Managing in a Strategic Business Context. September 2013

Managing in a Strategic Business Context EXAMINER'S REPORT September 2013 Chartered Institute of Personnel and Development Professional Developm...
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Managing in a Strategic Business Context

EXAMINER'S REPORT

September 2013

Chartered Institute of Personnel and Development

Professional Development Scheme

Leadership and Management

Managing in a Strategic Business

Context

September 2013

12 September 2013

08:50–12:00 hrs

Time allowed - Three hours and ten minutes (including ten minutes' reading time)

Answer TWO questions from Section A and SEVEN of the ten

questions in Section B.

Please write clearly and legibly.

Questions may be answered in any order.

Equal marks are allocated to each section of the paper.

Within Section B equal marks are allocated to each question.

If a question includes reference to 'your organisation', this may be interpreted as covering any organisation with which you are familiar. You will fail the examination if: • •

you fail to answer seven questions in Section B and/or you achieve less than 40 per cent in any section.

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Managing in a Strategic Business Context

EXAMINER'S REPORT

September 2013

SECTION A Answer ANY TWO questions in this section. 1. Read the following passage from 'Winning' by Jack Welch (2005:165) (a high profile CEO of the General Electric Company in the USA for over 20 years) and answer questions a, b and c which follow: Forget the arduous, intellectualized number crunching and data grinding that gurus say you have to go through to get strategy right. Forget the scenario planning, year-long studies and hundred plus page reports. They're time consuming and expensive, and you just don't need them. In real life strategy is actually very straightforward. You pick a general direction and implement like hell. a) What arguments can be made against Jack Welch's view that strategy making, even for a very large corporation, is best done simply and without the benefit of an extensive evidence base? What arguments could be made in favour of his view? Justify your answer with examples from your reading or from your own experience. b) In what ways can it be argued that developments in the contemporary business environment are either eroding or increasing the validity of Jack Welch's 'simple' approach to strategy-making? Justify your answer. c) Discuss the extent to which your own organisation's HR strategy has been developed using the Jack Welch approach. Explain in what ways it might be improved.

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2. Read the following passage paraphrased from an article entitled Tactics for Success by Bernie Tilling and Charles Fadel published in the RSA Journal, Summer, 2012:10-11 and answer questions a, b and c which follow: To qualify for membership of today's knowledge-focused workforce, young people need to develop 21st century skills. These include learning and innovation skills such as critical thinking and problem solving, creativity and innovation, communication and collaboration; digital literacy skills that develop information, media and ICT (information, communication technologies) competencies; and career and life skills such as flexibility and adaptability, initiative and self-direction, social and cultural fluency, and leadership and responsibility. But our education systems do not place the building of these skills on an equal par with acquiring content knowledge in a variety of core subjects and in building literacy and numeracy skills. This has given rise to a serious global skills gap - the gulf between the high demand for and low supply of many of these essential 21st century skills. a) Explain why the skills Tilling and Fadel cite as being 'essential 21st century skills' are more important for young people to develop now than was the case 30 years ago. b) To what extent do you agree with the view that our education system should focus as much on the development of these skills as it does on the acquisition of subject matter knowledge, literacy and numeracy? Justify your answer. c) What role might employing organisations play in helping to narrow the 'global skills gap' identified in the article?

PLEASE TURN OVER

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September 2013

3. Read the following passage paraphrased from an article by Matthew Bishop published by the Economist in The World in 2013 (116-7), and answer questions a, b and c which follow: Whereas their predecessors were largely focused on funding the arts and educational institutions, today's biggest philanthropists (Bill Gates, Warren Buffett et al) expect their giving to overcome some of the world's most formidable challenges such as the eradication of polio in the countries where it remains and reducing dramatically the number of deaths from malaria. Over the long term, they believe that philanthropy may be able see off climate change and largely consign poverty to the history books. To that end they are trying to persuade fellow billionaires across the world to sign a Giving Pledge, promising to leave half their wealth to good causes. Some quick wins for the new philanthropists would take some heat out of the growing anti-rich sentiment around the world. It might even form the basis of a new social contract, in which big differences in personal wealth are tolerated if the rich make a serious effort to give generously and effectively. Philanthropists can no longer expect to solve big problems on their own. Solutions are only attainable if they work effectively with the non-profit sector, government and especially international businesses. Establishing partnerships with powerful companies poses particular difficulties because of suspicions that companies such as Nike, Pepsico and Unilever use such partnerships as fig leaves rather than as a means of driving fundamental changes to the world. a) Which major contemporary developments in the business environment might explain why the 'new philanthropists' are developing different and much more ambitious objectives than their predecessors in past decades? Justify your answer. b) What factors underlie the growing 'anti-rich' sentiment referred to in the article? c) Explain why, from the philanthropists' point of view, there are risks associated with forming partnerships with large international business organisations.

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4. Read the following passage paraphrased from an opinion piece published in the Times (January 1st 2013:19). The article by Stephen King (Chief Economist at HSBC) was entitled Wake up. Our trade with China is pathetic, and answer questions a, b and c which follow: China's enduring success has had a highly ambiguous impact on Western economies. While those countries with strong trade connections to China have benefited hugely from its success, the same can not be said either about Western Europe or about North America. And it certainly can not be said about the UK. Germany has done better than most, with 2% of its national output exported directly to China, representing a fourfold increase over the last ten years. By contrast the UK's exposure to China is almost imperceptibly small. A pathetic 0.4% of our national output heads to China. The UK has ended up with many of the costs stemming from China's success yet with few of the benefits. China's insatiable demand for commodities has placed increasing strain on our economy, while Chinese growth has pushed up not just our fuel bills but also our food bills. At the same time off shoring and outsourcing has reduced the bargaining power of our labour. UK workers may blame domestic austerity for the absence of decent wage increases, but heightened competition from China and elsewhere in the emerging world must surely be a bigger constraint. a) Why does the UK have such a poor record when it comes to exporting goods and services to developing countries such as China? How might our record be improved in the future? b) Explain why the rise of China and other developing economies can be linked directly to increases in the price of oil and food in the UK. c) Explain how wage levels in the UK have been affected by the rise of the Chinese economy over the past 20 years.

PLEASE TURN OVER

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SECTION B Answer SEVEN of the ten questions in this section. To communicate your answer more clearly, you may use whatever methods you wish, for example diagrams, flow charts, bullet points - so long as you provide explanations of these. 1.

On the news it is reported that the proportion of workers who are members of trade unions (union density) has fallen in the past five years. However, there remains a big difference between the level of membership in the private sector (now just 14%) and that in the public sector (56%). You are asked to explain why there is such a difference. What will you say?

2.

A colleague argues that when new technologies are introduced to workplaces, some stakeholders always lose out while others gain. You are asked to say whether or not you agree with this point of view. Draw on examples from your own experience when answering.

3.

A commentator from France argues that it would be unfair for the UK to negotiate to remove itself from much European Union regulation, while retaining access to the European Single Market. You are asked to explain what the single market is and why most agree that retaining access to it is important for the UK economy. What will you say?

4.

You are asked to prepare a briefing paper for your organisation's Chief Executive Officer outlining the long-term impact that population ageing in the UK is likely to have on your organisation. What key points will you want to make and why?

5.

You are responsible for running induction programmes for new employees in an organisation which develops and manufactures food products. During the programme a video is shown in which managers state that the company's products are primarily bought by people in 'social class categories A, B and C1'. You are asked to explain what this means. You are also asked why the company does not produce foods that are attractive to everyone, whatever their social class. What will you say and why?

6.

Your manager reads a newspaper article that describes how a high profile commercial organisation has 'successfully lobbied government ministers' over a proposed policy change. He asks you explain what the term 'lobbying' means and what it involves in practice. What will you say? Illustrate your answer with an example.

7.

On the radio you hear a vigorous debate between two politicians. One argues in favour of rapid de-regulation of business and planning regulations in order to stimulate economic growth. The other questions how far such de-regulation would affect the economy in practice. Comment on this debate, stating your position and justifying it. 6

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8.

A colleague asks you to explain in what ways the HR function in your organisation contributes to strategy-making. How will you answer? Illustrate your answer with examples.

9.

At a job interview you are asked what you understand by the term 'professionalism'. You are also asked to set out your views on what distinguishes a professionally run HRM function from one which is unprofessional in its approach. What will you say and why?

10.

You attend a training event for managers working for different organisations in your industry. In one session you are asked to work in groups to produce a brief SWOT analysis focusing on the prospects for your industry over the next five years. What points will you be keenest to see included in the analysis and why?

END OF EXAMINATION

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Introduction A total of twenty candidates took the opportunity to sit this last PDS MSBC examination, some re-sitting others sitting for the first time. The overall pass rate was good (70%) and the proportion of merits (25%) most pleasing. The breakdown of marks, prior to final moderation, was as follows:

September 2013 Grade Distinction Merit Pass Marginal fail Fail Total

Number

Percentage of total

5 9 0 6 20

25 45 0 30 100

The figures shown are simply calculations based on the number of candidates sitting the examination in September 2013, whether for the first or a subsequent time, and are for interest only. They are not to be confused with the statistics produced by CIPD headquarters, which are based on the performance of candidates sitting the examination for the first time. It is from these figures that the national average pass rates are calculated. On this occasion the papers were marked by myself and moderated by Gail Swift. Feedback on each question is as follows:

Section A Question 1 The arguments against Jack Welch's view relate to the genuine utility of evidencebased strategy-making and techniques such as scenario planning. Not only do such approaches increase the chances that strategies will meet their intended outcomes, they also provide important justification which makes the strategies more credible as far as organisational stakeholders are concerned. They also serve to help build corporate reputation among key opinion formers such as financial analysts. The main argument for Jack Welch's view is based on the notion that management judgement (particularly when rooted in decades of relevant experience) provides a better basis for effective strategy-making than more expensive and long-winded approaches based on careful consideration of objectively-collected evidence. On the one hand it is often argued that the complexity of the evolving global business environment requires an evidence-based approach to strategy-making so that all 8 Registered charity no: 1079797

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significant factors are properly understood, taken into consideration and kept under review. Moreover, the uncertainty of this business environment makes scenarioplanning more necessary than was the case in the past. On the other hand, it is also often argued that traditional 'strategic planning' is increasingly redundant because the business environment is now so unpredictable as to make it an expensive and often unnecessary activity. Instead organisations need to be agile and opportunistic in their approach, and this can be held back by more complicated evidence-based approaches to strategy-making. Answers varied widely here. What mattered was that a coherent, thoughtful and full answer was provided to the question. Opinion, in practice was very divided on whether or not Welch-type thinking underpinned HR strategies. Candidates tended not to be as critical of it as had been expected. Question 2 This proved to be by far the most popular of the four Section A questions. Almost every candidate answered it, many very effectively. As far as part one was concerned, the key point to make relates to the evolution of a knowledge economy, springing from the restructuring of economies in the wake of globalisation and new technologies. A country like the UK can only now make its living in the world by selling services, cultural/educational products and hi-tech manufactured products. Meanwhile, jobs-for-life or for extended periods are becoming less common. Delayering in organisations and the rise of smaller, networked organisations means that a wider range of skills/attributes need to be acquired in order to sustain a career over time. People have very diverse views about this big, central debate in educational policy, and this was reflected in the candidates' views expressed here. Some argue that these are not really 'skills' at all and cannot therefore be taught in an educational institution. It is the job of the educator to develop learning skills alongside a knowledge-base, but softer skills are really attributes, competencies or even traits, that we can only develop through working and living socially. Others argue that the balance needs to shift and that, for example, it is a major function of a business school to develop and test skills acquisition alongside subject-matter knowledge. The answer here must be 'a great deal' through providing effective experience, through development programmes and performance appraisal systems and more generally through good, professional line management that sees its role as to bring out the best in people, by challenging them and providing developmental opportunities. This was answered very well on the whole, many candidates drawing on their own observation of workplace initiatives.

Question 3 Globalisation was the major development that stronger candidates reflected on here. This has made the world smaller and has broadened horizons away from national 9 Registered charity no: 1079797

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September 2013

concerns. Awareness of world poverty and of inequality has risen, and this is reflected in the wider horizons of the philanthropists and of the causes they want to be remembered for/associated with. The rise of international corporations with genuine global reach and activities in developing countries is another related factor. The rise of global media and its increased capacity to scrutinise the activities of philanthropists is another potentially significant development. The key points to make here were partly long-term, and partly shorter-term. Longer term we see a general trend towards greater inequality across the world and the rise of a class of 'super rich' people who have a great deal of power and are also well known thanks to media coverage. Rising inequality is always associated with a degree of resentment towards those who have most. Shorter-term factors relate to the current position of the world economy and to the fact that real incomes and living standards have been falling for a few years now across much of the industrialised world. Moreover there is a tendency for people (perhaps unfairly) to blame elements of the super rich for current financial woes. There is a strong hint about possible answers here by the reference to 'fig leaves' in the quotation, but candidates still struggled with it somewhat. The suspicion is that many large corporations are primarily motivated by self-interest rather than by philanthropic interests when they engage in CSR activity. Boosting their own publicity by wearing trendy ethical accessories, they are seen by many opinion formers as having a negative impact on the developing world through their global business activities. There is thus a danger of good causes becoming contaminated in the eyes of the public when acts of genuine philanthropy are linked closely with PR-driven corporate CSR activities. Question 4 This is not entirely clear, but the major problem is the lack of a manufacturing sector which is able to produce goods that are in demand by Chinese consumers. Whereas the German engineering sector has managed to increase its global market share in recent years (cars, machine tools, kitchens etc), the UK's has contracted. We maintain strengths in pharmaceuticals (which are exported to China) and in aerospace (which is not), but otherwise our exports now largely consist of services. We thus have a huge trade deficit with China. We import their goods in vast numbers, but sell little back to them in return. This situation will take a long time to fix. A globally successful manufacturing sector cannot be re-created over night. But steps could be taken in, for example, the R&D field to make a good start. In the short term there a need to promote service exports much more vigorously – that is, financial services, business services, cultural industries, tourism, higher education etc. A simple question about supply and demand which, as anticipated, was not wellanswered by some candidates. No sophisticated answers were required here, just a straightforward appreciation that increased demand from China and elsewhere of scarce commodities (for example, oil) and agricultural products, when combined with uncertain supply, increases global prices. It is a simple case of too many people chasing too few goods. Stronger candidates went on to explain that rising oil prices tend to push up the price of everything else because of the need to transport goods to retailers and consumers. 10 Registered charity no: 1079797

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Similarly here. No hugely sophisticated answers were required. Just an understanding that lower living standards in China permits manufacturers to undercut western-based competitors very substantially. This lowers the costs of goods and means that UK manufacturers have either tended to go out of business or to relocate their operations overseas in developing countries. Either way the impact on UK workers is to reduce bargaining power and hence to create a downward effect on wage levels. Stronger candidates observed that UK workers have also benefited from being able to buy cheap Chinese-manufactured goods which has greatly mitigated the overall impact on living standards. Price inflation levels have also been kept very low in recent decades due to the presence of Chinese products in Western markets.

Section B Question 1 This was answered by a majority of candidates, with very mixed results. Trade union density remains high in the public sector, in part, because it has not been affected to the same extent by changes in the competitive environment that have transformed the private sector in recent years. Sectors which have traditionally had high membership (manufacturing, mining, shipbuilding etc) have declined, their place being taken by private services (retail, call centres, hotels etc) where membership has always been low or non-existent. More intense global competition affecting the private sector has also led to a reduction in union wage premiums (that is, the extent to which a union presence is associated with higher wages), reducing the power of a union to have a huge impact. This is not true, for the most part, in the public sector. More controversially, it can be argued that the private sector has been better than the public sector at embracing sophisticated, high performance/engagement HR practices that tend to obviate the perceived need for unions. Private sector employers are also in the vanguard of the adoption of individualised HR practices, such as performance-related pay, which tend to undermine collectivism. These are being resisted with a degree of success in the public sector.

Question 2 Almost everyone had a go at this, most drawing effectively on their own observations and experience. There was plenty of room for the development of original arguments and justifications. Most (though by no means all) agreed with the statement and gave examples of situations in which groups of employees have lost out in some way thanks to new technologies. As always, what mattered is that a decent argument was advanced and justified, and that examples are given to back up the argument that is made. Weaker candidates struggled to this effectively. Question 3 11 Registered charity no: 1079797

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Few attempted this as is always the case for questions with the words 'European Union' in it tends to frighten candidates. This one aimed to tap into the most significant contemporary debate, namely whether or not the UK should seek to renegotiate the terms of its membership in the near future. To pass candidates had first to give a good, well-informed definition of what the single market is (that is, arrangement whereby free trade can occur across national borders without interference or tariffs etc), and secondly, to explain why access to this market is important for the UK. Strong answers to the second part referred to opportunities to trade internationally and to the effective attraction of inward investment from elsewhere in the world. Some poorer answers either failed to address both parts or confused the 'single market' with the 'single currency'. Question 4 Every candidate attempted this question, and most were able to provide good answers. There was plenty of scope, depending on the industry the candidate worked in, for reflections on the impact both for product markets and labour markets. The strongest answers covered both, but most only focused on HR issues. Arguments about products and services derive from an understanding that spending patterns vary with age and that some services are geared towards meeting the needs of particular age groups. As far as labour markets are concerned the key was an appreciation of the fact that the big baby boom generation is now retiring, leading over the longer term to risks of severe skills shortages. Pension and retirement age issues formed the major focus of most answers. Question 5 This was not so well done, despite it proving to be a popular choice. Candidates particularly struggled to identify the term 'social classes A, B and C1' as coming from the very well-established and widely used standard social classification system developed originally by the Institute of Practitioners in Advertising (IPA), or even to begin to define it at all. Group A is high earners, Group B consists of middle managers, administrators and professional occupations, while Group C1 are junior management, administrative and professional staffs. The second part of the question was more effectively answered, candidates successfully demonstrating a basic understanding of the commercial significance of variations in purchasing power, tastes, fashions and values across different groups within the population. Competitive advantage is thus gained and retained by targeting products and services at one or more specific groups. On the whole though, answers were unconvincing. Question 6 Most steered clear of this, despite it being a straight forward question about the chief way that organisations seek to influence government policy. A very wide range of tools and techniques are used from direct approaches (writing to and arranging meetings with ministers), to those which are indirect (lobbying people who have influence over ministers like MPs and advisors), to more general types of 12 Registered charity no: 1079797

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campaigning through industry bodies. Stronger candidates reflected on the role played by consultation exercises, professional lobbyists and media campaigns, but for the most part candidates avoided this question. Question 7 Again. not a popular choice. Views differed among those who did attempt it (six candidates). What mattered was that a full and well-informed answer was given that demonstrates an understanding of the basic points. Some argue that regulation represents not just an unnecessary cost to businesses, but also a burden. It follows that deregulation promotes economic activity and helps to make organisations more competitive, particularly internationally. Others argue that regulation does not just help ensure fairness, but that it also helps to provide a stable business environment in which all can participate on equal terms thus promoting business activity. It follows that de-regulation can reduce consumer confidence and hence have a negative impact on growth. Question 8 By contrast this was a very popular choice of question. Most did it well, reflecting on the way that an HR function makes a contribution to the making of corporate strategy. However, as this is often not something that occurs in organisations, it could also be answered perfectly well with reference to HR strategy. Answers varied hugely depending on the organisation and the nature of HR activities. What mattered was that a full, clear answer was given which was both well-informed and illustrated with at least two examples. Those who managed to do this picked up plenty of marks here. Question 9 Another question that people were attracted to. The first part of this question required candidates to define the term 'professionalism'. There are many potential ways of doing this, so provided the candidate provided a full, well-articulated and well-justified definition a pass mark was awarded. The major alternative perspectives identified in the literature focus on one or more of the following: •

putting the needs of the organisation or community above self interest



specialist knowledge



codes of conduct / ethics



regulation by a profession of its own members.

The second part of the answer follows on from whatever definition is provided in answer to the first question. So any number of potential answers could be acceptable. It was however important that candidates gave full attention to this second question and justified their views. It was also important that they did not simply write about legal compliance. That is one part of professionalism but there is a 13 Registered charity no: 1079797

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great deal more that also needs to be stated. Most did this well, focusing equity and maintaining professional relationships etc. Question 10 A very general question as the last question on the last ever MSBC paper. Answers varied greatly, but most successfully included each aspect of a SWOT analysis in their answers. Far too many, however, confused 'your industry' for 'your organisation' and ended up misfiring somewhat. Justification was also required, and candidates often did that rather poorly, simply presenting the analysis without annotation or explanation.

General comments Sadly this brings to an end the PDS MSBC examination. I have been the examiner for this paper since it was first set in 2006, and also looked after the old MBC exam for five years before that. So I reckon I must have set over thirty papers including standbys, samples and overseas versions. For the most part the results have always been good, averaging over 70%. The questions are challenging, but candidates have tended in the main to rise to the challenge. And this was the case for this final paper too.

Stephen Taylor Examiner

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