E1 March 2012 answers

The Examiner's Answers - March 2012 E1 - Enterprise Operations SECTION A Answer to Question One 1.1

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B

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

Answer to Question Two Requirement (a) There are several significant opportunities for an organisation operating in a modern global business environment and five are highlighted here.

Reducing the manufacturing cost base For many organisations there has been a strategy of off-shoring the manufacturing base to lower cost countries. Relocation of organisations manufacturing base to countries with lower labour costs means that an organisation can offer low or lower price products and remain competitive.

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Taking advantage of specialist expertise There has been an emergence of fast growth (BRIC) economies including India which has developed a high quality expertise amongst its workforce in linguistics and IT. The effect is that organisations in more established economies have outsourced back office and call centre activities knowing that costs will reduce and service levels will be maintained and possibly enhanced.

Access to large new markets The modern global environment offers access to new and potentially lucrative markets thanks to a relaxation of trade barriers and changing attitudes to world trade. By way of example the substantial emergence of a huge, largely untapped market in a growing economy such as China offers potentially access to a large proportion of the world’s population for the first time in decades. This means that although a market life for a product may be in decline in long established markets, potentially (at least), the same products could sell strongly in new markets.

Opportunities to collaborate and gain expertise The modern global environment has offered opportunities for cross-national business alliances and joint ventures. This has led to organisations gaining new expertise, accessing markets that were at one time thought impenetrable and achieving economies of scale in production and operation through collaboration. .

Take advantage of different tax jurisdictions The modern environment stresses the importance of global economic policy over national sovereignty and an organisation can expect financial opportunities if it operates across different tax jurisdictions.

It may be that certain developing countries actively encourage inward investment by offering attractive tax and other incentives.

Requirement (b) Ethics might be viewed as a set of moral principles that guide behaviour, based on what is felt to be “right”. As opinions may vary over what is “right” and what is “wrong” ethics is in many ways a subjective concept. Individuals have their opinions over “right” and “wrong” and ideas can vary enormously between different national and even organisational cultures.

Business ethics comprises the principles and standards that govern behaviour in the world of business. The factors that affect ethical obligations in business are the law, government regulations, social pressures and tensions between personal standards and the goals of the organisation, and ethical codes (e.g. the code developed by CIMA).

Ethical considerations underpin the concept of Corporate Social Responsibility (CSR). CSR refers to the idea that an organisation should be sensitive to the needs and wants of all its stakeholders, not just its shareholders/owners. CSR suggests that the organisation should consider the environmental impact of production on for instance non-renewable resources or non-recyclable inputs, the health impact of for instance tobacco on consumers, and fair treatment of employees, etc. CSR is perhaps wider in scope than “standard” ethical concerns and might for instance include a commitment to a “green” environmental agenda. Other examples include whether it is right to experiment on animals and the safety of products or production processes. These judgements influence society’s acceptance or rejection of the action taken. CSR means that businesses therefore should schedule their economic and legal duties with their wider responsibilities.

Requirement (c) When companies are considering Foreign Direct Investment (FDI) particular emphasis should be placed on determining any potential political risk. Rugman and Hodgetts (2002) identified a number of groups which may be potentially responsible for political risk. These are listed below along with examples of such groups.

Current government/ruling regime of that country This includes the government’s various departments and agencies such as a country’s department for trade. Risks arising from this group can take the form of industry regulation, taxes on specific types of business activity, etc.

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Political opposition groups Opposition groups may not be in power at the present time but may have political influence, (e.g. the Republican party in the USA which currently controls a chamber of government). It should be remembered that such groups may gain further power after FDI takes place. The risk arising is associated with changing policies and restrictions (for example, employment policies and product manufacturing restrictions).

Organised interest groups Organised interest groups such as religious groups, trade unions, etc. may impact upon a country’s operations and could lead to a disruption of trade for a particular company. (One example may be French transport drivers and farmers who have a history of taking direct action in response to government policy that they see as harmful).

Terrorist groups operating in that country Terrorist or anarchist groups may operate in certain countries, (e.g. separatists in Spain, extremist republican groups in Ireland, etc.). Risks include disruption of trade, damage to property and/or personnel from social unrest, acts of armed conflict, terrorism, riots, etc.

International organisations International organisations such as the World Bank or United Nations may bring influence to bear upon the country in question which could change the nature of existing trading and operations and represent a form of risk to trade.

International alliances The country in which FDI takes place may subsequently enter into an alliance with another foreign government and again the nature of existing trading and operations may change as a result.

Examples of trade agreements between governments are plentiful and include the current agreement between Vietnam and USA.

Requirement (d) The 5-S practice is an approach to achieving an organised, clean and standardised work place and can be seen as a part of the kaizen (continuous improvement) approach to quality. 5-S is based upon 5 Japanese terms 'seiri, seiton, seiso, seiktsu and shitsuke' but can be translated as sort, organise, clean, standardise and discipline. These simple principles can encourage the standardisation of procedures and clarification of management processes.

This can be explained with the following examples: • Sort - eliminate unnecessary items, get rid of old unwanted files. (Physical).

• Organise - develop and use a structured filing system. (Physical).

• Clean - clean work stations and work areas regularly. (Physical).

• Standardise - introduce standardised processes and systems such as an alphabetical filing system. (Thinking).

• Discipline - exercise discipline daily, not slipping back to old habits and ways of working.

(Thinking).

Requirement (e) Various options exist by which an organisation might respond to variations in demand for its products.

(An organisation which constantly adjusts its productive activity levels to shadow fluctuations in demand from customers is said to employ a 'chase' strategy.) These options might be classified in terms of: • Adjustments to workforce capacity to influence supply • Adjustments to stock levels • Adjustments to the marketing mix to influence demand Workforce capacity • Hiring and lay-offs - By hiring additional workers when demand is high and laying them off when demand reduces.

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Use of overtime working - By asking or requiring employees to work extra hours, organisations can create a temporary increase in capacity without the added expense of hiring additional workers.

Use of part-time or casual labour - By using temporary workers for a fixed period or casual workers (who are considered permanent but operate on an on-call basis when needed) capacity might be temporarily increased.

Shared employees - Rare and more novel ways of balancing supply and demand in certain industries involve a 'sharing' of employees. This arrangement works best when companies with counter-cyclical demand collaborate.

Developing a flexible workforce - An organisation might give its workforce experience in many areas of the business or train them to become flexible and multi-skilled. With an ability to perform tasks in several operations, these workers will create some flexibility when scheduling capacity. Workers may alternatively be employed on flexible arrangements whereby they are required for banded hours during a given period (e.g. between 25 and 50 hours in any given week).

Workforce capacity (outsourcing) • Subcontracting work - An organisation may choose instead to temporarily increase its capacity by engaging another provider to help meet temporary increases in demand.

Flexible inventory levels • Stock levels - Stocks of finished goods can be built up in periods of slack demand and then used to fill demand during periods of high demand.

Marketing mix to influence demand • Pricing and promotion - Adjustments to product pricing and promotional activity in particular can help 'smooth' peaks and troughs in demand.

Requirement (f) Operations management might contribute to achieving an organisation's sustainability targets in a number of ways.

Through process design - Production processes can be designed and improved upon so that they minimise wasted material and labour, lessen energy usage and reduce carbon and other emissions arising from the processes. (CAM and CAD technology might be utilised to assist this process.)

Through product design: • Products can be designed so that consideration is given to the amount of raw materials used and wastage from off-cuts etc.

• Products can be designed so that once they are used they can be disposed of in a way that is not harmful to the environment. (Better still spent products should be recyclable.)

• Products can be designed in a way that packaging is both minimised and/or made from biodegradable or recyclable material.

Through purchasing strategies - An organisation may decide to source products ethically. This might include the use of biodegradable or recycled materials or manufacture using raw materials from sustainable sources.

Through supplier selection - When choosing suppliers consideration may be given to those organisations that adopt sustainable development policies.

Through logistics - Unnecessary transport and the physical distance between supplier, factory and sales outlets could be considered in order to best meet an organisation's sustainability targets.

Through lean policies/quality initiatives - The adoption of a lean and/or quality orientated philosophy in operations should lead to an elimination or reduction of waste whilst achieving at the same time greater efficiency.

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SECTION C Answer to Question Three Requirement (a) It is clear that CXC faces a number of challenges and must overcome its weaknesses and counter the threats it faces. The weaknesses and threats it needs to consider and address are summarised below: Weaknesses • Organisational structure. CXC has an old fashioned structure. The scenario suggests a tall hierarchical structure with a General Manager, Regional Managers, right down to the Sales Associates who interface with the customers. This can lead to poor communications and to regions and Sales Associates 'doing their own thing'. There is little evidence of team working or 'bottom-up' feedback from the Sales Associates who work within the framework of policies and procedures coming from headquarters. Undoubtedly this represents a strategic weakness. The company should review this and initiate a change to a 'lean-flat' structure based on team work.

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High overheads. With many layers of management and a large office in the capital city this suggests that CXC has high central overheads and operating costs which could make it uncompetitive.

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Limited market awareness. CXC appears to have limited strategic direction and market awareness. Its headquarters may appear distant to its workforce in the regions. The emphasis appears to be upon monitoring and policy making rather than strategic leadership and market acumen. The working party charged with strategy making is drawn from CXC’s Regional and Assistant Managers - all senior staff and none in touch with customers in the way that Sales Associates are.

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Lack of sales incentives. Currently there is no incentive pay for the Sales Associates who are paid a flat-rate monthly salary. The General Manager has obviously acknowledged this weakness and is considering the idea of incentivising these key workers by implementing a bonus scheme.

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Reputation and repeat sales. Customer feedback from direct telephone sales is that whilst customers felt that the service was initially “excellent” in dealing with their enquiries, after the purchase had been made there was a generally poor service. This can lead to a loss of confidence and goodwill meaning that CXC risks its reputation and is unlikely to gain repeat sales.

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Unattractive marketing mix. It is evident that CXC has adjusted its marketing mix for the home business over the past two years. However the faltering performance indicates that the mix is still not sufficient to maintain market share and past success. CXC needs to consider more carefully the mix of product features and fitness of products for their purpose, promotion and the way in which it communicate with its target market, place, whether on the road sales, cyberspace or the telephone line and price reflecting those costs, competition and customers’ ability to pay in a challenging market. The outcome could be a range of actions that review price, promotion and products for the market.

Over-dependence on Sales Associates. Sales Associates deal directly with the customers and receive referrals from CXC’s headquarters. The majority of the business they generate however is down to their own endeavours whether getting further business from existing customers or developing links with local private medical companies, automobile traders, and travel companies, etc. This implies little information sharing and over dependence on this

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group of staff who do not as yet receive bonus payments. Unless addressed this leaves CXC vulnerable to Sales Associates leaving and working for competitor organisations.

Threats • Competitors in the home market. CXC's competitors clearly offer an on-going threat particularly in the home market. It is clear that CXC faces a number of challenges including declining sales market share with associated loss of business to competitors. The poor performance in the home market has been masked by its success in new ventures abroad and through phone sales. The effect of a recent loss of a major customer has been somewhat off-set by the success of sales in countries A, B and C. It would not be desirable for this foreign business to support the home market in the longer term.

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Inexperience in telephone sales. It is encouraging that CXC has considered different ways of accessing the market for insurance. It is, however, likely to experience aggressive competition from direct telephone sales possibly by competitors who have superior after sale and follow up services.

Ignoring the benefits of e-business. The company does not feel that online trading is the way forward but this is ignoring the potential available. It may be that the loss of home market share is because it has not embraced this modern way of trading. If it is not careful, less well established companies which have lower overheads may continue to grow at its expense as consumers become more comfortable with online trading. A second issue is that the opportunities of increasing sales in other countries could be more easily achieved through online trading.

Requirement (b) Identifying important detail to be included in the plan The working party will need to identify important detail for inclusion in the plan, for instance, the plan will need to reflect: • Training requirements • Budgets, targets and standards • Responsibilities for implementation and control • Reporting procedures that will enable achievements to be monitored against the plan The plan itself will need to meet certain key criteria: It will need to be realistic, accurate, suitable, consistent, etc.

Clarify CXC's objectives A useful method that can be used to develop a marketing strategic plan is to articulate and capture CXC's corporate objectives which, from the scenario at the moment, do not appear clear. For instance, although it is known that two years ago CXC had 12% of the home market in insurances and this has fallen to 10%, it is unclear what market share CXC aspires to. Clearly the General Manager will need to be involved in this process.

Establish marketing targets In the context of developing a marketing strategic plan, the working party will need to concentrate on the part that marketing can play in the implementation of CXC's corporate objectives. The plan will need to take account of and support the main corporate objectives and initiatives. Once there is agreement on new corporate objectives and manageable targets in a SMART (specific, measurable, achievable, realistic and time bound) format, their translation into marketing targets (such as sales) will be needed. At a managerial level, objectives will need to be developed into agreed achievable key performance indicators (KPIs).

Audit of external environment The General Manager knows that CXC faces some difficult challenges and that strategic threats must be addressed. In the same way, strategic opportunities must be seized. The working party has been examining CXC's current situation and a position statement is obviously an important part of the overall process. Part of this will need to include a complete review of the external market in which

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CXC operates. This will involve much analysis and discussion. Specific areas that should be considered include: • Trends in the macro environment, possibly using a PEST (Political, Environmental, Social and Technological) analysis.

• Competitor analysis including their relative market share, portfolio of products and strategic activities.

• Industry analysis, including the future potential of the insurance industry and products. If a market lifecycle could be developed, then CXC would be in a better position to make decisions over investment and product pricing.

From this analysis the working party should ascertain marketing opportunities and threats.

Conduct an internal review The working party has been examining CXC's current situation and part of this will need to include a complete internal review. Effectively the task will involve identifying the factors that make up CXC's strengths and weaknesses. This will include a review of CXC's portfolio of products (e.g. life insurance, mortgage protection insurance, other mortgage linked insurances, etc.) including their profitability and position in the market as determined by a BCG (Boston Consulting Group) matrix analysis which indicates relative market share and market growth.

Analysis and discussion Factors internal to CXC might be categorised as either strategic strengths or strategic weaknesses and factors external to CXC represent a source of either strategic opportunity or strategic threat. In combination, these factors may represent a simple snap-shot or position statement of where the organisation is situated (a SWOT analysis). From this detail of where CXC is, strategic marketing strategies and approaches might be usefully determined. It is important for the working party to involve a wide body of internal stakeholders in this process in order to ensure buy-in and commitment to the new strategic marketing plan. Discussions should centre on ways of building on strengths to seize opportunities, overcoming weaknesses and negating threats in order to meet marketing targets.

Communication Communication and co-ordination of the plan is important. The new plan should be co-ordinated across the organisation and, after drafting and approval, should be communicated to all employees involved in the marketing activities of the company.

Establish a system for effective monitoring and evaluation By establishing a system for effective performance and attainment, monitoring and evaluation, CXC should be able to measure how successfully the company is performing against its initial objectives.

Ensuring workforce buy-in Throughout this process it is important that the working party is mindful of the need to involve others in the strategy formulation process. In particular, sales associates will be crucial to successful implementation of the plan and their full cooperation and buy-in is vital.

Developing an integrated planning approach It must be acknowledged that in practice the strategic process is rarely as linear and sequential as a logical phased approach suggests and many aspects progress together. The working party should develop an integrated approach to developing the marketing strategy and be prepared to show flexibility.

Requirement (c) The working party is tasked with giving some guidance following the General Manager's idea to increase the sales by implementing a bonus scheme for CXC's sales associates. The guidance given by the Working Party might include: •

'Fit' with Corporate Goals. The scheme should support the corporate goals of CXC and contribute to its main objectives. The scheme should be designed in such a way that there is congruence between the scheme's outcomes and the overall organisational needs.

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Reward sales associates appropriately. It is commonplace in this type of organisation to reward sales associates with a range of items including pay, payment by results, sick pay, car, pension, medical benefits, etc. Much depends on what the associates themselves value (and are likely to be seen as positive motivators). A further consideration is the industry 'norm' for this sort of reward. Investigation of systems used by competitor and comparator organisations may be helpful in this respect.

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Simplicity. There is a need to ensure that the bonus scheme is simple and uncomplicated.

Not only will this allow for an easy means of calculation but it will also be straightforward to explain and apply and achieve transparency.

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Fairness and consistency. It is important that the workforce sees that the bonus scheme is fair, achievable and consistently applied with no suspicion of favouritism or discrimination against any individuals or groups.

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Total cost and flexibility. It is essential that the overall cost be controlled to ensure appropriate financial returns are achieved.

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Individual or team award. It is worth considering whether this bonus scheme should be based on an individual sales associate's efforts or whether it should be team based. If it is team based, this may encourage more sharing and team development.

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Impact on other groups. If a bonus scheme is introduced for this group of workers, the impact upon other groups should be considered including pay differentials and motivation.

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Answer to Question Four Requirement (a) The Managing Director is looking to consolidate operations of the company through standardisation of equipment and procedures. CQ4's operations might be transformed through the implementation of the EPoS system in a number of ways: Greater organisational control Greater control of the entire CQ4 stores is possible with data being received directly in head office.

Data received centrally would also provide the basis for common detailed reporting for marketing and management accounting purposes.

Alignment to corporate aims Reporting through the EPoS system may be tailored to the particular business needs of the individual organisation (which in CQ4’s case seem to be concerned with centralisation, efficiency and control).

Stock management EPoS software can simplify stock and product ordering locally. Currently staff spends several hours every day checking stock and placing orders for the next day’s trading. EPoS eliminates staff errors on counting and so overcomes the risk of over ordering or product 'stock-outs'. EPoS also simplifies stocktaking and reduces the need for laborious paper work to be maintained in stores.

Cost savings and improved profitability Significant cost savings may be possible through the system. Costs associated with staff daily cashing up, checking stock and placing orders for the next day’s trading could potentially be eliminated. In addition improved stock control, better informed decisions of choice of product lines should make a greater contribution to CQ4’s overall financial bottom line.

More efficient use of management time CQ4’s store managers report weekly on the performance of certain product lines. EPoS can instead provide detailed reporting in real time, freeing managers from this burden and allowing them to redirect their time more productively.

Financial management With improved reporting efficiency CQ4 should feel a real benefit as management accounting will be strengthened and reporting will be more accurate (possibly) and timely. Profitability forecasts might easily be constructed from this data against which monitoring of actual performance can occur. This functionality will increase the effective management of CQ4’s chain of stores.

Control of pricing All of CQ4’s stores are situated in the same geographical area and EPoS can keep pricing consistent amongst all its stores. It is also possible to change pricing quickly and easily to account for stock about to go out of date or reflect special offers and deals (such as 'two for one offers).

Product management EPoS can contribute to improved product management. Data received through transactions in CQ4’s stores can help inform matters such as promotional campaigns and the future range of products that should be stocked.

Customer management EPoS systems help to integrate a number of business systems by providing information quickly and efficiently. Many stores offer loyalty cards to their customers. If transaction data is linked to customer loyalty card information customer buying habits can be identified and promotional activities targeted.

Buyer behaviour can be more easily determined and greater management of the product mix can be achieved.

Operational efficiency Contemporary EPoS systems involve user friendly touch screen terminals meaning that transactions can be processed quicker than under other systems. The system means that: • customers will in future spend less time queueing and waiting at checkouts

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the accuracy of billing should also improve meaning that nothing is left off a customer's bill and all discounts are taken.

This improved efficiency should enhance customer satisfaction and improve staff morale and productivity.

Effective management of staff and transactions EPoS will offer a potential for closer control of staff and improved security of cash. As most EPoS systems normally use individual staff ID buttons, stock shrinkage and theft will be curtailed as sales and transaction patterns can be analysed and monitored more closely. Data produced from the system may also mean that the monitoring of efficiency of staff performance is also possible e.g. transactions per checkout operator per hour.

Improved reporting CQ4 has in the past adopted a policy of continuing to operate existing systems and equipment in stores. Difficulties include inconsistency of systems and variable quality of reporting through these systems. EPoS collects data and potentially can produce helpful reports on stock movements, the impact of marketing campaigns, store by store benchmarking ratios and financial analysis in a way that may not be possible under the existing arrangements.

Attainment of industry standard Contemporary developments have seen older cash registers being superseded by EPoS systems in hospitality and retail sectors and even small scale businesses now find it extremely affordable and beneficial to have such a system. An investment in the EPoS system will ensure that CQ4 has equipment at least comparable with its rivals.

Requirement (b) CQ4 has a policy of re-employing staff and continuing to operate existing systems and equipment in stores wherever possible. This means that staff may in some cases be very long serving and entrenched in past ways of working. CQ4’s Managing Director has however been warned that staff in some stores might offer some resistance to the changes he wishes to make. There are several ways by which the Managing Director might overcome potential staff resistance to the change.

Addressing the issues 'head-on' It has been speculated that a combination of reasons for potential resistance by CQ4's workforce is because some are set in their ways and/or fearful of new technology, and/or suspicious about the motives for the initiative. To overcome these issues the Managing Director could: • make clear why old ways of working are no longer appropriate; • offer support to cope with new technology appropriate to individual needs; • provide a rationale for the change and tackle unfounded fears In this way, the main issues might be addressed head-on.

Develop an open atmosphere/culture One of the problems of bringing about change is that people will not always openly admit the real reasons for opposing the changes. In particular, those reasons relating to self-interest are likely to be disguised as technical objections, such as arguing that the proposed system will not work. Attempts to deal with these technical objections will not get to the root cause of the resistance to change. Only in a climate in which individuals feel free to discuss their fears openly will it be possible for the change agent to deal with the underlying reasons for resistance.

Keep staff focused Inevitably people feel vulnerable during periods of organisational change. The Managing Director would do well to ensure that employees focus on the ‘right’ issues arising from change. For instance, store managers may believe that the most effective way to protect their future employment is to be more conscientious and work longer hours, etc. All this may be true but the real goal is to justify ones existence through adding value.

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Combine approaches There are a number of ways by which the Managing Director might overcome potential staff resistance to the change. Kotter and Schlesinger (1979) identified six main methods of dealing with resistance: • Education and communication • Participation and involvement • Facilitation and support • Negotiation and agreement • Manipulation and co-optation • Explicit and implicit coercion These six approaches are not mutually exclusive and those responsible for introducing the system may find it effective to use a combination of them. The most appropriate approach in each instance will depend on a variety of factors, including the goals of the initiative and the likely reactions of the people involved.

Education and communication Education and communication is useful when the basic problem is a lack of information about the need for, or the nature of, the planned change. In CQ4’s case potential resistance by employees may be because they are suspicious about the motives for the initiative. The scenario makes clear that CQ4’s Managing Director wants to consolidate operations through greater centralisation and standardisation of equipment and procedures. The electronic point of sale (EPoS) system is apparently a first step. There is no indication that the Managing Director has communicated this thinking to staff. It seems wholly appropriate to educate staff as to why these changes are taking place and the reasons for them. Some may believe the changes threaten job satisfaction or job security. If such anxieties are unfounded then the Managing Director needs to allay these fears. This may effectively head off a degree of resistance to the changes that are to occur.

Participation and involvement Participation and involvement increases the probability that people will be committed to implementing the change. This approach to dealing with resistance to change (like education and communication) can be time consuming but the benefit may be that if their views are taken into account, this may enhance the effectiveness of the change initiative. The Managing Director may wish to involve stores in implementing the systems themselves without disrupting business rather than imposing EPoS on them.

Facilitation and support Facilitation and support involves the use of techniques such as training, counselling and group discussions to reduce fear and anxiety. This is particularly appropriate where the principal reason for resistance is based on insecurity and adjustment problems. In the case of CQ4 some employees are set in their ways and/or fearful of new technology. A promise of full training for all staff in a nonthreatening way would undoubtedly allay many anxieties and fears and prevent resistance.

Negotiation and agreement It is said that people do not naturally resist change per se-they resist loss. Negotiation and agreement may be necessary where a group clearly stands to lose out in some way because of the change. If applied effectively this method of dealing with resistance to change may help to avoid major problems, but it can be expensive. In this case CQ4 staff currently spends several hours after the close of trading every day cashing up, checking stock and placing orders for the next day’s trading. As the system effectively does this job staff will not be required to work as many hours per day which could result in either a loss of pay or a redirection into more value adding activities. The Managing Director needs to consider the implications and then decide whether or not the impact of reduced pay might be softened in some way for individuals affected.

Manipulation and co-optation Manipulation is an approach that relies on presenting partial or misleading information to those resisting the change. Co-optation involves identifying key individuals resisting changes and ‘buying them off’ by giving them positions of authority to help implement the changes. Although this may be a quick and relatively inexpensive approach, it will probably result in future problems if the people

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involved realise they have been manipulated. These methods raise ethical and legal problems as well as involving considerable risk of making the situation worse and are not recommended in this case.

CQ4 has maintained a policy of reemploying existing staff in stores it takes over. One can speculate that this has led to loyalty to the company and it would be a pity to jeopardise this with such dubious tactics to overcome resistance.

Explicit and implicit coercion Explicit and implicit coercion involves the use of force, or the threat of force, to enforce the implementation of change. In this case it could be to threaten store managers whose staff do not comply with the initiative. As with the previous method such an approach raises ethical and legal problems and is not recommended. Store managers might be given responsibility for ensuring the smooth operation of EPoS within their stores but the issuing of threats attached to this is unacceptable.

Requirement (c) A number of HR issues need to be considered as a result of the Managing Director's new policy.

Reducing overall headcount painlessly The new EPoS system will do away with the need for staff spending time cashing up, checking inventory and placing orders for the next day’s trading, similarly store managers will be relieved of the need to report weekly to head office on performance. These time savings may be translated into a potential workforce reduction. How this might be achieved easily, quickly and as painlessly as possible is an area for consideration for HR. A new round of recruitment and selection Some staff may decide having considered the nature of planned changes that they are not prepared to work for CQ4 any longer and may find alternative employment. If those posts need to replaced then a new round of recruitment and selection may be needed.

Job content Currently staff spends time daily cashing up, checking stock and placing orders. Store managers report weekly on the performance of certain product lines. It seems that the new system will negate these requirements, and hence job content and possibly job roles will alter.

Organising appropriate training Staff members in some stores are fearful of new technology. Education and training in IT skills and IS will be vital components of successful implementation of EPoS. This might be achieved by facilitating workshops and ongoing support mechanisms such as mentoring, 'buddying' systems and/or local facilitators. In addition potential changes to job roles as a result of the new system may potentially also require training at various levels, particularly for checkout staff.

Developing a training needs analysis It is good practice to undertake a training needs analysis of the workforce and shape the strategy accordingly. Specific skills required for checkout staff in the future will for instance include computer literacy, listening and customer care. These should be compared with the skills currently possessed by these staff. Store managers may need training in project management, facilitation and leadership skills in successfully bringing about the necessary changes. Skill gaps in these areas should be identified and remedied.

Reward systems The Managing Director now wishes to consolidate the company by introducing greater centralisation of control and decision making and standardisation of equipment and procedures. Reward systems represent the ways in which staff are recognised and rewarded for their endeavours. Such systems may need to alter to ensure that they support and encourage CQ4’s initiatives. Typical organisational rewards usually include pay and promotion. Other rewards need not have financial implications and might for instance include greater empowerment and job fulfillment. It is a good idea to communicate these points widely and reward publicly, creating role models of those who achieve smooth implantation and operation of the EPoS system. In this way positive performance standards might be signalled to the whole workforce.

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Target setting and appraisals Major revisions to existing targets will be needed in the light of CQ4’s organisational initiatives and a mechanism for review and target setting will need to be considered. New personal plans, targets and key performance indicators (KPIs) will need to be created for every store manager and then cascaded down through subordinates and work groups so that the whole organisation’s performance is assessed having regards to the initiative. Once overall review mechanisms are established, annual appraisal and monthly target setting might reasonably be employed.

Communication systems The scenario makes clear that CQ4’s Managing Director wants to consolidate operations through greater centralisation and standardisation of equipment and procedures, including the use of EPoS but there is no indication that he has communicated this to staff. This highlights a possible need for more effective communication systems within CQ4 and HR may take the lead in this respect.

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