotional activity is to influence final consumer attitudes so that a product demand is created. If the strategy is successful, intermediaries will feel obliged to satisfy this demand, and will be encouraged to take the manufacturer’s products. Promotional activity typically involves heavy expenditure on advertising and consumer promotion in the hope of stimulating higher demand for the product (one example might be the distribution of coupons for money off the purchase). In the children's toy industry there are often intense advertising campaigns and the development of highly visible brands (often through children’s television) encouraging parents to actively seek specific products. The manufacturers’ marketing aim is that the customer “pulls” its products towards themselves.

Requirement (d) The marketing mix The four dimensions of the marketing mix represent decisions an organisation should make over the marketing factors that need to be mixed to achieve maximum impact and influence on its target market. In the case of the online company the mix is shown below. Product Pictures and product descriptions are likely to be displayed on the website but the products themselves will be synonymous with the strong brand name and image attached to them. Brands communicate expectations of quality, durability, and design to potential purchasers. (Sportswear brands such as Nike, Adidas and Puma represent some of the most powerful brands of any business). The company will be expected to offer an appropriate and up to date product range through its site. Packaging will not represent a significant feature of the product mix. Similarly issues of after-sales service, optional extras, guarantees, warranties (beyond those required legally) will not feature in the product mix. Place Rather than a physical sales location, ‘place’ is cyberspace, with the ‘place mix’ relying on the design and operation of an effective website. Web based trading means that distribution coverage is potentially global. Online companies generally do not involve themselves in issues of transportation directly, instead relying on postal services and package handlers for delivery. The online company will clearly need sufficient stock levels and warehouse facilities (the location of which needs to be logistically convenient). Alternatively, the company may rely instead on a JIT approach with minimum stock so long as they have a good working relationship with manufacturers. (Some of the savings achieved over high street shops in terms of operating overheads will be passed on to customers in the form of lower prices). Promotion All promotion is likely to take place online. Significant features of the promotional mix include a need to invest in an attractive and user-friendly website and high visibility of the site through web search engines. Online advertising might be undertaken through (for instance) pop-ups and online links from general sports and leisure sites. Product pictures are likely to be displayed on the web site. Sales promotion might be achieved through competitive pricing relative to other online outlets. Traditional personal selling and publicity will not feature in the mix. Price All branded products command higher prices than unbranded products whether sold

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traditionally or online. In this case prices will reflect branding but will be lower than for high street shops selling the same products (thanks to lower overheads). As part of the price mix the firm may offer online discounts for customer repeat purchases or bulk purchases. In common with other online operations, payment will be made by debit or credit card at the time when products are ordered meaning that payment terms and considerations of credit will not apply.

Requirement (e) A number of internal possibilities exist for recruitment, shortlisting and selection without the need to involve a third party, including: •

Advertising the vacancy internally using (physical) notice boards, or through other organisational communication methods such as email, the intranet, or organisational newsletters, etc. Based on expressions of interest, this may lead to internal promotion of someone or an existing employee moving sideways into the vacant role.

Advertising the vacancy externally using the organisational website or by placing posters outside the organisation’s buildings. This may lead to someone outside the organisation filling the vacancy.

(Where industry regulations and local conventions do not prohibit it) appointing to the job without advertising. This may involve promotion of another employee to the role (either permanently or on a temporary basis). Alternatively, it may mean transferring a member of the workforce from another part of the organisation, generally because of a corporate career development policy, redeployment and ‘rebalancing’ of the organisation or based on recommendations of organisational managers.

Contacting potential candidates by reference to a locally maintained register of those who have in the past submitted a CV, or who have worked for the organisation before and have taken a career break or maternity leave, etc.

Contacting previously unsuccessful candidates who have applied for similar posts in the past (assuming that they would be suitable for the position that is vacant).

Encouraging workforce recommendations of friends and family who may be interested in considering the vacancy.

Generally use of internal sources will be less costly, but the danger is that an inappropriate selection may result.

Requirement (f) There are many, often competing, theories of motivation. These might be understood in terms of Mullins’ (2007) classifications of: •

economic rewards (e.g. pay, security, perks of the job, etc.),

intrinsic satisfaction, (from the nature of work, job interest, self development, etc.) and

social relationships (e.g. friendships, being part of a team, etc.).

Certain aspects of these not involving financial incentives are discussed here. Encourage social relationships Organisations can develop teams and good worker/manager relationships. The potential impact of work groups on individual motivation and productivity was best illustrated by the Hawthorne Studies. Social relationships between workers within a team and between workers and their managers can prove a more powerful source of motivation than financial incentives. Structure the organisation positively Structuring the organisation to emphasise self-directed work teams which stress employee involvement can build on this social relationships thinking to motivate the workforce. Develop a positive culture/celebrate success The organisation could develop a stimulating organisational culture whereby employees feel valued and are motivated to contribute positively. Such cultures take time to develop and

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need to be carefully maintained through supportive management approaches and by use of appropriate actions. By way of example, outstanding employee performance might be rewarded through a number of mechanisms including additional leave entitlements, flexible working conditions and public recognition of achievements. Communicate positive messages The organisation could develop and enhance non-financial elements of a total reward package to communicate a positive message to employees. In any case, the organisation needs to pay attention to, ‘hygiene’ factors, so issues of working conditions, rest breaks and availability of food and refreshments can impact directly on morale and motivation. Regular communication to the workforce and collaborative activity can make employees feel good about both themselves and the organisation they work for. Effective job design Effective job design can be used to build more interest, variety, challenge and collaborative working into jobs which might motivate employees. (This is consistent with the job characteristics model which links job characteristics, the individual’s experience of those characteristics, and the outcomes in terms of motivation, satisfaction and performance). Thus special attention needs to be given to skill variety, task identity, task significance, autonomy and individual feedback. Introduce job variety The organisation could introduce job variety to motivate and develop individuals, overcome inertia, and help in understanding the roles performed by others. Job variety might be achieved through expanding a role by adding stimulating tasks (job enlargement) or tasks that might normally be carried out by someone on a superior grade (job enrichment) or swopping jobs for a period (job rotation). Clear Goals Consistent across the organisation, aligned between departments and with ongoing communication of performance. Provide resources Updating of equipment to enable efficient performance. Competent management Responsive to requests for support, sensitive and fair in issuing instructions, consistent in decisions made. Offer training and skill development By offering individuals an opportunity for additional training and skill development they should value the opportunity to develop their potential and consequently will be both engaged and motivated.

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SECTION C Answer to Question Three Requirement (a) Growth of BRIC Economies Currently the most important growing economies in the world are Brazil, Russia, India and China and they have come to be known as the BRIC group. The growth of each of these economies contains unique aspects of the history of each country but there are some general factors that have influenced the growth of all four. These include the following: General factors driving growth Globalisation This concept refers to the growing interdependence of countries worldwide and the freedom it gives to firms and individuals to initiate economic transactions with those in other countries. Factors that have contributed to the globalisation process include; • • • • •

developments in electronic communication such as the internet, improvement in transportation such as containerisation and the development of jumbo jets, convergence of tastes through the development of foreign travel and the world wide media, the reduction of trade barriers assisted by organisations like the World Trade Organisation (WTO) enabling the opening up of trade between countries and the growing readiness of multinational enterprises (MNE’s) to take advantage of instant communication and more rapid and cheaper transportation to conduct their operations on a global basis.

In providing opportunities for business organisations to trade and to invest in other countries, globalisation has also enabled more countries to take advantage of economies of scale and to reap the benefits of comparative advantage that trade between nations brings to the trading partners. These economic advantages of globalisation have enabled all countries including those in the BRIC group and other smaller countries to find markets for their products in other countries and to take advantage of the easier access to capital, new technology, business expertise and skilled labour that the world has to offer. Internal developments in emerging economies But while the development of globalisation has provided the conditions to assist in their growth, the emerging economies themselves have developed internally to take advantage of globalisation. In many emerging economies the government of the country has played a key role by adopting policies to assist the development of its own business infrastructure. In particular there has been a general move towards the adoption of a free market economy. This has entailed the removal of bureaucratic rules and the offering of greater incentives to individuals and businesses to benefit from their entrepreneurial efforts. This has been accompanied by relative political stability that has attracted inward investment from abroad. Previous poverty: Until this century they were very poor economies. This makes growth easier to achieve. Hong Kong, Singapore and South Korea also currently have very high growth but started from a higher prosperity than the BRIC countries. In many such countries the adoption of new agricultural techniques has improved productivity considerably and this in turn has provided a pool of labour available to work in the new manufacturing plants that the governments of these countries have encouraged. The availability of labour coupled with low wage rates relative to established economies has made BRIC economies very attractive to multinational businesses wishing to reduce production costs.

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Improvements in education have also been fostered and such improvements have made such countries attractive places for investment by the world’s multinationals. Natural Resources: The developing world economy is increasingly hungry for the resources that the BRIC countries can provide cheaply. Brazil and Russia have extensive raw materials; Brazil in agriculture and iron ore, Russia in oil. India and China have extensive cheap labour and manufacturing skill. Such investment in turn has provided work and income for the abundant labour force in the emerging economies and this income has contributed to the development of an urban middle class with discretionary income to purchase an ever widening range of consumer goods. These developments produce what might be called a ‘virtuous circle’ in which more employment produced more income which is spent on the consumption of more goods and through the multiplier effect increases the country’s overall GDP.

Requirement (b) Offshoring involves relocation by an organisation of a business process from one country to another. This is usually accompanied by migration of jobs from rich to poorer countries. The advantages and problems that follow relate to emerging countries in general , not India specifically. Advantages There are a number of advantages to the Group. It enables the Group to lower its cost of operations by having its back office operations performed in an emerging country at a fraction of the cost it takes to undertake them in country D. •

A large pool of underemployed well educated talent exists in such countries and wages are consequently lower than they are in a European economy like that of country D.

It is also the case that the government of some emerging economies have invested heavily in IT and the communications infrastructure so that internet and telephone links with countries around the world are excellent.

By centralising its back office operations in one location, the Group will also be able to cut costs because it will be easier to standardise and control its operations in a single location and division of the organisation.

It allows the G Banking group to concentrate on the more complex side of its banking operations and by so doing to become more expert and efficient in these activities through specialisation and division of labour. This kind of specialisation is increasingly necessary in a global economy where competition is increasing and where threats come not only from domestic banks but from banks in other parts of the world. Specific advantages include: •

Speed: Greater staff resource available in the offshore country enables faster responses to customers.

Sales to offshore country: Encourages sales to the country where production is partially done.

Problems Offshoring is being carried out in another country in which different political, economic, social, cultural, technological and environmental conditions prevail. Experience suggests that these differences can make for difficulties (although this may not necessarily be so for India). Difficulties can include: •

Cultural differences between say country D managers and local employees can make for misunderstandings and conflict.

The political polices of some emerging economies can involve costs on the business not found in the home country as for example the requirement to provide housing accommodation and other benefits for employees.

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Economic: Exchange rates can be unstable and local tax requirements may also be difficult to forecast.

There may also be language differences and time differences to be overcome. Some or all of the differences noted may result in real or perceived differences in service levels with the result that the overall image of the bank suffers in its own country.

Technical: Technical ability of staff and the local supply chain of essential supporting materials may be inadequate in some areas.

Legal: Risk of loss of confidentiality. Respect for intellectual property rights may not be clear in some countries.

Requirement (c) Role of HR division Help is promised to employees affected in country D. The following help can be offered by the HR division of the Group: •

Communication: Policy can be discussed with relevant staff unions and communicated to all staff. Issues of timing and compensation packages might be explained and negotiated.

Advice and training: Those losing their posts can be offered assistance with retraining. Careers advice can be given to those wishing to consider a new career path and targeted training provision could be offered.

Compensation: Those losing their posts can be provided with severance payments based on years of service.

Assistance with getting new jobs. Staff affected can also be allowed time off to attend interviews for new posts during the period leading up to the completion of their employment with the Group. Training in CV production and support in completing application forms might be arranged.

Counselling. Counselling by experts and mentor support could be offered for those struggling to cope with change or unable to adjust to the idea of not working for the Group.

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Answer to Question Four Requirement (a) Adoption of up-to-date supply chain management approaches to improve performance of W Company Innovations in Operations Management In recent years operations management has come to be seen by many as strategically important to the overall success of the business and a number of innovations have occurred including the shift from price-based operations to relational procurement and to a greater concern with supply chain management as part of a strategic process. Strategic importance of supply chain management While purchasing deals with the day to day buying of materials and equipment, ‘supply’ has come to be used to refer to more strategic considerations like the planning and implementation of a strategy and the management of the whole supply chain process. •

The essence of supply chain management is a cross-functional approach which involves managing the movement of raw materials into an organisation, some aspects of the internal processing of materials into finished goods, and the movement of finished goods out of the organisation and toward the end-consumer.

The increasing emphasis on core competences as a basis of competitive advantage has resulted in organisations outsourcing some of their non-core activities to other organisations which are able to perform activities like the sourcing of raw materials and the distribution of finished goods more effectively than the organisation itself. W would be advised to review its activities with a view to outsourcing those that could be done at less cost by an outside supplier.

One outcome of this development is to increase the number of organisations involved in satisfying customer demand, another is to make for greater difficulty in the control of logistics operations. So an important aspect of supply chain management is to develop trust and collaboration among supply chain partners thus improving the visibility of inventory and speeding up the movement of materials and products through the supply chain.

Another way in which the efficiency of operations could be improved in W is by attention to the following aspects of its supply chain management: •

Instead of maintaining the traditional form of organisational structure in which the organisation is split into specialist divisions or functions like production, sales and marketing that often results in poor communication and a resulting inventory build up, W could adopt a horizontal structure that focuses on improving the supply chain for the benefit of the end customer.

W could also improve its efficiency by paying more attention to the management of its relationships with its up stream and down stream partners. In particular it could reduce the number of suppliers and develop closer more collaborative relationships with them. As part of this, W could make use of cross-functional specialists to work with supplier organisations to improve quality and design of products.

Further efficiencies can be attained by use of integrated information systems that would replace paper orders to suppliers with faster more accurate electronic means in the form of electronic data interchange(EDI).

The use of Porter’s value chain analysis to identify the strengths and weaknesses in W’s supply chain might prove helpful. • JH might also find Porter’s value chain a useful tool for assessing the strengths and weaknesses of various aspects of W’s supply chain. •

Operations management is concerned with virtually all the primary activities that Porter depicts as horizontally linked in the value creation process: inbound logistics, operations, outbound logistics and services. In respect of the support activities, operations management is directly linked to procurement and elements of technology and infrastructure. By comparing the efficiency and effectiveness of these links with

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key rivals, the management of W will be able to identify where its weaknesses and strengths are and modify its supply chain strategy appropriately. Porter’s concept of the link between the organisation’s own value chain and the value chains of its suppliers and customers in a wider value system have also proved fruitful to supply chain specialists. Competitive advantage through linkages between the organisation and its value system components can be achieved by the analysis and subsequent improvement of relations with its suppliers and with its customers. This may even extend to collaboration with other organisations via the adoption of total quality management principles, common merchandising and even the formation of joint ventures or strategic alliances. In addition, JH might also find Cousins’ strategic supply chain wheel a useful framework as it attempts to summarise the key components of any corporate supply strategy. Cousins argues that an integrated approach to supply strategy involves the balancing of the five ‘spokes’ of the strategy wheel. The five spokes include several of the items noted above including, attention to organisation structure, improved relationships with suppliers and other partners, but adds the need to make use of cost/benefit analysis, careful consideration of the skills and competences of key personnel and the choice of appropriate performance measures to ensure alignment with the overall business strategy.

Requirement (b) Process design W has made little use of the latest developments in operations management such as process design with the result that costs are higher than those of competitors. This being the case, it may well be that W’s processes need improvement or a radical overhaul to operate in a different but more effective and efficient way. Before any changes to processes are undertaken however, it is necessary to conduct an analysis of existing processes. In order to do this thoroughly, an assessment of the organisation’s mission, goals and customer needs should be conducted. Only after such an analysis has been followed through should a more detailed analysis of processes begin. A business process can be examined, measured and improved or it can be completely redesigned or eliminated altogether. Business process design is the method by which an individual specialist such as JH seeks to understand the business activities that enable an organisation to function. This in turn will ensure that these activities or processes are designed so as to be as effective and efficient as possible. Apparently JH has used the method to good advantage in the past. Process design can involve the development of wholly new processes to facilitate the production of a good or service, or in the case of W Company, it can refer to the improvement of existing processes. The use of Process maps/charts The re-design of business processes requires a detailed analysis of existing processes and a number of aids or techniques have been developed to assist carrying out such an examination. One such aid is that of the process maps or charts. Process maps provide a visual representation of the processes via which a product or transaction is processed; in this case how the white goods are manufactured by W Company. The map will include workflow either within a process or within the organisation and the flows of information or products along supply chains and across networks. One of the advantages of process maps is that they help capture the operations process by illustrating the activities that transform inputs into outputs. For W this will involve transforming materials and parts into finished products. The advantages of charting include the following: • It allows employees to understand what their job is and how it fits into the whole process. • It provides management with an overview thus identifying responsibilities and key stages in the supply chain. • It helps indicate inefficiencies in existing processes thus identifying where waste exists and pointing to potential improvements in the system.

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It can assist in planning for change.

Given these advantages, it is evident that improvements in supply chain management activities within W Company could make use of these techniques to good effect. Business Process Re-engineering (BPR) When the analysis of processes has been completed a number of tools/methods and approaches are available for the improvement of processes. These include the use of TQM, Kaizen (continuous improvement), structural reorganisation and the most radical method of process design: Business Process Re-engineering (BPR). This approach, developed by Hammer and Champy, involves the fundamental re-thinking and redesign of existing business processes to achieve improvements in performance as measured in terms of cost, quality, service and speed. BPR challenges managers and staff to totally rethink the way they do things in order to improve organisational effectiveness. The creators of the Re-engineering approach identify four major themes of BPR as follows: • • • •

Process re-orientation which involves a focus on jobs, tasks, constraints and resources with the intention of carrying out jobs and tasks more efficiently, overcoming constraints and making better use of resources; Creative use of IT wherever this can enhance business processes; Rule breaking, which in this context means a readiness to do things in new and more effective ways; Ambition which involves setting targets for improvements in performance not previously contemplated.

This approach could be used to help facilitate the process improvements in procurement and supply chain management that JH will need make in Company W if it is ever to compete successfully again with its rivals. The use of BPR is a radical solution and requires careful consideration as this involves a fundamental review and possibly a costly reorganisation of the way in which W Company conducts its operations

Requirement (c) The misappropriation of funds and unethical conduct damages the functioning of any organisation. If monies or other resources are not used as intended then the efficiency and effectiveness of the whole organisation is compromised. Most professional bodies have developed a Code of Ethics to help regulate the conduct of their members and to try to prevent unprofessional conduct and unethical behaviour. One example of such a code is The Code of Ethics drawn up by CIMA in 2005. If W Company were to adopt such a code, future incidents could be limited for the following reasons: •

Disciplinary action: a Code of Ethics is particularly useful as it sets out standards which act as guides to behaviour and the punishments that would follow from infringement of these standards. (Action against the perpetrators of past ethical misconduct is required to punish miscreants and to set an example to others).

Expectations: a code can be used as a management tool for making clear the obligations and responsibilities of managers and staff and the ethical ambitions of the organisation. It can also offer guidance to employees on how to handle ambiguous situations which pose a dilemma between alternative courses of action.

Role model: in drawing up a code of ethics the W Company will need to tailor its code to the particular concerns of employees in the context of the organisation and the environment in which the business operates. To be effective it will be necessary for the senior management in W Company to demonstrate commitment in its implementation, monitoring and maintenance.

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Involvement: such a code is usually developed through including employees and management. Such discussion creates consensus on what is acceptable behaviour and causes group pressure to comply.

Training: training is usually provided to communicate and implement such a code. This training, if conducted well, will reinforce the necessary behaviour. Training will include stories and examples that will ensure the subject is real for everyone.

Publication: external publication of such a code enhances the reputation of the organisation and should increase pride in employees, which will reinforce compliance.

Two way responsibilities: a code identifies organisational responsibilities as well as those of employees. Clarity on this reminds management and staff of the fairness of obligations that are expected on both sides which should increase compliance.

Reporting: the code will include a procedure for reporting suspected breaches of the code. An open door policy plus acceptance of anonymous reports will avoid the appearance of creating a network of informants. Follow up of all reported violations with potential confrontation and leadership skill will reinforce the seriousness with which the code is taken.

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E1 - enterprise operations - the examiner's answers - May 2010