ACCA – FAB2
Part C – Accounting and reporting systems, controls anf compliance
The role of accouting
Control,security and audit
Identifying and preventing fraud
Chapter 8: The roles of accounting
TOPIC LIST
The purposes of accountinginformation
Nature, principles and scope ofaccounting
The regulatory system
Control over transactions
The main financial systems
Computerised accounting and databases
The purposes of accounting information
Accounting is language of business
It is a way of recording, analysing and summarising transactions of a business.
Who Uses Accounting Data
External Users
Internal Users
Human Resources
Taxing
Authorities
Labor Unions
Finance
Management
Customers
Creditors
Employee
Marketing
Regulatory
Agencies
Investors
The purposes of accounting information
Quality of good accounting information
• Relevance
•Comprehensibility
•Reliability
•Completeness
•Objectivity
•Timeliness
•Comparability
Nature, principles and scope of accounting
Financial Accounting and ManagementAccounting
These are both distinct
from financial
management, which deals
with raising finance and
controlling financial
resources (such as
borrowings, dividends,
capital expenditure, credit
policies).
Nature, principles and scope of accounting
Financial Accounting and Management Accounting
Externalreports
•Thestatement of profit and loss:income
generated and expenditure incurred over a
givenperiod.
Internalreports
•Costschedules:
enable managersto keep a check
on what the business is spending.
•Thestatement of financial position: all the
assets owned by abusiness and allthe
liabilities owed by a business at a particular
date.
•Budgets: projected sales, the
costs involved in generating
those sales, overheads and
projectedprofits.
•The statement of cash flows: sources of
cash generated during a period and how
these funds have beenspent.
•Variance reports: differencesbetween
cost schedules andbudgets
Nature, principles and scope of accounting
Sections in accounts department
The regulatory system
Control over transactions
The main financial systems
Computerised accounting and databases
Suit is a set of several modules
Computerised accounting and databases
Computerised accounting and databases
CHAPTER 9: Control, security, and audit
1. INTERNAL CONTROL SYSTEM
Counter risk
Internal control system
Comply Law & Regulation
managed by manager
Maintain quality of reporting
to achieve objectives and goals
1. INTERNAL CONTROL SYSTEM
• Facilitate its effective and efficient operation by enabling it to respond
appropriately to significant business, operational, financial, compliance and
other risks to achieving the company’s objectives, including the safeguarding of
assets from inappropriate use or from loss and fraud and ensuring that liabilities
are identified and managed
• Ensure the quality of internal and external reporting, requiring the
maintenance of proper records and processes that generate a flow of timely,
relevant and reliable information from within the organisation and from
external sources
• Ensure compliance with applicable laws and regulations, and also with
internal policies with respect to the conduct of business.
1. INTERNAL CONTROL FRAMEWORK
• Control environment is the overall attitude,
awareness and actions of directors and management
regarding internal controls and their importance in the
entity; encompasses the management style, and
corporate culture and values shared by all employees.
• Control procedures are those policies and
procedures which are established to achieve the
entity's specific objectives.
Classification of control procedures
Classification of control procedures
'
Classification of control procedures
Control procedures are those policies and procedures in addition to the control environment which are
established to achieve the entity's specific objectives.
Types of financial control procedure
SPAMSOAP
• Segregation of duties. For example, the chairman/Chief Executive roles
should be split.
• Physical. These are measures to secure the custody of assets, eg only
authorised personnel are allowed to move funds on to the money market.
• Authorisation and approval. All transactions should require authorisation or
approval by an appropriate responsible person; limits for the authorisations
should be specified, eg a remuneration committee is staffed by non-executive
directors (NEDs) to decide directors' pay.
• Management. Management should provide control through analysis and review
of accounts, eg variance analysis, provision of internal audit services.
Types of financial control procedure
SPAMSOAP
• Supervision. Supervision of the recording and operations of day-to-day
transactions ensures that all individuals are aware that their work will be checked,
reducing the risk of falsification or errors, eg budgets, managers' review, exception
or variance reports.
• Organisation. By identifying reporting lines, levels of authority and responsibility,
this ensures everyone is aware of their control (and other) responsibilities,
especially in ensuring adherence to management policies, eg avoid staff reporting to
more than one manager. Procedures manuals will be helpful here.
• Arithmetical and accounting. The correct and accurate recording and processing
of transactions eg reconciliations and trial balances should be checked.
• Personnel. Attention should be given to selection, training and qualifications of
personnel, as well as personal qualities; the quality of any system is dependent on
the competence and integrity of those who carry out control operations, eg use only
qualified staff as internal auditors.
Internal checks
Internal controls # internal checks
Internal checks are defined as the checks on the day-to-day
transactions whereby the work of one person
is proved
independently or is complementary to the work of another, the
object being the prevention or early detection of errors and fraud.
It includes matters such as the delegation and allocation of
authority and the division of work, the method of recording
transactions and the use of independently ascertained totals,
against which a large number of individual items can be proved.
Characteristics of a good internal control system
2. INTERNAL AUDIT
• Definition: An independent appraisal activity established
within an organisation. It is a control which functions by
examining and evaluating the adequacy and effectiveness
of other controls. The investigative techniques developed
are applied to the analysis of the effectiveness of all parts
of an entity's operations and management.
• The work of internal audit is distinct from the
external audit.
2. INTERNAL AUDIT
The role of internal audit
• Review of internal control systems
• Risk management
• Legal compliance
• Add value to their organisation.
2. INTERNAL AUDIT
Objectives of internal audit
Monitor all aspects (not just accounting) of the business, and the work of the
internal auditor is still prescribed by management
• Review of the accounting and internal control systems.
• Examination of financial and operatinginformation.
• Review of the economy, efficiency and effectiveness of operations
• Review of compliance with laws, regulations and other external
requirements and with internal policies and directives and other
requirements including appropriate authorisation of transactions.
3. INTERNAL AUDIT
Objectives of internal audit
• Review of the safeguarding of assets
• Review of the implementation of corporate objectives. This includes review
of the effectiveness of planning, the relevance of standards and policies, the
company's corporate governance procedures and the operation of specific
procedures.
• Identification of significant business and financial risks, monitoring the
overall risk management policy to ensure it operates effectively, and
monitoring the risk management strategies to ensure they continue to
operate effectively
• Special investigations into particular areas, for example suspected fraud.
2. INTERNAL AUDIT
The features of internal audit
Independence: Although an internal audit department is part of
an organisation, it should be independent of the line management
whose sphere of authority it may audit.
Appraisal: Internal audit is concerned with the appraisal of work
done by other people in the organisation, and internal auditors
should not carry out any of that work themselves. The appraisal of
operations provides a service to management.
2. INTERNAL AUDIT
Types of audit
Internal audit is a management control, to ensure that other internal control
are working satisfactorily
Operational audit
Social audit
Systems audit
Management investigations
Transactions audit
2. INTERNAL AUDIT
Operational audits
Concerned with any sphere of activities
Monitoring of management’s performance at every level
Concentrate on the outputs of the system
Known as ‘management’, ‘efficiency’, ‘value for money’
audits
2. INTERNAL AUDIT
System audits
Based on a testing and evaluation of the internal controls
within an organisation
- Compliance tests
- Substantive tests
3. EXTERNAL AUDIT
Internal auditors are
employees, to add
value and report to
the audit committee.
External auditors
are from accountancy
firms and their role is
to report on the
financial statements
to shareholders.
External audit: primary purpose
is to review the books and
records to give a professional
opinion on the financial
statements.
3. EXTERNAL AUDIT
3. EXTERNAL AUDIT –
Assessment by external auditors
Organizational status External auditors should consider any constraints or
restrictions placed on internal audit.
Scope of function: External auditors should also consider whether management
and the directors act on internal audit recommendations and how this is
evidenced.
Technical competence External auditors may review the policies for hiring and
training the internal audit staff and their experience and professional qualifications
and also how work is assigned, delegated and reviewed
Due professional care The existence of adequate audit manuals, work
programmes and working papers may be considered, as well as consultation
procedures.
Control into an information system
 Security controls – to mitigate the risks to data
 Intergrity controls – input controls. Processing control and output controls
 Contingency controls – an unscheduled interruption of computing services
that requires measured outside the day to day routine opreating procedures
Audit trail: shows who has accessed a system and the operations performed
CHAPTER 10: IDENTIFYING & PREVENTING FRAUD
1. Fraud
1. Fraud: deprive deceit
1. Fraud - Types of fraud
Removal of funds or assets from abusiness
Theft of cash
Theft of inventory
Payroll fraud
(a)Claiming overtime they did not really work.
(b) The payroll department may miscalculate selected payslips or inflated
rate/hours
(c)A fictitious member of staff can be added to the payroll list.
1. Fraud - Types of fraud
Removal of funds or assets from abusiness
Teeming and lading: in the sales ledger area. Teeming and lading is the theft of cash or
chequereceipts.
Fictitious customers: method of stealing inventory. Bogus orders are set up, and goods are
despatched on credit. The 'customer' then fails to pay for the goods and the cost is eventually
writtenoff asabaddebt
Collusion with customers: by manipulating prices or the quality or quantity of goods
despatched.
Bogus supply of goods or services: involves senior staff who falsely invoice the firm for
goods or servicesthat were never supplied
Paying for goods not received: Staff may collude with suppliers, who issue invoices for
largerquantitiesof goods thanwereactuallydelivered.
Meeting performance measures: targets can disguise frauds.
1. Fraud - Types of fraud
Manipulation of bank reconciliations and cash books: incorrect descriptions
of items and use of compensating debits and credits to make a reconciliation
work frequently ensure that fraudulent activities goundetected.
Misuse of pension funds or other assets: company assets may be
transferred to the fund at significant overvaluations.
Disposal of assets to employees: It may be possible for an employee to
arrange to buy a company asset (eg a car) for personal use. This could be
achieved by overdepreciating the relevant asset.
1. Fraud - Types of fraud
Intentional misrepresentation of the financial position of the business
Overvaluation of inventory:
- Inventory may be manipulated
-Deliveries to customers may be omitted from the books.
-Returns to suppliers may not be recorded.
-Obsolete inventory not be written off but held on the statement of
financial position.
-Irrecoverable debt policy may not be enforced: Aged receivables
who are obviously not going to pay should be written off.
Fictitious sales
Manipulation of year –end events
Understating expenses
Manipulation of depreication figures
1. Potential Fraud
2. Fraud - Prerequisites:
(1) Dishonesty
Dishonesty as an individual's tendency to act in ways which contravene
accepted ethical, social, organisational and legal norms for fair and honest
dealing. This tendency may arise from:
(a)Personality factors: a high need for achievement, status or security; a
competitive desire to gain advantage over others; low respect for authority.
(b)Cultural factors: national or familial values, which may be more 'flexible'
or anti-authority than the law and practice prevailing in the organisation.
(Cultural values about the ethics of business “bribes’ vary widely. 'Lying' is also
a very fluid concept: some cultures value 'saving face’ over giving strictly
truthful responses.)
2. Fraud - Prerequisites:
Motivation
(a)Financial needs or wants, or envy of others (in the case of theft
or fraud for monetary gain).
(b)A desire to exercise negative power over those inauthority
(c)A desire to avoid punishment (in thecase of cover ups, say)
Opportunity
An individual will have a high incentive to commit fraud if they are
predisposed to dishonesty and the rewards for the particular fraud
are high and there is an opportunity to commit fraudulent action
with little chance of detection or with insignificant sanctions if
caught.
2. Factors of fraud
External factors
Technological developments
New legislation or regulations
Economic or political changes
Increased competition
Changing customer needs
Internal factors
Changed operating environment
Rapid growth
New personnel
New technology
New or upgrated management information
systems
New products
New overseas operations
Coporate restructuring
3. Potential for fraud
predisposed
Business risks
 Profit deviating significantly from the industry norm
(i)The company suddenly starts to exhibit profits far above those
achieved by other firms in the same industry.
(ii) Turnover rises rapidly but costs do not rise in line.
(iii) Demand for a particular product increases significantly.
(iv) Investors seem to find the firm unusually attractive.
 Market option
 Complex structures
Personnel risks
Secretive behaviour
Expensive lifestyles
Long hours or untaken holidays
Autocratic management style
Lack of segregation of duties
Low staff morale
Computer fraud
Computer hackers.
Lack of training within the management team.
Identifying the risks.
Need for ease of access and flexible systems.
4. Systems for detecting and preventing fraud
Reasons for poor controls
a lack of
emphasis on
compliance/ a
lack of
understanding
Staff
problems:
understaffing
and poor quality
or poorly
motivated staff
Changes in
senior
personnel can
lead to a lack of
supervision.
Emphasis on
the autonomy
of operational
management
may lead to
controls being
by passed.
Systems for detecting and preventing fraud
General prevention policies
(a)Emphasising ethics can decrease the chances of fraud
(b)Personnel controls are a very important means of preventing fraud.
Thorough interviewing and recruitment procedures can be an effective
screening for dishonest employees.
(c)Training and raising awareness: Fraud awareness education should be
an integral part of the training programme, in high risk areas such as
procurement, and staff with key roles in fraud prevention and detection
5. Responsibility for detecting and preventing fraud
5. Responsibility for detecting and
preventing fraud
5. Money Laundering
PART D
Leading and managing individuals and team
Chapter 11
Leading and managing people
■ Topic list
-
The purpose and process of management
-
Management and Supervision
-
Leadearship
-
Leadership skills and styles
Purpose and Process of Management
■ Management “getting things done through other people ”
 Set objectives
 Monitor process and results
 Communicate corporate values
 Look after stakeholders
Key roles
 Work planning
 Resource allocation
 Prioritising
 Projects and project management
Allocation of power within an
organization
■ Authority – the right to do somethings
■ Accountability – accountability for actions
■ Responsibility – obligation to perform
■ Delegation – give subordinate authority
■ Power – the ability to do somethings
Authority and power
Authority is the right to do sth, power is the ability to do sth
Three ways people acquire legistimate power (authority)
(a) Charismatic authority
(b) Traditional authority
(c) Rational legal authority
Power and influence
Power
Detail
Physical power
The power of superior force
Resource power
The control over resources which are valued by the individual
or group
Coercive power
The power based on fear of punishment
Reward power
Related to resource power
Position power/ legitimate power
Associated with a particular job in an organization
Expert power
Based on expertise
Referent power
Lies in the personal qualities of the individual
Negative power
The use of disruptive attitudes and behavior to stop things
from happening
Project management
■ A project:
 have start and end points
 Quality objectives, cost, time schedule
 Cross organizational and functional boundaries

Project management
 To foresee as many contingencies as possible to plan, organization, co-ordinate and
control activites
Role of project management
Management Tasks
Comment
Outline project planning
strategy, procedures, targets
Detailed planning
identifying tasks, resources requirements; network analysis for
scheduling
Teambuilding
establishing project identity – multi-functional (or multiorganisational) if required
Communication
briefing team members, feeding, back on progress, reporting,
leading meetings
Co-ordinating project activities integrating schedules and work flows
Monitoring and control
identifying and correcting departures from plan
Problems resolution
interpersonal, task, contingency
Quality control
juggling time/cost and quality targets
Writers on management
Henri Fayol – Classical management
■ 5 functions of management
 Planning
 Organising
 Commanding
 Co-ordinating
 Controlling.
■ 2 key “omissions”
o Motivating
o communicating
Set of “Golden
rules”
Frederick Taylor: Scientific management
■ Based on “well-recognized, clearly defined and fixed priciples”
■ FT techniques:
 Work study techniques used to determine efficient methods and standard times
 Planning and doing were separated
 Jobs broken down into single specialised operations
 Workers trained and offered monetary incentives to accept new methods and output
norms
■ Potential benefits arising from Taylorism
 Increases in productivity,
 Fair and higher wage allocation based on output
 Workforce care programs because if you didn’t care for your work force, you have to
waste money through additional recruitment, training, and inefficiencies.
On the downside it had a great capacity for dehumanising work.
Elton Mayo: Human relations
■ People are motivated by 'belonging' needs which are satisfied by social relationships
at work
■ Group dynamics and other human factors have a key influence on work performance
■ Later (neo-human relations) writers (Maslow, Herzberg, McGregor) suggested that
people are motivated by 'higher' psychological needs for growth, responsibility,
challenge and fulfilment
 Investigation od the dynamics of work groups
Peter Drucker – The management process
■ The prime function of a business manager is economic performance
■ Management tasks
•
Manage a business
•
Manage other managers
•
Manage the workers and the work
■ Management processes
•
Setting objectives,
•
Organising the work,
•
Motivating and communicating,
•
Measuring performance, and
•
Developing people
Important !
All 5 functions need in
manager performs :
well or badly
Henry Mintzberg: Manager’s role
■ Managers are not reflective, systematic planners: managerial work, in practice, is
disjointed and discontinuous, and involves verbal/informal communication, intuition
and judgement.
Interpersonal roles
Information
processing
roles.
Decisional roles
Arising from formal authority and
status and supporting the
information and decision activities
๏ Figurehead
๏ Liaison
๏ Leader
For example, they monitor
information maybe by looking at
management accounts and they
distribute information
๏ Monitor
๏ Disseminator
๏ Spokesman
Making significant decisions,
perhaps about how resources
should be allocated, negotiating
with suppliers or lead members of
staff, and dealing with disputes; in
other words, the disturbance
handling role
๏ Improver/changer
๏ Disturbance
handler
๏ Resource
allocator
๏ Negotiator
Management and supervision
Strategic decision making
Tactical decision making
Operational decision making
Top
management
Middle
management
The SUPERVISION
workers
1
Manager
Planning
Organising
Commanding
Co-ordinating
Controlling
2
at
lowest
level
Doer
of own operational
work tasks
Interface
Gatekeeper
between managerial
Filter of information
and non managerial
downwards (briefings)
and upwards (reports)
staff
Leadership
■ 'The activity of influencing people to strive willingly for group objectives’
■ Leadership skills are in demand because of the increasing need for committed
performance, enabling flexibility, innovation, responsiveness and competitive advantage
Management
Leadership
Can be exercised over task, time, projects,
resources
Can only be exercised over people
Is an organizational process
Is an interpersonal process
Is based on authority
Is based on power/influence
Depends in legitimacy
Depends on followership: conferred from
below
Secures compliance/ standard level of
performance
Secures commitment/extra level of
performance
Involves structure, analysis, control activities:
planned inputs -> predicted ouputs
Involves influencing, persuading, enthusing:
creating/communicating vision for change
Leadership skills and styles
■ Trait or qualities theories ('leaders are born, not made') have been discredited.
■ Style theories describe the various preferences or behavioural styles of managers.
■ Contingency theory sees effective leadership as being dependent on circumstances
■ The Ashridge model
Tells
Sells
Consults
Joins
Autocratic
Persuasive
Consulative
Democratic
 It is important to be realistic about the value of style (or any) theory.
 Managers may not be flexible enough to adopt new styles
 Employees dislike apparent inconsistency
 No one style is 'best'
Blake and Mouton’s managerial grid
■ Concern for people and concern for production
The managerial grid
1.9 Country club
9.9 Team
5.5. Middle road
1.1. impoverished
9.1 task
1.1 Impoverished management
1.9 'Country club' management
9.1 Task management
9.9 Team management
5.5 Middle of the road (or
dampened pendulum)
Questionnaires are used to plot
a manager's 'position' for selfinsight and development
purposes
F E Fiedler
– psychologically closed & psychological distant’s style
■
Psychologically distant manager PDMs : maintain distance from their subordinates
- formal
- reserved
- task-focused
■
Psychologically closed managers PCMs : closer to subordinates
- informal
- relationship focused
■
The work situation
- leader/group situation
- task structure/definition
- power of the leaders
 The situation is favorable when:
Leader is liked/trusted and has high power and
Task is clearly defined
Highly favourable/unfavourable situation:distant style works best
Moderately favourable situation:close style works best.
John Adair : action-centred leadership
■ John Adair's situational leadership model (action-centered leadership) is less
concerned with leadership style than leadership functions . These must be seen in a
context of task, group and individual needs.The total situation dictates the relative
priority to be given to each of these needs.
Tasks roles:
Initiating
Information – seeking
Diagnosing
Opinion- seeking
Evaluating
Decision- making
Task
needs
Individual
needs
Individual roles:
Goal – setting
Feedback
Recognition
Counselling
Tranning
Group needs
Group needs:
Encouraging
Peace keeping
Clarifying
Standard-seeking
Bennis:
the distinction between management and leadership
Innovates and inspires trust
Administers and maintains
System control
Manager
Short term view
Focus on
people
Leader
Long term view
Does the right things
The management of attention
The management of meaning
The management of trust
The management of self
Does things right
■ Heifetz – 'dispersed' leadership
equates to a 'leadership influence‘ Social realtion
Acceptace
circumstances
 Leaders can 'emerge' from the prevailing organisational culture
Chapter 12
Recruitment and selection
■ Topic list
1. Recruitment and selection
2. The recruitment process
3. Selection methods in outline
4. Selection testing
5. Evaluating recruitment and selection practices
Recruitment and Selection
■ Recruitment: is the part of the process concerned with finding
applicants
■ Selection: is the part of the employee resourcing process with involves
choosing between applicants for jobs
■ 3 main stages
- Defining requirements
- Attracting applicants
- Selecting
■ Employees represent a scarce and crucial resource which must be
obtained, retained, developed and mobilised for organisational
success.
Who is responsibility for recruitment?
are responsible for
human resource
planning at the
strategic level:they
identify staffing needs
in relation to
objectives
• Senior
managers
may have centralised
authority for
recruitment.It will
develop policies,
ensure compliance
and administer
procedures
• HR department
Recruitment consultants:
 Specialist skills, knowledge
 Wide-ranging contacts
 Objective (outside) viewpoint (to avoid 'cloning')
 Anonymity of recruiter (avoid competitor interest
are increasingly
involved in defining
vacancies, liaising
with HR specialists,
interviewing
candidates and
making selection
decisions
• Line manager
o Time to get to know organisation and
requirements ‘
o Outsider' decision-making may be
resented
o Inhibits internal recruitment
o Cost
The recruitment process
■ Recruitment is a systematic process of
identifying and defining skill needs and
attracting suitably skilled candidates
■ Job Analysis: This determines the
requirements for a job, which are then set out
in a job description.Job analysis concentrates
on what job holders are expected to do.
Information needed:
Different sorts of
 Purpose of the job
competences:
 Content of the job
- Behavioural/personal
 Accountabilities
- Work-based/accupational
competences
 Performance criteria
 Responsibility
 Organisational factors – reporting lines
 Developmental factors – promotion paths
 Environmental factors – working conditions
■ Job description: is a written statement of facts which are important in a job
regarding tasks, responsibilities, conditions and organisational/ operational
relationships.
In recruitment, to formulate requirements
and to match jobs to candidates'
capacities
In job evaluation, to establish wage rates
In appraisal, training and development to
identify competence gaps or potential
In organisation design and change
management, to appraise job design and
HR needs
They only suit predictable, repetitive work
They go out of date as jobs change
They can be taken too literally/rigidly
Flexible working redefines 'jobs' as 'roles'
Contents
Purposes
Job title
Reporting relationships
Job summary
Key accountabilities/tasks
Principal operational contacts
Unusual working conditions
Employment terms and conditions
Date job description prepared
Personal Specification
■ A person specification sets out the education, qualifications, training, experience,
personal attributes and competence a job holder requires to perform the job
satisfactorily.
circumstances
■ Rodger’s 7-points plan Framework
Physical attributes
Attainments (including qualifications)
General intelligence
Special aptitudes
Interests
Disposition (manner, temperament)
Background circumstances
Advertising vacancies
■ An effective job advertisement:
Includes job, person and organisation factors
Is concise, but gives sufficient information to attract interest and allow self-selection
Is designed to attract suitable candidates
Is honest about the job and organisation, to manage expectations
Advertising media
 In-house noticeboard, journal,
Clearly states the requirements (and rewards) of the vacancy
intranet
 Professional/specialist
Specifies how, when and to whom to apply
journals/newspapers
 Newspapers:national, local,
Is presented in line with corporate style
free
Is formatted for, and transmitted by, appropriate advertising media
Radio/TV/cinema:national,
local
 Job centres and other registers
 Careers offices:school,
universities
 The internet:registers, own
website
A systematic approach to selection
■ Shortlisting-> interviewing-> decision making -> follow-up
■ A systematic approach may be outlined:
Selection methods and testing
Methods
Examples
interviewing
Individual
Interview panel
Selection boards
Selection tests
iQ
Aptitude
Personality
Proficiency
medical
Reference checking
Job references
Character references
Work sampling
Portfolios
Trail periods or exercises
Group selection methods
Assessments center
■ Interviews are the most commonly used selection method – although they are
notoriously unreliable for predicting job performance!
Interviews
■ Purposes of interviews
 Finding the best person for the job: direct assessment of the candidate
 Giving candidates the information they require to make a decision
 Giving a positive impression of the organisation
 Ensuring that all applicants are (and feel they have been) treated fairly (as required
by law
■ Limitation of interviews
They are limited in length/scope
They are artificial situations, which distort candidates' 'normal' behaviour
They are limited in relevance:not able to assess the full range of required attributes
Interviewers often make errors of perception and judgement:bias, stereotyping etc
Interviewers are often insufficiently trained and/or prepared to direct discussion
effectively, probe for answers and so on.
Interviewers often fail to give sufficient, honest or relevant information to the
candidate
■ Effective interviewing
Use consistent, specific, relevant criteria, as set out in the job
description, personnel specification
Effective techniques
Minimise stressful dynamics
Directly monitor job-relevant communication, interpersonal and  Using appropriate
questioning styles
problem-solving skills
 Pacing and controlling
Bias should be controlled by interviewer awareness training and
discussion
(where possible) checking with other interviewers (panels,
 Building (and standing
boards)
back from)
Train interviewers in effective techniques
rapport/empathy
Allocate sufficient time and resources
 Active listening to
surface and subtext
Give candidates opportunity to seek information
 Avoiding direct and
Evaluate process in the light of successful candidates'
indirect discrimination
performance
Open:Who? What? How? Why?
Closed: Did you ...? (Answer:yes or no)
Probing: But what in particular ...?
Multiple: How ...and why ...?
Problem solving: How would you ...?
Leading: Don't you ...? Surely you ...?
■ Selection test can be used before or after interviews
Types
Designed to measure
Proficiency
Ability to perform specific tasks (eg typing)
Aptitude
Potential to exercise or learn skills (eg numeracy)
Intelligence
IQ, usually:mental agility, verbal reasoning
Case studies
Role plays
'In-tray' exercises
Ability to perform in simulated job tasks and situations
■ Limitation of testing: It is very difficult to exclude cultural and even gender bias from
tests
 Not all jobs are amenable to proficiency testing: eg management
 Tests are subject to practice/coaching effects: style (or content) of questions
becomes familiar
 Intelligence is difficult to define: IQ must be supplemented by EI (emotional
intelligence), creativity etc
 Personality test results are subject to 'faking':the desirable answer is often obvious
 Suffer from time/ability constraints
 All tests require expert administration and result interpretation
Other seclection methods
Group
selection
methods
•Group role play exercises
•Case study
•Expensive
Reference
checking
•Providing further information
about candidate
•Written references
•Telephone references
Evaluating recruitment and selection practices
■ Recruitment and selection can be evaluated by:




Examples
 Number of candidates attracted by
Using attitude survey and feedback questionnaires
different media
To assess candidates' experience and perceptions  Number of suitable (shortlisted)
candidates attracted
of the organisation
 Number of women/ethnic minorities
Monitoring the job performance and development
applying
of recruits
 Number of women/ethnic minorities
selected
To assess accuracy of predictions made during
 Cost per short-listed or successful
recruitment/selection
candidate
Monitoring the composition of – and change in –
 Cost-effectiveness of each medium used
the workforce
 Average time taken to process each
application
To assess the effectiveness of equal opportunity
 Post-selection performance of candidates
measures, the turnover of recruits and so on.
 Proportion of recruits still employed two
Monitoring specific performance indicators
years later
Chapter 13
Diversity and equal opportunities
■ Topic list
1. Discrimination at work
2. Equal opportunities
3. The practical implications
4. Diversity
Discrimination at work
■ Social, demographic and policy changes have steadily increased the diversity of the
labor pool (more working women; older workforce).
■ The law protects the rights of various previously disadvantaged groups to equal
opportunity; managing workforce diversity is a key issue for HR policy and practice,
and management in general
Discrimination at work
■ Equal opportunities : An approach to the management of people at work, based on
equal access and fair treatment – irrespective of gender, race, ethnicity, age,
disability, sexual orientation or religion.
■ Discrimination on basis of gender, race or disability are enshrined in law. Others (eg
age) rely upon models of 'good practice'.
■ Business arguments in favour of equal opportunities
– Ethical and fair
– Wider pool of labour
– Compliance with legislation
– Good HR practice
– Image and reputation
■ Where can discrimination occur?
– Access to jobs
– Training
– Promotion
– Pay
– Benefits
=> Need to redress inequalities
Equal opportunities
■ Some countries have regulations which state that: men and women have the right to
equal pay for work of equal value.
■
Example Discrimination Act
Example of a Sex Discrimination Act
• Prohibits discrimination on grounds of
sex/marital status
• Advertisements
• Recruitment and selection
• Access to training
• Promotion
• Disciplinary procedures
• Selection for redundancy
• Dismissal
Example of a Race Relations Act
• Outlaws certain types of discrimination
on grounds of colour, race or
nationality.
• Larger public organisations (150+
employees) must have detailed plans
for achieving racial equality
Equal opportunities
 Direct discrimination occurs when one interested group is treated less favourably
than another.
 Indirect discrimination occurs when certain requirements or conditions are imposed,
with which a substantial proportion of the interested group could not comply.
 Victimization occurs when a person is penalised for giving information or taking
action in pursuit of a claim of discrimination.
 Harassment is the use of threatening, intimidatory, offensive or abusive language or
behaviour.)
 Under both sex and race discrimination law, there may be certain exemptions
('genuine occupational qualifications') in which discrimination of a sort may be
permitted, eg physiology, decency or legal restrictions
■ Disability: is defined as physical or mental impairment that has a substantial/long
term adverse effect on ability to carry out normal activities.
■ Converting assess to:
– Employment opportunities
– Interview
– Selection
– Training
– Promotion
– Dismissal
■ Age: Some countries have Age Regulations which prohibit unjustified age
discrimination in employment and vocational training ; support later retirement and
retirement planning; remove upper age limits for unfair dismissal and redundancy
rights.
The practical implication
■ Implementing equal opportunity policy
– Secure support from the top
management: create senior
accountabilities
– Set up a representative working party
to produce a draft Code of Practice
– Formulate action plans and allocate
resources to publicise/implement
policy
– Implement monitoring and review of
minority staff
entering/progressing/leaving
– Plan and implement positive action
initiatives to facilitate minority access
to opportunities
Examples
Use ethnic languages in job ads
Offer family-friendly working
hours/contracts: term-time hours, part-time
working etc
Alter premises/equipment to accommodate
wheelchair users, partially-sighted/deaf
workers
Extend 'spouse' benefits to same-sex
partners
Fast-track school leavers and post
managerial vacancies internally -> more
opportunities at lower levels
Awareness training for management
Workplace childcare or childcare
allowances
Encourage networking of minority business
people
Diversity
■ The concept of diversity recognises that 'equal
opportunity' categories (gender, race, age) are only
crude, irrelevant classifications.
Managing co-operative working in
diverse teams
■ Effective managers seek to recognise more jobrelevant, complex ways in which people differ:
personality, working style, needs and expectations.
Tolerance of individual differences
■ Managers need to facilitate the unique contribution
that each person – not each 'category' of person –
brings to the team.
■ Support for:
– Communication
– Education/training
– Career development
– Recruitment/selection
– Work/life balance to reflect diversity.
Communicating effectively with an
ethnically diverse workforce
Managing workers with diverse family
structures and responsibilities
Managing the adjustments to be
made by an ageing workforce
Managing diverse career paths and
aspirations
Confronting educational/qualification
issues in an international workforce
Diversity
Key steps in implementing a diversity policy
Introduce
diversity
into
corporate
strategy
Analyse the
business
environment
Identify
the
business
benefits
of
diversity
Communicate
communicate,
communicate!
Ensure top
management
support
Include
it in core
HR
systems
Involve
staff at
all levels
Evaluate
Understand
the company's
needs and
resources
Chapter 14:
Individuals, Groups and teams
Topic list:
•Individuals
•Groups
•Teams
•Team member roles
•Team development
•Building team
•Successful teams
Individuals
Personality:
is the total pattern of
characteristic ways
of thinking, feeling
and behaving that
constitute an
individual's
distinctive method of
relating to the
environment.
 Recruit and select carefully.
Manage conflict.
Contingency approach to
HRM
Key managerial issues
Compatibility?
Different personality
types may suit
different work
Different personality
types may suit
particular structures,
systems and
cultures of work
Different personality
types may have
different orientations
to/needs from work
Different personality
types may 'clash'
Perception:
is the psychological
process by which stimuli
(in-coming sensory data)
are selected and
organised into patterns
which are meaningful to
the individual.
Key material issues
Misunderstanding?
People see thing
differently: there is the
potential for
misunderstanding, which
can lead to conflict
People can confuse the
'map' for the 'territory':
perceptions can be
entrenched, even though
they are only viewpoints
 Practice and facilitate 'seeing
the other side'. Define terms
and problems collaboratively.
Recognize 'grey areas'
Common clashes of
perception include: 'us
and them'
(management/staff) and
unintended racial/sexual
harassment
Individuals
Attitude
is a mental state
exerting a directive or
dynamic influence
upon the individual's
response to all objects
and situations with
which it is related.
 Control conflict : reinforce cooperation.
 Discipline
unhelpful/unlawful attitudes.
 Reinforce (reward, recognise)
positive attitudes
Key managerial
issues
Attitudes to work may
be positive or negative
Attitudes to workrelated issues
(management, coworkers, conditions
etc) may affect cooperation, motivation,
commitment and so
on
Attitudes are brought
to work: these may be
helpful (or unhelpful)
eg in regard to
politics, race, gender
Roles:
are the part people act
out in different context
according to the tasks
and relationships
required by those
contexts. The people
who relate to a person
in a particular role are
called a 'role set'.
Key material
issues
 Facilitate work/life boundaries.
 Clarify role expectations and
relationships.
 Identify positive role models
Managers (and others)
need to behave
appropriately for their
role set, giving
appropriate role signs
Managers need to make
roles (responsibilities,
norms of behaviour) clear
to avoid role
ambiguity/stress
Conflicting demands (role
incompatibility/conflict)
should be avoided
Groups and teams
Team member roles
Belbin: Team roles
1.
Co-ordinator : presides over team activity. (Balanced, disciplined, good at working through others.)
2.
Shaper: spurs the teamspurs
on the
toteam
action.
(Dominant, Extrovert, passionate about the task.)
on to action.
3.
Plant : provides the team with ideas, proposals.(Introverted but creatively intelligent.)
4.
Monitor-evaluator : dissects and criticises ideas : spots potential problems.(Analytically intelligent.)
5.
Resource-investigator : accesses new contacts and resources.(Extrovert networker; not an
originator.)
6.
Implementer : translates ideas into practice, plans.(Not a leader, but an essential organiser.)
7.
Team-worker: holds the team together, supports members.(Empathetic, diplomatic.)
8.
Completer-finisher : chivvies the team to attend to details/deadlines/follow-up.
■
Belbin added a ninth role: the functional specialist (where required). Roles need to be balanced
and (ideally) evenly distributed for an effective team.
Team development
Tuckman’s
stages of
group
development
Forming: The group is coming together.Individuals try to find out about each other and
the aims and norms of the group.
Storming: Aims, procedures and roles (including leadership) begin to be hammered out
through more or less open conflict
Norming: The group begins to settle down, reaching agreements on work-sharing, roles
and norms . Group decision-making begins.
Performing: The group is ready to set to work on its task: the process of formation no
longer absorbs attention. The focus shifts to results
Later, added
2 stages
Dorming : A long-standing, steadily-performing group may get cosy and complacent,
and lose its focus on the task (added to Tuckman's model).
Mourning/adjourning: the group sees itself as having fulfilled its purpose
Building a team
Team building -> cohension (sticking together)
BUT
Team identity
Dangers of ultra-cohesive teams
Desire for consensus squashes divergent
views → complacent, risky decision making
Shared responsibility → risky decisionmaking
Team solidarity
Energy focused on group at expense of task
Hostility to outsiders → disintegration
Limit group think (Janies) by
Shared Objectives  Actively
seeking outside ideas
 Welcoming self-criticism within group
 Consciously evaluating conflicting
evidence and options
Successful teams
Measures
Effective job performance:
meeting task objectives,
standards, targets
Quantitative: standards, targets
Qualitative: external/internal customer satisfaction
Team member satisfaction with
relationships, process and
performance
Quantitative: turnover, absenteeism
Qualitative: communication, expressed attitudes
Effective and efficient team
functioning: co-operation,
balanced roles, consensus etc
Quantitative:discipline/grievance incidents
Qualitative:interest in decisions, motivation in leader's
absence
Effective and efficient task
functioning: ideas generation,
problem-solving, steady work
flow etc
Quantitative:output/productivity, workflow, accidents
Fulfilment of the team's role in
the organisation: reflecting
values, commitment to goals,
projecting image etc
Qualitative:ideas generated, seeking causes not
symptoms
Chapter 15
Motivating individuals and groups
Topic
list:
•Motivation
•Content theories
•Process theories
•Choosing an approach
•Rewards and incentives
•Pay as a motivator
Motivation
A decision-making process through which the individual chooses
desired outcomes and sets in motion the behaviour appropriate to
acquiring them.' (Huczynski & Buchanan
The social process by which the behaviour of an individual is
influenced by rewards, incentives and sanctions applied by others.
Motives : Learned influences on human behaviour that lead us to
pursue particular goals because they are socially valued.'
(Huczynski & Buchanan
Maslow's hierarchy of needs
■ Content theories ask:'What (needs or goals) motivate individuals?' They suggest that
behaviour is driven by the desire to satisfy certain needs or achieve certain
outcomes
Frederick Herzberg: Two factor theory
1. Need: to avoid
unpleasantness
 Policies, administration
 Pay
 Adequate working conditions
 Quality of supervision
Hygiene factors
2. Need: personal
growth,fulfilment
 Responsibility
 Challenge,
interest
 Achievement
 Growth in the job
Motivator factors
Victor Vroom : Expectancy theory
■ Process theories ask :‘ how can individuals be motivated?' They
explore the process through which outcomes become desirable
and are pursued by individuals
ExV=F
E : Expectancy The strength of the individual's expectation that
behaving in a certain way will result in a given outcome.
V : Valence The value that the individual places on the outcome
(whether positive/ desired or negative/ undesired).
F: Force of motivation The strength of the individual's motivation
to behave in the given way (and the likelihood that he will do so).
Douglas McGregor : Theory X and Theory Y
Theory X
Theory Y
The average person dislikes work and responsibility.
Workers must be coerced, controlled and directed in
order to make them perform adequately.
The expenditure of effort in work is natural and not
inherently disliked. People are capable of exercising
responsibility and self-direction, being motivated by the
desire for growth/achievement
Managerial objectives
of a reward system
•Attract and retain staff
•Increase the predictability
of employee behavior
•Increase employees'
willingness to change
•To motivate (provide
incentives for) effective
performance
•Be equitable
Rewards and incentives
Rewards:
Incentives :
• A token (monetary or
otherwise) given to
an individual or team
in recognition of
some contribution or
success
• The offer or promise
of a reward, designed
to motivate the
individual or team to
behave in such a way
as to earn it.
JOB SATISFACTION
• Skill variety
• Task identity
• Task significance
• Autonomy
• Constructive feedback
The job itself can be
used as a motivator
• A well-designed job
should provide five
'core dimensions'.
Job design as a motivator
Herzberg noted that the 'micro-designed' jobs favoured by
scientific management are repetitive, meaningless, unimportant,
programmed and devoid of feedback!
Three ways of redesigning jobs for job satisfaction.
• Job enrichment : A 'vertical' extension of the job by adding responsibility, breadth
and challenge: giving feedback, removing controls.(Job enrichment is equivalent to
'empowerment' on the level of individual job design.)
• Job enlargement : A 'horizontal' extension of the job by increasing the number of
operations or tasks: reducing the cycle of repetition, adding variety.(However,
adding more low-skill, meaningless tasks may not be a long-term source of
satisfaction.)
• Job rotation : Transferring the worker sequentially or cyclically from one job to
another, to allow task variety. (Sometimes used as a form of
training/development.)
Job design as a motivator
In line with the idea of job enrichment, various related concepts have been put forward
as potential motivators (or sources of job satisfaction), including:
Participation/involvement
• Certainty
• Consistency
• Clarity
• Capacity
• Commitment
Organization culture (Peters & Waterman) Employees can be 'switched on' to
extraordinary loyalty and effort if:
• The cause' is perceived to be great : 'reaffirming the heroic dimension of work' – eg quality, customer,
innovation
• People are treated as 'winners', valued contributors : 'good news swapping' and positive reinforcements
Pay as a motivator
Pay is an important motivator
• People need money to live
• Herzberg recognised pay's
Pay is a limited motivator
importance in satisfying needs and
symbolising /comparing individual • People tend to want equitable and
sufficient pay – not maximised earnings
worth
• Pay is a 'hygiene' factor : it cannot offer
• Money is a means of satisfying
job satisfaction
many needs (Maslow)
• Pay cannot (by itself) satisfy 'higher
order' needs
Remember that pay can be a powerful short-term motivator
Pay as a motivator
Pay levels/structures may be
determined by:
•Job evaluation: a systematic process
of analyzing job content (not job
holder performance) to determine the
'value' of the job.
•Negotiation/collective agreements on
pay
•Perceived fairness (equity)
•Market rates of pay
•Individual performance in the job
Payment by results (PBR)
• is related to output (in terms of
units produced or time taken).
Performance-related pay (PRP)
• is related to results achieved (in terms
of defined standards for key tasks,
fulfilment of objectives etc
Rewarding the team
• Group bonus schemes
• Profit sharing schemes
• other issues
Chapter 16
Training and development
Topic
list:
•The learning process
•Development and training
•Training needs and methods
•Responsibility for training and
development
•Evaluating training programmes
•Development
The learning process
Cognitive theory
Behaviorist theory
• Stimulus → Response (negative reinforcement )
• Stimulus → Different response (positive
reinforcement)
• Stimulus → Repeat successful response
Learning style (Honey & Mumford)
• Theorists - to understand principles
• Reflectors - to think things through first
• Activists - to try things, 'hands on‘
• Pragmatists - to work with real
tasks/problems
4.
Assess
the
results
1. Select
new goal
3.
Attempt
behavior
2. Plan
Learning cycles
(Kolb)
Learning theory suggests that motivation, objectives, feedback,
positive/negative reinforcement are key to effective training
Abstract
Apply
Analyses
Act
The learning process
Learning organization is one that facilitates the acquisition and sharing of
knowledge, and the learning of all its members, in order continuously and
strategically to transform itself in response to a rapidly changing and uncertain
environment
•Keep plans and decisions flexible
•Insist on data rather than guesswork
•Encourage experimentation and questioning
•Regard risks and failures as learning tools
•Gather information from all possible sources
•Share information through formal/informal networks
•Seek out learning opportunities
•Develop HR policies to support flexibility
•Develop management styles to support flexibility
•Focus training on 'learning how to learn'
Development and training
Training
Planned programmes and instruction which enable people to
achieve a higher level of knowledge, skills and competence.
Development
Growth of a person's ability and potential through the provision of
learning.
Education
Knowledge acquired gradually, through a process of learning and
instruction.
Development planning
Identify necessary
skills
Draw up development
strategy
Implement
Benefits of training
for the organization
for the trainee
• Increased skills/knowledge:
enhanced job performance
• Attraction and retention of quality
labor
• Improvement of skill base: adding
value to the human assets of the
business
• Enhanced workforce flexibility
• Enhanced managerial succession
• Better quality and customer service,
for competitive advantage
• Fewer errors, complaints, accidents
• Less need for detailed supervision
and managerial interventions
• Enhance competence -> sense of
achievement, self-esteem, security of
• greater employability
• Satisfaction from greater contribution
to business success, quality etc
• Opportunities for career development
and increased rewards
• Opportunities to extend own skills,
interests
Training is not a substitute for effective selection, organisation and supervision! Not all problems
are amenable to training. Training must also be effectively planned, designed and managed.
Training needs and methods
- A systematic approach to training
Stage One: training needs analysis
Organizational
objectives
Job
requirement:
Human resource
audit People's
current skills:
Environmental
changes
Job analysis,
specifications,
description
Testing
New technology
Role/skill
analysis
Observation
New legislation
Employee
surveys
Self assessment
New standards
Competence
definition
Appraisal
Performance
criteria/
Standards
Learning
gap/training
needs
Stage Two: planning and implementing training
Formulate training
objectives (SMART)
Select and develop
methods/media of training
Validate: Has it worked?
Implement training
Post-training test or
appraisal of performance
Evaluate whole process:
was it worth doing?
Feedback to trainee
Training needs and methods
Off-the-job training methods
Off-the-job methods
•Training room instruction
•Lectures/taught classes
•Case study analysis Role plays
•Simulations/in-tray exercises
•Visits and tours
•Outdoor training
•Distance or open learning
•Computer/video-based
learning
• Allow experimentation without risk,
pressure of work
• Away from interruptions, distractions
of work
• Can allow for own-pace study
• Suit theoretical learners
• May not relate directly to task or job
context
• Less immediate motivation and
feedback for learning
• Does not suit all learners
• Can create anticlimax on return to
work
Training technologies include video, interactive
video, online and various computer based
training methods.
Training needs and methods
On-the-job training methods include
On-the-job methods
•'Shadowing' a colleague Observation/imitation
•Job instruction
Demonstration/explanation
•Coaching
Guidance, advice, teaching
•Job rotation
Gaining work experience
•Temporary promotion Gaining management experience
•'Assistant to' positions Shadowing managerial work
•Committee/project work Exposure to other functions
•Apprenticeships
Mix of off- and on-the job
•Relevant to job skills
•'Fit' with job context
•Establish work relationships
•Suit active/pragmatic learning styles
•Depend on training skills of fellow workers/supervisors
•Risk, pressure, distraction of 'real' work context
•May train unhelpful methods/culture
•Requires tolerance of error
Introduction training
•The introduction of new recruits to the
job, work place and work group.It
begins an on-going process of
development
Orientation to workplace:
Introduction to
work, superior
and team
Briefing on
policies, rules
Plan mentoring,
initial training
and so on
Responsibility for training and development
Line
managers
Training
manager
Develop own
skills
Central
concern with
developing
people
Identifying training
needs
Feedback and
evaluation
Fewer
automatic
promotion
paths
Managing
careers
Coaching/
feedback
Reports to HR
director
New skills
always needed
Needs of
individual and
organisation
Assessing
competences
Programme
design
Identifying learning
opportunities&
organizing
programmers
Liaison
Trainee
HR
department
Responsibility for training therefore lies with the individual,
in collaboration with managers and HR professionals
Needs analysis
Responsibility for training and development
Validation of training:
is measuring the results of the programme against
its objectives : has it been effective in achieving its
goals?
Evaluation of training :
is analyzing the costs of the programme against its
benefits: has it been worthwhile?
Appraise the work performance of trainees for
general or specific improvement
Test post-training knowledge/skills for comparison
with pre-training tests
Assess the effect of training on team and
organization performance, for integrated
improvement
Survey the satisfaction of trainees, via feedback
forms, attitude survey or appraisal
Monitor the on-going development of trainees for
influence on promotability /succession
Analyze indicators of 'knock-on' effects : labour
turnover, disciplinary actions, suggestions etc
Development
Development is a wider concept than training, although training provides learning and
educational experiences for development.
Skill/competence development
• Acquiring job-relevant knowledge, skills through education and training.
Development
Employability development
• Acquiring a portfolio of experience/competence that enhances mobility/value
in the labour market.
Career development: Identifying career aspirations and planning
progression
•Gathering different experiences
•Using mentors and role models
•Accepting opportunities and challenges
Personal development
•Seeking wider learning experiences, to meet self- actualisation needs and goals.
Training
Education
Chapter 17
Performance appraisal
Topic
list:
• Performance management and assessment
• The purpose of performance appraisal
• The process of performance appraisal
• Barriers to effective appraisal
• How effective is the appraisal scheme?
Appraisal is one of the control systems of the
organization improving organizational efficiency
by ensuring that individuals within it are
performing to the best of their ability and
potential.
It should be a forward looking, problem-solving,
collaborative process, set firmly within with
organizational context and regularly evaluated
Performance management and assessment
■ Key features of performance measurement
Aspect
Comment
Agreed framework of goals, standards
and competence requirements
The manager and the employee agree about a standard of
performance, goals and the skills needed
Performance management is a
process
Managing people's performance is an ongoing activity, involving
continual monitoring and assessment, discussion and
adjustment.
Shared understanding
The goals of the individual, unit and organization as a whole
need to be integrated : everyone needs to be 'on the same page'
of the business plan.
Approach to managing and developing
people
Managing performance is not just about plans, systems or
resources : it is an interpersonal process of influencing,
empowering, giving feedback and problem-solving.
Achievement
The aim is to enable people to realize their potential and
maximize their contribution to the organization's success.
The purpose of performance appraisal
•Establishing key results which a job holder needs to
achieve for effective working
•Identifying improvement/training needs
•Identifying performance deserving merit pay awards
•Identifying areas in which work methods, technology
and other factors could better support performance
•Identifying candidates for promotion/succession
•Assessing organisational competences to aid HR
planning
•Encouraging communication about performance
•Creating a culture of openness to feedback, problemsolving and continuous improvement
Why have a formal
system?
Purposes of performance appraisal
Ongoing informal
feedback on
performance is an
important part of
management, but:
• Managers may obtain
only random
impressions based on
most recent/obvious
incidents
• Negative aspects may
get more attention
than positive
• Feedback may be
sporadic, subjective,
hasty and inconsistent
in applying criteria
Formal appraisal makes both appraiser
and appraise accountable for their
judgements, responses and follow-up
actions.
The process of performance appraisal
Performance appraisal control system
Corporate
plan
Purpose of
appraisal
Job analysis
Job
requirement
Identification
of criteria for
assessment
Performance
monitoring
Assessment
(report) by
manager
Employee’s
performance
Review
(interview)
Jointly
agreed,
concrete
conclusion
Follow up
action
Appraisal techniques refer to what is appraised and how
it is appraised/reported
Overall assessment
• Requires the assessor to write an appraisal in narrative form. Can be
unfocused, and depends on managers' writing skills.
Guided assessment
• Adds guidelines on attributes/performance elements to be
assessed, and how they are to be defined.
Behavioural incident analysis
• Compare employee behavior in critical incidents to classifications of successful/unsuccessful
behaviors in such situations. Job-relevant, though complex to develop.
Grading (or rating scales)
• Score workers according to the extent/level to which they possess
attributes. Graphic scales: eg: Poor / Fair / Good
There has been a trend towards more systematic, job relevant techniques such as:
• Competence assessment : based on competency definitions and standards developed for the job or occupation
• Results-based assessment : measuring performance against specific objectives and targets (eg MBO,
performance management)
The process of performance appraisal
Traditional performance
appraisal: Appraisal by the
worker's immediate
superior
•First-hand knowledge
•Authority to act
•Perceived as top-down
•May damage working
relationship
Alternative or multi-source feedback
1. Self appraisal (by the appraisee)
•Removes judgement, fosters self-insight
•Inevitably subjective
2. Upward appraisal (by subordinates)
•Meaningful feedback on management style
•Inevitably defensive
3. Peer and/or customer appraisal
•Meaningful feedback on internal/external customer care
•Peer feedback may be defensive
4. 360º Feedback (any or all of above
•Well rounded picture of performance
Appraisal interviews
Prepare
•Time/venue
•Review feedback reports
Interview
Agree
•Listen
•Be fair
•Collaborate
•Gain commitment
•Agree
•Summarise
'Tell and
sell‘
• Deliver assessment and 'sell'
(gain acceptance of)
improvement plan.
Tell and
listen
• Deliver assessment and
invite response.
'Problemsolving'
• Invite employee to identify
and discuss work problems,
areas for improvement.
Report
•Finish appraisal report, with
agreed conclusions
Follow up
•Take agreed action
•Monitor progress
Maier (1975)
Barriers to effective appraisal
■ Common problems with appraisal (or the way it is managed) include the following
Appraisal barriers
Comments
Appraisal = confrontation
Used for showdown, 'clearing the air': no developmental
outcomes
Appraisal = judgement
Defensive on both sides; awkward negative feedback;
suspicion of bias
Appraisal = chat
No clear purpose or objectives ; waste of time;not taken
seriously
Appraisal = bureaucracy
Regarded as a form-filling exercise : no positive outcomes
expected
Appraisal = unfinished business Used to deal with the most recent or ongoing issues only
Appraisal = annual event
Feedback, goals adjustment and improvement planning
should be a continuous process
'In the current climate, to review performance once a year is ludicrously relaxed and
undisciplined. Most targets ...become irrelevant and out of date within months or even
weeks.' (Lockett)
How effective is the appraisal scheme?
1. Is appraisal perceived as fair, relevant and important
•Monitor appraiser/appraise attitudes, using surveys, feedback forms, interviews
2. Has appraisal been effective in achieving
•Monitor individual/unit results
•Monitor training provision and outcomes
•Monitor promotions, succession plans
•Monitor HR indicators such as staff turnover, absenteeism, discipline
3. Is appraisal an efficient, cost-effective use of managerial
time/effort?
•Cost-benefit analysis (qualitative + quantitative benefits)
PART E
PERSONAL EFFECTIVENESS AND COMMUNICATION IN BUSINESS
Chapter 18
Personal effectiveness and communication
Topic list:
•Personal development plan
•Time management
•The role of IT
•Coaching, mentoring and
counselling
•Communication
Personal development plan PDP
A clear action plan incorporating a wide set of developmental opportunities
Systematic approach
Improving
performance
Select an area for development
Set a learning objective
Improving skills
and
competences
Acquiring
skills
OBJECTIVES
OF A PDP
Research and evaluate relevant
resources
Formulate action plan
Secure agreement if need be
Planning
career path
Pursuing
personal
growth
Implement
Time management
Goal setting
('SMART')
Action
planning
(How?)
Urgency
(Do it now!)
How, when and by whom
should the work be done?
• Work planning is another skill:
allocating tasks; sequencing
tasks; scheduling
PRINCIPLES
OF TIME
MANAGEMENT
Organization
(of your
work)
Focus (One
thing at a
time)
Prioritizing
(Importance)
depending
on:
• Consequences
• Dependency
• Urgency
• Deadlines
The role of IT
Deciding on a communication tool : Depends upon the characteristics of the message
Specific technologies
Common tools
•Conversation
•Meeting
•Presentation
•Telephone
•Fax/Memo/Letter
•Report
•Email
•Video conferencing
•Social media
Managers have
more
information!
•Electronic, digital transmission
•Electronic data interchange
(EDI)
•Mobile telephones (including
'smartphones')
•Voice messaging systems
•Computer bulletin boards
•Social media post (eg Twitter
Processing of routine data can be done in bigger
volume, at greater speed and with greater accuracy.
Coaching, mentoring and counselling
Coaching: occurs when a trainee
is put under the guidance of an
experienced employee ('expert').
Mentoring: is a long term
relationship in which a more
experienced person fosters
personal and career development.
• Establish learning targets
• Plan a systematic programme
• Identify opportunities
• Take strengths/limitations into account
• Exchange feedback
Features Not usually an immediate superior
Covers a wide range of functions
Career
functions
Coaching focuses on achieving specific objectives.
Psychosocial
functions
Coaching, mentoring and counselling
Counselling
Counselling can be defined as 'a purposeful relationship in which one person
helps another to help himself. It is a way of relating and responding to another
person so that the person is helped to explore his thoughts, feelings and
behaviour with the aim of reaching a clearer understanding ... of himself or of a
problem , or of the one in relation to the other.‘ (Ress)
Organisational
uses
The counselling
process
•Preventing underperformance
•Retaining staff loyalty
•Solving work problems
•Developing staff
•Controlling conflict
•Problem recognition
•Problem
expression/exploration
•Empowering solutionfinding
•Resourcing solutions
Situations for counselling
•Appraisal
•Discipline
•Grievance
•Change
•Redundancy
•Retirement
•Personal/performance problems
•Traumatic events
Communication
Communication involves the transmission or exchange of information and
the provision of feedback. It is required for planning, co-ordination and
control.
How does it flow?
• Vertically between ranks
• Horizontally/laterally
between peers
• Diagonally between
departments
Circle
Chain
'Y'
Wheel (the star)
How is communication
used?
•Giving instructions
•Giving or receiving information
•Exchanging ideas
•Announcing plans
•Comparing results against
budget
•Rules or procedures
•Information about the
organisation
Communication –
The communication process
Communication
should be:
• Concise
• Complete
• Correct
• Courteous
• Clear (Gowers)
Communication
Organisational objectives depend
on
• Exchange of information for planning,
control, co-ordination, problem-solving etc
• Giving orders and instructions to initiate
activity
• Establishment and maintenance of
working relationships
• Gathering and exchange of feedback for
control, improvement, learning and
customer care
• Communication of marketing and public
relations messages
Information flows within the
organisation
Downward
flow
Horizontal
flow
Upward
flow
Diagonal
flow
Communication
Interpersonal behavior is behaviour between people.
It includes:
•Interaction between people: two way processes such as communicating, persuading,
negotiating etc
•An individual's behaviour in relation to other people: assertiveness, empathy etc
Assertiveness: Clear, honest, direct
communication which respects the
rights of self and other:not passive,
not aggressive.
•Rapport-building: establishing relationships
•Persuasion/influence
•Assertiveness
•Negotiation
•Conflict resolution
•Empathy: understanding others
•Oral/non-verbal communication
•Appropriate roles and relationships
Assertiveness
Interpersonal skills include:
•Asking clearly and openly for what you want
•Saying 'no' without being defensive
•Receiving feedback/criticism objectively
Giving criticism constructively
Communication
Non-verbal communication
How to be an effective non-verbal communicator
• Posture:way of sitting/standing
Proximity:nearness to people
• Appearance:grooming, 'style‘
• Gestures
• Facial expressions
• Eye contact
• Physical contact:eg handshake
• Non-verbal sounds:eg sigh
• Movements:eg pacing, nodding
• Behaviours:eg yawning
• Silence
•Be aware of the variety of non-verbal cues
•Be aware of their different uses and meanings.
•Be aware of your own non-verbal behaviours.
Use them to provide (or seek) feedback, project
a desired image, reinforce spoken messages
etc.
•Be aware of the non-verbal behaviours of
others. Interpret them to gather feedback,
recognise underlying
messages/responses/feelings etc
•Be prepared to adjust your communication and
response strategies.
•Be aware of cultural differences.
Note:Non-verbal cues may emphasise, confirm or undermine verbal messages.
Communication
Barriers to communication
Methods of improving communication
• Poor communication skills of sender/receiver
• Failure to give/seek feedback
• Differences in language (including jargon)
• Personal differences ('social noise')
• Conflict:politics or hostility ('emotional noise')
• Inappropriate amount/accuracy/format of
information
• Active/implied discouragement:eg
organisations not giving opportunities for
upward communication
• Lack of trust in the source
• Poor communication media/channels
('technical noise')
• Poor environment, making oral communication
inaudible ('physical noise')
• Encourage, facilitate and reward
communication using all HR systems and
cultural methods
• Model good practice from the top
• Create opportunities for multi-directional
communication (especially upwards)
• Give training in communication skills
• Give awareness training in
difference/perceptions
• Manage interpersonal conflict
• Break down artificial functional/status barriers
• Adapt communication systems, tools and
technologies for greater
efficiency/effectiveness
• Use the informal communication system to
reinforce networking, information-sharing
culture
Communication
Oral communication
• Face to face (eg meetings, interviews) Particularly
good for:
• Generating new ideas
• Sharing information sensitively
• Real-time checking/questioning
• Interpersonal interactions
• Remote (eg by telephone) Particularly good for:
• Personal communication over distance
• Swift communication in real time
Oral communication skills include
• Appropriate language and usage
• Clear, audible, expressive, delivery
• Effective active, critical or empathetic listenin
How to be an effective
listener
• Be prepared to listen
• Be interested:listen actively
• Be patient:wait your turn
• Keep an open mind: avoid
prejudice
• Use your critical faculties
• Concentrate:don't get
distracted/side-tracked
• Give feedback:encourage,
ask, confirm
• Use non-verbal cues
Communication
Oral media
Factors in the choice of media
•Time required to prepare/send the message (and time
differences with the message destination)
•Complexity: need for illustration/real-time explanation?
•Confirmation: need written record (eg for legal
purposes)?
•Interactivity: need for real-time responses, questions?
•Confidentiality: need for security?
•Dissemination: need for large simultaneous audience?
•Sensitivity: personal tact/support/empathy?
•Cost of all the above:most effective medium at justifiable
expense
Note: The 'medium' is the vehicle (eg
letter, email, poster):the 'channel' is the
route (eg post, internet, notice board)
•Telephone/teleconferencing
•Interviews/discussions
•Meetings/committees/briefings
Presentations
Written media
• Forms
• Memoranda
• Notices/posters
• Emails
• Journals/bulletins/
• Reports manuals/handbooks
Websites
• Letters
• Social media
Communication
Written communication
Example
• Correct
grammar/syntax/punctuation
• Choice of vocabulary to suit
recipient
• Choice of structure to suit recipient
and purpose of communication
• Suitable time and style to suit
purpose of communication
• Legibility!
• Appropriate use of visual aids
• Attention to conventions of format
and house style (where appropriate)
• REPORT
• FORMAT
• REPORT TITLE
• I INTRODUCTION Or 'Executive
Summary',
• 'Terms of Reference' or
'Background'
• II ANALYSIS Appropriately headed
sections with body of report
• III CONCLUSIONS Or
'Recommendations' or 'Summary'
PART F
Professional ethics in accounting and business
Chapter 19: Ethical considerations
Topic
list:
•A framework of rules
•Management accountability
•The ethical environment
•Ethics in organisations
•Accountants and ethics
A framework of rules
Behaviour in society is required by the law,
rules and regulations, and ethics.
• Act ethically
• Meet the expectations of society
• Meet legal obligations
• Illegal
Acting ethically involves doing what
is 'right', even if the right thing to
do is not required under law – and
may exceed what society expects
from a 'typical' organisation.
Fairness
Take into account all stakeholders with legitimate interests
Transparency
Openness, disclosure in financial statements, press releases, websites
Independence
Need for independent non-executive directors who can monitor without conflicts of interest
Probity
Truth-telling/not misleading
Responsibility
Management responsible for organisation, means of corrective action and penalising mismanagement
Accountability
Directors and companies answerable for consequences of actions to shareholders, professionals to
values, public sector to stakeholders
Reputation
Jeopardised by poor risk management/corporate governance, may impact commercially
Judgement
Taking decisions that enhance organisation's prosperity
Integrity
Straightforward dealing and completeness, basis of trust
Management accountability
An organisation's managers are collectively responsible for
the conduct of an organisation's affairs:they have a
fiduciary responsibility (duty of faithful service).
How far do external pressures modify business objectives?
• Stakeholder view : A business depends upon appropriate relationships with
all groups who have an interest in what the organisation does. Each
stakeholder group has its own objectives so that a compromise is required.
• Consensus theory : Objectives emerge as a consensus of the differing
views of shareholders, managers, employees, customers, suppliers and
society at large but they are not all selected or controlled by management.
The ethical environment
Ethics can be regarded as a set of moral principles to guide behaviour, based upon concepts
of duty and consequences
•Duty: absolute moral
•consequences : outcomes 'the end justifies rules the means‘
Other considerations are based upon rights to be respected, and virtues to be
cultivated:firmness, fairness, objectivity, charity, forethought, loyalty ...
Social attitudes are also significant:work/life balance;'green' concerns;minorities
Translated into
business objectives
Employees
Customers
Supplier
Society
• Minimum
wage
• Job
security/satisf
action
• Working
conditions
• Product quality
• Pricing
• Safety
• Regular orders
• Timely
payment
• Pollution
control
• Sustainability
• Charity work
• Product quality
The ethical environment
Lack of objective standards
•Non-cognitivism – no possibility of acquiring objective knowledge of moral principles.
•Moral relativism – right and wrong are culturally determined.
Objective standards
•Cognitivism – objective, universal principles exist and can be known, ethics can be regarded as absolute.
Teleological
•Consequentalist ethics
•Moral judgements based on outcomes or consequences.
•Utilitarianism means acting for the greatest good to the greatest number
Deontological ethics
•Kant stated that acts can be judged in advance by moral criteria:
•Do what others should be doing
•Treat people as autonomous beings and not as means to an end
•Act as if acting in accordance with universal laws
Egoism
•An act is ethically justified if decision-makers pursue short-term desires or long-term interests (justification for free market).
Pluralism
•Different views may exist but it should be possible to reach a consensus;morality is a social phenomenon.
Ethics in organisations
Other influences
Organisations will have
either a compliancebased, or integritybased, approach
•Personal ethics of employees
•Professional ethics (eg ACCA)
•Organisational culture
•Organisational systems (eg
mission statements)
Accountants and ethics
Why should accountants behave ethically?
• Laws and regulation
• Upholding of professional standards and qualities (personal/professional)
• Protection of the public interest
Enshrined in a 'Code of Ethics' or 'Code of Conduct'
Codes can be
or rules-based
to account for
every possible
situation
Principles and
frameworks to
guide behaviour
IFAC – international body with its
The
accountant: own code of ethics. ACCA's is
aligned:
• Fundamentals
• Integrity
• Objectivity
• Professional competence
• Confidentiality
• Professional behaviour
Accountants and ethics
Threat
Professional safeguard:
• Self-interest
• Self-review
• Advocacy
• Familiarity
• Intimidation
•Entry requirements Training requirements
•CPD requirements
•Professional standards
•Professional monitoring
•Disciplinary procedures
•External review
Importance of independence
Safeguards in practice
• Reliability of financial information
• Credibility of financial information
• Value for money of audit
• Credibility of profession
• Peer review
• Independent consultation Partner/staff
rotation
• Discussion/disclosure to audit
committee
• Reperformance by another firm
Accountants and ethics
Recruitment
Financial
interest
Close
business
relationship
Lowballing
High
percentage
of fees
Percentage
or
contingent
fees
Self
interest
threat
Overdue
fees
Loans and
guarantees
Employment
with client
Partner on
client board
Family and
personal
relationship
Gifts and
hospitality
Other
services
Corporate
finance
Internal
audit
services
Recent
service with
an
assurance
client
Self
review
threat
General
services
Preparing
accouting
record and
financial
statements
Valuation
services
Tax
services
Accountants and ethics
Advocacy threat
•Where accountants take clients’s part act as their advocate or
will only earn fees from client if successful outcome is achieved
(contingent fees). Examples include provision of legal service
and corporate finance advice.
Conflicts of interest
•These can arise from accountants acting for clients with whom
they are in dispute, eg over quality of work.It can also arise
through disputes between two clients for whom accountants
are acting.
Accountants and ethics
Familiarity threat
• Family relationships
between client and firm
• Personal relationships
between client and firm
• Long association with client
• Recent service with client
• Future employment with
client
Intimidation threat
• Close business
relationships
• Family relationships
• Personal relationships
• Staff employed by client
• Litigation