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INSTITUTE OF BANKERS OF SRI LANKA
INSTITUTE OF BANKERS OF SRI LANKA
Diploma in Banking & Finance Examination September 2010
Management & Organization (91)
Instructions to Candidates
I. Do NOT open this question paper until instructed to do so.
2. Read the instructions on the cover of the answer book.
3. Time allowed 3 hours
4. The Paper consists of 6 questions. Section A consists of one question carrying
40 marks. Section B consists offive questions carrying 20 marks each.
5. Answer the question in Section A and Three (03) questions from Section B.
Section A
All candidates must answer Question 1
I. Shaking up the Giant - Not Just a Fairytale at EDS
Electronic Data Systems (EDS) is a giant in computer outsourcing - a term used to describe when
a company turns over its data processing activities to a third-party company. And you'd think that
a company in a high-tech field dealing with computer networks and sophisticated data-processing
activities would be relatively open to change and flexible. However, change has not come easy to
the giant.
EDS was founded in Dallas by Ross Perot and sold to General Motors in 2000. From its early
days, company has grown to over $8.5 billion in annual revenues and currently is a star division
at General Motors (GM). EDS's expertise is in processing data for other companies, and they're
the best in the world at it. But drastic changes in the market place were occurring, and EDS had to
transform its way of doing business in order to become more customer oriented. And this required
a major overhaul in employees' mind-sets.
The culture at EDS, like that at many service companies, had always been that an employee's job
was to do things and make changes in response to a customer's request. The new customer­
focused culture was going to require more than making adjustments for customers.
Instead, employees would now have to anticipate what customer was trying to do. Especially, this
demanded a change in employees from being order receivers in a traditional top-down corporate
hierarchy to being team members who had a significant amount of authority, responsibility,
control, and decision-making power to deal with customers. So, how did they do it - how was the
giant's culture transformed?
One of the most important things that EDS did was to tell everyone - not just sales people, but
engineers and product designers and receptionists - in the organization that they were going to
have to be "people person". But telling employees to "be something" or "do something" isn't
enough. As a manager, you have to set an example and that's exactly what EDS managers did.
Working in teams, they set up meetings with clients, took them out to dinner, and expended
intense effort in getting to know the customers. Their actions showed the seriousness of the
company's commitment to focusing on customers. [n addition, managers shared information
openly with employees about the company's financial status and condition, market conditions and
industry trends. In this way, employees were aware of the opportunities and challenges that faced
the company. Finally, the employees were told that performance appraisals and rewards were
going to be based on the strength of their relationships with their customers.
Changing an organization's culture is never easy. Yet EDS has been able to transform itself into a
more nimble and responsible company. And the company's continued dominance of its industry
is not just a fairytale ending!
Source: Adapted from Robbins P. Stephen & Coulter Mary (1998), Advanced Management
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Based on the above case study, you are required to:
(a) Explain how EDS could have continued to be highly profitable and successful if it had
used more conservative, incremental changes.
(10 marks)
(b) Identify and explain the possible challenges EDS's management might have to face when
enacting the change in culture and possible ways of overcoming same.
(10 marks)
(c) Discuss the strategic importance of developing a customer-focused culture.
(20 marks)
(Total Marks 40)
Section B
Answer 3 questions in this section.
2. Strategic Human Resource planning is now being effectively used to identify human resource
gaps and then use to fill those gaps in advance.
(a) Define 'human resource gaps' and explain how strategic human resource planning helps
to fi II thelse gaps.
(10 marks)
(b) Discuss the importance of strategic human resource management for an organisation.
(10 marks)
(Total Marks 20)
3. The process of strategic management is sometimes defined as comprising strategic analysis,
strategic choice and strategic implementation.
(a) Describe each of these three stages and comment on their inter-relationship. (10 marks)
(b) Explain various types of strategic management models which could exist in an
organisation.
(10 marks)
(Total Marks 20)
4. An organisation is seeking your advice to create a team-oriented approach to productively
manage its activities. Develop a report advising the management on team development process
and possible Iimitations for successful team bui Iding.
(20 Marks)
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5. Discuss the impact of recent developments and changes in information technology on;
(a)
(b)
Decision Making and Problem Solving
Co-ordination and control
(10 marks)
(10 marks)
(Total Marks 20)
6. There is no one best way
organisational designing.
of designing an organisation. Explain different approaches to
(20 Marks)
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INSTITUTE OF OF SRI LANKA
Diploma in Banking and Finance Examination September 2010
Management and Organization (91)
Suggested Answers
Section A
1.
(a)
Define Change:
Change can be defined as an alteration in the people, structure and technology.
There are two types ofchange:
(i) Incremental cbange
This type of change occurs slowly in a systematic and predictable way and is
often associated with change as it emerges within the organization. It involves
tine-tuning and making adjustments to procedures that will improve efficiency of .
organizational performance, but which will not fundamentally alter the
organization. Most organisational changes tend to be of this type.
(ii) Discontinuous/fundamental change
This type of change is sometimes referred to as transformational or fundamental
change. It can be defined as large change that is marked by rapid shift in
strategy, structure or culture. The forces of external pressures which could
threaten the continued existence of a tirm often bring about discontinuous change
and the result is often a major strategic shift.
.
Benefits ofincremental change:
* There can be less resistance from employees to adapt to the new change in ways
of doing things
* Provides opportunity to make necessary adjustments in the work processes and
procedures as it suits best through employee participation and involvement.
* Build credibility among other stakeholders since it provides gives' enough time to
recognize stakeholder needs
* Less administrative and other overheads. Change initiatives are embedded into
the existing system.
* Change process gives continuous feedback. Therefore, change initiatives are
more efficient.
(10 marks)
(b)
Challenges of introducing the new culture could mainly revolve around resistance to
change. This can happen at different levels, including the individual and organisational
level.
(i) At an individual level, security and comfort arising from familiarity and habit as
a source of resistance to change.
Security associated with economic factors and status can be another cause of
resistance.
(ii) At organisational level, well-defined structures, rules and procedures can lead to
resistance to change.
The lack of resources to commit to new projects can also hinder change.
Consideration of stakeholder interests also leads to resistance.
Overcoming such chaBenges:
Kotter and Schlesinger (1979) suggest a range of different approaches to deal with
resistance to change:
(i) Education and commitment
Resistance can be reduced by communicating with employees and help them see
the logic of change.
(ii) Participation and involvement
Make change decisions participatory, so that it is difficult to resist a change
decision in which employees participate.
(iii) Facilitation and support
Change agents can offer a range of supportive efforts to reduce resistance.
Employee counselling and therapy, new skills training, or short paid leave of
absence might facilitate adjustment.
(iv) Negation and agreement
Deal with potential resistance to change by exchanging something of value for a
reduction in the resistance.
(v) Manipulation and cooptation
This is attempting to influence. Twisting and distorting facts to make them
appear more attractive, withholding information, and creating false rumours or
use of grapevine to get employees to accept.
(vi) Explicit and implicit coercion
Using direct threats or force on resisters. This gives similar results as in the case
of manipulation. However, this can be illegal.
(10 marks)
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(c)
A customer-focused culture can help £OS build a sustainable competitive advantage
through quality customer service, differentiated products and innovation.
Sustainable competitive advantage is based on unique capabilities and core competencies
helps an organization create a unique market position. The sources of competitive
advantages are;
* must add value to customers .
* should be unique and rare
* should be inimitable
* and non-substitutable
Organization culture can be a source of competitive advantage due to above criteria.
Following are done at EDS in building a customer -focused culture:
* change of employee mind-set to be customer focused
* Employees are trained to be 'people-persons'
* Higher customer responsiveness
* Employees work as a team
'" More empowerment and autonomy to take decisions
* Open communication
.. Linking customer oriented behaviors and results with performance appraisal
A customer -focused culture can have an influence on Structure, Technology and People.
These changes can help an organization to achieve its strategic objectives and goals.
(i) Structure - organisation structure need to be more decentralized and less
complex and formalized in order to increase customer responsiveness. When an
organisation increases customer responsiveness, it helps to satisfy customer·
needs much faster than competitors.
When creating a customer -focused culture, jobs are also redesigned in such a
way that employees have more authority and control over decision making in
order to anticipate, identify and satisfy customer needs.
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(ii) Technology - change in culture required change in work processes, methods, and
infrastructure and facilities used. Therefore, new technology needs to be
introduced in order to bring about higher level of customer service. The higher
the technological know-how an organisation adapts, faster is its decision making
process and therefore, customer responsiveness. Competitive factors like
innovation often come from technological know-how. Automation can replace
most jobs. This can help reduce overheads and cost as well as increase the speed
of delivery of service. Computerization helps management to take strategic
decisions more accurately and speedily. '
(iii) People - new change of employee behavior help establish the changes made at
the structural and technological level. Employee mind-set mainly reflects the
customer responsive culture. Training, perfonnance management and rewarding
can facilitate the development of customer oriented behaviours and actions.
People become the main source of competitive advantage in a business.
Therefore, play a strategic role in bringing about a change that adds value to
business.
(20 marks)
(Total Marks 40)
Section B
2.
(a)
Human Resource Gap:
(i) Labour as key resource input into an organization (along with other resources
such as raw material, finance, land and machinery etc.)
(ii) A gap between the future expected level of labour resources and the presently
existing resources considering the new recruitment and retirement.
(iii) Resource gaps can be positive or negative - an excess or a deficit is given.
(iv) Skill or resource need.
How strategic human resource planning helps to fill the HR gaps:
Essential part of HR planning is to identify HR gaps and proposing ways to fill the gaps.
Once the gaps are identified, the manager can understand the nature and magnitude of the
gaps.
(i) HR deficit ean be filled with new recruitments or retaining
(ii) HR surplus can be addressed by disposals, redeployment, golden handshake
programmes etc.
The corporate plan should develop a clear and explicit link between their business and
human resource plans and so integrates the two more effectively.
HR strategies should then be focused to effectively bridge the HR deficit and surpluses.
It allows for much better control over staffing costs and numbers employed.
(JOmarks)
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(b) Discuss the importance of strategic Human Resource Management for an
organization.
(i) HRM strategies support the achievement of business objectives
(ii) HRM has both people and business orientation - increase individual
accountability for objectives, motivate staff and hence stimulate performance
(iii) HRM support business strategy development and efficient implementation.
eg: growth, consolidation, increasing competitive advantage through quality
(iv) Developing a performance-oriented culture, through empuwerment; involvement
and team working
(v) Develop commitment and performance- oriented organizational culture
(vi) HRM help build a sustainable competitive advantage through people
(lOmarks)
(Total Marks 20)
3.
(a)
Strategic analysis:
This means identifYing the conditions prevailing in both the internal and external
environment and the of these conditions on the organization. The following
matters will need to be addressed:
(i) SWOT
Oi) Competition analysis
(ii i) Customer analysis
(iv) Cultural.analysis
(v) Social analysis
Strategic choice:
The process of strategic selection involves the following steps:
(i) Define the company's mission or overall objective
(ii) Derive the company's goals and objectives from the mission
(iii) Develop strategies by which these goals and objectives could be met
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Strategic implementation
Having fonnulated strategies and plans it only remains to implement them. This will
almost certainly involve changes to the way things are done if the process of strategic
management has followed through from first principles.. Areas in which the
implementation of strategies is likely to cause changes are:
(i) The organization structure
(ii) The organization's culture
(iii) The quality of all outputs
(iv) Attitude towards innovation, entrepreneurship
(v) The degree of control exercised over subordinates, given new emphasis on
innovation.
After implementation, effectiveness of strategy implementation must be reviewed on a
continuous basis. Therefore, strategic review can be considered as the next step of
strategic management process. Once implementation is reviewed for its effectiveness the
process goes back in the cycle of strategic analysis and new strategies developed and
implemented. Hence, strategic management is a continuous process, of which each stage
is inter-linked. Each stage has its inputs to t h ~ other.
(lOmarks)
(b) Strategic management model refers to the pattern or mode of strategic management.
According to the strategic management model, a number of steps are taken to achieve the
objectives of a company. Different strategic management models are chosen by various
companies according to their conveniences.
There are four types of strategic management models:
(i) Rational systematic model
This model explains how intended or deliberate strategies are formulated for the
organization using a very rational and systematic process of strategic decision
making
(ii) Descriptive model
This model explains that strategies are emerged as a pattern of collective
behaviour of the organizational members over a period of time.
(iii) Prescriptive model
Thjs model explains that strategies come into existence through a combination of
rational processes as well as a pattern of behaviour which can be called as crafted
strategies.
(iv) Situational model
This model explains that strategies come in to existence as a result of situational
factors which are called as spontaneous strategies and accidental strategies.
(lOmarks)
(Total Marks 20)
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4.
Report should be in a report format and includelollowing points:
Team development stages according to Tuckman:
(i) First stage - forming
The members meet and decide the purpose of the team and how it will operate. At this
stage the 'team' is no more than collection of individuals who are finding out about one
another and about the task, although objectives may be unclear. This stage is wasteful,
time consuming although essential since the prospective team members are not at this
'itagt: comfortable with each other.
(ii) Second stage - storming
The phrase 'storming' is deliberately referenced to this stage which is characterised by
conflict. Previous ideas, attitudes and behaviour is challenged and often rejected. There is
competition for roles within this team. If the individuals come through this stage then a
stronger team wi! [ result.
(iii) Third stage - norming
At this stage the norms under the team will operate are established. The team is settling
down. Members experiment with ideas and test the reactions of the team ciS a whole.
At this stage the team will estabiish patterns of behaviour, levels of trust and the methods
by which decisions will be taken.
(iv) Fourth stage - performing
At this stage the team is complete and able to perfonn to its full potential.
Difficulties with team roles, individual conflict and problems of adjustment have been
resolved.
(v) Fifth stage - adjourning
Stage at which' group members complete their tasks and go back to their previous
positions. Some groups may continue to maintain informal relationships and still operate
as a group.
Limitations on successful team building:
When a new team is established there is a need to ensure that everyone shares the same
goals and objectives. Somehow, there arc specific blockages or limitations to successful
team building. These need to be recognised and steps taken to overcome them.
Blockages occur when:
(i) There is poor or ineffective leadership from supervisors or senior management.
(ii) Objectives set by management are unclear and are therefore often rejected by
team members who are uncertain as to the task before them.
(iii) Ineffective or unsound work methods or procedures, resulting from unclear or
confused objectives.
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(iv) Team members are unresponsive and not committed to the project or task
assigned due to personal aspirations.
(v) There is a general lack of motivation both within the team or from management.
(vi) Meetings of the team are unproductive or demoralised, time is seen as wasted
instead of getting on with the task in hand.
(vii) Low creativity and little attempt at problem solving because the team mix is
incorrect.
(viii) Lack of achievement within the team members or leadership resulting in
uncertainty and confusion.
(ix) Conflict within the team resulting from poor team construction and
misunderstanding on team roles.
(20 Marks)
5.
(a)
(i) Speeds up communication between individuals In an organization, therefore
decisions can be made more quickly.
(ii) Data can be analysed more extensively, thereby allowing better quality decisions
to be made.
(iii) Supply chain management can be improved through the use of 'just-in-time'
techniques i.e the cost of holding stock and the lost opportunities.
(iv) Monitoring and controlling of organizational performance is facilitated by
development in IT.
(v) IT can bring about increase in productivity, in the services and manufacturing
sectors.
(10 marks)
(b)
(i) Many organizations have used IT to develop closer relationships with their
customers
(ii) Improved IT has allowed firms to improve the way they manage their supply
chain
(iii) Performance standards can be managed more effectively
(iv) Organizational planning is facilitated by development in IT
(v) IT has helped to develop more flatter & flexible organization structure
(10 marks)
(Total Marks 20)
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6.
Organization designing involves developing an effective and efficient organizational structure for
successful implementation of the plans of the organization. Hence, it attempts to match the.
appropriateness ofthe structure to its objectives, strategies and culture ofthe organization.
Different approaches to management (classical, human relations, systems and contingency) have
adopted various methods in designing the organization. However, appropriateness ofthe methods
of designing will depend on many factors such as nature of the environment, type of the
organization, nature of the products and services, nature of the market, types of objectives and
strategies, type of organizational culture. All these methods have their own advantages and
disadvantages. Hence, one can argue that there is no one best way of designing an organization.
Main methods of organizational designing:
:
(i) According to Classical School
Max Weber. Taylor, Fayol, Urwick thought that there was a 'best way'. They believed in
a bureaucratic or hierarchical structure with many formal and rigid features. They argued
that bureaucratic organizations flourish well in stable environments, and do not readily
adjust to rapid change. However, excessive specialisation, difficulties of communication
and high rigidness decreased the organizational effectiveness and efficiency.
(ii) According to Human Relations School
This method emphasised that improvement to the structuring of organizations could be
brought by introducing less fonnalities and increasing subordinate participation. But, like
the classists, they also believed that there is one 'best design' which is related to
involvement and participation. However, they ignore the influence of external
environment on the structure ofthe organization.
(iii) According to Contingency Approach
This method suggests that there is no best design, but that organization structure will
depend on the particular circumstances in which the organization confronts. The most
popular contingency variable include external environment, objectives and strategies,
organizational tasks and systems, technology, culture and people.
(20 Marks)
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