Business Management Sample Paper 1 Questions and Suggested Solutions

NOTES TO USERS ABOUT SAMPLE PAPERS

Sample papers are published by Accounting Technicians Ireland. They are intended to provide guidance to students and their teachers regarding the style and type of question, and their suggested solutions, in our examinations. They are not intended to provide an exhaustive list of all possible questions that may be asked and both students and teachers alike are reminded to consult our published syllabus (see www.AccountingTechniciansIreland.ie) for a comprehensive list of examinable topics. There are often many possible approaches to the solution of questions in professional examinations. It should not be assumed that the approach adopted in these solutions is the only correct approach, particularly with discursive answers. Alternative answers will be marked on their own merits. This publication is copyright 2015 and may not be reproduced without permission of Accounting Technicians Ireland. © Accounting Technicians Ireland, 2015.

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INSTRUCTIONS TO CANDIDATES

Answer FOUR questions in total. Answer at least ONE question from Section A Answer at least ONE question from Section B Answer at least ONE question from Section C Answer ONE additional question from ANY section (A, B or C). If more than the requisite number of questions are answered, then only the requisite number, in the order filed, will be corrected. Candidates should allocate their time carefully. Answers should be illustrated with examples, where appropriate.

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Section A

(Answer at least ONE of the questions in this section)

Question 1

a) Define Human Resource Management (HRM). (5 marks)

b) Describe any 5 of the 12 components of Operations Management. (20 marks)

Total: 25 Marks

Question 2

Donal is a manager in a small business based in Derry. He has realized that the business will need to make a number of changes within the next six months, but is aware that several of his staff are likely to resist any changes.

a) Outline the 3 things a manager can change

(6 marks) b) Outline what is meant by the term ‘change agent’

(7 marks) c) Describe any 3 techniques for managing the resistance to change

(12 marks )

Total: 25 Marks

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Section B (Answer at least ONE of the questions in this section)

Question 3

a) Outline the FIVE broad functions of management. (5 marks)

b) Discuss the contributions that Mintzberg brought to the development of

management thought. (10 marks)

c) Discuss any 3 of Fayol’s Principles of Effective Management.

(10 marks) Total: 25 Marks

Question 4 “An effective leader is critical to every organization.” a) What does 'organisational leadership' mean?

(5 marks) b) Describe the skills you would consider necessary to be an effective leader.

(10 marks)

c) List the FIVE different types of leadership approach.

(5 Marks)

d) List any FIVE characteristics of a charismatic leader. (5 Marks)

Total: 25 Marks

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Section C (Answer at least ONE of the questions in this section)

Question 5

a) Describe the term Social Responsibility. (5 marks)

b) Outline the variables included in the three (3) content categories found

commonly in various corporate code of ethics. (15 marks)

c) Write a short note on the combined code on corporate governance.

(5 marks) Total: 25 Marks

Question 6

Miriam has been asked to join the Board of a local company. She has never served on a Board before and has asked for your assistance with some questions that she has in relation to the role of a Board.

a) Explain the role of the Board of a company. (10 marks)

b) Explain the term 'Corporate Governance’ and how this affects the Board.

(15 marks) Total: 25 Marks

REMINDER TO STUDENTS – You are required to answer FOUR questions in total. Make sure that you have completed the required number of questions.

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Suggested Solutions

SECTION A Question 1

a) Define Human Resource Management (HRM) 5 marks Candidates should provide a referenced definition of HRM, one of such; Boddy (2008) defines HRM simply as ‘the effective use of human resources in order to enhance organisational performance.’ Dessler (2013) provides a more comprehensive definition, as follows: ‘The policies and practices involved in carrying out the “people” or human resource aspects of a management position, including recruiting, screening, training, rewarding, and appraising’. These are all stated in the core text.

b) Describe 5 of the 12 components of Operations Management 20 marks Candidates should provide a description of 5 of the following 12 components of Operations Management; Location; Product development ; Forecasting; Layout of facilities; Process and system performance; Inventory management; Material requirements planning; Just in time ;Quality; Scheduling ; Purchasing; Maintenance Question 2 “Donal is a manager in a small business based in Derry. He has realized that the business will need to make a number of changes within the next six months, but is aware that several of his staff are likely to resist any changes.” a) Outline the 3 things a manager can change 6 marks

A manager can change three things. (a) Structure. (b) Technology. (c) People. Changing structure includes any alteration in any authority relationships, coordination mechanisms, degree of centralization, job design, or similar organisation structure variables.

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Changing technology encompasses modification in the way work is processed or the methods and equipment used. Changes in people refers to changes in employee attitudes, expectations, perceptions, or behaviors. b)Outline what is meant by the term ‘change agent’ 7 marks People who act as catalysts and assume the responsibility for managing the change process are called change agents. Any manager can be a change agent. A nonmanager can also be a change agent. c) Describe 3 techniques for managing the resistance to change 12 marks

• Education and communication help employees see the logic of the change effort. It assumes that much of the resistance lies in misinformation or poor communication.

• Participation involves bringing those individuals directly affected by the proposed change into the decision-making process. It allows for expression of feelings, increases the quality of the process, and increases employee commitment to the final decision.

• Facilitation and support involve helping employees deal with the fear and anxiety associated with the change effort. It may include employee counseling, therapy, new skills training, or a short paid leave of absence.

• Negotiation involves a bargain: exchanging something of value for an agreement to lessen the resistance to the change effort. This technique may be quite useful when the resistance comes from a powerful source.

• Manipulation and co-optation refers to covert attempts to influence others about the change. It may involve twisting or distorting facts to make the change appear more attractive.

• Coercion involves the use of direct threats or force against the resisters.

SECTION B

Question 3

a) There are five functions of contemporary management and each one is of equal importance:

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(i) Planning – the manager has to plan the tasks for the business and how the business should perform; (ii) Organising – to complete tasks to meet objectives, including people and resources; (iii) Co-ordinating – the many areas and functions within the business towards a common task; (iv) Commanding – by communication of the desired outcomes to employees and to maximise returns from employees; (v) Controlling – ensure that measures are in place to identify whether or not the business is on the right path. b) Henry Mintzberg suggested that, rather than look at the functions of the manager, it is more beneficial toconsider the following broad categories: interpersonal, informational and decisional. He drew together the research-based literature that helps to describe the processes of general management. This research revealed managers to be hostages to interruptions, flitting from subject-to-subject and rarely giving undivided attention to anything. ‘The pressure of the managerial environment does not encourage the development of reflective planners, the classical literature notwithstanding.’ Mintzberg further observed ‘The job breeds adaptive information-manipulators who prefer the live, concrete situation. The manager works in an environment of stimulus-response, and he develops in his work a clear preferencefor live action. ‘Instead of being isolated figureheads analysing and generating carefully thought-out strategy, managers were suddenly exposed as fallible and human’. The corollary of Mintzberg’s conclusions was that, if we don’t understand how managers spend their time and what they do, how can management be improved and the skills of managers appropriately developed? He concluded that management is rarely consistent will the models discussed earlier. Previous management behaviour studies had focused on team and subordinate behaviour or organisational structure instead of the day-to-day reality of managerial behaviour. To describe the work life of a CEO, Mintzberg first identified six characteristics of the job. Mintzberg then identified ten separate roles in managerial work, each role defined as an organised collection of behaviours belonging to an identifiable function or position. He separated these roles into three sub-categories which are summarised under the categories above.

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c) Henry Fayol developed the theory of management - managerial excellence is a technical ability and can be acquired. Fayol developed theories and principles of management which are universally accepted and make him universalistic. He was a pioneer of formal education in management. Fayol’s principles of management meet therequirements of modern management. The following are three of the fourteen principles of management;

According to Fayol, ‘The worker always on the same post, the manager always concerned with the same matters, acquire an ability, sureness and accuracy which increases their output’. Division of work means specialisation. According to this principle, a person is not capable of doing all types of work. Each job and work should be assigned to the specialist of his job. Division of work promotes efficiency because it permits an organisational member to work in a limited area, reducing the scope of his responsibility. Fayol wanted the division of work not only at factory level but at management levels also. Unity of direction Fayol advocates ‘one head and one plan’, which means that group efforts on a particular plan be led and directed by a single person. This enables effective co-ordination of individual efforts and energy. This fulfils the principles of unity of command and brings uniformity in the work of the same nature. In this way, the principle of direction creates dedication to purpose and loyalty. It emphasises the attainment of a common goal under one head. Fair remuneration to employees According to Fayol, wage-rates and methods of payment should be fair, proper and satisfactory, and all parties should agree to it.Logical and appropriate wage-rates and methods of their payment reduces tension and differences between workers and management, creates a harmonious relationship and a pleasing atmosphere of work. Further, Fayol recommended that proper facilities be provided including arrangement of electricity, water and so on. The other principles are authority and responsibility, discipline, unity of command, subordination of individualinterests to general interests, centralisation and decentralisation, scalar chain, order, equity, stability of use ofpersonnel, initiative and spirit spirit of co-operation (esprit de corps).

Question 4

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a) ‘Leadership is the process of motivating other people to act in particular ways in order to achieve specific goals.’ An organisational leader is interpreted as someone who sets direction in an organisation and influences people to follow that direction. How they set that direction and influence people depends on a variety of factors. There are also numerous theories about leadership, or about carrying out the role of leader. Leaders carry out their roles in a wide variety of styles depending on the situation. b) The skills of a leader are referred to as traits. The skills or traits necessary to be a leader are based aroundposition, ability, personality charisma and motivation. The next skill is to be able to identify and establish a position where there is a purpose and need for leadership by demonstrating rather than imposing the path the person wants to follow on others. Leaders tend to rise in informal organisations faster than in pre-determined organisations where managers are formally appointed, so leaders have internal motivation to aspire to the position before appointment. A leader is a person who has the ability and power to influence a group of people towards a specific result. It is not dependent on title or formal authority and therefore the power is generated through followers.Followers are those in organisations who, as a result of a leader’s personal qualities and the demands of the situation, are attracted to the leader and who accept (rather than being forced to accept) the person’s leadership. Leaders have a capacity to care for others, can communicate clearly and are committed to persist to achievethe goal. There are six categories of personal factors associated with leadership: capacity, achievement, responsibility, participation, status and situation. c) The five of leadership approach types are (note: just a list is sufficient):

• Trait approach • The behavioural approach • The Contingency Approach • The charismatic approach • The Situational Leadership Approach

d) (Note: Ten characteristics are listed in the text. Any five of these are

required; for example:)

Five characteristics of a charismatic leader are:

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1. A strong need for power / influence 2. High level of self-confidence 3. They have an ability to innovate to achieve goals 4. Very astute at scanning and ‘reading’ their environment 5. Can be unconventional / behave unconventionally

SECTION C

Question 5

a)Describe the term Social responsibility (5 marks)

• Managers regularly face decisions that have dimensions of social responsibility. Examples include employee relations, philanthropy, pricing, resource conservation, product quality and safety, and doing business in countries that violate human rights.

• There are two opposing views of social responsibility. The classical view is the view that management’s only social responsibility is to maximise profits. The socioeconomic view is the view that management’s social responsibility goes beyond the making of profits to include protecting and improving society’s welfare.

b)Outline the variables included in the three (3) content categories found commonly in various corporate code of ethics. (15 marks) Cluster 1. Be a Dependable Organisational Citizen 1. Comply with safety, health, and security regulations 2. Demonstrate courtesy, respect, honesty, and fairness 3. Illegal drugs and alcohol at work are prohibited. 4. Manage personal finances well. 5. Exhibit good attendance and punctuality. 6. Follow directives of supervisors. 7. Do not use abusive language. 8. Dress in business attire. 9. Firearms at work are prohibited.

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Cluster 2. Do Not Do Anything Unlawful or Improper That Will Harm the Organisation 1. Conduct business in compliance with all laws. 2. Payment for unlawful purposes are prohibited. 3. Bribes are prohibited. 4. Avoid outside activities that impair duties. 5. Maintain confidentiality of records. 6. Comply with all antitrust and trade regulations. 7. Comply with all accounting rules and controls. 8. Do not use company property for personal benefit. 9. Employees are personally accountable for company funds. 10. Do not propagate false or misleading information. 11. Make decisions without regard for personal gain. Cluster 3. Be Good to Customers 1. Convey true claims in product advertisements. 2. Perform assigned duties to the best of your ability. 3. Provide products and services of the highest quality. c) Write a short note on the combined code on corporate governance. (7marks) The Combined Code on Corporate Governance is published by the UK Financial Reporting Council. The report set down standards of corporate governance for companies listed on the Stock Exchanges in the UK and Ireland. Its contents have become the generally accepted statement of best practice for companies in Ireland and Britain. The Combined Code draws to a significant degree on two other reviews published in 2003, the Higgs Report – Review of the Role and Effectiveness of Non-executive directors, and the Smith Report – Audit Committees, Combined Code Guidance. The Combined Code is set out as a series of principles for companies and for institutional shareholders.

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The key principles for companies are presented on (1) directors, (2) remuneration, (3) accountability and audit, (4) relations with shareholders EU perspective April 2014. The European Commission has today [April 2014] announced a package to improve corporate governance for listed companies within the European Union (EU). The proposals aim to encourage long- term shareholder engagement and to improve corporate governance reporting by listed companies. The report set down standards of corporate governance for companies listed on the Stock Exchanges in the UK and Ireland. Its contents have become the generally accepted statement of best practice for companies in Ireland and Britain. The Combined Code draws to a significant degree on two other reviews published in 2003, the Higgs Report – Review of the Role and Effectiveness of Non-executive directors, and the Smith Report – Audit Committees, Combined Code Guidance. The Combined Code is set out as a series of principles for companies and for institutional shareholders. The key principles for companies are presented on (1) directors, (2) remuneration, (3) accountability and audit, (4) relations with shareholders EU perspective April 2014. The European Commission has today [April 2014] announced a package to improve corporate governance for listed companies within the European Union (EU). The proposals aim to encourage long-

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term shareholder engagement and to improve corporate governance reporting by listed companies. Question 6

Miriam has been asked to join the Board of a local company. She has never served on a Board before and has asked for your assistance with some questions that she has in relation to the role of a Board.

(a) Explain the role of the Board of a company. (b) (10 marks)

A single tier board (typical of the shareholder model in Ireland, UK and USA). A majority of directors may be non-executives. Non-executives represent the interests of shareholders. BUT choice of nonexecutives may be influenced by executives. A two-tier structure (typical of the stakeholder model in Germany, France and the Netherlands): – A supervisory board represents a wider range of stakeholders – A management board plans strategy and has operational control – Major strategic decisions have to be approved by both boards Two key issues for boards: • Delegation: strategy can be delegated to management but it is easier to ensure other stakeholders are protected with a supervisory board. • Engagement: The board can engage in the strategic management process but board members may have insufficient expertise. Accepted good practice for boards includes: • Operating ‘independently’ of management – the role of non-executives is crucial; avoid conflicts of interest or the perception of conflicts, e.g. having a personal interest in a company which does business with the company of which he/she is a non-executive director • Being competent to scrutinise the activities of managers • Having time to do their job properly. • Behaving appropriately given society’s expectations for trust, role fluidity, collective responsibility and performance.

b) Explain the term ‘Corporate Governance’ and how this affects the Board. (15 marks)

Corporate governance is concerned with the structures and systems of control by which managers are held accountable to those who have a legitimate stake in an organisation. It is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of the many stakeholders in a company - these include its shareholders, management, customers, suppliers, financiers, government and the community

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