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CIPS Level 6

QUICK START GUIDE

Leading and Influencing in

Purchasing

ii

First edition for new syllabus October 2006

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CHAPTER 1

Leadership and Management 1 What is leadership? Leadership and management

Management is ‘the process through which efforts of members of the organisation are co-ordinated, directed and guided towards the achievement of organisational goals: the clarification of objectives, planning, organising, directing and controlling other people’s work.’

Leadership is ‘a relationship through which one person influences the behaviour or actions of other people’. (Mullins)

The terms are often used interchangeably – but a number of efforts have been made to distinguish meaningfully between the two concepts.

• Kotter suggests that management is about coping with complexity: the use of structure and control to ensure order and continuity. Management can be exercised over processes, projects, resources, time and so on. Leadership is about coping with change: creating a sense of direction, communicating a vision, energising, inspiring and motivating. It can, essentially, only be exercised over people.

• Yukl suggests that while management is defined by a formal role and position in the organisation hierarchy, leaders are given their roles by the perceptions and choice of others. Managers have subordinates: leaders have followers.

• Katz & Kahn suggest that while managers aim to secure compliance with routine organisational objectives, leaders aim to secure willingness, enthusiasm and commitment.

• Boddy argues that effective managers get things done: effective leaders see opportunities to do new things. Leadership is about ‘where are we going?’ – while management is about ‘how do we get there?’

Do managers need to be leaders – and vice versa?

Whetten & Cameron argue that the distinction between managers and leaders is no longer very useful. (‘Managers cannot be successful without being good leaders, and leaders cannot be successful without being good managers.’) Kotter, while distinguishing between management and leadership, stressed that organisations need both, for effective performance.

An alternative framework for looking at this, with which you might be familiar, is the McKinsey 7S framework. Organisations require attention to:

• Strategy, Structure and Systems: ‘hard’ or technical aspects – which are the focus of management and

• Style (or culture), Staff, Skills and Shared goals: ‘soft’ or people-oriented aspects – which are the focus of leadership.

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Leading and Influencing in Purchasing

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Why then might it be important for managers to become leaders in an organisation or supply chain? Leaders energise and support change; secure commitment; set direction; support, challenge and develop people; and maximise the contribution of skilled, networked teams.

2 Leadership traits Trait theories suggest that the best way to define leadership is to analyse the personalities of successful leaders and identify their common personality characteristics as ‘leadership traits’. Various attempts have been made to determine exactly what these traits are: adaptability, social alertness, ambition, decisiveness, persistence, self-confidence, tolerance of stress, dominance, co-operation, willingness to take responsibility, energy and so on.

Trait analysis has proved unable to produce a consistent (or realistic) set of qualities to distinguish meaningfully between leaders and non-leaders. However, it has remained useful for management selection, as a way of expressing essential qualities: usually, some mix of the drive to influence and achieve, intelligence and social competence.

3 Leadership skills and values One of the major strands of behavioural theory is the idea of leadership style: more or less consistent clusters of behaviour that reflect a particular purpose or preference on the part of the leader.

Some of the skills said to characterise effective leaders include:

• Vision: the ability to envision a ‘desired future state of the organisation’; to put in place a picture of a compelling future which involves others and focuses on achievement.

• Emotional intelligence (EQ): ‘the capacity for recognising our own feelings and that of others, for motivating ourselves, and for managing emotions well in ourselves as well as others’ (Goleman). The five basic components of EQ are: self-awareness, self-regulation, motivation, empathy and social skills. EQ correlates strongly with effective leadership, because it supports leadership qualities and leadership skills such as inspiring, persuading, motivating.

• Interpersonal and communication skills. As an interpersonal or relational process, leadership depends to a large extent on interpersonal skills. Think of the effective leaders you know – and you will probably recognise them as effective communicators.

Key communication skills for leadership include: promotion (of vision, goals and values; of the team/department; and of the leader’s own image and achievements); influencing and persuasion (in order to get things done through other people); inspiration (appealing to the aspirations of followers); supporting (to build confidence) and challenging (to build competence).

Values are things we value or attach importance to: a mixture of beliefs, emotions and positive/negative judgements about things. Peters & Waterman suggested that a ‘handful of guiding values’ could be a powerful unifying force and a non-threatening form of leadership control in an organisation.

Integrity is a construct: people define it according to specific values about what constitutes ethical behaviour in their culture. However, it is often used to refer to a cluster of behaviours to do with: consistency/reliability, openness, honesty and respect for people.

Chapter 1: Leadership and Management

4 What do leaders actually do? Functional leadership

In functional leadership models, leadership is defined by the functions carried out – not by a particular individual or position. Mullins cites a summary of 14 functions of the leader: as executive; planner; policy-maker; source of expertise; external group representative; controller of internal relations; purveyor of rewards and punishment; arbitrator and mediator; exemplar or role model; symbol of the group; substitute for individual responsibility; ideologist (source of values and standards); father figure (focus of positive emotions); and scapegoat (focus of blame).

Action-centred leadership

John Adair developed ‘action-centred’ leadership, arguing that the common perception of leadership as ‘decision-making’ was inadequate to describe the range of action required by the complex situations in which a manager may find herself. He saw the leadership process in a context made up of three basic objectives: task achievement; the development and satisfaction of individuals; and the building/maintenance of effectively functioning groups.

Task, individual and group needs must be examined in the light of the whole situation, which dictates the relative priority that must be given to each. Effective leadership is identifying and acting on that priority, and exercising (or mobilising in other group members) a relevant cluster of leadership roles to meet the various needs.

The challenge-focused approach

Pedler, Burgoyne & Boydell propose an alternative model, based on their re-definition of leadership as a collective activity focused on mobilising the resources needed to meet challenges. Leadership needs attention to three basic domains: challenges (critical tasks, problems and issues for the organisation, which require leadership response); characteristics (the qualities, competencies and skills that individuals can bring to bear on challenges); and context (the immediate conditions operating in the challenge situation).

5 Leadership roles in a purchasing function

Any member of a purchasing team may exercise leadership in the ways described above. However, there will probably be designated leadership roles in the purchasing function. These will vary, according to the size and type of organisation, and the status and role of purchasing within it (bear this in mind when tackling exam case studies…).

However, typical leadership roles include: a purchasing director (or Chief Purchasing Officer or Head of Purchasing), who creates the direction, culture and values of purchasing in the organisation; and a Senior Purchasing Manager, leading a team of Purchasing Managers (or a cross-functional Purchasing Council). In large organisations, there may also be a Purchasing Leadership Team (PLT) which meets regularly to ensure the ‘flow down’ of strategic vision.

The leadership focus of purchasing at the business and strategic levels will be on areas such as: strategy formation and alignment; securing stakeholder buy-in; establishing and applying meaningful Key Performance Indicators for purchasing; integrating purchasing activity within the organisation; developing ethical practice; and developing network relationships.

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CHAPTER 2

Leadership Styles & Approaches 1 Leadership style models Leadership style may be defined (Mullins) as: ‘the way in which the functions of leadership are carried out; the way in which the manager typically behaves towards members of the group’.

Many attempts have been made to classify styles. Some of these models have suggested that team members prefer some styles better than others, or that teams work better under some styles than others. Other models, however, have reflected the growing realisation that a range of different styles might be appropriate, depending on the leadership context.

2 Two dimensional models of leadership behaviour Blake and Mouton classify managers on a grid in terms of their concern for people (vertical axis) and their concern for production (horizontal axis).

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(1, 1) ‘Impoverished’: leader exerts minimal effort/concern for staff or work

(1, 9) ‘Country club’: leader develops work relationships at the expense of task

(9, 1) ‘Task management’: leader focuses almost exclusively on achieving results

(9, 9) ‘Team management’: leader achieves results by leading a committed, high-morale team.

The grid assumes that leadership requires a balance between concern for the task and concern for people.

Directive leadership is based on letting subordinates know clearly what is expected from them; giving specific guidance and instructions; setting rules and procedures; scheduling and co-ordinating work; and monitoring and controlling performance. It may be effective when subordinates do not share the leader’s objectives, or lack ability or confidence; when time is short and results critical; and when subordinates are willing to accept top-down authority.

Facilitative leadership is based on giving team members opportunities to take responsibility and initiative: jointly agreeing objectives and standards; delegating responsibility for day-to-day activities; providing constructive feedback; and being available to coach/advise if required. Such a style may be effective where subordinates are willing, able and confident enough to participate in decision making; where subordinate input to (and acceptance of) decisions is important; and where the task or problem is relatively unstructured.

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Chapter 2: Leadership Styles and Approaches

5

A number of classic models propose that the style of leadership chosen by a manager depends, among other things, on the assumptions he is making about workers. Douglas McGregor proposed two extreme sets of assumptions.

Theory X asserts that the average human being dislikes work and will avoid it if he can. People must therefore be coerced, controlled, directed or bribed to expend adequate effort. This is acceptable to the worker, who prefers to be directed and wants security above all.

Theory Y asserts that work can be a source of satisfaction. People can exercise self-direction to achieve objectives to which they are committed, and – if supported – will seek responsibility and to exercise initiative and creativity in solving organisational problems.

If employees are treated as if Theory X were true (using carrot-and-stick motivation systems, close supervision etc) they will eventually behave accordingly. Treated as if Theory Y were true (using empowered teamworking and a facilitative style), they will rise to the challenge.

3 Classifications of leadership style Huneryager and Heckman identified three basic leadership styles:

(a) Authoritarian (or autocratic) style: power and authority are centralised in the leader.

(b) Democratic style: decision-making is shared by team members via participative processes, and there is greater group interaction.

(c) Laissez-faire style: the team is genuinely autonomous, organising its own work and making decisions (within defined boundaries).

Other studies have identified different style classifications, but style models are often talking about the same things: a range of behaviours on a continuum (Tannenbaum & Schmidt) from wholly task-focused to wholly people focused; directive to facilitative/supportive; autocratic (high managerial control) to democratic (high subordinate discretion).

Tells, sells, consults, joins The research unit at Ashridge Management College identified four styles:

• Tells (autocratic): the leader makes decisions and expects instructions to be obeyed. This is quick and efficient, but does not encourage initiative or commitment from subordinates.

• Sells (persuasive): the leader persuades/motivates team members to implement decisions. This may encourage better understanding and commitment – but not much

• Consults (participative): the leader takes team views into account in making decisions. This encourages commitment and may benefit from input, but it takes longer.

• Joins (democratic): the leader works with the team to develop consensus decisions. This is highly empowering and motivating, though it risks loss of control.

The style approach has helped in the perception of leadership as a range of choices open to the manager. However, it doesn’t address issues such as the limits of behavioural flexibility and the need for consistency.


4 A situational approach to leadership Situational models see effective leadership as being dependent on a number of contingent factors: it is necessary to lead in a manner that is appropriate to a particular situation.

Hersey and Blanchard focus on the readiness of team members to perform a given task, in terms of their ability and willingness to complete it successfully.

An effective leader will adapt his style to the current level of readiness of the team and help team members to develop maturity or readiness as far as possible.

Situational approaches raise awareness of the factors in choosing leadership style. The main challenge is for the leader actually to modify his behaviour as situations change, without perceived incon

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sistency.

5 Transactional and transformational leadership Transactional leaders see the relationship with their followers in terms of mutual dependence or exchange: they use directive behaviours and carrot-and-stick motivation.

Transformational leaders see their role as an interpersonal process of stimulating interest, generating awareness, inspiring higher achievement, and motivating people to genuine commitment. A transformational style is charismatic or inspirational.

6 Strategic leadership approaches ‘Strategic leadership’ is how senior leaders manage strategy and change in the organisation.

• Strategy approach: the (visionary) leader focuses on identifying opportunities and formulating strategic plans: day-to-day operations are delegated to other managers.

• Human assets approach: the leader focuses on selecting, developing and empowering people who can add value and take responsibility for managing the corporate strategy.

• Expertise approach: the leader focuses on developing expertise and core competences for competitive advantage: other managers are expected to support.

• Control approach: the (transactional) leader focuses on controlling performance, setting up procedures, performance measures and controls: other managers implement.

• Change approach: the leader focuses on championing and driving cultural and strategic change: other managers act as change agents.

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CHAPTER 3

Influencing 1 Collaboration Thomas suggested that conflicts of interest can be mapped on two dimensions, according to one’s assertiveness and co-operativeness.

Competition/adversarialism is based on getting your own way – if necessary, at the expense of others. This does not foster long-term constructive relationships, but may be appropriate if the issue/outcome is important.

Accommodation is based on maintaining harmonious relationship, at your own cost. This may be appropriate if relationship is the priority (or you don’t have much power).

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Collaboration is based on both parties working together to find a solution or outcome in which the needs and interests of both parties are taken into account as far as possible. This is potentially the basis for long-term constructive and co-operative relationships.

In a purchasing context, collaboration implies integration and adaptation by both parties, in terms of operational linkages, joint definition of expectations, information exchange, and sharing of the added value created by the relationship.

2 What is ‘influencing’? Influencing is the process of applying some form of pressure in order to change other people’s attitudes or behaviours: to secure their compliance, obedience, conformity or commitment.

Influencing is different from negotiation in several key respects. It is a continual process, not an event. It need not be intentional or conscious, or involve conferring or bargaining with the other party: it not end with an explicit joint agreement. Techniques and tactics of influence and persuasion are, however, used by both parties in a negotiation. And the aims of ethical influencing are not dissimilar to a negotiated approach: the aim is to allow both parties to have their views and needs taken into account, and to integrate their goals and interests so that the outcome is perceived as a win-win.

3 Influencing as an interpersonal process It is worth remembering that business people are people! The core leadership quality of emotional intelligence includes being aware of, or sensitive to, the needs and emotions of other people – and being able to respond flexibly to those needs and emotions in such a way as to build relationship and get the best out of people.

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Rapport may be defined, most simply, as the sense of relationship or connection we have when we relate to another person. We have ‘positive rapport’ with people we find warm, attentive and easy to talk to. Rapport is a core skill for influencing, in simple terms, because: ‘influencing is easier if the other person feels comfortable with you; if they feel they trust you; if they feel you understand them’ (Gillen).

Rapport-building techniques are based on the idea that it is easier to relate to someone who is (or appears to be) like us in some way, and who treats us with respect. They include: ‘mirroring’ the other person’s body language, vocal tone and vocabulary; listening attentively and actively; emphasising common ground; and using people’s names.

Trust is a crucial pre-condition for open, honest communication – which in turn is the basis for positive and deepening collaborative relationships. Trust must be earned, on the basis of: doing what you say you will do; not letting people down; showing that you take their needs into account; showing consistent integrity; maintaining confidentiality; and so on.

Communication skills for influencing

Influencers require a broad repertoire of communication skills. Gillen, for example, includes among his list of influencing skills: probing (using questions); active listening; expressing empathy with another person’s viewpoint and feelings; communicating assertively; building and maintaining rapport; focusing on interpersonal processes (rather than merely the content of what is being said); and using and interpreting body language.

4 Key methods of influencing Some methods of influencing are more directive (power-based) than others.

A push approach A pull approach • Exerting power or authority • Influencees are fully aware of the process • Aimed at securing compliance, often

against the resistance of influencees

• Persuasion or interpersonal influence • If performed effectively, influencees may not be

consciously aware of the process • Can secure commitment

Push approaches may secure compliance, but they can create resentment and barriers to a fully collaborative relationship. Pull approaches have potential for true collaboration, as they integrate the goals and interests of both parties.

Persuasion is a means of exerting influence over people by means other than using authority or power. It pulls or leads people to change by bringing their beliefs and goals into alignment with those of the influencer.

The key approach to persuasion is logical argument, usually supported by: relevant and verifiable factual evidence; objectivity or fairness to both sides of an argument; and a facilitative approach, whereby each step of the argument is clearly explained and linked.

A persuasive communication style uses techniques such as: rapport; open body language; and speaking with appropriate emphasis, appeal and interest (since passion is contagious!) A persuasive strategy is one which, essentially, appeals to the needs, goals and interests of the influencee. Persuasion is a form of motivation: if you can make it look as if aligning themselves with your viewpoint or plans will offer others something of benefit to them, they will be more amenable to persuasion.

Chapter 3: Influencing

5 Power and its uses Power is an aspect of any relationship – not just obvious ones such as leader-subordinate or buyer-supplier. It depends on how a person is perceived by others, and how far (s)he is able to offer them something that they value.

Power is not the same as ‘authority’. Authority refers to the scope and amount of discretion given to a person to make decisions by virtue of the position (s)he holds in an organisation. It is usually conferred from the top down by delegation. Power is the ability to influence – and may not be connected to formal organisational or legitimate authority.

French & Raven identified a number of different sources of power.

Legitimate power (or ‘position power’): the legal/rational, formally-conferred authority associated with a position or role in an organisation. Purchasing officials have direct line authority over the members and activities of their department or team.

Expert power: the power of expertise or knowledge which is both recognised and valued by the group (as necessary for them to achieve their own goals), so that they are willing to be influenced by the expert. Expert power is extremely important for the purchasing function, especially where buying activities have been devolved to line departments. It can cause political problems, if expertise is used (or perceived) to undermine line authority, is divorced from line objectives, or is simply not recognised.

Reward power (or ‘resource power’): recognised control over resources and rewards that are valued by the group, so that they are willing to be influenced in return for rewards. This depends on how far the individual controls the resource, how much it is valued by others, and how scarce it is. Purchasing managers exercise reward power over subordinates, and in relation to suppliers (with the ability to award or withhold contracts, recognition etc). This power will be particularly great if the supplier is dependent on the buying organisation for a major proportion of its income; if it would be difficult to attract other buyers (eg because of relationship-specific adaptations); and/or if the individual buyer is perceived to have control over contract award.

Referent power (or ‘personal power’): emanating from the attractive and inspiring personality, image or charisma of the individual, and the perception by others of his or her leadership quality.

Coercive power (or ‘physical power’): the power to threaten sanctions, hand out punishments or physically intimidate others if compliance is not obtained. This is rare in business organisations – as indeed it should be! Staff reprimands and the threat to drop or downgrade an underperforming supplier may be considered coercive: they should be delivered in an impartial, fair and constructive manner.

A purchaser may operate out of legitimate power with his subordinates; out of referent power with his manager; out of expert power in a cross-functional project meeting; and out of reward power in price negotiations with a supplier.

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CHAPTER 4

Leading and Influencing the Supply Chain 1 Stakeholders in purchasing activity Stakeholders are groups who have a legitimate interest or ‘stake’ in an organisation or project (eg directors, managers and employees, shareholders, financiers, customers, suppliers.

Stakeholder management enables you to gain expert input from stakeholders, to improve the quality of your decisions. Stakeholders are also more likely to ‘own’ and support plans to which they have had input, and this will make on-going collaboration easier.

Mendelow’s power/interest matrix is a useful tool for mapping stakeholders according to their power to influence purchasing activity and the likelihood of their showing an interest in it. Each quadrant has a recommended strategy (as shown). Key players (such as major customers and suppliers) are potential drivers or opponents of strategic change: they should be consulted and involved as early as possible.

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2 Influencing tactics for all-direction leadership The syllabus specifies a model by Yukl and Falbe, who classify nine basic influencing tactics.

Influencing tactic Approach Rational persuasion Logical argument and evidence, designed to demonstrate credibly that the

request or plan is desirable and feasible Inspirational appeal Appeal to influencees’ ideals, values and aspirations, and/or statements of

encouragement/belief, arousing confidence and enthusiasm Consultation Asking influencees to participate in planning an activity or programme, or

demonstrating willingness to take their ideas and concerns into account Ingratiation Getting influencees to think well of you, or to be in a co-operative frame of

mind, before a request is made Exchange Offering a reciprocal exchange of favours or promising a share of the

benefits accruing from the plan Personal appeal Appealing to personal friendship and loyalty Coalition Seeking others’ help to persuade the influencee, or using their support as a

reason for the influencee to agree as well Legitimating Demonstrating your legitimate right to make a request: eg by appeal to

positional authority, rules, policy or custom Pressure Threatening sanctions, or aggressively demanding compliance

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Chapter 4: Leading and Influencing the Supply Chain

11

Different tactics are typically used depending on the direction of the influence (as we will see in the following sections). In general, however, the choice of influencing tactic will depend on: the leader’s power/resources to make the tactic work; the likely response of the other person (and whether this suits your goals); the potential costs of the strategy (in terms of reciprocal obligations, broken relationship or loss of credibility, say); how ethical the strategy is; and the prevailing culture of the organisation.

3 Managing upwards Effective upward management is helpful in: gaining access to authority, information and resources available at higher levels; gaining support for your ideas (and maximising follow-through on promised support); managing the expectations of your superiors; getting your superiors used to reporting by exception (so they don’t ‘micro-manage’); and promoting your and your department’s achievements to your superiors.

The main issue for influencing upwards is that you lack positional authority to impose what you want. Research shows that, when influencing up, managers mainly use rational persuasion, coalition and ingratiation or personal appeal (where trust and rapport exist). Exchange is less popular in this context, since the power imbalance may undermine reciprocity: what can the subordinate meaningfully offer in return?

Persuasive communication to one’s superiors should use appropriate channels of communication (where possible); be concise, relevant and timely; use logical argument leading to a firmly supported conclusion or recommendation; and present a business case (relating the problem or recommendation to business objectives).

4 Leading direct reports and teams Managers have formally delegated positional power over subordinates or team members, which can be backed up by disciplinary sanctions if necessary. Influence and leadership are mostly applied, therefore, to gain commitment over and above mere compliance.

When influencing down, managers mostly use: inspirational appeal, rational persuasion, and pressure. In the broader employee relations context, consultation is also becoming highly valued as a strategy for securing employee commitment to organisational objectives. Remember that there is no one best strategy for using leadership influence: it depends on the readiness of the followers (in Hersey and Blanchard’s situational model), among other factors.

5 Cross-functional influence A purchasing manager may exercise lateral influence in cross-functional teams or informal networks. The key issue for lateral influence is that it may not be supported by positional power: the purchasing manager may have expert power in these situations, but additional influencing tactics may be required if the expert power is not recognised or valued by others.

When ‘influencing across’, managers mostly use: personal appeal/ingratiation; rational persuasion and consultation (capitalising on the potential for expert power); and exchange (trading relatively equal benefits or favours to mutual advantage); and legitimating.

Another key source of lateral influence is networking: making and cultivating interpersonal contacts.


6 Influencing external stakeholders A particular form of stakeholder mapping may be used in buyer-supplier relationships, where there is a structural balance of power and dependency. (You should be familiar with the concept of buyer/ supplier power from Michael Porter’s Five Forces model.)

High B is dominant over

A

A and B are interdependent

Importance of B’s

resources A and B are independent

A is dominant over B Cox et al depicted

these issues of power and dependency in a simple matrix.

A similar model, often used to assess potential sourcing strategies, was formulated by Kraljic (the Procurement Positioning tool).

For routine and leverage items, transactional relations may be sufficient for efficient purchasing. For bottleneck items, the buyer may enter longer-term contractual relationships to ensure reliable supply. Strategic items involve mutual dependency – requiring long-term, mutually satisfying collaborative relationships.

Non-personal forms of influence may be exercised over suppliers in the form of contract terms, service level agreements, incentives/penalties, offers of approved supplier status, the potential for on-going business, competitive pressures and so on. However, interpersonal forms of influence may be required in the negotiation and management of all these structural/contractual issues.

7 Evaluating the outcomes of influencing attempts Different influencing styles have different effects on influencees. Boddy suggests that people’s response to influence attempts take three basic forms.

• Resistance means that influencees position themselves against a request or idea, and actively attempt to avoid having to comply with it.

• Compliance means that influencees are willing to do what is requested, but no more: they make the minimal effort necessary to satisfy the terms of the legal/psychological contract. Underlying attitudes have not been altered by the influence attempt.

• Internalisation means that influencees are brought to agree internally with the requestor idea: it is aligned with their own goals, beliefs and interests, so that they are able to buy into it in a personally-committed way. They are therefore likely to be willing to put forth extra effort and energy on its behalf, doing their best to support success.

Low High

to A

Importance of A’s resources to B

Bottleneck

Strategic or critical items

Non-critical or routine items

Leverage items

High

Low High

Strength and complexity of supply market

Strength of buying organisation

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CHAPTER 5

Productivity Through People 1 Why ‘productivity through people’? Productivity is not gained solely through programmes and activities, but through people: people add value to material, financial, informational and other resources. Why do we need to help people develop their skills and contributions? Because that is the source of competitive advantage and added value in a fast-changing, networked, knowledge-based, customer-focused business environment.

This is the cornerstone of what has come to be known as a Human Resource Management (HRM) orientation to leadership. Armstrong has defined HRM as: ‘a strategic and coherent approach to the management of an organisation’s most valued assets: the people working there who individually and collectively contribute to the achievement of its objectives.’

The factors in individual effectiveness and productivity can be classified as:

• Commitment: how willingly and energetically people approach their work

• Contribution: the conditions required to support effective working and task fulfilment: clear goals; control; leadership support; co-ordination/communication systems; appropriate technology; a safe environment and so on.

• Capability: the aptitudes, skills, competences and creativity people bring to the work – and how they can be developed.

2 Individual differences and styles of working People differ on many dimensions (beliefs, attitudes, perceptions and behavioural responses) all arising from differences in genetic heritage, history, culture, circumstances – and so on. Fortunately, there are also ways in which people behave alike – and more or less consistently – so that we can deal with them in social situations.

One of the concepts that allows us to do this is personality: ‘the psychological qualities that influence an individual’s characteristic behaviour patterns, in a distinctive and consistent manner, across different situations and over time.’ (Huczynski & Buchanan)

There are many models used to describe and measure personality preferences and differences in behaviour. One of the best known, in the business world, is the Myers-Briggs Type Indicator (MBTI®) model, which identifies personality preferences in four dimensions: Perceiving or Judging; Sensing or Intuition; Thinking or Feeling; and Extraversion or Introversion.

No type is better than another: each can make its own contribution to a work task and team. Personality models are designed to help people understand areas of difference between them (which might otherwise be a source of misunderstanding) and to enable individuals and teams to improve their performance by appreciating the strengths of different operating styles.

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3 Learning Learning can be defined as ‘relatively permanent change in behaviour that occurs as a result of practice or experience’. Learning theory offers certain useful propositions for leaders, including the need to motivate learners; to set clear goals for learning; to give timely, relevant

feedback on progress; and to use positive reinforcement (including praise and recognition).

ACT Have an

experience

ANALYSE Reflect on the

experience

ABSTRACT Devise

hypotheses

ADJUST Plan to test hypotheses

David Kolb’s learning cycle shows how everyday work experiences can be used for learning, personal development and performance improvement, through the process of ‘learning by doing’.

Honey and Mumford drew up a popular classification of learning styles for which people may have a natural preference. Theorists need to understand underlying concepts prior to any hands-on attempt: their preferred approach is intellectual and rational. Reflectors need to observe or research things before acting or reaching conclusions. Activists want to ‘get stuck in’: they need to work on practical tasks or problems. Pragmatists need to see a direct link between the topic and a real task or problem: they prefer on-the-job training.

4 Motivation Motivation is the process of choosing desired outcomes and deciding how to pursue them. There are several major theories of how this works.

• Hierarchy of needs (Maslow). People behave in a way that satisfies a need or drive: when a basic need (eg for security and social belonging) is satisfied, they move on to higher needs (eg for recognition and personal growth).

• Two-factor theory (Herzberg). The need to avoid unpleasantness is satisfied by hygiene factors in the environment (eg pay, conditions, leadership). The need for personal growth is satisfied by motivator factors in the job itself (eg challenge, interest, responsibility, growth, achievement).

• Expectancy theory (Vroom). Force of motivation depends on the individual’s preference for a given outcome (valence) and his belief that he will get that outcome (expectancy).

Leaders can motivate their teams by using intrinsic as well as extrinsic – and non-financial as well as financial rewards. Don’t underestimate the motivating power of vision, values, praise, recognition, participation and feedback.

5 Individual roles and competences A distinction has been drawn between functional roles and competences (contribution to the content of the work, task outputs or project outcomes) and process roles and competences (contribution to the processes by which the work gets done).

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CHAPTER 6

Productivity Through Teams 1 Teams A group is a collection of people with a sense of identity and belonging: ‘a small group of people with complementary skills who are committed to a common purpose, performance goals and approaches for which they hold themselves basically jointly accountable.’

Teams allow the pooling of collective skills and knowledge. They procedure better evaluated (though fewer) decisions than individuals working separately. They facilitate the co-ordination of the work across organisational boundaries. They facilitate interactive communication for decision-making, ideas generation and conflict resolution. They can also satisfy their members’ needs for relationship, and enable them to achieve more than they could do themselves.

On the other hand, group working requires attention and energy, which may detract from the task. Group decisions take longer, may be based on the group’s agenda rather than task goals, and are often riskier than individual decisions. Group norms may restrict individual contribution. Even where teamworking is positive, there is such a thing as an ineffective team!

Multi-skilled teams bring together versatile individuals, each of whom can perform any of the group’s tasks: work can thus be allocated flexibly to whoever is best placed to do it.

Cross-functional teams bring together individuals from different specialisms. Ongoing cross-functional working is often organised as a matrix structure: staff in different functions are responsible both to their departmental managers and to a product, project or account manager, in regard to activities related to that product, project or account. Project teams are examples of cross-functional task force or problem-solving teams: they are often short-term in nature, and empowered to act within the limited remit of the project specification.

Cross-functional teams are valuable in increasing team members’ awareness of the big picture. They enable a wider pooling of viewpoints, expertise and resources, and represent a wider range of interests. They are a key tool for co-ordination across organisational boundaries, increasing the flow of communication, informal relationships and co-operation.

Supply chain networks may take on the status of virtual teams: ICT-connected people who may not be present in the same office or organisation but who share data and tasks, make joint decisions and effectively work together.

2 Team formation and development Teams mature and develop. Four stages in this development were identified by Tuckman. Forming: members try to find out about each other and about how the group is going to work. Storming: members begin to assert themselves and test out roles, leadership, behavioural norms and ideas. Norming: agreements are reached about work, sharing, individual requirements and output expectations. Performing: the group focuses on executing its task.

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16

A group may progress through these stages quickly or slowly, may overlap stages, or may get stuck at a given stage (particularly storming). One of the tasks of leadership is the ‘building’ of the team: initiating or accelerating the stages of development, to support progress towards mature performance.

3 Team roles Where a manager is able to select team members, a mix of attributes, competencies and resources should be secured to match the needs of the task. In addition to the specific requirements of its objectives (which may be called content roles), an effectively functioning team requires its members to adopt various task and team-maintenance (or process) roles.

Belbin developed a model of the healthy mix and balance of roles in an effective team. The nine roles are: Plant (ideas person); Resource investigator (finds opportunities, makes contacts); Co-ordinator (facilitator, delegator); Shaper (driver); Monitor-evaluator (evaluates options); Team worker (manages team relationships); Implementer (turns ideas into action); Completer (follows through); and Specialist (technical know-how).

The leadership role in a team may be taken by a designated individual, or the functions of leadership may be distributed or rotated among team members: in Belbin’s framework, it is represented by a cluster of different roles. Belbin also distinguishes between solo leaders (autocratic and directive in approach) and team leaders (who deliberately limit their role, exercising a more democratic style of leadership).

In self-managed teams, team members collaboratively share decision-making on all the major issues affecting their work and internal processes. Any external leadership, once goals have been set for the group, is primarily supportive and facilitative.

Some teams deliberately remove the direct leadership role, in order to explore un-directed group processes between members eg T-groups (training groups). The benefit of leaderless groups is that, faced with confusion and lack of agenda, people will fall back on habitual or characteristic coping behaviours. This gives the opportunity for these behaviours to be observed and discussed by the group, to develop emotional intelligence.

People get habituated to situations over time; they begin to think ‘inside the box’ rather than in new and creative ways. Leaders of established teams should regularly ‘mix things up’ a little so that people see things fresh again, and have to be more intentional about how they behave. This can be done by rotating roles, challenging people to stretch in their areas of weakness, seeking continuous improvement and offering new rewards and incentives for motivation.

4 Team diversity and cohesion Diverse styles, viewpoints, personality types and backgrounds are a positive asset in team-working, if they have the effect of: widening the range of ideas and information which is taken into account in decision-making; reflecting the concerns of stakeholders; controlling the risk of blinkered and complacent thinking (‘group think’); opening methods to questioning and learning; and creating a positive, accepting group climate.

Cooperative groups, compared with the competitive ones, show greater productivity, better quality of product and discussion, greater coordination of effort, more attentiveness to fellow members and more friendliness during discussion.

Chapter 6: Productivity Through Teams

Team cohesion is often based on fostering: team identity (the sense of being a team, or ‘esprit de corps’); team solidarity/loyalty; commitment to shared goals; and competition, crisis or emergency (which makes the group ‘pull together’).

One of the benefits of maintaining team diversity is that it is possible for groups to become too cohesive. Ultra-cohesive groups can serve their own interests (at the expense of the task), and can become dangerously blinkered to outside information and feedback: Janis described this as ‘group think’.

5 Working together Team-building strategies encourage commitment to shared work objectives and to the cooperative working required to achieve them. The leader has a key role in modelling and promoting the cultural values that build co-operative and mutually enriching relationships within a team: trust, fairness, equal opportunity and diversity, respect and ethical conduct.

Conditions for effective team working include: clearly defined goals; aligned priorities; agreed roles and responsibilities; individual self-awareness; facilitative leadership; open group dynamics; open communication; task content over which the team has some discretion; and a supportive organisational infrastructure.

6 Conflict in teams Conflict can energise relationships and clarify issues. Hunt suggests that conflict is constructive where its effect is to: introduce different solutions to problems; define power relationships; encourage creativity and the testing of ideas; and bring emotions out into the open. On the other hand, conflict can be destructive if its effect is to: distract attention from the task; polarise views; subvert objectives in favour of political agendas; encourage defensive behaviour; stimulate win-lose conflicts; and result in disintegration of the group.

Conflict may arise within a team due to everyday factors such as: disagreement about needs, goals, values and priorities; lack of direction; lack of clarity about roles or authority; poor communication; competition for scarce resources, power and status; interpersonal issues; dissatisfaction with hygiene factors (eg work conditions); and political ‘game’ playing.

There are two basic approaches to the management of conflict.

(a) Conflict management focuses on creating conditions in which individuals and groups may be better able to interact co-operatively with each other, and in which issues and potential conflicts can be openly discussed with a view to mutual understanding.

(b) Conflict resolution focuses on resolving disputes or conflicts, using: detailed rules and procedures for conduct; confrontation and negotiation meetings; mechanisms for third-party intervention (eg by mediation, conciliation or arbitration) and so on.

7 Successful teams The criteria for team effectiveness, however, are both: fulfilment of task and organisational goals and satisfaction of team members (especially the fulfilment of their high-level needs for growth and development).

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CHAPTER 7

Managing Diversity 1 Equality and diversity Equality is the principle that people should be treated fairly and without bias or discrimination in their access to rights and benefits, compared to other groups. Diversity is the principle of appreciating and respecting differences between people. As an HRM policy, it implies that the make-up of an organisation’s workforce should broadly reflect that of the external labour market, target customer base or society as a whole in order to be able to meet the challenges posed by those environments.

The benefits claimed for developing a diverse workforce include: the widening of the recruitment pool; performance benefits of being able to draw on diverse skills, experiences and viewpoints; reflecting and understanding the diversity of external stakeholders; enhanced customer satisfaction and loyalty; enhanced employer brand, enabling the organisation to attract and retain talent in competition with other employers; compliance with equal opportunities legislation; a rich organisation culture; and potential for flexibility and learning.

There may be difficulties and costs involved in formulating and administering diversity policies and practices; managing culturally diverse teams; organising work flexibly for diverse family responsibilities; adapting work for disabled employees; and minimising conflict arising from differences. These should be seen as management challenges – not arguments against diversity!

2 Equal opportunities and discrimination Equal opportunity means that everyone has a fair chance of getting a job, accessing benefits and competing for promotion, regardless of individual differences or minority status.

In the UK, the Sex Discrimination Act (and amendments) prohibits certain types of discrimination in employment by reason of sex, marital status and change of sex, while the Employment Equality Regulations 2003 cover discrimination on the basis of sexual orientation.

There are four basic types of unlawful discrimination under equal opportunity law: direct discrimination; indirect discrimination (where rules appear fair but are discriminatory in effect); victimisation; and harassment.

In the UK, the Race Relations Act (and amendments) covers discrimination on grounds of colour, race, nationality, and ethnic or national origin, while the Employment Equality Regulations add discrimination on the grounds of religion or belief. Larger public organisations (more than 150 employees) are required to draw up detailed plans for achieving racial equality in all employment practices. The Race Relations Act generally follows the wording of the Sex Discrimination Act in relevant areas.

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Chapter 7: Managing Diversity

19

The Disability Discrimination Act makes it unlawful for an employer (with more than 20 employees) to discriminate against a disabled person in deciding whom to interview or employ; in the terms of employment and the opportunities for promotion, training or other benefits; and in decisions relating to redundancy and dismissal. In addition, the employer has a duty to make reasonable adjustments to working arrangements or to the physical features of premises where these constitute a disadvantage to a particular disabled employee.

The Employment Equality (Age) Regulations 2006 make it illegal to discriminate against employees, trainees or job seekers because of their age, ensuring that all workers have the same rights in terms of access to help and guidance, recruitment, promotion, development, termination, perks and pay. Compulsory retirement below age 65 will have to be objectively justified, and all employees have the right to request working beyond retirement age.

The Equal Pay Act 1970 was the first major attempt ‘to prevent discrimination as regards the terms and conditions of employment between men and women’. (It does not cover other grounds of discrimination.) The Equal Pay (Amendment) Regulations 1984 established the right to claim equal pay and conditions for work ‘of equal value’, as objectively assessed by job evaluation. ‘Equal pay and conditions’ includes overtime, bonuses, employment-related benefits (eg sick pay), welfare provisions (eg holiday or parental leave) and pension rights.

3 Equal opportunity and diversity in practice In addition to responding to legislative provisions, many employers have begun proactively to address the underlying problems of equal opportunities. The formulation and promotion of an effective equal opportunities and diversity policy requires buy-in from key stakeholders.

Implementing an effective diversity policy may require careful definition of its business benefits; championing at a senior level; use of a representative working party to formulate policies and does of practice; communication and promotion of the policy; reinforcement through HR processes (selection, training etc); and monitoring and benchmarking progress.

Recruitment and selection are areas of particular sensitivity. Recruiters will need to give attention to areas such as: justifiable selection criteria; non-discriminatory job advertising, interviews, application forms and selection tests; and keeping detailed records of interviews and reasons for selection decisions.

Proactive measures to support equal opportunity and diversity may include: flexible policies on working hours and career shapes to facilitate employment for women with family responsibilities (eg flexible hours, part-time working, term-time or annual- hours contracts, career-break and return-to-work schemes, childcare support); accelerated development of women and minority groups (eg fast-tracking school leavers, posting managerial vacancies internally, offering training to previously under-represented groups); supporting disabled workers (eg providing wheelchair access, braille versions of documentation, text-based telecom systems). Many organisations also attempt to address underlying discriminatory attitudes: offering awareness and/or sensitivity training; establishing counselling and disciplinary frameworks to manage offensive behaviour; and perhaps offering assertiveness training for women and minority groups.

CHAPTER 8

Developing People 1 Why develop people? Employee training and development can offer the employing organisation significant benefits in the form of: enhanced job performance and commitment; enhanced flexibility; less need for supervision; the harnessing of knowledge for quality/improvement; better health and safety; less errors and wastage; a positive employer brand to attract and retain quality labour; support for change management, and enhanced corporate social responsibility.

It also offers the trainee the benefits of: enhanced skill/competence (with psychological and financial benefits); opportunities for career development, job enrichment and enhanced satisfaction; and opportunities to meet employability and personal development needs.

A strategic approach to human resource development is ‘the process of achieving outstanding organisational performance through empowering people to achieve and give of their best’. The term learning organisation describes an organisation ‘that facilitates the acquisition and sharing of knowledge, and the learning of all its members’.

2 A systematic approach to training Training is ‘the systematic development of the attitude/knowledge/skill/behaviour patterns required by an individual in order to perform adequately a given task or job’.

Formal training needs analysis may be carried out at functional, job or individual levels.

A wide variety of training methods and media are available: on-the-job (eg job instruction, coaching or job rotation, assistant positions, project work) and off-the-job (eg taught classes, use of case studies and role plays, open/distance learning, visits and tours, or e-learning).

The effectiveness of training should be evaluated at the level of trainee satisfaction, learning, job performance, results and wider impacts. There should also be a system of development, by which staff: gain

experience; are given guidance, support and counselling to help them to formulate personal and career development goals; are supported in accessing learning opportunities to develop their skills and knowledge; and are facilitated in identifying future opportunities within the organisation.

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Chapter 8: Developing People

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3 Training needs analysis A contingency approach must be applied to situations where employee performance is below the desired standard. The problem may not be a skill gap which is amenable to training: it may be in systems, procedures, motivation, discipline and so on. If there is a skill gap, its precise nature skill must be identified, so that training resources can be justified, and allocated where they will be most effective.

Some training requirements may emerge relatively informally, eg from: changes in legislation or technology; the analysis of critical incidents; periodic developmental discussions (eg coaching or mentoring); or self-assessment and personal development. Training needs may also, however, need to be more systematically assessed, in order to take into account the organisation’s future skill requirements, ensure that training supports overall performance, and ensure a full and objective assessment of people’s current skill levels.

Training needs are most simply identified as the gap between the requirements of the job and actual current performance of the job holder. The required level of competence minus the present level of competence equals a gap which may be susceptible to learning or training. This can be analysed at a functional level (eg when there is a change of policy or new systems are introduced); job level (eg where new jobs have been created); or individual level.

A typical training plan for a business unit might include: the training objective (expressed as a specific, measurable, time-bounded outcome); the number of people requiring the training; the timescale or schedule for training; the method(s) chosen; resources (people, machines, space, materials) and support (authorisation, time off) required; the training budget; and how learning will be measured and assessed (post-training tests, observation/sampling of work, impact on results and so on).

4 Training methods and media Off-the-job training may be provided by the training department of a larger organisation or external training providers. Various methods may be used, including: training room instruction; lectures or taught classes; case studies, role plays and in-tray exercises; open or distance learning; site visits and tours; development centres (group training); outdoor training; computer-based training and e-learning (delivered or supported using internet or intranet).

On-the-job training includes methods such as: induction training; ‘sitting with Nellie’ (observation) and systematic job instruction; coaching and/or mentoring; and action learning (problem-solving teams, facilitated as T-groups).

Coaching is a collaborative series of developmental discussions, during which the coach facilitates the coachee in agreeing to learning goals and exploring appropriate methods of (primarily self-directed) learning. It usually lasts for a short period and focuses on specific skills and goals. Mentoring is a longer-term developmental relationship, focused on broader issues of personal and career development. It is typically carried out by a more senior member of the organisation, who may occupy a role as the individual’s ‘wise (or critical) friend’, teacher/coach, counsellor, role model and supporter/sponsor in the organisation.

Various approaches to experiential learning (allowing the trainee to experience and learn from performing different roles) may be accomplished via: rob rotation or ‘work shadowing’; temporary promotion or ‘assistant to’ positions; project of committee work.


The most appropriate method should be selected according to: the nature of the skills/competences/ knowledge to be developed; the benefits of learning outside the job context (less risk and distraction; suits theoretical/reflective learners) or within it (relevance to the job; better transfer of learning; suits hands-on learners); the abilities and learning styles of trainees; and the availability and cost-effectiveness of alternative methods.

Blended learning may be used to maximise the benefits of the various methods and media. The term is used to describe learning or training activities where e-learning is combined with more traditional forms of training, such as classroom training or instruction, for a flexible and efficient use of training resources.

5 Evaluating training It is important that training activities be evaluated in order to ascertain whether objectives have been met, whether the intervention was worthwhile – and what improvements are required in future. This process needs to be carried out before training (to check that plans are feasible and cost-effective); during training (so that shortcomings in the plan or its delivery can be adjusted in real time to improve the outcomes); and after training (to appraise its effectiveness and adjust future plans, where required).

Key criteria for evaluating training include: trainee reactions to the experience; trainee learning (in relation to learning objectives); changes in trainees’ job behaviour and performance; and the wider impact of training on organisational results and culture. The costs of training should also be compared to the benefits obtained – although many of the benefits may be long-term and qualitative rather than quantitative (cultural shifts, support for change, enhanced loyalty and so on).

6 Development approaches Management development is ‘an attempt to improve managerial effectiveness through a planned and deliberate learning process.’ (Mumford). Management development includes career development and succession planning by the organisation, which in turn require attention to issues such as: the types of experience a potential manager will have to acquire; providing the individual with guidance and mentoring in the organisation; preparing the individual to take on more responsibility; offering lateral transfers/secondments etc as an alternative to upward career progression in delayered organisations.

Personal development offers employees wider-ranging development opportunities, rather than focusing simply on skills required to do their current job better. A team leader may guide individuals in developing individual learning goals and plans, and may coach team members in self-development processes and techniques.

Continuing Professional Development (CPD) is a self-managed process, with the individual continually reassessing his learning needs in the light of changes, and seeking to meet those needs via available avenues. Membership of a profession requires an undertaking to develop and maintain standards of competence and ethics on an on-going basis. A team leader may act as a mentor or supervisor for team members’ CPD – as well as seeking similar support, guidance and feedback for him or herself.

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CHAPTER 9

Managing Projects 1 Project management A project is: ‘a unique set of co-ordinated activities, with definite starting and finishing points, undertaken by an individual or team to meet specific objectives within defined time, cost and performance parameters.’ Unlike ordinary or ongoing working, projects have: a defined, finite lifespan; defined and measurable deliverables or outcomes; a defined amount of resources allocated to them; and a dedicated organisation structure (often crossing functional boundaries) to manage the project. These characteristics require a complex management approach, including planning, control, co-ordination and stakeholder management.

Successful project management requires: clearly defined scope and goals; top management support; a competent project manager and team members; sufficient resources; good communication and control; feedback capabilities and troubleshooting mechanisms.

The project management process may be seen as a lifecycle with six stages (definition, planning, initiation, organisation, control and closure/completion). Maylor simplifies this as a ‘4D’ model: Define the project (conceptualisation and analysis); Design the project (planning, justification and agreement); Deliver/Do the project (start up, implementation, completion and handover); and Develop the process (Review, feedback, document and define learning).

Like any other collaborative venture, projects have a number of stakeholders, with their own objectives and interests. The project’s client/sponsor (representing corporate objectives), customers/users, suppliers and project participants may have input, according to their power and interest in the project process and/or outcomes.

Projects may be structured in different ways, depending on size and complexity, but the management structure will typically comprise the roles of sponsor (initiator/client); project steering committee or project board (representing key stakeholders); project manager; and project and support team(s).

2 Project planning and resource scheduling A project requires a clear and unambiguous statement that encompasses: objectives (the end result that the project is trying to achieve); scope (terms of reference); and strategy (how objectives will be met). These elements are often defined in a Project Charter or Brief or a Project Initiation Document (PID), which states the business case for the project proposal, and forms the basis of consultation and agreement by participants and stakeholders.

The project management plan embodies and steers the project. It basically establishes why, what, how, who, how much and when, for the project manager and his or her team. It should include a definition of objectives and deliverables; how these will be achieved, measured and verified; estimates of time and costs required; risks and how they will be managed; relevant technical, commercial or organisational aspects; and health and safety, environmental and quality policies (where relevant).

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Most projects are too complex to be planned effectively unless they are broken down into manageably sized chunks. A work breakdown structure (WBS) breaks down a project into progressively smaller component parts, until it is expressed as a series of activities or work packages, for which times and costs can be estimated.

The key questions for work planning are:

• When must tasks be completed (project deadlines)?

• What resources are required to complete the tasks?

• If resources are available, how long will it take to complete the tasks?

• What is the lead time to access resources?

• What critical tasks must be completed on time for the project to meet its deadlines?

Projects generally comprise a number of activities which are interdependent: eg Activity C can only be commenced after Activities A and B have been completed. Simple precedence networks can be used to show the sequence of activities. The distinctive contribution of Critical Path Analysis (CPA) is to identify the critical path: the sequence of activities in which any delay will lead to a delay in the overall completion of the project.

This kind of analysis allows the planner to focus attention on critical activities, to maintain a constant check on the progress/status of the project, to manage for uncertainties in estimated activity durations (eg using project evaluation and review technique or PERT), and to allocate resources in order to maintain or shorten the overall project running time.

Gantt charts are horizontal bar charts used to illustrate the time scale for project phases, and to estimate the resources required. In their simplest form, they show the planned duration of each task as a line or bar, enabling everyone to see clearly where the task is supposed to start and end – compared to any given date. The number of staff (or other resources) required for each task can also be added.

A range of simpler scheduling tools is available for individual and team planning, including: checklists and action plans; traditional diaries, time-tables, calendars and wall-charts; and software equivalents, such as MS Project, Primavera, Outlook, Palm Desktop and so on.

The resource plan is a statement of the resources required to complete a project, based on the Work Breakdown Structure. It will include: a list of the types of resources required (with the number and purpose of each); a resource schedule (showing when each resource will be required); and a resource usage plan (assigning resources to particular tasks).

The project budget is a statement of the amount and allocation of resources, usually in financial terms. Monetary budgets are often used, through the process of budgetary control, to monitor cost and schedule variances. During the project, actual expenditure is measured against budgeted expenditure (as part of progress reporting, or in separate budget reports).

In order to present a credible business case for allocating extra resources to a project, the project manager may need to show: the objectives and deliverables of the project; the problem for which additional resources may be required and its potential impact on the project; a schedule of the additional resources required; and an explanation of how they will mitigate or resolve the problem.

Chapter 9: Managing Projects

3 Project monitoring and control Project control ensures that the project is progressing as intended, that the measurement criteria detailed in the project plan are being met – and (if not) that remedial action is being taken. Project monitoring is the process whereby progress is continually measured against the plan. Project review is the evaluation of progress at periodic or agreed intervals, such as at the end of each project stage, or at weekly or monthly project meetings.

There are two key elements to the control of a project: agreed milestones (clear targets of what needs to have been achieved and by when) and feedback mechanisms, to allow progress to be reported and problems discussed.

The project may have various mechanisms for measuring progress. End stage assessments may be carried out at completion of each stage of a project, using reports from the project manager and representatives of sponsor/user groups. Highlight reports may be submitted regularly by the project manager to the steering committee or project board. Checkpoints (eg weekly progress review meetings) may be used for more frequent monitoring and feedback by the project team.

At the end of each project, the project manager should produce a completion report, summarising the outcomes achieved; budget and schedule variances; and how any on-going issues will be followed up.

A post-completion audit is often used to formally review a project, assess its impact and effectiveness, and ensure that any lessons arising from it are acknowledged and learned for the future. Such an audit may be carried out using a survey questionnaire of all project team members and key stakeholders, or meetings to discuss what went well and what didn’t.

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CHAPTER 10

Creating Vision and Values 1 What is vision? Vision is ‘strategic intent, or the desired future state of the organisation… an aspiration around which a strategist, perhaps a chief executive, might seek to focus the attention and energies of members of the organisation’. In order to be effective in uniting people and inspiring committed effort, a vision needs to be compelling: attractive, influential, meaningful and shared (preferably on a widespread basis).

Vision, as an overarching sense of what the organisation is about or is seeking to achieve, is a cornerstone of transformational change: change which affects the basic strategic direction of a business. It allows clarity in the communication of strategic intent, and measure of control coherence (or focus), by creating a sense of direction and simple rules for action.

2 Strategic alignment of change plans The general objectives of the organisation cascade down to the more specific objectives of business units, groups and individuals.

Mission statement describes purpose, business area and key values, in qualitative terms.

Goals: desired future state (‘where we want to get to’)

Objectives: specific targets to pursue (‘what we need to do to get there’)

5

ng particular

y, targets, resources, over short term (up to 1 year)

sub-units dovetail with each other, for co-ordinated effort and a coherent face to the world.

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Strategic plans apply to whole organisation, focusing on the broad direction over long term (3-years)

Tactical plans apply to particular functions, focusion tasks required to pursue strategies inmarkets, over medium term (1-2 years)

Operational plans apply to departments and units, focusing on detailed activit

The vertical alignment of departmental plans with higher plans ensures that all sub-unit efforts contribute to overall corporate mission, for unity of direction. The horizontal alignment of various departmental plans ensures that efforts of different

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Chapter 10: Creating Vision and Values

3 Creating vision and securing buy-in The vision must be expressed in a way that is meaningful, exciting and motivating, using explicit mission and value statements; corporate mythology and symbols; expression and role-modelling by senior influencers; and powerful presentations of desired outcomes (or consequences of failure). It can also be reinforced using HR systems to motivate and empower people to act on the vision.

There are various widely-recognised strategies for managing change stakeholders.

• Education and communication: getting across the compelling need for change, and its benefits, to persuade stakeholders to accept the vision – and to give them the information and confidence they need to implement it.

• Participation and involvement: inviting stakeholder input to change decisions and implementation, both in order to encourage ownership and to enhance the quality of decisions. Participative approaches can significantly reduce resistance.

• Facilitation and support: assisting stakeholders to change (eg with training, coaching) and helping them to come to terms with changes (eg through counselling), in order to reduce insecurity and barriers to internalisation.

• Negotiation and agreement: allowing opposing interest groups to bargain towards an agreement based on compromise. This is often required where potential resistance groups have considerable power (eg in unionised workforces or interdependent buyer-supplier relationships). Negotiation allows conflicts of interest to be taken into account – and agreement creates motivation to support the change.

• Manipulation and coercion: applying various forms of power to implement changes and enforce compliance. This may be effective, especially in a crisis situation – but at best it secures mere compliance (where commitment may be required to achieve a vision).

4 Culture and values in purchasing

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Paradigm

Stories Symbols

Power structures

Organisation structures

Control systems

Rituals and routines

Organisation culture is ‘a pattern of beliefs and expectations shared by the organisation’s members, which produce norms which powerfully shape the behaviour of individuals and groups in the organisation’. In other words: ‘the way we do things around here’.

Culture operates on three levels: outward expressions (norms, artefacts and rituals), values and beliefs, and underlying assumptions.

The cultural web is a way of representing ‘the taken-for-granted assumptions, or paradigm, of an organisation, and the behavioural manifestations of organisational culture’.


There are many models of how organisations can be classified into types. One popular model is that of Harrison, which distinguishes between: power culture (centralised around a key figure, owner or founder); role culture (bureaucracy); task culture (out-put focused, horizontal project structure); and person culture (focused on individual members, eg barristers in chambers). Another model, by Deal & Kennedy, considers cultures as a function of the willingness of employees to take risks, and how quickly they get feedback on whether they got it right or wrong.

The underlying elements of culture – like the part of an iceberg that lies under the water – are the ones that are difficult to manage. Explicit value statements are increasingly used in organisations, to define value-laden concepts; specify the values and behaviours considered desirable (and undesirable) for the organisation; and encourage on-going discussion about ethical issues.

5 Corporate Social Responsibility (CSR) and ethics Ethics are a set of moral principles or values about what constitutes right and wrong behaviour. At the corporate level, they address how an organisation interacts with its various stakeholders. At the individual level, they address how people act and interact within the supply chain: issues of objectivity, confidentiality, professional conduct and so on.

The term ‘corporate social responsibility’ is used to describe a wide range of obligations that an organisation may feel it has towards the society in which it operates, in areas such as: sustainability and environmental responsibility, human rights, labour and community relations and supplier and customer relations – over and above mere legal obligations.

Purchasing functions can contribute to CSR by: enforcing codes of practice in sourcing; encouraging ethical employment and/or environmental practices by suppliers; planning specifications and logistics for environmental protection and fuel efficiency; and so on.

Milton Friedman took the view that ‘the social responsibility of business is profit maximisation’: securing return on shareholders’ investment. ‘Consequently,’ argued Friedman, ‘the only justification for social responsibility is enlightened self interest’. CSR serves the interests of the firm by: avoiding financial penalties and reputational damage; enhancing corporate brand (in an increasingly CSR-aware market); enhancing its employer brand to attract and retain quality labour; and supporting sustainable sources of supply and business relationships.

The detail of purchasing ethics is outside the scope of this syllabus, but you should be aware that buyers are more exposed to temptation than most professionals! They control large sums of organisational funds. Their decisions typically benefit some suppliers over others – creating an incentive to try and influence those decisions. Meanwhile, it is difficult to determine wholly objective criteria for deciding between rival suppliers, allowing bias or unfairness to enter the process. Such factors place great responsibility on buyers to maintain personal ethical standards.

National and international bodies representing purchasing professionals have published ethical codes. The code published by CIPS, for example, emphasises the overriding principle that members should not use a position of authority for personal gain. Equally, members have a responsibility to uphold the standing of the profession (and the Institute) by their conduct both inside and outside their employing organisation.

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CHAPTER 11

Models of Change 1 Analysing the change situation In today’s fast-moving business and social environment change within organisations is inevitable. We most often hear about ‘resistance to change’, but organisations can also create conditions that are favourable to the acceptance of change: financial viability and security; adaptable (output-focused, flexible and horizontal) structures; communication networks; vision and leadership from senior management; supporting HR systems and culture.

Analysis of contextual factors will help inform decisions about whether the organisation has the ability (capacity, capability, readiness and power structures) to achieve the desired change, and how the change should be managed.

Forcefield analysis (Kurt Lewin) is a technique for identifying forces for and against change, in order to diagnose some of the change management problems that will need to be addressed, and some of the resources and dynamics available to support it.

Lewin recognised that at any time in an organisation there exist both forces for change (driving forces, pushing towards a preferred state) and forces for maintaining the status quo (restraining forces, pushing back towards the way things are). The interplay of these forces determines the current state of the organisation (where the forces balance each other out, creating a temporary equilibrium) and the pace and direction of change (if one set of forces is stronger than the other) at any given moment.

Force field analysis suggests a method of visualising or mapping the forces for and against change using directional arrows. Numerical values can be given to each force, and the balance of the two ‘sides’ ascertained. Managers can then select strategies which add or strengthen driving forces (‘adding forces in the desired direction’), or weaken restraining forces (‘diminishing the opposing forces’), or both.

2 Factors driving organisational change Internal triggers for change are factors that cause organisational disequilibrium: in order for equilibrium to be re-established, some element of the system will have to change. They may include questioning of authority; poor performance and competitive pressures; new leadership; changes in strategy (eg growth, divestment or diversification); favourable experience of change in the past; or an injection of new knowledge or resources.

These internal triggers may, or may not, be related to external forces operating within the organisation’s environment (often analysed using PEST or PESTLE analysis) such as: economic opportunities and threats (eg the opening of new markets); changes in the demographic or cultural characteristics of the population; resource scarcity and ‘green’ consumerism; technological developments (supporting new products and processes); globalisation of trade; and constant amendments to the legal regulation of business activity.

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3 Responses and barriers to change Changes may affect individuals in many different ways: physically, circumstantially, socially and psychologically. In addition to facts, people’s response will be affected by their beliefs, feelings and values in relation to the change. Four common sources of resistance to change include self-interest (investment in the status quo); misunderstanding and lack of trust; contradictory assessment of the need for or impact of change; and low tolerance of change in general.

Responses to change have been found to follow a ‘coping cycle’. People typically move through denial to confront the reality of change, and realisation of its impact (often with anger, bargaining and depression), before moving towards acceptance and internalisation.

Organisational conditions and dynamics identified as barriers to change include: internal focus (rather than sensitivity to the environment); bureaucratic structure/culture (formalised, hierarchical, stability-oriented); centralised power and organisational politics (stifling unity of direction); security-seeking or risk aversion; management cultures based on deference/status (reducing participation) or blaming (creating risk aversion); and lack of resources (financial and managerial) for change.

In addition, change programmes often fail (Kotter) because they are too complex; fail to build stakeholder support; lack clear vision; fail to communicate the vision; allow resistance/barriers to gather; fail to build in short-term wins (creating momentum and confidence); stop short; or fail to embed changes in the corporate culture.

4 The organisational development (OD) model Organisational development (OD) is ‘an effort (1) planned, (2) organisation-wide, and (3) managed from the top, to (4) increase organisation development and health through (5) planned interventions in the organisation’s processes, (6) using behavioural science knowledge’. OD is mainly about changing people and their behaviour over the long term: the key ‘topics’ of OD are organisational culture, employee commitment, organisational conflict, management of change and management development.

The values underpinning OD are people-centred: the importance of people, mutual respect and shared goals; the need for open communication, trust and employee involvement; the superiority of commitment to compliance; the superiority of collaboration to conflict; the value of personal growth at work; and so on.

Two basic approaches are used to implement OD programmes: a project-based (often ‘one-off’) planned change model, and an ongoing, cyclical action research model.

The action research model is based on the Observe; Reflect; Plan; Act cycle or the DMAIC (Define; Measure; Analyse; Improve; Control) process for continuous improvement.

A cyclical change approach has certain advantages. It involves learning how to learn, which supports continuous change and improvement. Its collaborative approach develops working relationships and self-awareness in the organisation. The cycle also ensures that recommended courses of action are applied in organisational practice.

Chapter 11: Models of Change

5 Planned change models Kurt Lewin developed his force field model, working in collaboration with Edgar Schein, to draw up a three-step model for changing human behaviour.

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• Stage 1: unfreeze the existing restraining and driving forces which preserve equilibrium.

• Stage 2: introduce imbalances which allow driving forces to outweigh restraining forces.

• Stage 3: refreeze the driving/restraining forces to hold the new equilibrium in place, through consolidation or reinforcement of the new behaviour.

Lewin’s model is less applicable in fast-changing or turbulent business environments, where ‘freezing’ may be seen as counter-productive, hampering flexibility and responsiveness. Some organisations may need to exist in a constant state of unfreezing and changing.

There are a number of other change management approaches based on the concept of a phased project management structure: ‘n’ sequential steps or phases to implement change. Kotter, for example, proposes an eight step model for major or transformational change:

1 Establish a sense of urgency: prioritise objectives based on market/business imperatives

2 Form a guiding coalition of influential stakeholders

3 Create a compelling vision for change

4 Communicate the vision as widely and clearly as possible

5 Empower people to act by removing cultural, technological and structural obstacles

6 Plan to create short-term wins which foster momentum and buy-in

7 Consolidate improvements to produce further change, keeping momentum going

8 Institutionalise new approaches: embed them in culture, procedures and HR systems.

6 Skills and attributes of a successful change agent The success of a change programme depends to a large extent on the attributes and skills of the change agent or champion. The key attributes of a successful change agent (Crainer) include: managing conflict; interpersonal skills; project management skills; leadership balanced with flexibility; managing processes (not just the content of change); managing strategy (aligning changes to corporate objectives); and managing personal development.

External consultants are often used to help formulate new strategies, and to plan and facilitate change programmes. They may be asked to diagnose the change context and forces for and against change; to act as project planners; to facilitate the processes of project teams, workshops and forums; and so on. The advantage of using external agents in such roles is that: they are more likely to be objective and dispassionate; they may better represent a range of stakeholder interests; they may be better able to challenge/question the status quo (and encourage employees to do so); they may have technical expertise in research and OD intervention; and they are dedicated to the change programme.

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CHAPTER 12

Planning Strategic Change 1 Incremental and transformational change A distinction is made between change (incremental change) and transformation (fundamental change). Other authors use the terminology ‘evolutionary’/‘revolutionary’ change.

Evolutionary change is often used as a proactive approach, building on the existing situation (the status quo) in small steps over a long period of time. This is the basis of business improvement strategies such as kaizen (continuous improvement) and Total Quality Management. Because it requires only realistic, small operational improvements and elimination of wastes, it can be implemented from the ‘bottom up’, involving employees through suggestion schemes, quality circles and self-improvement plans.

Revolutionary change is often a reactive approach, responding to ‘disruptive’ change, crisis or the need for a completely new paradigm. It seeks to overthrow (or throw out) the status quo and introduce radical transformation in a relatively short period of time. This is the basis of business improvement strategies such as Business Process Re-engineering (BPR). Because it requires discontinuous and sweeping change across organisational structures and systems, it can only be implemented from the ‘top down’, with top management vision and leadership.

2 Change objectives and targets Planned change (life cycle or project) models emphasise the need to set objectives and targets, in order to minimise risk and uncertainty and to move the organisation forward in a rational, planned and co-ordinated way.

Other models emphasise the difficulties and dysfunctions of the rational-linear approach in a turbulent environment, arguing that the organisation needs to stay alert and adaptive to opportunities and threats which emerge in the environment in which it operates: such models encourage a cyclical or emergent approach, keeping change goals short-range and fluid.

Where objectives are set for a change programme, they should be aligned (both vertically and horizontally) with other objectives; effectively formulated (Specific, Measurable, Attainable, Realistic and Time-bounded); formulated (where possible) with the participation or agreement of key stakeholder; and flexible.

An integrated change plan will address, in one coherent statement: the need for change (its contribution to the overall mission and objectives of the organisation); the vision for change (what it will ‘look like’ once accomplished); the SMART change objectives; resource requirements; and a process/structure for implementation (accountabilities, monitoring and reporting, progress milestones and so on).

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Chapter 12: Planning Strategic Change

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3 Structuring the change programme A project is a time-bounded process (with a defined start and end time) aimed towards achievement of a specifically-defined goal or objective, typically involving complex collaborative effort. A programme is a series or group of interlinked projects devoted to a common objective or purpose, and managed together as a portfolio.

Programme management focuses on the interdependencies between and around individual projects: gaining an overview of the progress of each project (its completed and uncompleted milestones) in relation to the others, particularly where the milestones of one project are dependent on another; and reporting on the progress of the programme as a whole (drawing on project reports) to the programme sponsor.

A steering group or committee (representing the sponsor, project manager and user groups) may be appointed to set the overall objectives or policies pursued by the programme and to oversee and co-ordinate progress.

For complex projects, responsibility for delivery of objectives may be distributed among assignment groups or work streams: teams dedicated to one ‘strand’ of the overall project.

Focus groups are a mechanism for gathering qualitative feedback. They involve facilitated group discussions, during which representatives of stakeholder groups are given an opportunity to exchange views and information, for later analysis and feedback reporting.

Cross-functional teamworking has become a mainstream approach to the co-ordination of projects across departmental boundaries, and is often applied to change management.

Change agents are individuals or teams who are appointed or empowered to drive a change programme. A change agent can be any member of an organisation seeking to promote, support, sponsor, initiate or deliver change.

4 Resource requirements for change Once change objectives have been determined, they must be expressed as a series of stages and tasks which can be allocated to individuals and teams. This can be done using various project and performance management techniques, such as Management by Objectives (MbO) and Work Breakdown Structures (WBS).

The process of prioritisation assigns relative priority to tasks, which determines their sequence in the plan. Prioritising techniques include: Pareto analysis (sorting the ‘vital few’ from the ‘trivial many’ tasks); network analysis; risk analysis; screening questions as to the suitability, feasibility and acceptability of options; or the importance-performance matrix (what aspects of performance are important to the customer – and how does your organisation perform in those areas?)

Change requires the investment of resources, including: finance, managerial time, staff learning time, physical resources and the opportunity costs of people/systems underperforming as a result of change. Decisions are needed as to what resources are required; whether they are available within the organisation; if so, how they can be mobilised; and if not, how, when, from where and at what cost they can be obtained and developed for use.


5 Stakeholder consultation and engagement We have already seen that different stakeholder groups must be managed differently. Supporters need to be encouraged and kept ‘on side’; opponents need to be persuaded of the merits of the change agenda; and so on. Mendelow’s power/interest matrix particularly argues the need to consult with ‘key players’ (high interest, high power) when introducing strategic change which will affect them. The needs of voiceless stakeholders must also receive attention, however, since they may be co-opted to join the resistance group.

Consultation is the process of exchanging information with stakeholders as part of the change process. Engagement is the process of securing their interest, collaboration and support for the change programme.

The aim of effective consultation and engagement processes is to: allow the views and needs of stakeholders to be taken into account; develop change objectives and processes that are likely to be accepted or supported (or at least not strongly resisted) by stakeholders; enhance the quality of change plans through input from expert/involved stakeholders; and to provide for issues and crisis management (dealing with problems with least damage and conflict).

There is a wide range of mechanisms and media available for consultation and stakeholder marketing, including: existing steering groups and cross-functional teams; temporary advisory or task-force teams; consultation programmes targeted at key stakeholder groups; issuing proposals and inviting responses (eg via public advertisement, direct mail, workshops or public forums); or unveiling proposals at meetings or seminars.

Dunphy & Stace identify four categories of change leadership style: coercion, direction, consultation and collaboration. Different styles are appropriate, according to the scale and pace of the desired change.

• For incremental change, a directive/coercive style may be most appropriate where key stakeholder groups oppose the changes, and a collaborative/consultative style when they support the changes.

• For transformational change, a collaborative/consultative style is preferable where there is support for radical change. A directive/coercive style may be most appropriate, however, where there is little time for participation and no internal support for change – but the change is necessary for the organisation’s survival.

One of the key roles of a change leader is to resolve conflicts of interest between stakeholders at the project definition stage, and to resolve conflicts that arise between collaborators as the project progresses. Conflicts may arise over disappointed/mismatched expectations; competition for scarce resources; frustration due to the interdependence of activities along the critical path; political competition for influence; and so on.

The Thomas-Kilmann instrument (TKI), can be used to map conflict-handling styles on two dimensions, according to the intentions of the parties involved: their assertiveness and co-operativeness. This highlights five possible styles: avoiding, accommodating, competing, compromising and collaborating. Collaboration is the most positive way to settle conflict where there is interdependence between the two parties and mutual advantages to working together. However, competition is a valid response to a different set of assumptions (if one party needs to ‘win’) – and compromise may be necessary if conflicting interests are represented by parties of equal power.

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CHAPTER 13

Implementing Strategic Change 1 Delegating responsibility for change Delegation of authority is the process through which a superior hands over to a subordinate (or team) part of his or her own authority to make decisions or take actions. Delegation is also a style of leadership in Hersey & Blanchard’s situational model of leadership.

A manager should delegate when trust can be placed in the competence and reliability of subordinates and the work to be delegated is routine, repetitive or of low consequence, or the quality of the work/decision will be improved by the input, or subordinates’ involvement/acceptance improve morale and commitment to the plan’s implementation.

Delegation is an interpersonal process which balances control/support (so that the superior can be confident the work will be done as required) and empowerment/challenge (so that the subordinate can exercise genuine initiative and discretion).

The process of effective delegation can be shown as follows.

Methods for monitoring and reviewing delegates’ performance (without interfering) include:

• Periodic work sampling or observation by the leader

• Formal and informal reporting back (on a periodic or exception basis)

• Team meetings for progress assessment, feedback and problem-solving

• Gathering feedback (eg 360-degree feedback or supplier surveys)

• Measuring progress against defined goals/targets or project gates or milestones

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The leader should be alert to both negative feedback (suggesting that things are going wrong) and positive feedback (suggesting that things are going right), and should both offer constructive criticism and acknowledge successes and improvements. If performance feedback indicates an unforeseen or escalating problem, the leader may need to take corrective action, by: facilitating subordinates in problem-solving; giving more directive leadership; or re-directing tasks to others with the authority or expertise to take fast remedial action.

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2 Monitoring the impact of change The impact of change can be monitored at various levels.

Evaluation of Monitoring/measurement methods Reactions: How far are stakeholders satisfied with the programme?

Employee (and other stakeholder) attitude surveys; focus groups; feedback gathering

Outcomes: Have programme objectives and targets been met?

Budgets & budgetary control; project measurements

Behaviour: Have people changed their behaviours as a result of the programme?

Observation; feedback; work sampling

Results: Is the change reflected in performance and results?

Benchmarking; auditing

Budgets are plans expressed in financial and/or quantitative terms for a specified period of time in the future. Budgetary control involves comparison of the budget with the actual results and costs achieved: significant divergences are reported for control action.

Budgets offer a formal framework for planning and management by objectives. They support delegation by embodying relevant policies, and giving targets against which performance can be assessed. Preparing budgets requires stakeholder communication, which may have other benefits for problem-solving and relationship-building. And budgetary control focuses managerial attention where it is most needed, encouraging report by exception.

A post-completion audit is often used as a formal review of a change project, in order to assess its impact and ensure that any lessons arising from it are acknowledged and learned.

In addition, an audit may be carried out to measure purchasing performance, and compare key performance indicators against previous measures, to assess the impact of the change. Quantifiable performance metrics may be determined for purchasing in areas such as: cost, productivity, technology and supplier leverage, cycle times, error rates, customer satisfaction, partnering and strategic alignment. Different performance measures will be used, depending on the role of the purchasing function in the organisation.

Benchmarking is a continuous process of measuring products, services and practices against models of best practice and/or competitor practice. It encourages units continually to define and emulate best practice in their field, and can be used as a yardstick for measuring progress towards best practice objectives, as part of the process of controlling change programmes.

Benchmarking allows the impacts of change to be measured using a set of objective, systematic, realistic and performance-relevant criteria. It also stimulates more research and feedback-seeking into customer needs and wants, and helps to generate new ideas and insights outside the box of the organisation’s accustomed ways of thinking and doing things.

3 Managing continuity of performance The key responsibility of the purchasing function is to maintain continuity of supply. This takes precedence over the implementation of change: there should be no ‘interruption to normal services’ due to teething troubles or staff training.

Chapter 13: Implementing Strategic Change

At some point, there will be a handover from the change/project team to the operational team which will use and apply the new strategy, system or procedures. This process will be easier if representatives of user groups have been involved in the planning stages.

Additional measures to ensure a smooth transition include: clear lines of responsibility for implementing and following up the change; briefing, education and training of uses; comprehensive, clear documentation of the new policies, systems and procedures; acceptance testing (where users get to operate and give feedback on the new system); and mechanisms for support and assistance where needed.

For some change projects, there may also be plans for phased implementation, to minimise the risks of teething troubles and to allow time to embed and adjust the system. This may take the form of incremental implementation, parallel running of old/new systems; pilot programmes or trial periods.

The adoption of a new supplier, or the replacement of one supplier with another, represents a significant change where the product or service supplied is important to the buying organisation or where the supply contract represents significant expenditure.

Attention will have to be given to issues such as: the preparation of detailed product/service specifications, service level agreements and supply contracts (so there is clear understanding of the expectations, rights and responsibilities of both parties); advice planning for the readiness of stakeholders, systems and infrastructure on both sides; a negotiated transition plan; provision for acceptance testing prior to adoption of the contract (perhaps during a trial period or pilot programme); parallel running (where the outgoing supplier’s activity is progressively reduced or ‘ramped down’, while the incoming supplier’s is ‘ramped up’); and on-going contract management and review (including continuous improvement planning).

In any change of supplier, there is a risk that the current supplier may attempt to disrupt the transfer of business to new suppliers for a new contract period, or may simply lose motivation to provide the required service levels.

Constructive relationship management should underpin any change in supplier. The buying organisation may offer the outgoing supplier helpful feedback on the reasons for non-renewal, and where possible, the door should be left open for renewal of the relationship in future.

Additional incentives may be used, in the form of loyalty or performance-related bonuses or positive supplier rating, to motivate the supplier to provide quality service right to the end of the existing contract. Sanctions may also be applied to enforce the terms of the contract. Model contracts often include clauses to ensure smooth transition, so that any disruption caused by the outgoing supplier is interpreted as breach of contract, opening them to legal damages.

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CHAPTER 14

Negotiation and Industrial Relations 1 Negotiation in leadership and management Negotiation is a process whereby two parties come together to confer, in a situation in which there is some conflict of interests between them, with a view to reaching a jointly acceptable agreement. This typically involves both purposeful persuasion and constructive compromise.

In commercial contexts, ‘negotiation is applicable where there is disagreement or potential disagreement between suppliers and buyers’ (Lysons). However, negotiation is not the only technique for ‘getting what you want from others’, particularly in commercial or contractual terms: alternatives include competitive bidding, persuasion, coercion and problem-solving.

2 The negotiation process The negotiation process (in its broadest form) may be shown as follows.

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Advance preparation is central to modern thinking on negotiation, because of the need to gather information to build a negotiating position and anticipate opposing positions: take stakeholder needs and concerns into account; prepare a coherent approach by the negotiating team and establish an agreed response to contingencies.

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Chapter 14: Negotiation and Industrial Relations

39

Pre-negotiation planning is another application of stakeholder analysis. Negotiators must assess the power and interest of the parties, as a way of estimating their bargaining power and motivations: what do they need or want, how motivated will they be to obtain it, and what influence can they wield to force concessions? The relative power of the negotiating parties will dictate the strength of the positions that can be put forward and the approach used.

Negotiating objectives should be ranked as high priority, medium priority or low priority, helping negotiators to determine where they can best afford to give ground and which areas are non-negotiable. If one side’s low-priority (easy to concede) objectives coincide with the other’s high-priority (valuable to gain) objectives, there is significant potential for bargaining.

Both parties should determine two parameters in respect of each objective: the best position that they can reasonably hope for, and the worst position that they are prepared to accept. Where the two acceptable ranges overlap there is scope for negotiation. There should also be a contingency plan for situations where an acceptable compromise cannot be reached: a BATNA (best alternative to a negotiated agreement).

Negotiating teams are often used, because they allow for pooling of technical knowledge and interpersonal skills, and allow team members to support each other. However, a variety of viewpoints may create a poorly integrated bargaining position, especially if there are active conflicts of interest or approach within the negotiating team.

3 Approaches to negotiation • Distributive bargaining involves the distribution of limited resources, or ‘dividing up

a fixed pie’. One party’s gain can only come at the expense of the other party: this is sometimes called a zero-sum game, or a win-loss outcome.

Distributive tactics include: presenting exaggerated initial positions/demands; polarising conflicting positions; withholding information that might weaken a bargaining position; and using all available levers to coerce or manipulate the other party into making concessions – while making minimal concessions oneself.

• Integrative bargaining involves collaborative problem-solving to increase the options available (or ‘expanding the pie’), with the aim of exploring possibilities for both parties to find a mutually satisfying or win-win solution.

Integrative tactics include: being open about your own needs and concerns, and seeking to understand those of the other party; collaboratively generating options; focusing on areas of common ground and mutual benefit; helping the other party to accept your proposals; modelling flexibility; and offering reasonable concessions.

The foundation for integrative approaches in supply negotiations is the belief that cooperation along the supply chain can lead to elimination of waste at all stages, benefiting all parties; and in employee negotiations, that employee satisfaction and commitment benefit organisational performance – and vice versa. However, where one party benefits from dominance, power or independence, available leverage may be applied using a more adversarial style.

An integrative approach uses concessions to build trust (Malhotra). Unilateral concessions send the message that there is an underlying belief in the potential for mutual satisfaction and gains over time. An adversarial approach uses concessions as trading currency: they represent a cost to be tightly controlled, invested and leveraged for reciprocal gains.


4 Industrial relations and employee relations Industrial relations (IR) can be defined as ‘all the rules, practices and conventions governing interactions between managements and their workforces, normally involving collective employee representation and bargaining’ (Graham & Bennett). This typically covers areas such as: individual and collective processes for agreeing terms and conditions of work; recognition of trade unions and/or alternative mechanisms for employee representation and consultation; and machinery for handling individual and collective grievance and discipline issues (including external arbitration and conciliation if necessary).

A purchasing manager may have day-to-day responsibility for implementing the organisation’s industrial relations policies, by: conducting disciplinary and grievance procedures; implementing collectively-negotiated agreements on working conditions and pay; communicating with employee representative; managing people fairly (in order to avoid industrial conflict); and being aware of the industrial relations implications of policies such as outsourcing, off-shoring and supplier rationalisation.

IR has traditionally been adversarial, both in perception (‘us and them’ attitudes) and in genuine inequities and conflicts of interest. However, it has also been recognised that employers and employees are interdependent, and that enlightened HRM approaches (participation and involvement; profit-sharing; consultation and communication; development and empowerment; and so on) capitalise on these shared interests, making traditional IR approaches irrelevant.

Employee relations is defined as ‘all those areas of HRM that involve general relationships with employees, through collective agreements where trade unions are recognised [ie industrial relations] and/or through commonly applied policies for employee involvement and communications.’ In this sense, any leader in the organisation may participate in employee relations, by fostering harmonious and co-operative relationships in functions and cross-functional working.

5 Negotiation for industrial relations In the arena of employee and industrial relations, there are three main contexts in which negotiations may be required: individual or collective employee grievance/conflict handling; general problem-solving in cases of conflict of interest or priority; and the negotiation of terms and conditions, often with employee representatives (collective bargaining).

There are some key differences between employee and commercial negotiations. Commercial negotiators can (to an extent) select their negotiating partners, while industrial relations negotiators have to deal with the elected representatives of specific interest groups, often with legal entitlement to be part of the negotiation. Commercial negotiations are often conducted by remote communication, while employee negotiations always take place face-to-face. Commercial negotiators often have a BATNA to fall back on, while in employee negotiations, a ‘no agreement’ outcome is not available: the parties must reach some kind of agreed position – at the cost of one or the other, if necessary.

Even more than commercial negotiations, employee negotiations are based on the assumption that the parties have to have an ongoing, long-term, constructive working relationship.

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