ACCA - FBT – Business & Technology
Concept Backbone
Business organisations and their stakeholders
Chapter 1
Companies
A company has a separate legal personality from its Owners (Shareholders) & Managers (Directors).
Limited liability
The shareholders cannot normally be sued for the debts of the business unless they have given some personal
guarantee. Their risk is generally restricted to the amount that they have invested in the company when buying the
shares.
Characteristics
1.
2.
3.
4.
5.
6.
7.
8.
It has to be registered with 'Companies House', office of Registrar of Companies - UK
It can be a Public Limited, means it can issue share to general public through listing itself in Stock Exchange
It can be a Private Limited, means it cannot issue share to general public
Ownership and Management of companies must be in separate hands
Shareholders usually appoint Directors to govern & manage the company affairs on their behalf
Directors are of two types Executive & Non-Executive
Directors are ultimately responsible for company management and are accountable to Shareholders
A company must produce Annual Report, (SoFP & SoCI) and it must be audited by external neutral 3rd party,
known as External Auditor
9. External Auditor is also appointed by Shareholders
10. External Auditor gives his professional opinion on company Financial Reports for their truthfulness & fairness
11. There are strict rules for Public companies than Private companies
Mendelow’s Stakeholder Mapping Matrix
•
•
•
•
Segment D demands high degree of flexibility & management concentration as stakeholders are Key Players.
Segment C demands that stakeholders in it must be Kept Satisfied.
Segment B demands that stakeholders in it must be Kept Informed as power of stakeholders is low.
Segment A however requires a Minimal Effort.
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
The business environment
Chapter 2
Environmental Influences
Broadly environmental influences fall into two categories;
1. Influences in the industry – [Five Forces – Porter]
a. Bargaining Power of Customers
b. Bargaining Power of Suppliers
c. Threat of Substitutes
d. Threat of New Entrants
e. Rivalry
2. Influences in the country – [Six Factors – Johnson & Scholes]
a. Political
b. Economic
c. Social
d. Technological
e. Ecological
f. Legal
PESTEL Analysis
Political influences
1.
2.
3.
4.
5.
6.
7.
8.
9.
Political risk
Political change
Capacity expansion
Demand
Divestment & Rationalisation
Emerging industries
Entry barriers
Competition
International trade
Social influences
Demographic trends effects on Labour
1.
2.
3.
4.
5.
6.
Increasing/decreasing birth rates
Falling/Rising death rates
Quantity & participation of women
Demographic dispersion
Literacy
Health and diet issues
Demographic trends effects on Market
1.
2.
3.
4.
5.
6.
Socio-economic classes
Buying patterns (behavioural determinants/inhibitors)
Cultural trends
Literacy
Health and diet issues
Fashion
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Technological influences
Influences on organisation structure
1. Smaller & more agile
2. Flexible
3. Delayering
4. Downsizing
5. Wider spans of control
6. Closer business relationships
7. Information systems & technology
8. Efficient routine processing
9. Digital information and record keeping
10. New skills required
11. Reliance on IT
12. New methods of communication
13. New methods of providing service
14. Interoperability
15. The view of information as a valuable resource
16. The view of information as a commodity
17. Home-working and supervision
18. Freelance relationships
Ecological influences
Issues relating to the effect of an organisation's activities on the physical environment have come to the fore in
recent years
Environmental footprint
The impact that a business's activities have on the environment, including its resource environment and pollution
emissions.
Business impacts on environment
1.
2.
3.
4.
5.
6.
Depletion of natural resources
Noise and aesthetic impacts
Residual air and water emissions
Long-term waste disposal
Uncompensated health effects
Change in the local quality of life
Environment impacts on business
1. Stakeholder expectations
2. Reputation risk
3. Corporate social responsibility
The business response
1.
2.
3.
4.
5.
Green products
Changed practices
Education (may be confusion)
Environmental impact assessments
Extent & limitations
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Legal influences
Influences of employment law
Rules on retirement
1. Age equalism (Men & Women)
2. Early retirement options (due to downsizing)
Rules on resignation
1. Notice periods
2. Exit interviews
Rules on dismissal
1.
2.
3.
4.
5.
Statutory minimum notice periods
Written statement of the dismissal reasons
Prohibition of 'Wrongful dismissal'
Prohibition of 'Unfair dismissal'
Disciplinary procedures
Rules on redundancy
Compensation payment
Exceptions;
1. Unreasonably rejection of suitable alternative employment by employee
2. Employee is at/over pensionable age
3. Less than two years employment
4. Employee could have been dismissed for misconduct (without notice)
Data protection and security
There has been a growing fear that the ever-increasing amount of information about individuals held by
organisations could be misused
Requirement of law
1. Lawful & purposeful collection & retention of data with accuracy & integrity
2. Prohibition of unauthorized use & disclosure
3. Consistently updating data with time (where necessary)
4. Consistently updating technical & security standards with time
5. Prohibition of passing data to otherwise EU members without appropriate security technologies
The rights of data subjects
1. Compensation for damage & distress due to loss, lack of integrity, destruction or unauthorised disclosure of
data
2. Requesting court for removal of mistakes or even complete data after completion of purpose
3. Obtaining access to personal data for knowledge of extent and integrity of data
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Health and safety at workplace
Employers' duties
1. Safe & healthy work practices & work environment
2. Regular plant & equipment maintenance
3. Encouragement of safe working practices
4. Clear communication of safety policy
5. Risk assessments
6. Sharing of hazard and risk information with other employers
7. Introduction of controls to reduce risks
8. Revision of safety policies
9. Identify employees at risk (especially)
10. Employ competent safety & health advisers
11. Identify & train careless & ignorant employees
12. Health and safety policy
13. Accident and safety policies
Employee duties
1. Take reasonable care of themselves and others
2. Allow the employer to carry out their duties
3. Use all equipment properly
4. Not interfere intentionally or recklessly with any machinery or equipment
5. Inform the employer of any hazardous situation
Consumer Protection
Law of Contract
Contract is a legally binding agreement
Essentials of valid contract
1. Agreement
2. Consideration
offer +
acceptance
something in exchange
Nature of Agreement
1. Express
2. Implied
Rights of parties to contract
1. Require performance from the other
2. If something goes wrong;
a. End the contract
b. Claim compensation (Damages)
Concern of parties
1. Date & time of goods delivery
2. Seller's right to sell
3. Desired quality, description or as per sample
4. Suitability for their purpose
Terms of contract
1. Express
2. Implied
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Porter’s Value chain
The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing (or
service) organisation as a system, made up of subsystems each with inputs, transformation processes and outputs.
The Value network
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
The macroeconomic environment
Chapter 3
Macroeconomic policy describes the policies and actions a government takes to control economic issues, including
economic growth, inflation, employment and trade performance
Concept of ‘Circular flow of Income’
There is a circular flow of income in an economy, which means that expenditure, output and income will all have the
same total value;
Macro-economic conditions
1. Inflationary gap
2. Deflationary gap
3. Stagflation
Tabani School of Accountancy
[Full employment | Demand Rises | Output Unchanged | Prices Rise]
[Unemployment | Demand Rises | Output Rises | Prices Unchanged ]
[High unemployment | Demand Rises | Output diminishes | High price rise]
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
The business cycle
Four main phases of the business cycle can be distinguished;
1. Boom
2. Recession
3. Depression or Slump
4. Recovery
Inflation
Inflation is the name given to an increase in price levels generally. It is also manifest in the decline in the purchasing
power of money.
Inflation as a problem
1.
2.
3.
4.
5.
6.
7.
Un-equal distribution of income and wealth
Balance of payments effects
Uncertainty of the value of money and prices
Higher resource costs due to changing prices
Economic growth and investment declines
Increase in the underlying rate of inflation
Increase in the Retail Prices Index (RPI)
Causes of inflation
1.
2.
3.
4.
Demand pull factors
Cost push factors (import cost as well)
Excessive growth in the money supply
Expectations
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Unemployment
Types of unemployment
1.
2.
3.
4.
5.
6.
Real wage
Frictional
Seasonal
Structural
Technological
Cyclical or Demand-deficient
Consequences of unemployment
1.
2.
3.
4.
5.
Loss of output
Loss of human capital
Increasing inequalities in the distribution of income
Social costs
Increased burden of welfare payments
Government employment policies
1.
2.
3.
4.
5.
Spending more money directly on jobs
Encouraging growth
Encouraging training in job skills
Offering grant assistance to employers
Encouraging labour mobility
Economic growth
Economic growth may be measured by increases in the real gross national product (GNP) per head of the population.
Economic growth can be divided into two constituents;
1. Actual economic growth; the annual percentage increase in national output
2. Potential economic growth; the rate at which the economy would grow if all resources were utilised
Actual growth
1. The growth in potential output (in other words the aggregate supply)
2. The growth in aggregate demand (AD)
Potential growth
There may be increases in the amount of resources available;
1. Land and raw materials
2. Labour
3. Equipment & technology
4. Natural resources reservoirs
5. Ore deposits
6. Mines
Disadvantages of economic growth
1.
2.
3.
4.
Growth implies faster use of natural resources
Much economic activity tends to create pollution
Technological or structural unemployment
More investment needed;
a. Requires higher savings from public
b. Implies cut in consumption in longer term
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Government Economic Policies
Macroeconomic policy objectives relate to economic growth, inflation, unemployment and the balance of payments.
Fiscal policy [the budget]
Government policy on taxation, public borrowing and public spending
The three key components of the fiscal policy are;
1. Expenditure
2. Revenues
3. Borrowing
[Public Sector Net Cash Requirement]
Negative PSNCR
Revenues
xx
Expenditure
(xx)
Budget Surplus
xxx
+ve
Positive PSNCR
Revenues
xx
Expenditure
(xx)
Budget Deficit
(xxx)
-ve
Tax
An amount charged by the government for following functions;
1. To raise revenues for the Government
2. To cause certain products to be priced to take into account their social costs
3. To redistribute income and wealth
4. To protect industries from foreign competition
Types of Tax
1.
2.
3.
4.
5.
6.
7.
Direct tax
Indirect tax
Specific tax
Ad valorem tax
Regressive tax
Proportional tax
Progressive tax
[citizen pays directly]
[intermediary collects & pays on behalf of citizen]
[fixed sum]
[fixed percentage]
[poor pays more - rich pays less]
[both pays according to the value of taxed commodity]
[rich pays more - poor pays less]
Fiscal policy options
1.
2.
3.
4.
Reduce taxes - Increase expenditure - Increase PSNCR
Increase taxes - Reduce expenditure - Reduce PSNCR
Increase taxes - Increase expenditure
Reduce taxes - Reduce expenditure
Influence of tax
1. It affects consumers' purchasing power
2. Taxes on company profits affect return on investment
Influence of spending decisions
3. It affects suppliers to the Government
4. Creates 'knock-on' effect
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Monetary policy
Government policy on the money supply, the monetary system, interest rates, exchange rates and the availability of
credit
Objectives of monetary policy
1. Ultimate objectives
Example: bring rate of inflation to a sustainable low level
2. Intermediate objectives
Example: reduction in interest rates & money supply
Variables of monetary policy
The money supply
• Increase will inflate economy resulting in decreased demand
• Decrease will deflate economy resulting in increased demand
Interest rates
• Increase will encourage savings resulting in decreased demand
• Decrease will discourage savings resulting in increased demand
The exchange rate
• Increase will make imports cheaper to home country
• Decrease will make imports expensive to home country
Targets and indicators
1. Leading indicator
Example: If sterling falls it might be predicted that balance of payments will have adverse effect
2. Coincident indicator
Example: Increase in GDP suggests a parallel increase in employment
3. Lagging indicator
Example: Increased consumer price indices are a result of inflation
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
The balance of payments
The net of amount to be paid & received from another country arising due to foreign trade & transactions
Current account
The account UK maintains with other trading countries is known as 'Current account'
Before 1996 the term ‘visibles’ was used for trade in goods and the term ‘invisibles’ was used for the rest.
Now transactions are subdivided into four parts.
1. Trade in goods
2. Trade in services
3. Income
4. Transfers
Balances
1. Surplus on balance of payments
More receivables over payables
2. Deficit on balance of payments
More payables over receivables
Equilibrium in the balance of payments
A balance of payments is in equilibrium if current account has neither surplus nor deficit. This helps in exchange rate
being stable.
Rectifying a current account deficit
1. A depreciation of the currency also known as 'devaluation'
2. Direct measures to restrict imports;
a. Tariffs
b. Quotas
c. Exchange control regulations
3. Domestic deflation to reduce aggregate demand
Tabani School of Accountancy
[Expenditure switching]
[Expenditure switching]
[Expenditure reducing]
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Microeconomic factors
Chapter 4
Demand
Demand for a good or service is the quantity of that good or service that potential purchasers would be willing and
able to buy, or attempt to buy, at any possible price.
Demand curve
If demand is changed due to any factor other than price then the curve is shifted
Increased Demand
Tabani School of Accountancy
Decreased Demand
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Supply
Supply refers to the quantity of a good that existing suppliers or would-be suppliers would want to produce for the
market at a given price.
Supply curve
If supply is changed due to any factor other than price then the curve is shifted
Increased Supply
Tabani School of Accountancy
Decreased Supply
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
The price mechanism and the equilibrium price
The price mechanism brings demand and supply into equilibrium, and the equilibrium price for a good is the price at
which the volume demanded by consumers and the volume that firms would be willing to supply is the same.
This is also known as the ‘market clearing price’, since at this price there will be neither surplus nor shortage in the
market.
Consumer surplus and producer surplus
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Demand and supply analysis
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Supply decisions
There are various possible supply quantity decisions that businesses take over time;
Cost-plus pricing
Short run supply curve
Long run supply curve
Marginal cost curve remains the supply curve.
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Industry competition
1. Perfect competition
A perfectly competitive market has many firms producing the same (ie homogeneous) goods or services. The
market is easy to enter and exit.
2. Imperfect competition
The term 'imperfect competition' apples to any market that is not perfect
3. Monopoly
A monopoly describes the situation where a market has only one producer.
4. Oligopoly
An oligopoly arises when a market has a few dominant producers. Each of the few producers has a high level
of influence – and a high level of knowledge of their competitor strategies
5. Monopolistic competition
Monopolistic competition arises when the market comprises many producers who tend to use product
differentiation to distinguish themselves from others
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Business organisation, structure & strategy
Chapter 5
Organisations within an organisation
Broadly two organisations exist within an organisation and goes in parallel.
1. Formal Organisation
the organisation itself
2. Informal Organisation
formed as a result of social relationships
Characteristics of Informal Organisation
1.
2.
3.
4.
Follows informal communication network known as ‘grapevine’
Work related/non-related discussions, activities & norms
Tends to bypass formal organisation and its policies
Informal leaders independent of what organisation has appointed on positions
Organisational Structure
Structures by Henry Mintzberg
1. Simple Structure
Features
1. Small & young organisations
2. Single entrepreneur
3. Direct control & supervision
4. Centralisation
5. Succession crises
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
2. Building Block Model
Other Structures
1. Machine bureaucracy
2. Professional bureaucracy
3. Divisionalised
4. Adhocracy
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Functional Structure
Geographic Structure
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Product/Brand Structure
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Divisionalisation
A division is an autonomous business unit with its own decisions for investment, revenues, expenditures and profit.
It is also known as ‘Strategic Business Unit (SBU)’.
Requirements
1. Properly delegated authority & accountability
2. Large enough
3. No reliance on head office
4. Potential for growth
5. Scope and challenge in market
6. Arm's length transactions with other divisions
Matrix Structure
A cross-functional team structure between functions and projects/products.
Conflict with Classical Management
Unity of Command vs Dual Authority
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Other Structures
1.
2.
3.
4.
Tall organisation
Flat organisation
Centralisation
Decentralisation
Forms of Modern Organisations
1.
2.
3.
4.
5.
6.
7.
Chunked & unglued structures
Output-focused structures
Jobless structures
Virtual Structures
Hollow organisation
Modular organisations
Boundaryless organisations
Levels of Strategy
1. Corporate
2. Business / Market
3. Operational / Functional
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Organisational Culture & Committees
Chapter 6
Definitions of Culture
‘the collective programming of the mind which distinguishes the members of one category of people from another'
Hofstede
'the way we do things around here'
Charles Handy
Influences on organisational culture
1.
2.
3.
4.
Founder's values & beliefs
Organizations history
Leadership & management style
Organization's environment
Elements / Levels of culture Edgar Schein
1. The First Level / Observable level / Artifacts
2. The Second Level / Professed culture / Underlying values & beliefs
3. The Third Level / The Paradigm / Underlying assumptions
Types of organizational culture Charles Handy (orginally by Harrison)
1.
2.
3.
4.
Power culture (Zeus)
Role culture (Apollo)
Task culture (Athena)
Person culture (Dionysus)
The impact of national culture Geert Hofstede
1.
2.
3.
4.
Power distance
Uncertainty avoidance
Individualism
Masculinity
Tabani School of Accountancy
[High - Low]
[High - Low]
[High - Low]
[High - Low]
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Corporate Governance
Chapter 7
Corporate governance is a framework by which companies are directed & controlled.
UK Corporate Governance Code 2018
•
•
Following high-profile corporate failures, corporate governance codes set out best practice. It is a
combination of various reports which was published as UK Combined Code 1998.
Companies listed on London Stock Exchange (FTSE 350) are required to follow the code on ‘comply or
explain’ basis
Corporate governance theories
There are following theories that describe the nature of relationship and their interest between shareholders and
Board of Directors.
Stewardship Theory:
Good Corporate Governance undertakes the higher management (directors) as the person; sole responsible for
looking after the organizations property.
Managers are thought to work in favor of the organizations and neglect their own self-interest.
Agency Theory:
Agency theory emphasizes on the relationship of a principal and an agent. Those who owns the company
(shareholders) appoints the one to run the company (managers) in their best interest.
Aim of agency theory is to create the goal congruence (balance) between the managers self-interests in line with the
organization interests.
Stakeholder Theory:
Stakeholder theory depicts the natural view of an organization with the belief that external bodies are also of
importance as that of the shareholders. Aim of this theory is to manifest that each body having any kind of interest
associated with the organization should be of equal importance to managers instead only working in best of
shareholders.
Corporate Social Responsibility
In large organizations and companies in addition to meeting all statutory requirements, it is most important and
beneficial to satisfy and facilitate the whole society in which organizations are working.
Some of the organizations consider following duties under corporate social responsibility;
• To provide safe and healthy environment
• To provide jobs and earning resources to the society
• Try to avoid and minimize all negative impacts on the society e.g. pollution
• To satisfy all the stakeholders including external, connected and, internal stakeholders
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Ethical considerations
Chapter 19
Ethics
Ethics is the science of morals in human conduct - i.e. determining what is the right or wrong course of action.
If law is the ‘minimal required behaviour’ expected from a person or a body, ethics are the expected moral behaviour
from a person or a body in a society.
Professional Accountants need to observe the duty imposed upon them by their respective bodies (through Codes )
of being ethical in their conduct, practices, advises, suggestions, opinions, etc and be honest, fair, impartial &
truthful.
Ethical problems faced by managers
Another ethical problem concerns payments by companies to government or municipal officials who have power to
help or hinder the payers' operations. In The Ethics of Corporate Conduct, Clarence Walton refers to the fine
distinctions which exist in this area. Various problems include;
• Extortion
• Bribery
• Grease money
• Gifts
Specific environmental responsibilities
Businesses are widely regarded as having a duty to safeguard the natural environment. There are six areas for action;
1. Environmental auditing
2. Economic action
3. Accounting action
4. Ecological approach
5. Production
6. Quality management
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Personal Qualities expected from Professional Accountants
International Accounting Education Standards Board (IAESB) has published personal attributes that a Professional
Account should bear. They are;
1. Reliability
2. Responsibility
3. Timeliness
4. Courtesy
5. Respect
Professional qualities expected of an accountant
The professional qualities an accountant should demonstrate are:
1. Independence
2. Accountability
3. Scepticism
4. Social responsibility
IFAC & ACCA Code of Ethics for Professional Accountants
In June 2005, IFAC (International Federation of Accountants) published Code of Ethics for Professional Accountants
which was prepared by Ethics Board of IFAC.
A professional accountant shall comply with the following fundamental principles:
1. Integrity – to be straightforward and honest in all professional and business relationships.
2. Objectivity – to not allow bias, conflict of interest or undue influence of others to override professional or
business judgments.
3. Professional Competence and Due Care – to maintain professional knowledge and skill at the level required
to ensure that a client or employer receives competent professional services based on current developments
in practice, legislation and techniques and act diligently and in accordance with applicable technical and
professional standards.
4. Confidentiality – to respect the confidentiality of information acquired as a result of professional and
business relationships and, therefore, not disclose any such information to third parties without proper and
specific authority, unless there is a legal or professional right or duty to disclose, nor use the information for
the personal advantage of the professional accountant or third parties.
5. Professional Behavior – to comply with relevant laws and regulations and avoid any action that discredits
the profession.
Threats to independence
1.
2.
3.
4.
5.
Self-interest threat
Self-review threat
Advocacy threat
Familiarity threat
Intimidation threat
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Approaches to ethics
Making ethical decisions is often not an easy process. Individuals may find themselves facing an ethical dilemma and
could be unsure of the correct action to take.
There are several possible approaches to making these decisions.
1.
Absolutism
This means that there is an unchanging set of ethical principles that will apply in all situations, at all times
and in all societies.
Absolutist approaches to ethics are built on the principle that objective, universally applicable moral truths
exist and can be known. There is a set of moral rules that are always true.
2.
Relativism
It is the view that a wide variety of acceptable ethical beliefs and practices exist. The ethics that are most
appropriate in a given situation will depend on the conditions at that time.
The relativist approach suggests that all moral statements are essentially subjective and arise from the
culture, belief or emotion of the speaker.
3.
Pluralist approach
Another ethical approach is known as pluralism. This involves trying to cater to the needs of all stakeholders
without seriously compromising the interests of any one group.
4.
Deontology
This approach is basically “Ethics based on duty”. One’s actions may be based on duty rather hisher own
decisions.
5.
Consequentialist approach
This approach states that a decision is right or wrong depending on the consequences or outcomes of that
decision. As long as the outcome is right, then the action itself is irrelevant.
This approach can be broken down into two further perspectives:
a. Egoism – the action is morally correct as long as the outcome is favourable for the individual making
the decision
b. Utilitarianism – the action is considered to be morally correct if the outcome is favourable for the
greatest number of people or ‘the greater good’.
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - FBT – Business & Technology
Concept Backbone
Ethical Dilemma
An ethical dilemma is a complex situation that often involves an apparent mental conflict between moral
imperatives, in which to obey one would result in transgressing another.
Ethical dilemmas occur as a result of tensions between four sets of values
• Societal values – the law
• Personal values – values and principles held by the individual
• Corporate values – the values and principles of the organisation where the individual works, often laid down
in ethical codes
• Professional values – the values and principles of the professional body that the individual is a member of,
often laid down in ethical codes
Generally following elements should be considered;
1. I
2. DO
3. BEST
Conflict resolution guidance by ACCA
Tabani School of Accountancy
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Leading & managing people
Chapter 11
Management
Getting things done through other people.
Stewart
Management inventory
Authority
1. Charismatic authority
2. Traditional authority
3. Rational-legal authority
Responsibility
Accountability
The manager's role in organising work
1. Work planning
2. Assessing where resources are most usefully allocated
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Classical writers on management
Henri Fayol - Five functions of management
1.
2.
3.
4.
5.
Planning
Organising
Commanding
Co-ordinating
Controlling
F W Taylor - Scientific management
1.
2.
3.
4.
The development of a true science of work
The scientific selection and progressive development of workers
The application of techniques to plan, measure and control work
The constant and intimate co-operation between management and workers
Elton Mayo - Hawthorne studies & human relations
People are motivated at work by a variety of psychological needs, including social or 'belonging' needs.
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Modern writers on management
Peter Drucker - The management task & process
Drucker argued that the manager of a business has one basic function – economic performance
Management tasks
1. Managing a business
2. Managing managers
3. Managing workers and work
Management processes
1.
2.
3.
4.
5.
6.
7.
8.
Setting objectives for the organisation
Organising the work
Motivating
The job of measurement
Establish objectives or yardsticks
Analyse actual performance
Communicate the findings
Developing people
Mintzberg - Ten managerial roles
According to Mintzberg there are 'Ten Roles' that managers are seen playing practically;
1. Interpersonal
a. Figurehead
b. Leader
c. Liaison
2. Informational
a. Monitor
b. Spokesperson
c. Disseminator
3. Decisional
a. Entrepreneur
b. Disturbance handler
c. Resource allocator
d. Negotiator
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Leadership
The activity of influencing people to strive willingly for group objectives
Terry
Bennis: the distinction between management and leadership
Warren Bennis puts forward some specific differences between the role of the manager and the role of the leader;
1. The manager administers and maintains, by focusing on systems and controls and the short term
2. The leader innovates, focuses on people and inspires trust, and holds a long-term view
Bennis further distinguishes between the two as;
1. The manager as someone who 'does things right'
2. The leader who 'does the right thing'
Theories of leadership
1. Trait theories
2. Style theories
3. Contingency theories
Style theories
The Ashridge Management College model
1.
2.
3.
4.
Tells (autocratic)
Sells (persuasive)
Consults
Joins (democratic)
leader makes all of the decisions
subordinates have to be motivated to accept them
leader confers with subordinates
decision on the basis of consensus
Blake and Mouton's Managerial Grid
ACCA - F1 – Accountant in Business
Concept Backbone
Contingency theories
F E Fiedler
Fiedler studied the relationship between style of leadership and the effectiveness of the work group and identified
two types of leader;
1. Psychologically distant managers (PDMs)
maintain distance from their subordinates
a. They formalise the roles and relationships
b. They choose to be withdrawn and reserved
c. They prefer formal consultation methods
2. Psychologically close managers (PCMs)
are closer to their subordinates
a. They do not seek to formalise roles and relationships
b. They are more concerned about maintaining good human relationships
c. They prefer informal contacts
Fiedler suggested that the effectiveness of a work group depended on the situation, made up of three key variables;
1. The relationship between the leader and the group
2. The extent to which the task is defined and structured
3. The power of the leader in relation to the group
John Adair: Action-centered leadership
ACCA - F1 – Accountant in Business
Concept Backbone
Recruitment & selection
Chapter 12
Recruitment
Recruitment is the part of the process concerned with finding applicants: it is a positive action by management, going
into the labour market (internal and external), communicating opportunities and information, and generating
interest
Selection
Selection is the part of the employee resourcing process which involves choosing between applicants for jobs: it is
largely a 'negative' process, eliminating unsuitable applicants.
The recruitment process
1. Detailed human resource planning
2. Job analysis
a. A job description
b. A person specification
3. Identification of vacancies or handling job requisition
4. Recruitment advertising
5. Selection procedures
6. Notifying applicants of the results
Recruitment policy
1.
2.
3.
4.
Internal advertisement of vacancies, where possible
Efficient and courteous processing of applications
Fair and accurate provision of information to potential recruits
Selection of candidates on the basis of suitability, without discrimination
Advertising vacancies
Contents of a job advertisement
1.
2.
3.
4.
5.
6.
The organisation
The job
Conditions
Qualifications and experience
Rewards
Application process
A systematic approach to selection
1.
2.
3.
4.
5.
6.
7.
8.
Deal with responses to job advertisements
Assess each application against key criteria
Sort applications into 'possible', 'unsuitable' and 'marginal'
Invite candidates for interview
Reinforce interviews with selection testing
Review uninterviewed 'possibles' and 'marginals'
Send standard letters to unsuccessful applicants
Make a provisional offer to the successful candidate
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Selection methods
1. Interviewing
a. Individual (one-to-one)
b. Interview panels
c. Selection boards
2. Selection tests
a. Intelligence
b. Aptitude
c. Personality
d. Proficiency
e. Medical
3. Reference checking
a. Job references
b. Character references
4. Work sampling
a. Portfolios
b. Trial periods or exercises
5. Group selection methods
a. Assessment centres
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Diversity & equal opportunities
Chapter 13
Diversity
The ways in which people meaningfully differ in the workplace include not only race and ethnicity, age and gender,
but personality, preferred working style, individual needs and goals, and so on.
Managing diversity
A 'managing diversity' orientation implies the need to be proactive in managing the needs of a diverse workforce in
such areas as;
1. Tolerance of individual differences
2. Communicating effectively with (and motivating) ethnically diverse workforces
3. Managing workers with increasingly diverse family structures and responsibilities
4. Managing the adjustments to be made by an increasingly aged workforce
5. Managing increasingly diverse career aspirations/patterns, flexible working, etc
6. Dealing with differences in literacy, numeracy and qualifications in an international workforce
7. Managing co-operative working in ethnically diverse teams
Equal opportunities
Equal opportunities is 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 religious belief.
Discrimination at work
Treating an individual or a group less favourably than others.
Types of discrimination
1.
2.
3.
4.
Direct discrimination
Indirect discrimination
Victimisation
Harassment
Legal requirements
Discrimination of certain types is illegal in the UK on grounds of;
1. Gender and marital status
2. Colour, race, nationality and ethnic or national origin
3. Sexual orientation
4. Religious beliefs
5. Age
6. Disability
Effect on recruitment and selection
1.
2.
3.
4.
5.
6.
Advertising
Recruitment agencies
Application forms
Interviews
Selection tests
Records
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Individuals, groups & teams
Chapter 14
Individuals
1.
2.
3.
4.
Personality
Perception
Attitudes
Intelligence
Groups
A group is any collection of people who perceive themselves to be a group.
Groups attributes
Groups have certain attributes that a random crowd does not possess, they are;
1. A sense of identity
2. Loyalty to the group
3. Purpose and leadership
Group norms
A work group establishes norms or acceptable levels and methods of behaviour, to which all members of the group
are expected to conform
Reaction to norms
Individuals may react to group norms and customs in a variety of ways;
1. Compliance
toeing the line without real commitment
2. Internalisation
full acceptance and identification
3. Counter-conformity
rejecting the group and/or its norms
Group pressures
There are some circumstances which put strong pressure on the individual;
1. The issue is not clear-cut
2. The individual lacks support for their own attitude or behaviour
3. The individual is exposed to other members of the group for a length of time
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Teams
A team is a small number of people with complementary skills who are committed to a common purpose,
performance goals and approach for which they hold themselves basically accountable.
Katzenbach & Smith
Nine Team roles
1.
2.
3.
4.
5.
6.
7.
8.
9.
Belbin
Plant
Resource Investigator
Coordinator (Chairman)
Shaper
Monitor-Evaluator
Team worker
Implementer
Completer-Finisher
Specialist
People team contribution
1.
2.
3.
4.
5.
6.
7.
8.
9.
Rackham and Morgan
Proposing
Supporting
Seeking Information
Giving Information
Blocking/Difficulty stating
Shutting out behavior
Bringing in behavior
Testing understanding
Summarising
Stages of group development Bruce Tuckman
1.
2.
3.
4.
Forming
Storming
Norming
Performing
Later writers added two stages to Tuckman's model
1. Dorming
2. Mourning/adjourning
Rewarding effective teams
Individual performance rewards may act against team co-operation and performance. For team rewards to be
effective, the team must have certain characteristics;
1. Distinct roles
2. Significant autonomy
3. Maturity and stability
4. Co-operation
5. Interdependence of team members
Reward schemes
1. Profit sharing schemes
2. Gain sharing schemes
3. Employee share option schemes
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Evaluating team effectiveness
The task of the team leader is to build a 'successful' or 'effective' team. The criteria for team effectiveness include;
1. Task performance
2. Team functioning
3. Team member satisfaction
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Motivating individuals & groups
Chapter 15
Motivation
Motivation is a decision-making process through which the individual chooses desired outcomes and sets in motion
the behaviour appropriate to acquiring them. Huczynski & Buchanan
Theories of motivation
1. Content theories
2. Process theories
What are the things that motivate people?
How can people be motivated?
Content theories
Maslow's hierarchy of needs
Herzberg's two-factor theory
Herzberg's two-factor theory is based on two needs;
1. The need to avoid unpleasantness
2. The need for personal growth
Hygiene factors
The need to avoid unpleasantness is satisfied through hygiene factors which if inadequate, cause dissatisfaction with
work.
Examples
1. Company policy and administration
2. Interpersonal relations
3. Salary
4. Working conditions
5. The quality of supervision
6. Job security
ACCA - F1 – Accountant in Business
Concept Backbone
Motivators
The need for personal growth is satisfied by motivators which actively create job satisfaction and are effective in
motivating. A lack of motivator factors will encourage employees to concentrate on the hygiene factors.
Examples
1. Status
2. Challenging work
3. Advancement
4. Sense of achievement
5. Recognition
6. Growth in the job
7. Responsibility
Herzberg suggested three types of job design which would offer job satisfaction through enhanced motivators;
1. Job enrichment
more responsibilities with more authority
2. Job enlargement
more responsibilities with same authority
3. Job rotation
diversified work environment
Process theories
Expectancy theory
Victor Vroom
Victor Vroom stated a formula by which human motivation could be assessed and measured. He suggested that the
strength of an individual's motivation is the product of two factors;
1. Valence
the value that individual attaches to an incentive
2. Expectancy
the expectation of incentive being rewarded
The formula
Force of Motivation = Valence x Expectancy
Theory X and Theory Y
Douglas McGregor
Douglas McGregor suggested that managers tended to behave as though they subscribed to one of two sets of
assumptions about people at work;
1. Theory X
suggests that most people dislike work and responsibility and will avoid both if possible
2. Theory Y
suggests that physical and mental effort in work is as natural as play or rest
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Incentives
An incentive is the offer or promise of a reward for contribution or success, designed to motivate the individual or
team to behave in such a way as to earn it.
Rewards
A reward is a token (monetary or otherwise) given to an individual or team in recognition of some contribution or
success.
Nature of rewards
1. Extrinsic rewards
2. Intrinsic rewards
external to the job itself
arise from the performance of the work itself
A reward system
Child has outlined management criteria for a reward system. Such a system should do six things;
1. Fill job vacancies
2. Increase the predictability of employee's behaviour
3. Increase willingness to accept change and flexibility
4. Foster and encourage innovative behaviour
5. Reflect the nature of jobs in the organisation
6. Motivate
Job design as a motivator
Job design could act as a powerful motivator. Following are few job designs;
Feedback as a motivator
Feedback is a response of authority towards the work of subordinate, it has strong motivational influence.
There are two main types of feedback, both of which are valuable in enhancing performance and development;
1. Motivational feedback
2. Developmental feedback
Participation as a motivator
People generally want more interesting work and to have a say in decision-making. These expectations are a basic
part of the movement towards greater participation at work. Participation can involve employees and make them
feel committed to their task.
Pay as a motivator
In light of theorist's views pay can be regarded as a short-term motivator.
Inappropriate reward systems
Inappropriate reward systems may occur in practice. For example:
1. Bonuses awarded regardless of performance
2. Pay rises built into a contract regardless of performance
Prepared by Sir Uzair Fatmi
ACCA - F1 – Accountant in Business
Concept Backbone
Training & development
Chapter 16
Learning theory
There are different schools of learning theory which explain and describe how people learn;
1. Behaviourist psychology
people learn from their past
2. Cognitive approach
people process available information to learn
Learning styles
Honey and Mumford
Different people have different learning styles or preferences
1. Theorists
2. Reflectors
3. Activists
4. Pragmatists
The learning cycle Kolb
People can learn from everyday work experience, using the learning cycle of reflection, generalisation & application.
ACCA - F1 – Accountant in Business
Concept Backbone
A systematic approach to training
Personal development plan
A personal development plan is a clear developmental action plan for an individual which incorporates a wide set of
developmental opportunities, including formal training.
The purposes of a personal development plan include;
1. Improving performance in the existing job
2. Developing skills for future career moves within and outside the organisation
Steps in personal development planning
1. Analyse the current position
2. Set goals to cover performance
3. Draw up an action plan to achieve the goals
ACCA - F1 – Accountant in Business
Concept Backbone
Training methods
1. Off the job training
a. Courses
i. Day release
one day per week
ii. Distance learning
iii. Evening classes
iv. Revision courses
v. Block release
four weeks at a training centre then a period back at work
vi. Sandwich courses
six months at college then six months at work
vii. Sponsored full-time course
b. Computer-based training
c. E-learning
d. Techniques (webinars, seminars, case studies, etc)
2. On the job training
a. Demonstration/instruction
b. Job rotation
c. Temporary promotion
d. Assistant to positions
e. Action learning
f. Committees
g. Project work
Induction training
Induction is the process whereby a person is formally introduced and integrated into an organisation or system.
The purposes of induction
1.
2.
3.
4.
5.
To help new recruits to get their bearings
To begin to socialise new recruits into the culture and norms of the team/organisation
To support recruits in beginning performance
To identify ongoing training and development needs
To avoid initial problems at the 'induction crisis' stage of the employment life cycle
Development
Development may include training, but may also include a range of learning experiences whereby employees are:
1. Given work experience of increasing challenge and responsibility
2. Given guidance, support and counselling
3. Given suitable education and training
4. Helped to plan their future
Approaches to development
Approaches to development include the following;
1. Management development
enrolling junior managers in relevant education programmes
2. Career development
progressing employee upward in career
3. Professional development
enrolling employees in CPD programmes
4. Personal development
developing soft skills as well
Prepared by Sir Uzair Fatmi
Concept Backbone
ACCA - F1 – Accountant in Business
Performance appraisal
Chapter 17
Performance management
Performance management is a means of getting better results by managing performance within an agreed
framework of goals, standards and competence requirements. It is a process to establish a shared understanding
about what is to be achieved, and an approach to managing and developing people in order to achieve it.
The process of performance management
A systematic approach to performance management might include the following steps;
1. From the business plan
2. Draw up a performance agreement
3. Draw up a performance and development plan with the individual
4. Manage performance continually throughout the year
5. Performance review
Performance appraisal
Appraisal is part of the system of performance management, including goal setting, performance monitoring,
feedback and improvement planning.
Specific objectives of appraisal
1.
2.
3.
4.
5.
6.
7.
8.
9.
Establishing what the individual has to do in a job
Establishing the key or main results which the individual
Comparing the individual's level of performance against a standard, to provide a basis for remuneration
Identifying the individual's training and development needs
Identifying potential candidates for promotion
Identifying areas for improvement
Establishing an inventory of actual and potential performance
Monitoring the undertaking's selection procedures
Improving communication
The process of performance appraisal
Concept Backbone
ACCA - F1 – Accountant in Business
Appraisal techniques
1.
2.
3.
4.
5.
Overall assessment
Guided assessment
Grading
Behavioural incident methods
Results-orientated schemes
The manager writes in narrative
Comment on a number of specified characteristics
Comparative frame of reference to the general guidelines
Employee behaviour compared to typical behaviour
Review performance against specific targets and standards
Types of appraisals
1.
2.
3.
4.
Individual him/her-self required to comment on own performance
Subordinates are questioned for their boss’s appraisal
Customers & clients are encouraged to evaluate
Combination of above
Self-appraisal
Upward appraisal
Customer appraisal
360 degree appraisal
The appraisal interview
The process of an appraisal interview may be as follows;
1. Prepare
2. Interview
3. Agree
4. Report
5. Follow up
Styles of interviewer
Maier
1. The tell and sell style
2. The tell and listen style
3. The problem-solving style
Barriers to effective appraisal Lockett
Barriers to effective appraisal can be identified as follows;
1. Appraisal as confrontation
2. Appraisal as judgement
3. Appraisal as chat
4. Appraisal as bureaucracy
5. Appraisal as unfinished business
6. Appraisal as annual event
Prepared by Sir Uzair Fatmi