Block 5, session 65 "Strategic aspects of development"• The role of training and development: organizational strategy and HRD (pp.94-95)

Chapter 15: Learning and development• Identifying learning and development needs (pp.295-297)

Block 5, session 66 "Perspectives on learning and development"• Development methods and evaluating learning (pp.104-105)

Block 5 (HRM)

The role of training and development: organizational strategy and HRD

o Development refers to the training programs and approaches to skills enhancement.

o It is important to identify the contribution of human resource development (HRD) to the organizational success. And to establish a relationship between organizational business strategy and HRD planning and initiatives.

o McCracken and Wallace outline nine characteristics of a strategic approach to HRD;

1- HRD shapes the organization's mission and goals.

2- Top management are leaders not just supporters.

3- Senior management are involved in environmental scanning in relation to HRD.

4- HRD strategies, policies and plans are developed through the involvement of both the organization and the top management team.

5- Line managers are also involved as strategic partners.

6- There is strategic integration with other aspects of HRM.

7- Trainers have an expanded role, including facilitation and consultants.

8- HRD professionals have a role in influencing the organizational culture.

9- There is an emphasizes on future-oriented cost effectiveness and results, in terms of evaluation of HR development activity.

Development methods and evaluating learning

There are various methods of learning and development that depend upon the needs of both the individual and the organization. These include;

1- Off job methods

o Includes educational and training courses on part time, full time or distance learning basis.

o It is not bound up ملزم with immediate work tasks or carried out on the job.

o Examples; like MBA (master of business administration) study. Some short courses as IT and changes in legislation. And some in-house courses (within the organization).

o The key challenge is to transfer benefits back to the workplace.

2- learning on-the-job

o It can be derived from peers, line managers, coaches or natural learning through experience and the practice of doing and self-development.

o Other initiatives provided by HRD to encourage learning like learning logs or diaries which help with reflection.

o Learning contracts; which denote formal or semi-formal commitment by the individual to carry out learning in line with identified development goals.

3- E-learning and blended learning.

o E-learning; involves distance learning through electronic communications and presents vast opportunities for organizations and the development for their staff

o Interactive learning and virtual activities can also be important for training activities to ensure that desperate staff can obtain the required skills.

o Blended learning; is combined with more traditional methods of learning such as face-to-face techniques. Also is can be used to refer to the combination of different learning as e-learning, self-managed learning and coaching.

It is important that training and development is evaluated in order to:

1- Assess effectiveness to help with identifying further learning needs and shortfalls and thus help future HRD decision making.

2- To prove the value for money and return on investment of options chosen.

Chapter 21: Setting pay• The elements of payment (pp. 414-416)• The importance of equity (p. 422)• Total reward (pp.425-426) + figure 21.2

Setting pay

The elements of payment

The payment of any individual employee will be made up of one or more elements;1- Fixed elements; those are regular, rarely variable weekly or monthly payment

to the individual. And which do not vary other than in exceptional circumstances.

2- Variable elements; those are irregular and varied by either the employee or the employer.

The potential elements of payment;1- Basic rate: The minimum rate of pay is basic and not have any additions made

to it.In other cases it is a basis on which earning built by the addition of one or more of the other elements in payment. (Factory workers have little more than half of their earnings in basic, teachers have all their payment)

2- Plussage : When the basic has an addition to recognize as an aspect of working conditions or employee capability. Like payments for educational qualifications, and for supervisory responsibilities. While there is an infinite range called Fudge payments; when there is an addition to the basic as a start-up allowance, mask-money or dirt-money.

3- Benefits: Extras to the working conditions that have a cash value are categorized as benefits. Like company cars, subsided meals, privet health insurance

4- Premia: When employees work at inconvenient مالئم ,times as on shifts غيرor permanently at night. They receive a premium payment as compensation for the inconvenience ( االزعاج Sometimes this is built into the basic .(تعويضعنrate.

5- Overtime: Overtime is for employees working more hours than the normal. This element is seldom regarded as fixed.

6- Incentive: Incentives are elements of payment linked to the working performance of an individual or working group as a result or a previous arrangement. Includes payments by results schemes that reward people for the quantity of their output like commission. The employee knows what has to be done to earn the payment.

7- Bonus: Deferent type of variable payment is the gratuitous ( مبرر payment (بالby the employer that is not directly earned by employee. The essential different between this and incentive is the employee has no entitlement ( to the payment as a result of a contract of employment, like (استحقاقChristmas bonus. Bonus often takes the form of profit-sharing schemes which seek to link individual pay levels to the performance of the organization as a whole.

The importance of Equity Employees must ensure that they are perceived by employees to operate equitably. A key determinant of satisfaction at work is the extent to which employee judge

pay levels and pay increases to be distributed fairly, and these lead to Equity theory holds that we are very concerned that reward or outputs equate to

our input (skill, effort, expertise, qualifications) and these are fair when compared to rewards being given to others.

When not fairly rewarded, we show signs of dissonance which leads to absence, voluntary turnover, and low trust employee relations.

The important principles when making decisions in the pay field are1- A standard approach for the determination of pay (basic rates & incentives)

across the organization.2- As little subjective or random decision making as is feasible. (محتمل)

Individual

3- Maximum communication and employee involvement in establishing pay determination mechanisms.

4- Clarity in pay determination matters so that everyone knows what the rules are and how they will be applied.

Total reward Total reward involves managers viewing the way that they reward employees in

the round, taking equal account for both tangible and intangible ingredients. That together help to make work rewarding in the widest sense of the word.

Four different categories of rewards are identified; each has equal potential significance as a source of reward from the employee perspective.

Base payContingent pay

BonusesIncentives

SharesProfit sharing

PensionsHolidays

HealthcareOther perks

Flexibility

Learning and development

TrainingCareer development

LeadershipOrganizational values

VoiceRecognition

AchievementJob design

Work-life balance

The change in perspective away from a narrow focus on payment towards a broader focus on total rewards has come largely because of developments in commercial environment.

Every year organizations operating in private sector are facing competitive pressure in their product markets leading them to search for ways of reducing their costs and improving quality, while Public sector faces pressure to keep costs down, this pressure come from tax payers seeking good value for their money.

These pressures are faced with tighter labor markets condition, make it difficult for employees to recruit and motivate the staff they need without increasing pay level.

There are variety responses that organizations are embracing (احتضان). One involves employing fewer but more highly paid people to carry out existing work efficiently. The other involves keeping a lid on payment levels while looking for other ways of rewarding staff effectively.

The tangible components like financial is relatively unproblematic provided basic principles are adhered (انضمت) to and the correct technical decisions are made while they enable organization to secure a degree of competitive advantage in their labor markets. These tangible parts of total reward package are imitated by competitors.

Transactiona

Relational

Communal

Intangible reward is hard to replicate and also hard to achieve and evaluate. Intangible rewards are intrinsically (جوهري) rather than extrinsically (خارجي)

motivating and cannot be provided by managers. These terms used by to distinguish between sources of positive motivation which

are external to individuals and given to them by their employers such as money, and those which are internally generated.

The result is that the managers try to create and sustain a culture in which individual employees can achieve essential motivation and hence experience work which is rewarding.

Accounting chapter 6Measuring and reporting cash flows

The statement of cash flows It is the statement that shows the sources and uses of cash for a period. The statement of cash flow is recent addition to financial statement. All the financial information needed by users would be contained within these two

statements. Income statement sets out the revenue and expenses for the period rather than the

cash receipts and cash payments. This mean that the profit (or loss) which is represents the difference between the revenue and expenses for the period have no relation to the cash generated for the period.

In Activity 6.1 Page 211(generating revenue) will lead to an increase in wealth that will be reflected in the income statement.

If the sale is made on credit the increase in wealth is reflected in another asset. If the item of inventories is the subject of the sale wealth is lost through the

reduction in inventories. This means that an expense is incurred in making the sale which will show in the income statement.

Why is cash so important? Cash is an asset that the company needs to help it to function.

Cash is important because; No businesses can operate without it.If business employees people, it must pay

them in cash.

Chapter 6: Measuring and reporting cash flows• The statement of cash flows (pp.197-205)• Preparing the statement of cash flows: deducing net cash flows from operating activities (pp.206-mid 210)

If the business wants to buy a new non-current asset, the seller of the asset insist being paid in cash.

Cash is what analysts tend to watch the most carefully when assessing the ability of businesses to survive and/or to take advantage of commercial opportunities.

Cash movements cannot be readily deducted from income statement, which focuses on revenue and expenses rather than on cash receipts and cash payments.

The main features of the statement of cash flows The statement of cash flow is the summary of cash receipt and payments over

period concerned. The net total of the statement is the net increase or decrease of the cash (and cash

equivalents) of the business over the period.

A definition of cash and cash equivalents Cash are notes and coins in hand and deposits in banks and similar institutions that

are accessible to the business on demand. Cash equivalents are short-term, highly liquid investments that are readily

convertible to known amounts of cash and subject to an insignificant risk of change of value. They are held for the purpose of meeting short-term cash commitments rather than for investments or other purposes.

Whether an item falls within the category of cash and cash equivalents depends on two factors: (The nature of the item. And why it has arisen.)

The relationship between the main financial statements The Statement of cash flow is now accepted along with the income statement and

the statement of financial position (balance sheet) as a major financial statement. The relationship between these three statement Figure 6.1 p 216

- The Statement of financial position reflects the combination of assets (including cash) and claims (including shareholders' equity) of the business at a particular point in time.

- The statement of cash flows and the income statement explain the changes over a period to two of the items of the financial position.

- The statement of cash flows explains changes to cash.- The income statement explains the changes to equity, arising from trading

operations.

The form of the statement of cash flows Figure 6.2 p216 show (the standard layout for the statement of cash flows) and the

following is the terms used in the statement of cash flows

1- Cash flows from operating activities ( provide positive cash flows)- This is net inflow or outflow from trading operations after tax payments (or

receipts) and cash paid to meet financing costs.- It is equal to the sum of cash receipts from trade receivable and cash receipts

from cash sales. From this are also deducted payments for interest on the business borrowings, corporation tax and dividends paid.

- It is the amount of cash received and paid during the period that feature in the statement of cash flows.

- The net figure is intended to indicate the net cash flows for the period that arose from normal day to day trading activities after taking account of the tax

that has to be paid on them and the cost of servicing the finance needed to support them.

2- Cash flows from investing activities(cause net negative cash flows)- Here is concerned cash payments made to acquire additional non-current

assets and with cash receipts from the disposal of non-current assets. Such as buildings and machinery. They may also be loans made by the business or shares in another company bought by the business.

- Here also includes cash receipts arising from financial investments (loans and equities) made outside the business.

- These receipts are interest on loans made by the business and dividends from shares in other companies owned by business.

3- Cash flows from finance activities(can go negative or positive cash flows)- It is concerned with long-term financing of the business. Considering

Borrowings (other than short-term borrowings) and finance from share issues.- It is concerned with repayment/redemption (refund) of finance as well as with

rising of it.- It shows the net cash flow raising and/or paying long-term finance.

4- Net increase or decrease in cash and cash equivalents- The total of the statement must be the net increase or decrease in cash and

cash equivalents over the period concerned.- It shows the normal direction of cash flows for healthy, profitable business in

a period. Figure 6.3 page 218.The normal direction of cash flows

Operating activities provide positive cash flows that help to increase the business's cash resources.

Investing activities cause net negative cash flows: because many types of non-current asset wear out or become obsolete. Also businesses tend to expand their asset base.

In net terms the Cash flows are negative when cash spent on new assets outweighing that received from disposal of old ones.

Financing can go either direction, depending on the financing strategy at the time.Preparing the statement of cash flows

Deducing net cash flows from operating activities Two approaches that can be taken

1- The direct method : (by analyzing the businesses cash records).- Involves analysis the business's cash records for the period picking out all payments and receipts relating to operating activities to give the total figures for inclusion in the statement of cash flow.2- The indirect method :(by analyzing the business's financial statements). Figure

6.4 p223- It relies on the fact that sales revenue gives rise to cash inflows. Expenses give

rise to out flows.So profit for the year will be closely linked to the cash flows from operating activities.

- Information from an income statement used as starting point to deduce (.the cash flow from operating activities (استنتج

- Profit for the period will not equal the net cash inflows from operating activities.

- When sales on credit the cash come any time after sale. So sales revenue made towards the end of reporting period will be included in that reporting period’s income statement.

- Most of the cash from those sales will flow and should include in the statement of cash flow in the following period.

- To deduce the cash receive from sales it should we have the relevant income statement and statements of financial position.

- The depreciation for reporting period is not associated with any movement in cash during the same period.

- This means that we can take the profit before taxation (the profit after interest but before taxation) for the year, and back the depreciation and interest expense charged in arriving at that profit, and adjust this total by movements in inventories , trade receivable and payables.

- We have the net cash if we deduct the payments for taxation interest on borrowings and dividends(ارباح).

- It is important to add back an amount for interest at the start of derivation of cash flow from operating activities only to deduct an amount for interest further down for two reason:-

1- The interest expense for the reporting period.2- The amount of cash paid out for interest during that period. Example 6.2 page

221.

Profit before taxation (After interest) K.D. 125,000Depreciation charged in arriving at profit before taxation K.D. 35,000At the beginning of the year:

Inventory K.D. 1,500

Trade receivable K.D. 2,400

Trade payable K.D. 1,800

At the endof the year:

Inventory K.D. 2,800

Trade receivable K.D. 1,400

Trade payable K.D. 2,200

Other information:Taxation paid K.D. 31,000Interest paid K.D. 6,000Dividends paid K.D. 8,000

(1) The following information is obtained from the financial statement of SEMAZ Organization in 2011.

Requirement: Prepare the cash flow statement using the indirect method of deducing the net cash flows from operating activities.

Profit before taxation (After interest) K.D. 220,000At the beginning of the year:

Trade receivable K.D. 3,000

Inventory K.D. 2,500

Trade payable K.D. 2,900

At the endof the year:

Trade receivable K.D. 3,500

Inventory K.D. 3,000

Trade payable K.D. 2,100

Other information:

Interest paid K.D. 8,000

Dividends paid K.D. 10,000

Depreciation charged in arriving at profit before taxation K.D. 25,000

Taxation paid K.D. 29,000

1) Prepare the cash flow statement for the following information obtained from the financial statement of ARJANA Company in 2012

Profit before taxation (After interest) K.D. 125,000

Depreciation charged in arriving at profit before taxation K.D. 35,000

At the beginning of the year:

Inventory K.D. 1,500

Trade receivable K.D. 2,400

Trade payable K.D. 1,800

At the end of the year:

Inventory K.D. 2,800

Trade receivable K.D. 1,400

Trade payable K.D. 2,200

other information:

Taxation paid K.D. 31,000

Interest paid K.D. 6,000

Dividends paid K.D. 8,000

Solve:

ARAJANA CompanyStatement of cash flow for the year ended 2012

Profit 125,000 KDDepreciation 35,000 KDInventories (1,500-2,800) (800) KDTrade Receivables (2,400-1,400) 1,000 KDTrade payables (1,800-2,200) 400 KDCash generated from operating activities 160,000 KDTax paid (31,000) KDInterest paid (6,000) KDDividends paid (8,000) KDNet Cash from operating activities 115,600 KD

Explain the standard layout of the statement of cash flow

Cash flows statement sets out the cash receipts andcash payments, while Income statement sets out the revenue and expenses for the period

Cash flow from operating activities: (plus or minus)It’s concerned with the net cash flows for the period that arose from normal trading activities aftertaking account of the tax that has to be paid on them and the cost of servicing the finance(equity and borrowings) needed to support them.Note that the amounts of cash received and paid

during the period that feature in the statement ofcash flows are not the revenue and expenses for that period. However, the income statement dealswith the revenue and expenses, similarly the tax and dividend payments that appear in thestatement of cash flows are those made in the period covered by the statement

Cash flow from investing activities: (plus or minus)it’s concerned with cash payments made to acquire additional non-current assets and withcash receipts from the disposal of non-current assets, Such as; buildings and machinery. It includescash receipts arising from financial investments (loans and equities) made outside the business.These receipts are interest on loans and dividends from shares in other companies.

Cash flow from financing activities: (plus or minus)it’s concerned with the long-term borrowing to finance the business other than very short-term andshare issues. It’s concerned with repayment/redemption of finance as well as whit the raising of it.It also includes dividend payments made by the business and shows the net cash flows from raisingand/or paying back long-term finance

Net increase or decrease in cash and cash equivalents: (Equals)The total of the statement must be the net increase or decrease in cash and cash equivalents overthe period concerned.