Chap 8

E2: Enterprise Management
Chapter-09: Relationships in the Working Environment

1. What is mentoring? Why mentoring is important for organization? (2½ Marks) [CMA Dec, 2019]
2. Muaz, the Managing Director of ABC Company, recently announced to the workforce that the Board had
agreed to the establishment of a set of new working practices which should lead to improved productivity.
The new working practices will mean the introduction of weekend working and the rotation of shifts for
all workers.
The senior management of ABC Company consider the changes to be necessary if the company is to
survive the very difficult operating conditions it is currently facing. However, the announcement has led
to conflict between management and workers, and the workers are now threatening industrial action.
Required: Discuss the different strategies that Muaz could use to manage the conflict occurring in ABC
Company. (6 Marks) [CMA Dec, 2019]
3. How conflict creates? What is Horizontal conflict and vertical conflict? (2½ Marks) [CMA June, 2019]
4. Describe Business Process Outsourcing (BPO). (2½ Marks) [CMA June, 2019]
5. Briefly describe what is meant by mentoring. (2½ Marks) [CMA December, 2018]
6. “Teams are a kind of group, all groups are not teams.” Describe briefly the essential features of a team.
(6 Marks) [CMA December, 2018]
7. BD Company has for many years operated as a family owned business producing gift boxes, wrapping
paper and greetings cards. The company is one in which everyone knows everyone else and employees
participate in some way in the day-to-day running of the business. The owner/manager, Mr. M, is always
open to new ideas from any member of staff since he feels that local knowledge is important to decision
making. He encourages staff to be flexible in their roles within the company, depending on business
needs.
New staff tends to be recruited locally and often follow others from their family into the company. Many
of the current management positions are held by employees with no formal management training or
qualifications, but who have worked their way up from junior positions within BD Company. Z prides
himself on knowing the names of all his staff and takes time to ask them about their families and interests.
He also tries to attend the many social events the employees arrange and plays for the company's football
team.
Last month Mr. M announced that, with some regret, BD Company is going to be sold to a much larger
international organization, SA Group. He explained to staff that whilst he anticipates that most employees
should be able to keep their job, the acquiring organization will have its own way of doing business. He
advised staff that they will, in the future, have to accept a much more bureaucratic approach which would
be quite different to how things have operated in the past. He also mentioned that the new senior
management team would be appointed from within the SA Group's other companies.
SA Group has already proposed that senior managers in its other companies should act as mentors for
the junior managers in BD Company as part of their development and transition into the Group. Mr. M
has some reservations regarding how BD Company's junior managers might view mentoring.
Required: (a) Compare and contrast the way in which BD Company is currently managed and how it is
likely to be managed in the future, following acquisition by SA Group.
Your answer should make reference to relevant theory.
(b) Explain the purpose of mentoring and how it might benefit the junior managers in BD Company.
[Marks: (8+7) = 15] [CMA June, 2018]
8. Following the recent appointment of a new Chief Executive for BD COMAPNY Company, it is apparent
that he intends to make a number of structural changes across the company with the stated aim of
improving operational effectiveness.
The Finance Director, FD, has taken on the role of leading the re-structure of the company's finance
function. The change will involve consolidating the different finance departments across the company
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into a shared service center (SSC) model.
FD has worked for BD COMAPNY Company for 25 years during which time she has led a number of
change initiatives. She is a charismatic figure within the company and is very well respected by members
of the different finance departments, with a reputation for her fairness and expert technical knowledge.
FD has always been a champion of the finance function, making sure that her staffs enjoy excellent
working conditions. As a result, the morale of the finance staff has always been high.
However, FD is aware that the move to a SSC will not be welcomed by all members of the various
finance departments and she expects that the change will be met with some resistance, even though it
has been announced that there will be no changes to staff remuneration and no redundancies. She has
already heard that staff are concerned about working in a SSC since they think that this will not only
mean fewer job promotion opportunities, but that they will be removed from business units and will end
up doing more routine work which will be tightly controlled.
Required: (a) Explain the benefits of BD COMAPNY adopting a shared service center model for the
finance function.
(b) Discuss the factors that FD, the Finance Director, will need to consider in order to ensure that staff
motivation is not damaged as a result of the move to the shared service center.
(c) Explain the different sources of power that FD could use to help her manage the structural change of
the finance function to a shared service center model. [Marks: (5+5+10) = 20] [CMA June, 2018] &
[CIMA May 2014, Q.6]
Suggested Answer:
Requirement (a)
The establishment of a shared service centre (SSC) will essentially involve the bringing together of the
various finance departments from across the PRC Company into one central unit. It is sometimes referred
to as internal outsourcing since it will allow the company to take advantage of the benefits of
consolidation whilst maintaining full internal control and thus minimising the control risks associated
with outsourcing.
PRC could expect to enjoy substantial payback in terms of reduction of overhead costs and hence unit
transaction costs. Moving to the SSC model should also result in more consistent management of business
data in that standard approaches can be developed across the company, rather than each individual finance
department developing its own methods. It should also lead to an enhanced quality of service for PRC
Company. This is because, it is argued, learning and sharing of knowledge between colleagues is better
facilitated through the finance teams being located together.
Requirement (b)
To help CS in thinking about the factors she will need to consider to ensure staff morale and motivation
are not damaged as a result of the move to a SSC, it may be helpful for her to refer to Hertzberg’s theory
on motivation. His dual factor theory on motivation refers to two different types of need: hygiene factors
and motivators. Herzberg suggests that hygiene factors need to be in place in order to reduce staff
dissatisfaction. If they are absent this can lead to dissatisfaction and consequently impact on performance.
For example, factors surrounding the job context such as pay, working environment, company policy and
interpersonal relationships. These factors tend to be extrinsic to the job itself and whilst unlikely to
motivate staff, if they are not right can cause dissatisfaction and de-motivation. The other set of factors
are those, which if present, can motivate individuals to superior effort and performance. They tend to be
related to the job itself, in other words are intrinsic factors and are referred to as motivators or growth
factors.
Applying this theory to the SSC it seems likely that the hygiene factors such as competitive salaries and
good working conditions will be in place. However, there are some hygiene factors that need attention,
specifically the concern about the nature of supervision. It will be important that the work design in the
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SSC does not come across as close supervision which would be problematic to professional finance staff
used to making their own decisions.
Another set of recommendations that should be made relates to the potential motivating factors, such as
those relating to recognition, challenging work, responsibility and advancement. This could include
looking at the design of jobs within the SSC, and the possibilities for job enlargement and job enrichment.
This would involve exploring the design of job roles in the SSC to ensure interesting and challenging
work for staff is afforded.
It will be important that the style of leadership in the SSC is participative, rather than autocratic and that
the finance staff are given responsibility for their own area of work and encouraged to participate in
decision making, but with managers providing constructive feedback.
Another recommendation would be to look at how prospects for career development could be achieved
in the SCC. This might mean providing opportunities for lateral moves to enable staff to gain new
experiences and competencies.
A recommendation could be made to introduce some kind of recognition scheme in the SSC since
recognition is an important motivator. This could be achieved, at one level, by simply encouraging
managers to thank members of staff for their contribution, acknowledging extra effort and performance
as the SSC is established. More formal recognition systems could also be considered.
(Answers could develop with reference to alternative theories on motivation)
Requirement (c)
Leaders have a number of sources of power that they can use to influence the behaviours and actions of
others, particularly in a change management scenario. The framework proposed by French and Raven
can be used to describe the different sources of power that CS could use in managing the changes required
to move to the SSC model. The sources of power they identified are referent, reward, coercive, expert
and legitimate power.
The information in the scenario would suggest that CS has referent power, which is sometimes referred
to as charismatic power. This source of power is gained by the personal qualities of a person, and found
in an individual who is respected, likable and worthy of emulation. CS is very well respected by her
colleagues, known for her fairness and is seen as a charismatic leader. It is, therefore, likely that she will
have referent power which will help her in the change process to the SSC, since her staff will be motivated
to comply with requests made by a charismatic leader since they will want to please her and gain her
approval.
CS may also be able to use reward power, for example control over the organisation’s resources such as
salary, bonuses or promotion. In the change situation CS should be able to directly influence the intrinsic
or extrinsic rewards available to followers, i.e. the finance staff. This would include the ability to provide
incentives for individuals who behave in a particular manner, for instance committing positively to the
move to the SSC. As a senior manager CS could have reward power that she could use to encourage
people to adopt the changes in roles and responsibilities in the SSC. As well as financial rewards CS
could use intrinsic rewards such as verbal praise for those supporting the changes.
Reward power is usually used in a positive manner. It is worth noting though that it can be used in a
negative way through the threat or removal of rewards.
CS could use coercive power, which, as the term implies, is the ability to threaten, punish or deprive
people of things that they value. This includes the use of penalties or sometimes punishments to enforce
compliance. It is based on fears and the use of the ‘stick’ or sanction, making life unpleasant for people.
Given CS's leadership approach it is doubtful that she would want to resort to using this coercive power
and indeed staff are unlikely to respond to this type of power. Whilst the immediate response might be
compliance, it is unlikely to result in long-term commitment by staff but rather resentment, anger and
possibly retaliation.
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It is probable that having worked in PRC Company for over twenty five years that CS will possess expert
power. This source of power is based on the followers’ belief that the leader has certain expertise and
knowledge relevant to a particular problem or issue. It will only work if staff acknowledge the expertise.
CS's expert knowledge will assist her with the implementation of the SCC, introducing the new roles and
responsibilities and should encourage respect from staff that this is a positive move.
As Finance Director, CS will certainly have legitimate power, sometimes referred to as position power.
This source of power is associated with a particular job and formal position in the organizational hierarchy
which will give CS authority to make decisions and command the action of others. It is when followers
accept that the leader has the right to influence them in certain areas or aspects of behavior. As CS is both
a senior manager and leader of the SSC change, she will be deemed to have legitimate power and hence
the right to issue instructions to staff regarding the change.
It is worth noting that the sources discussed in the above sections are not exhaustive and there are other
sources of power. Other examples include resource power, personal power and connection power. The
latter results from personal and professional access to key people and information which CS is likely to
have. [CIMA Adapted]
9. The Jabber Textile Mills Ltd is in a troubled state. The trade union representing the weavers has just
negotiated a pay increase for its members, and this has led to a claim by the mechanics, who maintain the
machinery, for a similar percentage pay increase so that the traditional differential with the weavers is
maintained. The Jabber Textile Mills Ltd is seeking to resist the mechanics’ claim on the grounds that
the weavers’ extra payment can be justified by increases in productivity, while the maintenance work
carried out by the mechanics has not changed. The response of the mechanics has been to threaten
industrial action.
The problems for the Jabber Textile Mills Ltd have been made worse by a dispute between the Weaving
Department and the Cloth Inspection Department. All members of the Weaving Department, including
the weaving shed managers and its supervisors, receive a bonus based on the productivity of the whole
department. Employees in the Cloth Inspection Department are paid a fixed salary based on proven
competence and experience.
The conflict between the departments developed following the appointment of a new manager in the
Cloth Inspection Department. The Works Manager has warned the new manager that the quality of output
has to improve if the company is to remain competitive.
This has resulted in a general tightening up of the standards enforced in the inspection process so that
weaving machines are standing idle more frequently than in the past while faults detected during cloth
inspection are investigated.
The sight of idle machines has resulted in intense frustration among management and employees in the
Weaving Department as every idle machine means a reduction in their bonus payments. The weavers’
frustration is now being taken out on the Cloth Inspection Department by adopting a policy of not
cooperating.
Required: (a) Explain the causes of the horizontal and vertical conflicts within the Jabber Textile Mills
Ltd.
(b) Discuss how each type of conflict within the Jabber Textile Mills Ltd might be resolved. Explain what
factors might influence the likelihood of a successful outcome for each type of conflict. [Marks: (8+7)
= 15] [CMA DECEMBER, 2017]
10. In response to changing customer demands and strong competition, the new product development team
of MAZE Company has been working on a new product range. However, the process has not been easy
and conflict between different interest groups is a major problem. For instance, the Marketing
Department staffs are complaining that the research and development staffs are not working quickly
enough in translating their ideas into possible products. Production staffs are saying that no
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consideration has been given to the implications of the new product designs on the production process.
A hastily convened meeting by the Finance Director of MAZE Company to discuss the financial
viability of the new range of products has not helped. This ended in chaos with no agreement being
reached as to how to proceed. Members of the Marketing Department returned to their desks
complaining that the finance team had not brought along the relevant information on which to base the
discussions. They also felt they had not been allowed to voice their views during the meeting, which
was dominated by ‘financial speak’. Members of the Production Department were unclear on why they
had been asked to attend at all and felt they had wasted their time. It is clear that the meeting was poorly
run.
Required: (a) Explain the sources of conflict between the different groups involved in the new product
development process.
(b) Discuss what the Finance Director should do to ensure that future meetings are effective in achieving
satisfactory outcomes for all members. [Marks: (10+10) = 20] [CMA JUNE, 2017] & [CIMA
September 2011, Q. 7]
Suggested Answer:
See the answer of Q. No- 18
11. The T Aerospace Company is in the early stages of planning the development of its latest commercial
jet, the 007. The aircraft industry is a fiercely competitive one, dominated by a few large global players
who operate at the forefront of technology. In this industry, competitors quickly copy any advance in
technology or new management technique that might provide them with a competitive edge. Some of the
T Aerospace Company’s competitors have adopted team working as a means of speeding up their
development and production processes.
The T Aerospace Company is thus considering the adoption of team working in its operations, but some
of the traditionalists in the company are doubtful. They are concerned that the benefits of work
specialization will be lost. Some of the managers have had negative experiences with team working and
so have strong reservations about the proposed changes.
Required: (a) What are the essential features of a team and list the benefits T Aerospace Company can
expect to gain from the adoption of team working.
(b) List the difficulties that the company is likely to encounter to manage the teams. [Marks: (6+4) =
10] [CMA DECEMBER 2016]
12. DESIGNALL Company is in the business of designing and printing bottle labels for soft drinks
distributors. The company is, at present, facing very difficult times as recessionary economic conditions
have had a negative impact on the demand for its customers' products, which in turn is having a knock-
on effect on the demand for DESIGNALL Company's labels. As a result, the senior management team
has been investigating how the company can become more efficient to ensure its future survival.
Redundancies across the company have recently been announced. In addition, the current operating
conditions mean that there will be some significant changes made to the contractual terms and
conditions for management and administration staff working in the various functional departments,
along with a restructuring of operations.
Of immediate concern to the senior management is the threat made by the trade unions to take industrial
action to protect jobs and also the contractual terms and conditions of their members.
Required: (a) Discuss the different conflict handling strategies that could be used in managing the
conflict in DESIGNALL Company.
(b) Explain the different stages of negotiation that should take place to ensure the negotiation process
between senior management and the trade union representatives is effective. [Marks: (5+5) = 10] [CMA
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JUNE 2016] & [CIMA March 2011, Q. 6]
Suggested Answer:
See the answer of Q.N-16
13. T4M is a mobile phone network provider, with its main headquarters based in B country. Whilst there
has been significant industry growth in the last decade, more recently there are signs that this growth has
begun to level off. At the same time, competition is intensifying.
The Board of T4M is preparing to take on the strategic challenges of the changing operating environment.
As well as assessing the external environment, it has started a major review of its internal capability, with
a particular focus on examining how efficiency gains can be achieved across the various business
functions.
F, the Finance Director, is deliberating on how he can gain efficiency in his department. His initial
assessment has identified a number of transaction activities that he feels could be outsourced, such as the
work undertaken by the customer bill payment team, including some aspects of customer service on bill
queries and payroll. F is very enthusiastic about this and his thinking has been informed by the fact that
he was only recently approached by G2O, a company specializing in this type of service, based in H
Country.
If the outsourcing strategy goes ahead, along with other efficiencies the Finance Director has planned,
then this would mean a substantial reduction in headcount within the Finance Department, with predicted
job losses of around 300 staff. The trade union has already heard about the proposal and the possibility
of redundancies. It has made it clear that it will put up a fight against redundancies, on behalf of its
members, to keep jobs in T4M.
F will need good negotiation skills since it is likely that he will be involved in a number of negotiation
scenarios if the outsourcing strategy is implemented.
Required: (a) Explain the benefits and drawbacks associated with T4M’s proposal to outsource some of
the work currently undertaken in the Finance Department. (12 marks)
(b) Discuss how F, the Finance Director, should approach negotiations so that they are effective if the
outsourcing strategy goes ahead. (13 marks) [CIMA May 2010, Q. 7]
Suggested answer:
Requirement (a)
The concept of outsourcing is concerned with contracting with a third party (external supplier) to provide
a part of a business process. The proposal in the scenario could in fact be termed offshoring since the
outsourced business function will be carried out in another country.
There are a number of benefits T4M could gain from outsourcing to G2O:
 A primary benefit of outsourcing is cost reduction to T4M which is perhaps why the Finance Director
is so enthusiastic about the proposal. The supplier, G2O, should be able to perform the functions
more cheaply and efficiently for a whole host of reasons, not least if the labour costs are lower in H
country. It will also save T4M labour costs such as those associated with recruiting and training staff.
Essentially, outsourcing activities converts fixed costs into variable costs.
 The services provided by G2O should be at an agreed cost which could lead to a more accurate
prediction of costs for T4M, and therefore assist budgetary control.
 A specialist provider could give access to specialist skills and bring best practice expertise. The
outsourced company can leverage skills to achieve greater efficiency gains.
 It may allow the finance function to concentrate on its role as business partner, working more closely
with the business, improving its contribution to strategic decision making.
There are, however, a number of drawbacks which the Finance Director should take into consideration:
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 Whilst reducing cost, when moving to an outsourced model, T4M will need to factor in the costs of
managing the outsourced contract (i.e. transaction costs), along with developing the expertise needed
to manage the contract. There will be the negotiation and drafting of the legal contract with G2O and
then the monitoring of compliance with the contract in terms of the quality and reliability of service
that G2O provides. There is also the possibility of costs associated with pursuing legal actions for
redress due to non-performance by G2O.
 Outsourcing can result in less managerial control, since it may be harder for T4M to manage the
outsourcing service provider, G2O, as compared to managing its own staff.
 Another drawback is associated with risk. Over reliance on external providers can lead to an erosion
of internal knowledge and skills and can result in some of the benefits of organizational learning
being transferred to the service provider.
 A further potential drawback concerns confidentiality of information given to the external provider,
for example that provided by T4M's customers such as bank account details. T4M will need to put in
place security measures to limit the risk of any breaches in the use of confidential customer
information by G2O.
 T4M could end up having to pay increased costs from additional services required after the service
level has been agreed. There may be penalty payments and cancellation payments if T4M finds that
it needs to change its side of the bargain and draft a new contract with G2O.
 It will be important to ensure contract compliance to the predetermined standards to reduce the risk
of increasing any monitoring costs and the costs associated with loss of customer business as a result
of unsatisfactory service.
Requirement (b)
Negotiation is the process of satisfying needs by reaching an agreement. The main aim of negotiation is
to use argument and persuasion in order to strengthen one’s own case by undermining the opposition.
F, the Finance Director will need good negotiation skills since it is likely that he will be involved in a
number of different negotiation scenarios if the decision to outsource goes ahead. For example, in
implementing the outsourcing strategy with the Finance Director will need to use his negotiating skills
when securing the contract with T4M on his desired terms.
Negotiation is often necessary within organizations to resolve conflicts of interest between two or more
parties which have arisen because the parties have different objectives, when there is a conflict of interest
between two or more parties and when what one party wants is not necessarily what the other wants. This
is likely to be the case in T4M where the Finance Director will need to reduce numbers of staff but
employees will not want to lose their jobs. In this situation F will be involved in negotiations with
employees and trade unions regarding the possible redundancies.
If F is to be effective in his negotiations it is essential that he adopts the strategies and tactics that
experienced negotiators have learned and developed over the years.
Since negotiation takes place between different parties who have different objectives it is important to
find out at the outset what these objectives are, since approaches to the negotiation process can be best
achieved through focusing initially on each side’s primary objectives, rather than becoming distracted by
minor negotiating points at an early stage. This will be important in determining the terms of the contract
with G2O.
Given that G2O is located in H, a different country to that of T4M, it may be necessary to learn something
about the prevailing culture in H. Whilst most of the objectives should be made explicit and clearly stated,
others may be unspoken and those unfamiliar with culture may not realize that negotiations are not
proceeding well because they have not taken into account the unspoken objectives of the other party.
It is necessary to maintain some flexibility within the negotiation process and for both parties to be
prepared to settle for what is ‘fair’. It is also important to listen to what the other side wants and to make
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an effort to compromise so that both sides can attain their goals. However, this is often where negotiation
can fail because of the tensions between the different objectives that can never coincide. This could occur
for T4M since the employees and the union’s main objective will be to keep jobs, whilst the Finance
Director may see no alternative if the outsourcing proposal goes ahead.
With regard to negotiations on redundancies it is likely that in the first stages of negotiation that the union
will reject the proposals as unacceptable and will prepare its negotiation strategy. Whilst the union will
not want to agree to job losses it might recognize that they are inevitable and concentrate instead on
persuading management to provide generous severance pay above the legal minimum and to consider re
-deployment opportunities. F should have anticipated such a reaction and should have his negotiation
strategy worked out.
The ideal will be to achieve a win-win outcome where both sides achieve enough of their objectives to
be satisfied with the end result, trading-off wins and losses so that each side get something in return for
everything it concedes on. Win-lose or lose-lose outcomes are in no one’s best long term interest. Whilst
T4M will want to get a good deal, for example with G2O, if one party comes out of the negotiation a
loser it may feel resentful and this is not a good basis for building a long term relationship.
Important tactics for negotiation are to use questions effectively so as to control the situation; the use of
persuasion. F will not want to weaken his case inadvertently. During the negotiation process it is
important from time to time to test that both sides understand clearly what is being proposed and at the
stage the negotiations are at.
It is suggested that effective negotiation should go through a number of stages, for example:
 Preparation
This involves both parties in the negotiation gathering information and insight to the problems in
order to understand the constraints acting on the negotiating parties. Who is involved in the
negotiation, what the concerns of each party are and what the goal of the negotiation is will need to
be determined. Another key feature at this stage is to determine the time for negotiation.
 The opening phase of negotiation

This involves both sides presenting their starting positions to one another. It is at this stage that the
greatest opportunity is present to influence the other side.
 The bargaining phase

This is where both parties will aim to narrow the gap between the two initial positions to persuade
the other party that its case is so strong that the other must accept less than it had planned. This might,
in the case of T4M, perhaps be in terms of the total number of job losses, or the financial arrangements
for redundancy. The union will want the best for its members, whereas the management will want to
minimize the cost of redundancy. In terms of the contract with G2O, T4M will want to get the best
service level agreement for the lowest cost.
Some rules of bargaining have emerged which skilled negotiators have found helpful. For example,
don’t give anything without taking something in return, give things you can afford to lose and only
take the things that you want.
In the bargaining process, F should be careful not to push things so hard that conflict with the other
party ensues. Conflict can damage the relationship between the parties to negotiation to such an extent
that a beneficial outcome becomes increasingly difficult.
If negotiations reach a point of deadlock, which neither party can shift from if its objectives are to be
achieved, then the advice is to look for areas of common ground and then to build on them.
 The closing phase of negotiation

This represents the opportunity to capitalize on the work that has been done at the earlier phases. It
is at this stage that agreement is reached. The outcomes from the agreement should be formalized
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and implemented. It is important that the contract or terms of reference document is drawn up,
perhaps with the help of the company lawyer to make sure that what has been agreed in the
negotiations is reflected in the document. [CIMA Adapted]
14. JB has recently joined the Finance Department of P Company as a trainee management accountant. As
part of the Company's induction, she has been offered a mentor. However, since JB has not had any
previous experience of mentoring, she is unconvinced of the benefits. She has asked LC, the facilitator
of the induction session, to explain what is involved in the process of mentoring and how it might be a
benefit to her as a new member of staff.
Required: Explain the points that LC should make concerning the process and the benefits of mentoring
for new members of staff. (10 marks) [CIMA November 2010, Q. 3]
Suggested Answer:
LC could start by explaining to JB that the purpose of a mentoring system is to provide new employees
with a forum to discuss development issues in a relaxed and supportive environment. A mentoring system
would be useful to JB, as a new member of staff, in helping her socialise into the culture of the
organisation and facilitate quicker learning about the way the organisation works. LC could go on to say
that the mentoring relationship is not based on authority but, rather, a genuine wish by a mentor to share
knowledge, advice and experience with junior members of staff.
LC should explain that the mentor would be in a senior position within P Company, and the purpose
would be to guide and support JB, as a less experienced employee. LC should also explain that whilst
JB’s mentor will hopefully be from the finance function that she has joined, the person acting as mentor
would not be her direct line manager. The reason for this is to ensure that the mentor can act as an
independent arbiter, and avoid the danger of conflict given the developmental nature of mentoring versus
line management. The mentor would normally be a role model, having already achieved a status to which
JB might aspire.
LC could then explain the different functions of mentoring, for example differentiating between career-
enhancing and psychological functions.
In terms of career enhancing, a mentor could help JB in her career with P Company through exposure,
visibility and sponsorship. Having a mentor could also help JB in expanding her network of contacts and
in gaining greater exposure in the organisation.
The psychological function of mentoring could help JB enhance her competence and effectiveness in her
role. LC could point out that the role of the mentor would be to encourage and assist JB in analysing her
performance and identifying her strengths and weaknesses. The mentor would provide JB with honest
but supportive feedback and guidance on how she could work on her weaknesses. The mentor would also
provide feedback and encourage JB to reflect on her behaviour and experiences as she develops into her
new role. LC could explain that JB could ask her mentor questions and learn from her mentor’s
experience, using the mentor as a safe sounding board. So having a mentor should help JB in her new job
through encouragement and nurturing her learning and development.
LC should also explain that mentoring would work alongside some of the more formal control
mechanisms such as appraisal. The mentor would be able discuss with JB her training needs, advise on
qualifications and provide a forum for her to discuss any interpersonal problems and career goals. [CIMA
Adapted]
15. The data on sales performance in LS Company has shown a significant downward trend over the last
year. The Marketing and Sales Department is blaming the Finance Department for the poor performance,
since it was the pressure from the Finance Department that led the Marketing and Sales Department to
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increase the product price. The Marketing and Sales Department staff say that, in current market
conditions, this was inappropriate and was the main reason for the loss of market share. They feel that
the Finance Department staff are short sighted, too focused on costs in pricing decisions and do not
appreciate that there are other factors that should be considered in product price setting. However, the
Finance Department thinks that the Marketing and Sales Department has been complacent and has not
had an aggressive marketing and sales strategy in place. Perhaps not surprisingly, communications and
cooperation between the staff in the two departments is at an all-time low and in meetings there is constant
in-fighting and disagreements.
To make matters worse, a consequence of the drop in sales has been that the senior management is
proposing that there will need to be job losses in the Production Department. The trade union which
represents the production workers is now threatening to take industrial action.
Required: Compare and contrast the different types and sources of conflict occurring in LS Company.
(10 marks) [CIMA November 2010, Q. 5]
Suggested Answer:
Conflict is essentially a disagreement and is when one party is perceived as preventing or interfering with
the goals and actions of another. It can occur in a variety of forms and at different levels in an organisation.
Whist conflict can be considered as an inevitable feature of organisation life, in the case of LS Company
it is having negative outcomes.
In LS Company, the poor communications and cooperation between the staff in the Marketing and Sales
Department and the Finance Department is an example of horizontal conflict. This type of conflict occurs
between groups of staff or between departments at the same level in the organisation hierarchy.
The sources of the conflict may be due to the fact that the priorities and goals of the departments are
different. The staff in each of the two departments will want to focus on their own goals, which they may
view as being mutually exclusive. This is illustrated by the fact that both departments are blaming each
other for the poor sales performance. The Finance Department is seen by the marketing and sales staff as
controlling and only taking a short term and cost based view. At the same time, the Finance Department
staff think that the poor sales performance is because the marketing and sales strategy is ineffective, and
that the marketing and sales staff have been complacent.
It is likely that another possible source of conflict is due to the difference in the perceptual differences
(cognitive and emotional) of staff working in the different functional departments. The staff in the two
departments will probably have different skills and attitudes, and perhaps the consequence of this is a
lack of understanding of the nature and challenges of each others work, and suspicion and lack of trust
between staff.
In contrast, the threat of industrial action from the trade union is an example of vertical conflict. This
type of conflict occurs between individuals or groups who are at different levels in the organisation
hierarchy, and can often arise because of status and power. The grounds for handling vertical conflict is
normally formalised by rules and regulations.
The source of conflict is because senior management will be looking to reduce costs in the Production
Department, as a result of diminishing sales orders, whilst the employees and the union want to protect
workers' jobs. The workers in the Production Department, may, individually feel powerless, with little
say in the decisions about their future and job security. Standing together in a union will provide them
with strength that equalises their power with senior management in this conflict. The union will exert
pressure through the threat of industrial action to try to make senior management reconsider the proposal
to cut jobs in the Production Department.
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Both types of conflict in LS Company are dysfunctional and destructive since both management and staff
time and effort will be wasted in addressing the conflicts. The lack of communication and cooperation
between the Finance Department and Marketing and Sales Department, and the threat of industrial action
will both impact negatively on the performance of staff, and hence on the company. [CIMA Adapted]
16. ZEZ Company is in the business of designing and printing bottle labels for soft drinks distributors. The
company is, at present, facing very difficult times as recessionary economic conditions have had a
negative impact on the demand for its customers' products, which in turn is having a knock-on effect on
the demand for ZEZ Company's labels. As a result, the senior management team has been investigating
how the company can become more efficient to ensure its future survival.
Redundancies across the company have recently been announced. In addition, the current operating
conditions mean that there will be some significant changes made to the contractual terms and conditions
for management and administration staff working in the various functional departments, along with a
restructuring of operations.
Of immediate concern to the senior management is the threat made by the trade unions to take industrial
action to protect jobs and also the contractual terms and conditions of their members.
Required: (A) Discuss the different conflict handling strategies that could be used in managing the
conflict in ZEZ Company. (13 marks)
(B) Explain the different stages of negotiation that should take place to ensure the negotiation process
between senior management and the trade union representatives is effective. (12 marks)
[CIMA March 2011, Q. 6]
Suggested Answer:
Requirement (a)
There are a number of different ways of handling conflict. A useful way of explaining the alternative
approaches has been developed by Thomas who identified five conflict handling strategies based on two
conflict management dimensions. These consist of the degree of assertiveness in pursuit of one’s interests
and the level of cooperation in attempting to satisfy others’ interests. The strengths of each of these in a
particular situation can be regarded as lying along two continuums respectively:
The five identified strategies are:

Avoidance: This is where one or more parties in conflict may seek to avoid, suppress or ignore the
conflict. This would not be recommended in the case of ZEZ Company since it does not end up resolving
the conflict and could therefore impact negatively on the future survival of the company if the industrial
unrest is not resolved.
Accommodation: This involves one party putting the other’s interests first and suppressing its own
interest in order to preserve some form of stability. Again, in the case of ZEZ Company this is not
recommended given that the nature of the conflict is endemic and the accommodation strategy will not
resolve the differences of the management and employees satisfactorily. ZEZ is fighting for survival and
unless costs are reduced there may be nothing left to negotiate on.
Compromise: This is often viewed as an optimum strategy. Each party gives something up and a deal
somewhere between the two is accepted. For ZEZ Company this approach might be used between
management and the trade unions to determine the number of redundancies, the criteria for redundancy,
the redundancy package and changes to terms and conditions.
Competition: This is a state where both or all parties do not cooperate. Instead they seek to maximise
their own interests and goals. It ends up creating winners and losers. This approach is not recommended
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for ZEZ Company since it can prove damaging both to the organisation and to individuals, rather than
working to resolve the conflict.
Collaboration: This is where differences are confronted and jointly resolved, with a win-win outcome
achieved. Whilst this is also viewed as a favourable approach to managing conflict, it is not always
possible. In the case of ZEZ Company, where some harsh decisions and actions will need to be taken,
collaborating with the unions to work out solutions will only work if they accept that there will be a need
to make some redundancies and changes to contracts, but can benefit from collaborating on ‘the how’.
Requirement (b)
Negotiation involves argument and persuasion in order to strengthen one’s own case by undermining the
opposition. It occurs when there is no established set of rules for resolving the conflict and parties are
committed to search for an agreement rather than fighting openly. Negotiation is often necessary within
organisations to resolve conflicts of interest between two or more parties which have arisen because the
parties have different objectives and is a useful and civilised way of settling disputes.
In the case of ZEZ Company conflicts have arisen as a result of the need to make changes to terms and
conditions of contracts and also the redundancies. These conflicts may be resolved through negotiation
between management and the unions who are representing employees. The process of negotiation
between employers and trade unions is often referred to as ‘collective bargaining’. Without any
negotiation the result could be that the union calls for industrial or strike action which could have a
detrimental impact on the ZEZ Company’s future survival.
Approaches to the negotiation process can be through focussing initially on each side’s primary
objectives, rather than becoming distracted by minor negotiating points at an early stage. It is necessary
to maintain some flexibility within the negotiation process and for both parties to be prepared to settle
for what is ‘fair’. It is important to listen to what the other side wants and to make an effort to compromise
so that both sides can attain their goals. However, this is often where negotiation can fail because of the
tensions between the different objectives that can never coincide. This could occur for ZEZ Company
since the union’s main objective will be to keep jobs, whilst the organisation may see no alternative to its
long term survival without the job cuts and changes to terms and conditions.
It is likely that in the first stages of negotiation that the union will reject the proposals as unacceptable
and will prepare their negotiation strategy. Whilst the union will not want to agree to job losses it might
recognise that they are inevitable and concentrate instead on persuading management to provide generous
severance pay above the legal minimum and compensation for staff who are being asked to relocate. ZEZ
Company management will have anticipated such a reaction and should have their negotiation strategy
worked out.
be satisfied with the end result, trading-off wins and losses so that each side get something in return for
everything they concede on. Win-lose or lose-lose outcomes are in no one’s best long term interest.
Important tactics for negotiation are to use questions effectively so as to control the situation, also the use
of persuasion, and not to weaken your case inadvertently.
It is suggested that effective negotiation between ZEZ Company and the trade union should go through
the following four stages:
 Preparation which involves both parties gathering information and insight to the problems in order to
understand the constraints acting on the negotiating parties. At this stage, who is involved in the
negotiation, what the concerns of each party are and what the goal of the negotiation is will need to be
determined. Another key feature at this stage is the establishment of the time for negotiation.
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 The opening phase of negotiation involves both sides presenting their starting positions to one another.
It is at this stage that the greatest opportunity is present to influence the other side.
 The bargaining phase is where both parties will aim to narrow the gap between the two initial positions
to persuade the other party that its case is so strong that the other must accept less than it had planned.
This might, in the case of ZEZ Company, be on the total number of job losses, the financial arrangements
for redundancy or in relation to specific aspects of terms and conditions. The union will want the best for
its members, whereas the management may be constrained by the financial position of the company.
 The closing phase of negotiation represents the opportunity to capitalise on the work that has been done
at the earlier steps. It is at this stage that agreement is reached. The outcomes from the agreement should
be publicised and implemented.
During the negotiation process, particularly in the case of negotiations surrounding the changes in ZEZ
Company which are formal in nature, it is important from time to time to test that both sides understand
clearly what is being proposed and at what stage the negotiations are. [CIMA Adapted]
17. PR has recently joined FPC Company as the new Finance Director. He is required to work towards getting
the finance staff to play a fuller role in the company, becoming more integrated into the strategic and
business activities of the organization. However, PR is aware that this will not be an easy task since his
impression is that the Finance Department has a very poor reputation in the company, and current
relationships between the finance staff and other departments are not good.
Having discussed the poor perception with other department heads, it is clear that the finance staff are
generally viewed as being unhelpful. Many of the complaints surround poor communications. A
consistent comment made is that messages received from the Finance Department are too complicated
and that too much financial jargon is used. Another common observation is that at inter-department
meetings, the finance team use 'financial speak' which other members of staff find hard to understand.
The finance staff have an obsession with financial indicators, and do not appreciate that there are other
factors which inform decisions. It is also felt that too many emails are sent from the Finance Department,
and it is often difficult to find the relevant information on some of the financial spreadsheets circulated
which are supposed to help in decision making.
PR has noted that many of the staff in the Finance Department are de-motivated. None of them appear to
have clear targets and objectives, and they have told him that they have had no feedback on their
performance and staff development simply has not existed. PR has established that, whilst there is a
company-wide staff performance appraisal system in place, none of the staff in his department have had
an appraisal in recent years.
PR has identified a number of immediate actions to improve the performance of the Finance Department.
He has decided that all staff in the Finance Department need training to improve their communication
skills. He also intends to make sure the company's appraisal system is implemented and that all staff in
his department will have an appraisal in the next three months.
Required: Discuss what should be covered in the series of training sessions to help members of staff in
the Finance Department improve their communication skills. (15 marks) [CIMA May 2011, Q. 7]
Suggested Answer:
If the finance staff are to play a fuller role in FPC Company they will require a broader understanding of
business. They will need to be trained not just to furnish and assemble financial information but draw
insights and to communicate these effectively to support other functions in the company in decision
making. To achieve this, developing effective communication skills will be crucial.
The training on communication could start by getting the Finance Department staff to explore the barriers
that currently exist in their communications with other members of the company. For example, helping
Page 13 of 30
them to appreciate that the messages they currently send are often too complex and are not fully
understood by the other members of staff because of the technical jargon used. Also, that the receivers
feel that they are overloaded with emails from the Finance Department and it can be difficult to find
relevant information on the spreadsheets they receive. Hence, they may not be picking up the most
important elements of the message to inform decisions.
The training could make reference to the communication process model (see diagram below) as a
framework to help the finance team understand the different elements in the communication process
which could help them improve their skills.
The training should provide an explanation of the things the sender needs to do to be effective in
communication. This would include ensuring that the sender of the message is clear on its purpose with
the receiver in mind. The sender of the message should have a clear objective in terms of what he/she
wants to achieve from the communication. For example, is the communication aimed at providing
information, or does it require specific actions to be taken. This needs to be coded into messages in a way
that is understood by its audience.To make communication effective the sender of the message should
plan the communication. For example, the sender needs to think about what is to be communicated, to
whom it is to be communicated and the best medium to use for the message. For instance should the
message be communicated verbally or written, formal or informal etc?
The training could also cover issues associated with the medium used. It is important to select the most
appropriate language and medium for the message thinking about the situation that the receiver will be
in when the message is received. When creating a message, care needs to be taken so as not to cause
confusion in the communication process through the overuse of jargon or lack of fluency in the message
to ensure that communications are not being made unnecessarily complex.
Moving through the process of the communication to the receiver, the training should help the finance
staff to understand the need to anticipate possible reactions by the receivers to the message and cater for
these through the message or choice of medium. For example, if the message from the Finance
Department relates to bad news about the financial position or budgets then this could upset the recipient
and it would therefore be appropriate to use face to face communications.
Finance staff should also be made aware of the concepts of individual bias and selectivity and the
implications of this for the receiver, i.e. people often hear and see what they want to. To help minimise
this problem they should view communication as a two way process, encouraging feedback from the
receiver. Feedback is often a neglected part of the communication process, but provides a crucial check
for the finance staff to ascertain if their messages have been correctly understood and interpreted.
The training should highlight the concept of ‘noise’ that can occur in the communication process. This
refers to any distractions or interference in the environment in which the communication is taking place
and which can impede the transmission of the message. It happens when the message becomes distorted
by extraneous factors between the sender and the receiver of the message such as distractions in the
environment, information overload, such as the overuse of emails for complex messages. People can feel
weighed down by the high volumes of information that are being transmitted, and hence ignore the
communication.
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The training should also cover nonverbal communication. For instance, it is important that any nonverbal
communication reinforces verbal messages and does not undermine them. If the medium channel selected
involves personal presentations, such as finance briefings, then it is important to ensure that all elements
of communication, for instance words used, tone and nonverbal signals (gestures, facial expressions, and
posture) all fit with each other rather than contradict, so as not to confuse the receiver.
The overriding aim in terms of improving the communication skills of staff in the Finance Department
should be to improve relationships enabling them to make a greater contribution taking on a partnership
role in decision making, rather than simply a provider of information.
18. In response to changing customer demands and strong competition, the new product development team
of Z Company has been working on a new product range. However, the process has not been easy and
conflict between different interest groups is a major problem. For instance, the Marketing Department
staff are complaining that the research and development staff are not working quickly enough in
translating their ideas into possible products. Production staff are saying that no consideration has been
given to the implications of the new product designs on the production process.
A hastily convened meeting by the Finance Director of Z Company to discuss the financial viability of
the new range of products has not helped. This ended in chaos with no agreement being reached as to
how to proceed. Members of the Marketing Department returned to their desks complaining that the
finance team had not brought along the relevant information on which to base the discussions. They also
felt they had not been allowed to voice their views during the meeting, which was dominated by ‘financial
speak’. Members of the Production Department were unclear on why they had been asked to attend at
all and felt they had wasted their time. It is clear that the meeting was poorly run.
Required: (A) Explain the sources of conflict between the different groups involved in the new product
development process. (13 marks)
(B) Discuss what the Finance Director should do to ensure that future meetings are effective in achieving
satisfactory outcomes for all members. (12 marks) [CIMA September 2011, Q. 7]
Suggested Answer:
Requirement (a)
Organisational conflict can occur on a number of different levels and can have a detrimental impact on
the business. The conflict in Z Company is best characterised as horizontal conflict. This is where conflict
occurs between groups or departments at the same level in the hierarchy. A number of factors play a part
in creating the conflict:
Goal incompatibility is often the main cause, where the goals of one area block the achievement by other
areas. In Z Company, the functional structure of the organisation could encourage employee loyalty to
particular departments with employees wanting to concentrate on their own goals. The goals of different
departments are often seen as mutually exclusive. This can result in conflict and lack of cooperation
between different departments during the New Product Development (NPD) process.
Goals of innovation often can cause more conflict than other goals since the NPD process requires
departments to co-operate. However, where there is an increase in task interdependence between different
departments, then the potential for conflict increases. This is because the greater interdependence means
that departments may exert pressure for fast response because the work in one department has to wait on
other departments. Employees will need to spend time sharing information and communicating. As a
result, differences in goals and attitudes can emerge leading to conflict. There appears to be a lack of
understanding and appreciation of the pressures and needs of other departments during the NPD process.
For example whilst the Research & Development (R & D) Department wants to come up with the best
possible product range from a technical perspective, in doing so it may not take account of the cost aspect,
Page 15 of 30
nor of the implications for the production of the new products, which will be of concern for the Production
Department.
The marketing sales staff will want a new product range ready for the sales team. The Finance Department
is viewed very much as a controller and an obstacle to the NPD process. The marketers and R&D staff
may see finance as only taking a short term view rather than investing for the future of the company.
Another source that can lead to horizontal conflict are the differences in the personalities, attitudes and
experience of managers in different functional departments. This is often apparent between the different
values of those working in marketing, finance and R &D. This stems from the different skills,
qualifications and time horizons of the people working in these different areas.
Requirement (b)
Meetings can take up a significant amount of time and should, ideally, be seen to benefit those who attend.
However, as in the scenario, people often leave meetings feeling frustrated at the time spent without any
useful outcomes for them.
As a first step, the Finance Director should prepare for the meeting, set clear objectives on the purpose
of the meeting, and establish who from the project team needs to attend. This should ensure that the time
is not wasted for people who do not need to be there and to ensure the objectives of the meeting can be
achieved. A practical aspect is to make arrangements in terms of the location and time of the meeting to
encourage attendance.
An agenda should be drawn up by the Finance Director in advance and circulated to those attending. The
agenda should provide a focus for the discussion and allow people to prepare before coming to the
meeting, ensuring that they have relevant information with them. In the scenario, it is likely this had not
been done since the necessary information from finance was not brought along to the meeting.
Other common problems that can occur during the meeting stem from having an ineffective chairperson,
which can then result in the domination of discussion by a few people, conflict between attendees and
the agenda items being unrealistic or badly structured. These problems can be addressed by the Finance
Director acting as an effective chairperson. Ideally there will also be a secretary or administrator who
will be responsible for taking the minutes at the meetings.
The Finance Director should impose some order on the meeting and ask participants to contribute in
accordance with meeting protocols, such as time constraints. His role is to facilitate discussion at the
meeting. The Finance Director should also be able to manage conflict should it arise in a meeting and
control any disruptive elements. Whilst encouraging constructive debate the skill is in limiting the scope
of the discussion to agenda items.
Throughout the meeting the Finance Director should summarise and clarify key points made, explaining
any jargon used and check understanding by all attending the meeting. He should note the actions that
need to be taken, by whom and when, so that it is clear who is responsible for what. At the end of the
meeting, a summary of the results should be gone through so that all participants are clear on the action
points and their commitment is gained.
The Finance Director needs to bear in mind that the level of attention of participants diminishes towards
the end of a meeting, particularly when it goes on too long. People may agree to anything towards the
end of the meeting simply to get away.
After the meeting, the main problem is that actions are not always carried out. Therefore, minutes should
be distributed to the attendees and other interested parties so that the outcomes are not lost, and team
members are reminded of their responsibilities, priorities and action points. This should be kept as brief
as possible to improve the chances of the minutes being read and action points acted upon. The minutes
should form the basis of the next meeting so that failure to carry out actions is identified.
Page 16 of 30
19. TFX is a multinational company which manufactures and retails branded designer clothing with business
units in a number of different countries globally. Up until now, each of the business units has had its own
finance department.
The company recently appointed an external consultancy company to undertake an internal review of the
organizational structures to establish if they are 'fit for purpose'. One of the outcomes of the review is the
recommendation that the finance function should be transformed, moving to a shared service center
model.
In taking this recommendation forward a number of factors will need to be considered, for instance any
possible difficulties of moving to a shared service center model, and also in which country the shared
service center should be established. The implementation of a shared service center will also require the
formation of new teams of staff.
Required: (A) Discuss the rationale for TFX Company moving to a shared service center model,
including the benefits and any possible disadvantages. (13 marks)
(B) Explain how TFX Company should develop and build the new finance teams, if the move to a shared
service center goes ahead. (12 marks) [CIMA May 2012, Q. 6]
Suggested Answer:
Requirement (a)
The shared-service centre (SSC) concept refers to the provision of a service by one part of the organisation
where that service has previously been found in more than one part of the organisation. The establishment
of a SSC for TFX Company would essentially involve the bringing together of the various finance
departments across the organisation into one central unit. It is sometimes referred to as internal
outsourcing since it would allow TFX Company to take advantages of the benefits of consolidation whilst
maintaining full internal control and thus minimising the control risks associated with outsourcing.
By consolidating the finance departments to a SSC, TFX could expect to enjoy substantial payback in
terms of reduction of overhead costs and hence unit transaction costs.
One of the overarching benefits of establishing a SSC is that it can lead to economies of scale, since the
finance staff are gathered together to form a centre of excellence rather than being spread across business
units. This arrangement would usually lead to headcount reductions and hence cost savings since it will
reduce duplication. In addition, since it would be located in one centre there would be a reduction in
premises and associated costs.
There is also the potential of benefiting from favourable labour rates depending on the geographical
location chosen to establish the SSC. In other words, TFX Company could carefully select the location
of the SSC in order to ensure that it can take advantage of the lowest cost provision.
It is suggested that the SSC model would lead to an enhanced quality of service for TFX Company. This
is because learning and sharing of knowledge between colleagues is better facilitated through the finance
teams being located together.
The SSC model should also result in more consistent management of business data in that standard
approaches can be developed across TFX Company, rather than each individual finance department
developing its own methods.
There are however some potential disadvantages which TFX needs to consider if it decides to go ahead
with the SSC model.
The finance departments are currently embedded within the various business units and it is likely that
strong relationships have been built up between the finance team and the management of the business
Page 17 of 30
area. Moving to a SSC model may make it more difficult for such relationships and trust to be developed
in the future.
In addition, it may be more challenging for staff in the SSC to gain local knowledge of a specific business
unit and its particular information needs when operating at a distance.
As a dedicated finance team for a business unit, staff may have been able to play a stronger role acting
as a business partner. This may be lost in the move to a SSC model.
Finally, there will be the practical management issues that could present challenges with the move to a
SSC in terms of, for example, cultural difference between staff working together in the SSC and the
various business units, along with problems associated with time differences and different languages
when a centralised service operates at a geographical distance.
Requirement (b)
If the decision is made by TFX Company to go ahead and establish an SSC, this will result in groups of
staff coming together to form new finance teams. As such, the managers of the various teams should not
assume this happens automatically and need to be proactive in building the teams. Tuckman’s team
development theory would be a helpful framework to use in order to consider the stages the new teams
will need to go through before they can be effective in the SSC. Indeed, staff may move from other
countries to work in the SSC.
To help the development of teams it is important to consider the manner in which the team comes
together, since it cannot be assumed that members of a team will work together effectively immediately.
To build an effective team it is necessary that it is allowed to progress through the developmental stages.
Tuckman describes a model of team formation which suggests that to be effective a team must progress
through a number of stages, which have a linear relationship. It is only when these stages have been
successfully passed through that the group can concentrate on the attainment of its purpose, in this case
as a finance team of the SSC.
The four stages identified are:

Forming: This is the initial period when the individual members of the new SSC come together, finding
out about each others’ attitudes, abilities and characters. The initial objectives and parameters of the team
are established for the SSC. It is at this stage that individuals will work out initial roles and relationships,
acceptable behaviours and codes of conduct.
Storming: This stage can be characterised as a period of disagreements, arguments and high emotion.
As members of the team begin to work together and get to know each other, so they present their different
views on the best way of achieving the SSC objectives and different approaches to working together. As
this is a new model and staff may have joined from various finance departments or indeed be new to TFX
Company, they may hold different views on how to operate and hence conflict and hostility can emerge.
This will cause the effectiveness of the team to fall. It is during this stage that any cultural conflicts may
surface.
Norming: It is important that conflicts at the storming stage are resolved and guidelines on procedures
and standards of behaviour of the SSC teams are established. It is important that team members reach
agreement over any issues through negotiation, compromise and finding areas of commonality. Team
cohesion develops during this stage as do norms of what is acceptable behaviour, which in turn, will
govern individual members’ behaviour for work in the SSC. This stage is important in agreeing standards
of performance.
Performing: This is when the team has successfully progressed through the three earlier stages and has
created cohesiveness to operate effectively as a team in the SSC. At this stage the team will finally be
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able to concentrate on the achievement of SSC objectives and it will be at its most effective because all
energies are focused on tasks, rather than resolving conflicts within the team.
As well as the team development stages discussed, there are other factors to consider when building
teams. For example, appropriate group membership with individuals possessing the necessary skills and
attitudes. It will be important that the members of the teams in the SSC understand their own and others'
role requirements. Teams will also need a balance of team roles as proposed by Belbin. [CIMA Adapted]
20. GBF Group is a leading food and beverage manufacturer with an international presence in over 50
countries worldwide. The group has seven strategic business units (SBUs) and each has responsibility for
one of the group's key business segments. The business segments comprise:
 Frozen foods
 Dairy products
 Pet food
 Biscuits
 Confectionery
 Breakfast cereals
 Soft drinks
Each of the strategic business units operates autonomously and currently each one has its own finance
function. However GBF Group does require each SBU to have a multi-disciplinary management team,
made up of representatives from all of the different functional specialisms. GBF Group's Chief Executive
believes that these management teams are crucial to the group's success in developing strategy and
improving the performance of individual SBUs.
A new Finance Director has recently been appointed to GBF Group and one of his key priorities is to
review the effectiveness of the current structure in place for providing the finance function for each of
the different SBUs. He has also made it known that he is considering alternative models for delivering
the finance function across the group, based on his experience in other organizations where he has
previously worked.
Required: (A) (I) Explain the advantages and disadvantages of each of GBF Group's strategic business
units (SBUs) having its own finance function. (9 marks)
(II) Discuss TWO alternative models that the GBF Group could use to deliver the finance function other
than the one it currently uses. (6 marks)
(B) Explain the factors that will contribute to the effectiveness of a high performing multi-disciplinary
management team for the GBF Group. (10 marks) [CIMA September 2012, Q. 7]
Suggested Answer:
Requirement (a)(i)
GBF Group has a dedicated finance function embedded in each business area operating as a business
partner. This should mean that members of the finance function will play a full role in strategic
development of the business unit and providing information to help inform strategic decisions.
There are a number of advantages for GBF Group which are associated with having the finance function
as part of the business area that it serves. For instance, the finance function should have a stronger
connection with the activities of the business unit and, as such, will build up a solid knowledge and
understanding of the business, its products and the markets it serves. As a dedicated resource, members
of the finance function should be able to play a more valuable role in contributing to strategic decisions,
rather than being at arm’s length. Members of the finance team will gain a detailed local knowledge of
the business and understand its finance information needs.
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Being part of the business unit should foster stronger relationships and trust between the finance function
and the management of other business areas. This lends itself to the concept of a business partner where
members of the finance function are viewed as an essential part of the management team.
There are some disadvantages of this model. Specifically, from a cost perspective there could be
duplication of effort across the organisation, with similar work carried out across the business. This is
often the reason that some organisations are moving to a shared service model.
The finance function in the various business units may feel isolated and may develop their own ways of
working which may not constitute best practice. There may be little scope for the sharing of best practice
within the organisation if different teams build up their own ways of doing things.
Requirement (a)(ii)
If the Finance Director of GBF Group decides not to embed the finance function within the business area
which it supports, the various finance functions across the business units could be consolidated into a
central service unit, which is often referred to as a shared service centre (SSC).
This model of organising the finance function is sometimes referred to as ‘internal outsourcing’ where
the financial activities are consolidated at one site. This option would allow the organisation to gain the
cost benefits of consolidation of activities, whilst maintaining full internal control, and developing
consistent financial management practices across the organisation.
Another option in the positioning of the finance function is business process outsourcing. This would
involve contracting with a third party/external supplier to take on the responsibility of the finance system.
Whilst GBF Group would lose control and risk unsatisfactory quality, there is the potential to achieve
cost reduction using this model as well as accessing best practice expertise, paricularly before routine
accounting processes such as payroll, invoicing, chasing debts. However, this approach may not work so
well in providing ad hoc financial information to support decision making specific to a SBU.
Requirement (b)
A multidisciplinary team is one that brings together individuals with different specialisms so that their
skills, knowledge and experience can be pooled or exchanged.
There are a number of models which could be helpful to consider how GBF Group can build a high
performing multidisciplinary management team.
It is important that the individual members of the multidisciplinary management team understand its
purpose and objectives. Associated with this team, members need to be clear of their individual roles,
responsibilities and activities as well as understanding what other team members are contributing. In this
context, it is essential to have clear communication procedures, regular management team meetings and
status reviews. Understanding each others' roles, rather than just the functional area an individual comes
from, will have a positive impact in the leadership team on the interactions between team members.
Members of the team must all have commitment to the purposes of the team and be focused on the
achievement of the team’s objectives. There needs to be a high degree of trust and participation by all
team members.
Strong leadership will be crucial, particularly as members of the multi-disciplinary team are coming from
different functional areas and will have different backgrounds and perceptions of other team members. It
is therefore important that there is a feeling of mutual trust between team members notwithstanding the
fact that in a multidisciplinary team, individuals will come from different backgrounds. The leader should
ensure that there is full participation by all members with a free flow of information and communication.
Equally, conflict in a high performing team is best resolved by the members themselves.
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Referring back to team roles as well as functional roles, a high performing team will need to be made up
of a balance of individual skill and personality types. This is based on the work of Belbin who proposed
that a well-balanced group should contain eight main character types. He suggested that a member of a
team can adopt two or more roles if necessary. However the absence of one team role can mean a
reduction in the effectiveness of the team.
The classification of roles identified by Belbin included: the coordinator, the plant, the shaper, the
monitor-evaluator, the resource investigator, the implementer, the team worker and the
completer/finisher. Another role added to Belbin’s original work is the expert or specialist which should
be present in the multi-disciplinary management team. [CIMA Adapted]
21. R Company is in the business of manufacturing contemporary and traditional furniture for the home.
When the previous sales director retired after working for more than 20 years for the company, his
replacement, BG, was faced with the task of reversing the downward trend in sales. However, BG was
disturbed to find a general lack of cohesion throughout the different departments. This was characterized
by poor communications and widespread frustration, including hostility between staff in the various
departments. Department heads blamed each other for the current financial performance of the company
and its reduced sales. In addition, the departments appeared to have developed their own plans resulting
in conflicting priorities.
BG recognizes that for the company to prosper in the future, he needs to get everyone in the organization
to work together.
Required: Explain what BG could do to resolve the conflict that has developed in R Company. (10
marks) [CIMA November 2012, Q.4]
Suggested Answer:
Conflict occurs when there is disagreement between different parties within the organisation. It can occur
in a variety of forms and between different levels in an organisation. The conflict outlined in the scenario
is an example of horizontal conflict and inter-department/inter-group conflict, in that it is happening
between departments at the same level in the hierarchy. It is also dysfunctional and destructive in that it
would appear to be harming the organisations performance and is demoralising for staff.
There are number of steps BG could take to resolve this which include:
BG could set super-ordinate goals that require the co-operation between departments. At the moment it
would seem that the departments have developed their own plans with conflicting priorities rather than
sharing the same goal and depending upon each other to achieve them. Setting super-ordinate goals
should result in better communications and coordination.
He could also use confrontation, bringing the heads of department together to work out their differences.
The idea of confrontation is that, through negotiation and bargaining, it will enable the department heads
to reach an agreed solution. However, confrontation needs to be carefully managed since it is not always
successful and emotions can mean that the discussions can get out of hand rather than resolving the
conflict.
The conflict occurring in R Company is serious, impacting on performance with department heads and
members of staff blaming each other and not co-operating, so BG may decide to use a third party
consultant to help resolve the conflicts. This involves bringing in an expert from outside the organisation
to meet with representatives from the different departments with the aim of working through the conflicts.
BG could also consider member rotation, which is where individuals from one department work in
another department on a temporary or permanent basis. This helps individuals gain a deeper
understanding of the values, problems and goals of other departments and the individual can explain the
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problems and goals of their original department to their new colleagues. The idea is that this can result in
a better understanding of the work of different departments and a good exchange of views.
Intergroup training is another intervention that can be used to help resolve conflict. The training could be
at department head level, or it could involve department staff attending workshops away from the
organisation. The rationale for the training would be to develop company-wide co-operative attitudes
focusing on R Company’s super-ordinate goals. Staff from the different departments are brought together
and interventions are used to get them to explore perceptions and relationships. This requires free and
open expression and needs to be managed carefully. At the end of the training, department employees
should understand each other better and this should lead to improved attitudes and better working
relationships over the long term.
This technique is expensive, but could be worth investing in to gain the long term benefits and resolution
of the inter-department conflict which is currently damaging the performance of R Company.
(An alternative approach could be used to develop the answer using Thomas Kilmann's conflict handling
framework applied to R Company.) [CIMA Adapted]
22. In the face of rising costs, the senior management in PT Company has decided that significant cuts will
be needed in the budgets of some of its departments. The promotional budget was singled out to be hardest
hit. However, YE, the Marketing Manager, considered that this was a soft target for making major savings
and had not been thought through sufficiently. In particular, he feels that plans to launch a new product
range would be severely hampered by a lack of promotional support and that this could threaten the future
of the company. Unfortunately, his view is not shared by other department heads who feel that perhaps
the current business climate is not ideal for such ambitious plans. A meeting has been arranged with
senior executives where YE hopes he will be able to negotiate an increase in the promotional budget.
Required: Explain how YE should approach the negotiation, including reference to the different stages
in the negotiation process. (10 marks) [CIMA November 2012, Q.5]
Suggested Answer:
Negotiation is the process of satisfying needs by reaching an agreement. It is often necessary within
organisations to resolve conflicts of interest between two or more parties which have arisen because the
parties have different objectives. In this case, the senior management of PT Company have the objective
of cutting costs, whilst for YE, the Marketing Manager, the cut to the promotional budget will have a
detrimental impact on the launch of the new product range. YE will need good negotiation skills to help
him to secure the budget he needs.
Approaches to the negotiation process can be best achieved through focusing initially on each side’s
primary objectives, rather than becoming distracted by minor negotiating points at an early stage. It will
be important for YE to listen to what the senior management position is and to make an effort to
compromise so that both sides can attain their goals. However, this is often where negotiation can fail
because of the tensions between the different objectives that can never coincide. This could occur in this
scenario since there will be a finite overall company budget and other department heads will want what
they perceive to be a fair share in order to to deliver their departmental objectives. YE needs to anticipate
this and have his negotiation strategy worked out.
be satisfied with the end result, trading-off wins and losses so that each side gets something in return for
everything they concede on. Win-lose or lose-lose outcomes are in no ones best long term interest. In this
case, YE may be able to put forward alternative approaches to help in managing the rising costs, in order
to secure the budget needed to promote the new product range.
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YE needs to be aware of some of the important tactics for effective negotiation. For instance, he should
use questions effectively so as to control the situation and use persuasion. During the negotiation process
it is important from time to time to test that both sides understand clearly what is being proposed and at
what stage the negotiations are at.
YE also needs to be aware that effective negotiation should go through a number of stages, for example:
 Preparation
This involves the parties in the negotiation gathering information and insight to the problems in order to
understand the constraints acting on the negotiating parties. Issues such as who is involved in the
negotiation, what the concerns of each party are and what the goals of the negotiation are, all need to be
determined. YE could collect information on the level of cuts to other budgets. He could also seek out
possible alternative ways the marketing department could reduce costs.
 The opening phase of negotiation

This involves the senior management and YE presenting their starting positions to one another. It is at
this stage that the greatest opportunity is present to influence the other side.
 The bargaining phase

This is where both parties will aim to narrow the gap between the two initial positions to persuade the
other party that their case is so strong that the other must accept less than they had planned. YE could
present his case in terms of the positive contribution the new product range will make to the company’s
financial performance in the long term, hence justifying the need for the size of the promotional budget.
 The closing phase of negotiation

This represents the opportunity to capitalise on the work that has been done at the earlier phases. It is at
this stage that agreement is reached. The outcomes from the agreement should be publicised and
implemented.
23. J, the Finance Director, is preparing for an important negotiation with P, the Marketing and Sales
Director, regarding the way the company's sales targets will be set in the future. Whilst he is confident
that he has a good case, he knows that having effective communication skills will be vital to the success
of the forthcoming negotiation.
Required: Explain to J the potential barriers to effective communication in the negotiation process and
how they can be overcome. (10 marks) [CIMA March 2013, Q.2]
Suggested Answer:
In explaining the potential barriers to communication in negotiation and how to overcome these, it would
be helpful to refer J to the communication process model.
With reference to the model, there are a number of possible barriers to effective communication in the
Finance Director's negotiation with the Marketing and Sales Director.
Page 23 of 30
At the preparation stage of the negotiation J first needs to consider himself in terms of the sender of the
messages. He should define the purpose of his message with P, the receiver, in mind and select the most
appropriate language and medium for the message. For the negotiation this is likely to be face-to-face. J
needs to have a clear objective of what he wants to achieve from the communication which, in this case,
will be a successful negotiation outcome.
During the opening stage and the bargaining stage of the negotiation process J must ensure that his
messages are not too complex or poorly expressed, otherwise they may not be fully understood by P. J
also needs to take care not to cause confusion in the communication process through the over use of
jargon or lack of fluency of his message. He needs to code his messages in a way that is understood by
his audience. He needs to be able to communicate his case clearly in a planned and logical way or else P
may not pick up the principal elements of the message, especially important in the bargaining process.
During the negotiation it is important that J’s non-verbal communications reinforce his verbal messages
and do not undermine them. The medium channel for the negotiation will be through face-to-face
discussion so he needs to ensure that all elements of communication, for instance words used, tone and
non-verbal signals (gestures, facial expressions, and posture) all fit with, rather than contradict each other,
so as not to confuse P.
J needs to anticipate possible reactions during the negotiation process by the Marketing and Sales Director
to the message regarding changes to the way sales targets are set. He should also be aware of individual
bias and selectivity by P. This occurs because often people hear and see what they want to, particularly
in negotiation. P, as the receiver, may have a different set of expectations from J regarding the setting of
sales targets. Throughout the negotiation it will be important to minimise this problem by ensuring that
communication is two ways. J should encourage feedback from P to check out that the message has been
correctly understood and interpreted. This will be particularly important at the closing stage of the
negotiation when it is vital that the communication is correctly received so as to ensure each party is clear
and in agreement with the outcome reached.
J should also be aware of ‘noise’ that can occur in the communication process. This refers to any
distractions or interference in the environment in which the communication is taking place and which can
impede the transmission of the message. It happens when the message becomes distorted by extraneous
factors between J and P, such as distractions in the negotiation environment and information overload
during the negotiation.
The overriding aim in terms of having effective communication skills is to achieve a win-win outcome
from the negotiation.
24. LG, the Managing Director of NWP Company, recently announced to the workforce that the Board had
agreed to the establishment of a set of new working practices which should lead to improved productivity.
The new working practices will mean the introduction of weekend working and the rotation of shifts for
all workers.
The senior management of NWP Company consider the changes to be necessary if the company is to
survive the very difficult operating conditions it is currently facing. However, the announcement has led
to conflict between management and workers, and the workers are now threatening industrial action.
Required: Discuss the different strategies that LG could use to manage the conflict occurring in NWP
Company. (10 marks) [CIMA March 2013, Q.5]
Suggested Answer:
There are a number of different ways LG could handle the vertical conflict in NWP Company which is
occurring as a result of the announcement to introduce new working practices. For example, he could
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make use of the five conflict handling strategies identified by Thomas which are based on two conflict
management dimensions:
• the degree of assertiveness in pursuit of one’s interests, and
• the level of cooperation in attempting to satisfy others’ interests.
The strengths of each of these in a particular situation can be regarded as lying along two continuums
respectively.
LG could use the avoidance strategy. This is where one or more parties in conflict may seek to avoid,
suppress or ignore the conflict. This would not be recommended in the case of NWP Company since it
does not resolve the conflict. It could therefore impact negatively on the future survival of the company
if the support to the new working practices is not resolved since industrial action would remain a
possibility.
An alternative strategy LG could us is accommodation. This would involve one party putting the other’s
interests first and suppressing their own interest in order to preserve some form of stability or to suppress
the instability. Again, in the case of NWP Company, this is not recommended since this strategy is
unlikely to resolve the differences of the management and employees relating to the new working
practices to the satisfaction of both parties.
LG could use the conflict handling strategy of compromise. This is often viewed as an optimum strategy
since it involves each party giving something up and a deal somewhere between the two is accepted. For
NWP Company this approach might be used between management and the workers, for example, to
determine the number of hours needed to be worked at the weekend, and an enhanced reward for working
over the weekend.
Another conflict handling strategy is competition. This is a state where both or all parties do not
cooperate. Instead they seek to maximise their own interests and goals and so end up creating winners
and losers. This approach is not recommended for NWP Company since it can prove damaging both to
the organisation and to workers now and in the future.
The fifth approach LG could use to handle the conflict is called collaboration. This is where the
differences between the management and the workers are confronted and jointly resolved, with a win-
win outcome achieved. Whilst this is also viewed as a favourable approach to managing conflict, it is not
always possible. For instance, the new working practices proposed are needed to improve productivity
and actions will need to be taken collaborating with the workers to work out how these new working
practices can be implemented. This will only be successful if the workers accept the need for the new
working practices and are prepared to collaborate on ‘the how’ they are introduced. [CIMA Adapted]
25. QT Company, to date, has operated its business through two call centers - Call Centre East (CCE) and
Call Centre West (CCW). Both call centers are located in the same city. However QT Company has
recently decided to close CCE in the interests of cost efficiency. It will concentrate its resources on the
development and expansion of CCW. The decision on which call center to invest in was a marginal
decision made by the Board, since both had performed equally well over the past year.
All employees of CCE will be offered the opportunity to transfer to CCW, which is just 30 minutes away
in terms of travel distance. However, whilst there will be no compulsory redundancies, employees from
both centers have been told that they will have to apply for specific roles at CCW. Employees will not
be guaranteed that they will get their preferred role.
Senior management fully expects to have to deal with some conflict in a variety of forms and at different
levels as the restructuring is implemented and employees from CCE take up their new roles alongside
Page 25 of 30
their co-workers at CCW. However, they feel that if they can anticipate possible causes of such conflict
they will be better placed to deal with it when, and if, symptoms arise.
Required: Explain the potential causes and forms of conflict which the senior management of QT
Company may have to deal with as a result of the restructuring of the call centers. (10 marks) [CIMA
November 2013, Q.1]
Suggested Answer:
Conflict can be defined as disagreement arising when one party is seen as preventing another party from
achieving its interests or goals. There are a number of potential causes of conflict that could emerge due
to the proposed changes and the restructuring of QT Company's Call Centres.
Change in itself can create conflict. In this case, new relationships and teams will be formed at Call Centre
West (CCW). Hence, it is likely that the new teams will go through the storming phase of team
development (as proposed by Tuckman). Conflict is likely to be prevalent in this stage as team members
challenge each other on the way work is done, and test their roles and responsibilities. Associated with
this, another cause of conflict might emerge due to the different histories of employees from the two call
centres as existing and established relationships are threatened or disbanded altogether. Staff who are
required to undertake new responsibilities and roles may do so reluctantly and with little enthusiasm.
While employees from Call Centre East (CCE) have been offered jobs at CCW conflict may arise because
they may think that they are in a losing situation since CCE has been the one identified for closure. They
may feel that they will be viewed negatively by their colleagues already working at CCW. This may be
exacerbated by staff in CCW holding the belief that they are in some way better than employees from
CCE, even though we are told it was a marginal decision to invest in CCW. Conversely, the decision to
close CCE may be perceived by staff there as being unfair. Depending on the severity of disgruntlement
amongst employees, the conflict could lead to industrial action.
A further cause of conflict could be stress and failure which might arise if an individual or work group
feels unable to cope with the pressures and problems of the move to CCW, where they will be working
in a different environment and with different people.
Uncertainty is often a cause of conflict and this could occur amongst staff from both call centres, since
the reorganisation will impact on all their roles. There may be resentment from the employees in CCW
of having the staff from CCE to work with, which they may view as underperforming, since it has been
chosen for closure. This could result in hostility and jealousy as people apply for roles. Whilst jobs have
been guaranteed for all employees there will inevitably be a level of competition for particular roles, with
winners and losers in terms of individuals securing their preferred jobs.
Another cause of conflict could arise because of poor communication up and down the hierarchy about
the changes proposed. This could lead to rumours and misunderstandings between management and staff,
resulting in vertical conflict.
In conclusion, an understanding of the likely causes of conflict should help the senior management of QT
Company in eliminating or minimising disruption when implementing the restructuring plan, including
the integration of employees from CCE to CCW. The management of conflict is likely to be more
effective if the causes can be recognised and dealt with at an early stage. [CIMA Adapted]
26. When the previous Head of the Finance Department of GSP Company moved on to his new position,
none of the department's staff showed any interest in applying for the post. As a result the post was
advertised externally and K was appointed. Although this would only be K's second managerial post
since qualifying as a management accountant five years earlier, he impressed the interview panel with
his excellent technical accountancy skills.
Page 26 of 30
Unfortunately, after three months in post, K has become frustrated and disillusioned by the apparent lack
of support he has received from his staff, who, he thinks, resent his appointment. At a recent meeting
with his line manager, J, to discuss the situation, J suggested that the present situation has arisen due to
K's communication problems rather than anything to do with hostility and jealousy.
Unknown to K, J has received numerous complaints from staff in the Finance Department about K's poor
communication skills. These have included K's preference for sending long, complex and tedious emails,
his use of lots of jargon and a lack of individual face-to-face communication. It seems that many of his
emails are sent at the weekend or late at night and he often expects an immediate response. Staff also
commented that the department meetings K chairs are disorganized and people have stopped attending
since they do not see any actions resulting from the meetings.
Required: Discuss what K could do to improve his communication within the Finance Department of
GSP Company. (10 marks) [CIMA November 2013, Q.5]
Suggested Answer:
It would appear that K has been selected for the position as Head of the Finance Department based on his
technical skill, rather than other important management competences, in particular effective
communication. However, a key attribute of an effective leader is to have good communication skills
since communcaiton is an important aspect in the relationship between managers and employees.
Effective communication is essential in identifying problems, co-ordination of tasks and decision making.
To identify ways in which K might improve his communication skills it is useful to make use of a
communication model such as that illustrated below.
This model indicates the potential barriers to communication and helps summarise why K‘s methods of
communication present problems for the staff in his department.
As the sender of communications K needs to be clear on the objective of his communication, and then
plan the communication, using an appropriate channel or medium through which the message is sent. For
instance, rather than sending everything through long emails, it may sometimes be more effective for K
to have face to face communication with individuals, since this would help K in re-building important
personal relationships with staff.
K should be mindful about the receiver and the receiver's situation when receiving messages. He should
be more proactive in seeking feedback to ensure his communication has been received in the way intended
and fully understood by the recipient. In this context K needs to think more about the medium he uses for
communciation. Face to face communication has the benefit of providing the opportunity for the receiver,
who may not grasp the meaning of the message, to ask questions for clarification, checking out
understanding. In other words it helps the receiver decode what K is seeking to convey. Communication
is a two way process, so it is as important for K to understand what his staff are saying to him and in this
respect K also must learn the signifnace of listening.
When using face to face communicaitons, K needs to be aware that non-verbal communication skills are
very important in conveying a message effectively. K could think more about his nonverbal
communication cues. This includes maintaining eye contact, speaking at a moderate pace, and
Page 27 of 30
occasionally smiling and nodding, in order to reinforce the message as well as putting the receiver at
ease. It is essential that verbal messages and non verbal messages reinforce each other rather than
contradict.
K should also think about the language he uses in terms of coding his messages. For insance, whether the
perceived over-use of jargon in his communications is appropriate and will be understood by the receiver
of his communication. K should consider using simpler sentences and plain language to improve the
clarity of his messages, He should also be aware of information overload which can sometimes prove
intimidating to staff, especially if they do not possess the same technical accountancy skills as K.
The concept of noise in the communication model refers to anything in the environment surrounding the
interaction between sender and receiver that may interfere with the message. In this context K needs to
pay attention to the timing of when he sends his emails . Staff may feel too pressured and stressed to
respond immediately to emails they receive during 'out-of-office' times. They may view these emails as
an unwelcome intrusion on their time away from the office when they are at home with their families or
socialising, and also unreasonable and inappropriate of K to expect them to respond. If K prefers to
construct emails in the evening and weekends, he could save the emails as drafts and send them at a more
appropriate time.
In managing the finance department meetings it is important that, as the chairperson, K is well prepared
for his meetings. He should ensure that an agenda is circulated prior to the meeting and should use the
agenda items as the focus for the meeting, so as to keep on track. He also needs to make clear the purpose
of the meeting and why invitees need to attend.
At the beginning of each department meeting K should go through the minutes from the last meeting and
ensure actions have been taken as agreed, or obtain reasons for actions not being complete. This means
that in future meetings, it is important that for each action point from decisions made K ensures that a
person is identified as responsible for completing it.
In summary, if K is to win back the support of staff in the Finance Department it is clear that he needs to
recognise that effective and regular personal communication is just as important as his technical
accountancy skills in ensuring the smooth running of the department. [CIMA Adapted]
27. Team (and group) work is often viewed as desirable, resulting in benefits both for the organization and
individual employees. However, there can be some negative effects associated with team working.
Required: Discuss both the positive and negative effects of team working. (10 marks) [CIMA March
2014, Q.2]
Suggested Answer:
There are a number of positive outcomes of team working both for the organisation and the employee.
Fundamentally it is assumed that working in a team will lead to increased productivity. This is because
tasks can be broken up into different parts and different team members with different skills can work on
the task simultaneously, combining their skills and knowledge. This is sometimes referred to as synergy
(i.e. 2+2=5) in which the combined activity of individuals has greater effect than the sum of the activities
of an individual.
Working as part of the team can be motivational in terms of meeting social needs (identified in Maslow's
hierarchy of needs) and also providing a sense of belonging to the individual, creating increased employee
satisfaction. This can also link to productivity in that individuals may work harder for each other, not
wanting to let other members of the team down.
Other benefits of team working are related to greater creativity and improved problem solving on the
basis that discussions between team members will generate better ideas and solutions than individuals
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working alone. It is also suggested that working in teams improves communication flows through the
organisation and between team members.
Whilst team working has positive effects, it is possible that there could also be negative outcomes
associated with team working. For instance, peer pressure may result in individuals being persuaded to
agree with a decision which they know will not work. This is referred to as conformity in decision making.
Another negative aspect of team working is the concept of risky shift or group polarisation and concerns
the tendency of groups to take decisions which are in fact riskier than individuals would take on their
own. This occurs because the responsibility for the decision is not vested in one person.
Group think can also occur where a team is particularly cohesive and team members will try to minimise
conflicts and seek consensus without being willing to critically evaluate alternative courses of action. In
other words all members "think" in the same way. The team could develop its own norms which may
conflict with those of the organisation. Associated with group think is a concept called the Abilene
paradox which is a case where the team can end up with an outcome that none of the individuals members
actually wanted, but no one wants to disturb what they believe is the consensus. [CIMA Adapted]
28. BL Company is a long established family business which started out making made-to-measure boots and
shoes by hand, but now also produces other leather goods. The company's production workers include
skilled craftsmen who have served long apprenticeships to acquire their particular skills. The company
also has a dedicated marketing and sales team which sells its goods through established retail outlets
around the world.
With sales and profits on the increase, N, the owner manager, has every reason to be optimistic about the
future of his company. However, it seems that the company is in danger of becoming a victim of its own
success as the production department is struggling to keep up with the increased demand. The marketing
and sales team is frustrated with the workers in the production department, suggesting that they are
inflexible and unwilling to look at methods to improve productivity to meet the new orders it has won.
For their part, the skilled craftsmen have complained to N that the pressure being put on them to step up
production is unreasonable and will compromise quality. They are also unhappy that the marketing and
sales team is paid a commission yet the production workers have no opportunity to increase their pay. N
has been warned by their trade union representative that the production workers are threatening industrial
action to stop work.
Required: Compare and contrast the different forms and causes of conflict occurring in BL Company.
(10 marks) [CIMA March 2014, Q.3]
Suggested Answer:
Conflict occurs when there is a disagreement and one party is perceived as preventing or interfering with
the goals and objectives of another. In the case of BL Company, the conflict could be viewed as
destructive and dysfunctional between the different groups. Examples of both horizontal and vertical
conflict are evident.
The conflict between the production department and the marketing and sales team is horizontal conflict
because it is occurring between the same levels in the hierarchy. The cause of the conflict is due to the
different objectives of the different groups.
The marketing and sales team is focusing on getting sales with no regard to whether the orders can be
met. On the other hand, the production department is focused on producing high quality products and is
unable to cope with meeting the demand and feels that it is facing undue pressure. In this sense each of
the department's operative goals could be regarded as being incompatible in terms of volume of sales
versus quality of production.
Page 29 of 30
Horizontal conflict may also be a feature of the different background, values and skills between the two
groups. The marketing and sales team is externally focused on increasing sales opportunities for the
company. In contrast those in the production department probably view themselves as craft workers,
having served long apprenticeships, and are proud of the quality of the leather products they produce,
rather than volume of production. In other words the two groups have very different motivational and
psychological positions on what is important.
This is exacerbated by the different reward systems. The marketing and sales team members are on
commission and will be keen to win as many orders as they can. At the moment the production workers
do not receive any additional payment for increased productivity and this is a source of dissatisfaction.
In contrast, the conflict between the union representing the workers and N is an example of industrial
relations conflict which could also be viewed as vertical conflict. This occurs between individuals or
groups who are at different levels in the hierarchy and arises because of status and power differences
between groups.
The conflict has arisen because of the expectations of N for the workers in the production department to
increase productivity but with no proposal to increase their pay. This has led to industrial unrest. The role
of the trade union in vertical conflict is to try to equalise the power differences between the workers in
the production department and N.
Concept & Compiled by:

Md. Shahadat Hossen
ACMA, CFC (Canada), CIPFA (Affiliate, UK)
Deputy Manager- Finance (Additional Charge)
Dhaka Power Distribution Company Limited
Ministry of Power, Energy & Mineral Resources
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E2: Enterprise Management

Chapter-09: Relationships in the Working Environment

 The opening phase of negotiation

 The bargaining phase

 The closing phase of negotiation

The five identified strategies are:

The four stages identified are:

 The opening phase of negotiation

 The bargaining phase

 The closing phase of negotiation

Concept & Compiled by:

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