Category: Business

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Business Money Research

Methods for investment appraisal

Atrill & McLaney (2011, p.358) describe the four main methods of investment appraisal to be:

1)     Accounting Rate of Return (ARR)

2)     Payback Period (PP)

3)     Net Present Value (NPV)

4)     Internal Rate of Return (IRR)

It is noted that companies do have variations on the above but these are the main methods used. Details of the four methods are as follows:

1)     Accounting Rate of Return
Atrill & McLaney (2011, p.359) explain the ARR method to use the two main pieces of information.

  1. Annual average operating profit
  2. Average investment

The equation to calculate the ARR is as follows:
ARR = Annual average operating profit / Average investment (to achieve profit) x 100%

The company should decide a minimum target ARR and base their decisions upon projects achieving an ARR of that minimum percentage or higher. If there are numerous projects that meet the required minimum, the one with the highest ARR should be selected (Atrill & McLaney, 2011, p.360).

The main risk with using ARR is that it does not take into consideration the time factor for return on investment (Atrill & McLaney, 2011, p.362). If three projects have an equal investment and projected return a fixed period of time, they will all have the same ARR; but if one of those projects covers its investment costs within 1 year and the other only after 4 years, project 1 should be the clear winner.

The second major flaw in the ARR method is that ARR is based on Accounting profits rather than cash profits. As explained in an example by Atrill & McLaney (2011, p.362); if an asset has a residual value at the end of life of the project, giving it away rather than selling it allows for a higher ARR (Average Investment = Cost of Asset + Residual Value).

2)     Payback Period

This calculates the amount of time that is required for a project to repay the initial investment amount out of its resulting cash inflow (Atrill & McLaney, 2011, p.364).

Companies should base their decisions when using PP on a predefined maximum time limit for projects to repay their investments, the project with the shortest projected time to repay initial investment should be chosen (Atrill & McLaney, 2011).

The flaw with this method is that it doesn’t consider the amount of cash flow in the period it takes to repay the investment. As per Atrill & McLaney’s example (2011, p.366) if project A B and C repay an investment in the exact same amount of time (3.5 years), but project C repays almost all of the investment in the first year while project B and A in the late 2nd and 3rd respectively, project C should be the clear winner. Also, it does not consider the cash flows after the initial investment has been reach, it concentrates on high initial returns which lends itself to a more negative idea that the project is going to fail so the money must be recouped as soon as possible. If project A gives twice as much return as project C after the third year then that should be strongly considered as a better option.

3)     Net Present Value

The NPV method allows us to make a decision based on all of the costs and benefits as well as the exact timings in which they occur (Atrill & McLaney, 2011, p.368).

To put it simply, NPV compares the value of the invested currency today and compares it with the value of that invested currency in the future, also taking into consideration inflation and returns (Investopedia, 2011).

Value Based Management (n.d.) describes the steps to calculating NPV as follows:

1)     Calculate expected free cash flows per year as a result of the investment

2)     “Subtract/discount for the cost of capital (an interest rate to adjust for time and risk)”
This intermediate result is called the Present Value

3)     Subtract initial investment amounts

This end result is the Net Present Value

Companies should consider projects with a positive NPV,  negative NPV’s should be rejected and the project with the highest positive NPV should be chosen when faced with multiple projects.

The problem with NPV as explained by Value Based Management (n.d.) is that it does not account for flexibility or changes / uncertainty after the decision has been made to proceed with the project.

4)     Internal Rate of Return

This method is closely tied with NPV. IRR uses the method of discounting future cash flows from an investment but it produces the discount rate at which an NPV value of zero is achieved (Atrill & McLaney, 2011, p.379). It is noted that IRR is difficult to calculate as it involves trial and error to get the value down to 0.

IRR can be thought of as “the rate of growth a project is expected to generate” (Investopedia, n.d.).

Investopedia (n.d.) explains that generally a project with a higher percentage IRR is more desirable than one with a lower percentage IRR. The project that yields the highest percentage IRR is the project that should be considered first.

The flaw with IRR is that it does not take into consideration the scale of development (Atrill & McLaney, 2011, p.383), basically an increase in investment can increase returns yet give us the same percentage. Another issue is that it does not cater for fluctuations in cash flows. With a fluctuating cash flow, multiple IRR’s or none at all may be the result (Atrill & McLaney, 2011).

Atrill & McLaney (2011, p.383) mention that NPV overcomes the flaws of IRR and out of the 4 options outlined above I would also tend to lean towards NPV as being the best method of assessing a risky investment because it gives us closer to real world values of our returns on a project. I believe it is very important to consider that even if we are getting a positive return when projecting, what would that amount really equate to in the time frame that it is being returned, with inflation and rising labour costs it wouldn’t be wise to exclude them from your assessments.

That being said, as Atrill & McLaney (2011, p.388) point out, companies use combinations of the above 4 methods to evaluate investments and I would consider using NPV and IRR and PP when considering an investment.

References

Atrill, P. & McLaney, E. (2011) Accounting and Finance for Non-Specialists. 7th Edition. Prentice Hall.

Investopedia (n.d.) Internal Rate of Return – IRR [Online]. Available from: http://www.investopedia.com/terms/i/irr.asp (Accessed:

Investopedia (n.d.) Net Present Value – NPV [Online]. Available from: http://www.investopedia.com/terms/n/npv.asp (Accessed: 30 April 2011).

Value Based Management (n.d.) Net Present Value Method [Online]. Available from: http://www.valuebasedmanagement.net/methods_npv.html (Accessed: 30 April 2011).

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Business Money

Cash Flow Statements

A cash flow statement (or statement of cash flows) shows a fairly detailed description of the movement (or flow) of cash over a period of time. The cash flow statement includes with the cash flows from operating activities, investing activities, financing activities and provides the cash and equivalents total for the end of the reported period.

There are two methods of measuring the cash flows from operating activities

Direct Method

This is the simplest, yet the least used method. The requirements are simply to add up all the payments and receipts over the reported period to give a total that reflects on the cash flow statement.

Indirect Method

This method is the more popular method and is based on the principal that the sales revenue increases cash inflow while expenses increases cash outflows. “The indirect method adjusts net income for items that affected reported net income but didn’t affect cash” (Anon, n.d.)

Examples

ABC Limited reported a revenue of $ 1 000 000 at the year ending 31 December 2010. The income statement reflected a $ 140 000 tax payment and a Net Income of $ 34 000. Accounts receivable increased by $ 200 000; therefore cash collected on the revenue is $ 800 000 ($ 1 000 000 – $ 200 000). ABC Limited reported operating expenses of $ 825 000. Accounts payable (operating expenses) was reported as being $ 45 000; therefore cash operating expenses were $ 780 000 ($ 825 000 – $ 45 000). Tax payable at the end of the year was reflected as $ 0.00 which means the income tax payment was made during the year in cash.

Direct Method

Cash collected from revenues                                                   800 000
Cash payments for expenses                                                     780 000
Income before income taxes                                                            20 000
Cash payments for income taxes                                            140 000
Net cash flow from operating activities                                     (120 000)

Indirect Method

Net income                                                                                           35 000
Increase in accounts receivable                                         (200 000)
Increase in accounts payable                                              45 000         (155 000)
Net cash flow from operating activities                                    (120 000)

We can see that both methods result in the same net cash from operating activities. While direct looks directly at the cash in hand the indirect looks more at the income statement and uses trade payables and receivables to work out the cash flow from operating activities.

References

Anon (n.d.) Cash Flow Statement Example-Direct and Indirect Method [Online] Accounting for Management. Available from: http://www.accountingformanagement.com/preparation_of_statement_of_cash_flows.htm (Accessed: 16 April 2010).

Atrill, P. & McLaney, E. (2008) Accounting and Finance for Non-Specialists. 6th Edition. Financial Times Press.

Categories
Business Law Money Research

Liability, Tax and Financial Reporting Requirements in South Africa

Legal Entity

Limited companies are, by law, legal entities that have a (perpetual) life of their own, irrespective of the owners/shareholders of the company. As stated by Atrill & McLaney (2011), this means that the company itself can be sued, or can sue another person/entity in its own capacity, irrespective of the owners. This is in direct contrast with sole proprietorships where, unlike the accounting (where the owner and the business is separate), the owner and the company are legally treated as the same entity, therefore the owner is the one who is liable if any legal issues arise.

Limited Liability

Perhaps one of the most important features of a company is that the shareholders of the company have a liability that is limited only to the equity (shares) they have in the business. If the company has a large outstanding debt which it is unable to repay, by law only the assets/equity the business itself owns can be liquidated to repay the outstanding amount, and the shareholders are not liable for any repayment in their personal capacities. Again this is in direct contrast, as mentioned above, with sole proprietorship where the sole proprietor themselves would be liable for any bad debts in their personal capacity and therefore even their “non-business” assets may be liquidated to fulfil debt payments.

Tax

Due to the two points mentioned above, a limited company therefore must be taxed as an entity. Most countries have separate taxation percentages for legal entities. These taxes are charged to the company and this does not exempt shareholders from their personal tax requirements, for example; receiving a dividend pay-out from the already taxed profits does not mean the shareholder doesn’t have to pay tax on the dividend pay-out as the dividend pay-out is a taxable income to them personally, the tax the company has paid is for the company.

South Africa – Accounting and Financial Reporting

South Africa currently has limited companies as well as another form of entity called a close corporation. Closed corporations are much easier to incorporate than regular companies and do not require full accounting audits, but have a number of other limitations compared with regular limited companies which are represented by (Pty) Ltd (eCompanies, n.d.). Close corporations in South Africa have, however, been phased out as of this year.  Regulations for limited companies in South Africa, as mentioned, require the financials to be audited by a firm of Chartered Accountants.  With effect from July 1, 2010, a new legislation amendment has been made to the companies act that states financial reporting standards “must be consistent with the International Financial Reporting Standards of the International Accounting Standards Board” (eStandardsForum, 2009).

References

Atrill, P. & McLaney, E. (2011) Accounting and Finance for Non-specialists. 7th Edition. England: Pearson Education Limited.

eCompanies (n.d.) What is a close corporation? [Online]. Available from: http://www.ecompanies.co.za/cc.htm (Accessed: 16 April 2011).

eStandardsForum (2009) South Africa – International Financial Reporting Standards [Online]. Available from: http://www.estandardsforum.org/south-africa/standards/international-financial-reporting-standards (Accessed: 16 April 2011).

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Business Money Research

Accounting conventions and their effects on financial position

Balance Sheets

This report can also be referred to as “The Statement of Financial Position” (Atrill & McLaney, 2008). It shows a “snapshot” of the businesses financial position, it is important to remember that the balance sheet only reflects for the date on which it was prepared; it is not highly unlikely that dates before and after may be significantly different. The details on the Balance sheet include a value listing of the current assets (items equitable to a monetary value with an expected conversion to the proposed value within 12 months), the non-current assets (the same as current but with an expected conversion to monetary value that is over 12 months), versus the liabilities (items that the business owes money on, such as loans and stock purchased on credit; both current and non-current) and equities (amounts paid in to the business by the owners as well as the profits generated by the business).

As the name states, the balance sheet should always balance so that the Total Assets = Total Equity + Total Liabilities.

Accounting Conventions – Effects on Measuring & Reporting Financial Position

There are a number of different accounting conventions that can change the appearance of a company’s financial position which are outlined by Atrill & McLaney (2008) and can be summarised as follows:

  • Business Entity Convention:
    Whether a business is a sole proprietorship or a partnership, or any other kind of business, the business always exists as its own entity with its own finances. If the business owner invested $ 50 000 in to the business then that is considered as an amount the business “owes” the owner.
  • Historic Cost Convention:
    This convention specifies that the costs of assets are to be recorded and maintain the original cost value throughout their lifetime. The purchase of a vehicle which depreciates fairly rapidly and the cost of property which appreciates will be recorded at the original purchase price. In these two situations the financial representation can be biased either positively or negatively respectively.
  • Prudence Convention:
    This convention is used to avoid over-optimistic projections by managers and directors. All possible losses are recorded once and in full while the profits are only recorded once they actually happen. This is a somewhat bleak outlook on financial position and may end with investors placing a lower value on their investments into the business than the true value.
  • Going Concern Convention:
    This convention has a more positive view than the prior convention. The assumption is made that the business will not be closing in the foreseeable future. Values are taken as current. The issue that arises with this convention that is if the company is to close, assets being sold off will more than likely be sold for less than their reflected value.
  • Dual Aspect Convention:
    This convention keeps with the concept of the balance sheet. Each transaction has a positive and negative effect on the balance sheet and should be recorded as so in the relevant categories. This assures the balance sheet will always balance.

Asset Valuation – Effects on Measuring & Reporting Financial Position

Asset valuation can be measured in different ways. One of the ways as mentioned above is the historic cost method where an asset is valued at its original cost to the business. As with the example above, it is important to keep an accurate record of the depreciation (decrease in value, such as with motor vehicles) and/or appreciation (increase in value, such as with property) recorded to maintain a more accurate measurement of the true values.

“Fair values” may also be used to measure an assets worth. This can be the assessed value of replacing or selling the asset as opposed to the depreciated or appreciated value of the asset. Fair value is often open to much debate and is more difficult to pin-point than appreciated or depreciated values.

References

Atrill, P. & McLaney, E. (2008) Accounting and Finance for Non-Specialists. 6th Edition. Financial Times Press.

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Business Money Research

Finance, Financial Accounting and Management Accounting

Finance

Atrill & McLaney (2008) describe Finance (also referred to as financial management) as being something likened to accounting rather than accounting itself. Atrill & McLaney (2008) go on to describe finance as existing to aid decision makers on how to plan a business, by assessing the needs of the business and organising the finances to suit these needs (being simply to make investments for good returns, or additionally numerous other arenas where financial needs must be assessed).

Financial Accounting

Atrill and McLaney (2008) outline Financial Accounting quite thoroughly and it can be summarised as the following: Financial Accounting is predominantly produced to summarise the overall financial standing of a business in a formal, regulatory defined format for public view (eg: investors/potential investors, governments, general employees, suppliers, competitors etc.). Financial accounts are usually prepared out of necessity once (in some cases twice) per year and are often a requirement by many countries tax laws.

Management Accounting

Atrill and McLaney (2008) describe how, as the name suggests, this form of accounting is used by management in a company and are often used to aid in specific decision making requirements (such as new purchases, new investments, etc.). Management accounts are mostly tailor-made both in format and in financial area to best suit the requirements of the specific manager and specific task at hand.

Similarities and Differences

Finance itself is a broader outline of the processes involving finance in a business, which is arguably the most important aspect of a business. Finance itself would encapsulate the latter two of the above definitions.

As described above, Financial Accounting provides predefined forecast on how a business has been running, financially, in the past period; which, as Atrill & McLaney (2008) point out, can also be used to forecast future performance. Management Accounting is predominantly used for projections or forecasts on new ventures or current ventures that a business is partaking in and are generated if and when they are required by management, rather than at predefined times as required by regulatory bodies.

To conclude, “management accounting seeks to meet the needs of the business managers and financial accounting seeks to meet the needs of the other user groups” (Atrill & McLaney, 2008).

References

Atrill, P. & McLaney, E. (2008) Accounting and Finance for Non-Specialists. 6th Edition. Financial Times Press.

Categories
Business Research

Should an Organisational Strategy intertwine itself with the Human Resources Policy?

With regards to the argument of whether organisational strategy should or should not be intertwined with the human resources policy, I believe that it should be.

As written in by Buchanan and Huczynski (2010), people form an organisation, even down to the organisations “personality” – while the organisational strategy may seem on the surface to be more along the lines of the organisations ideal vision and mission, this is the weight the employees must take on their shoulders and human resource policies should be structured to align the real world, daily function of the organisation to achieve the ideals specified in the strategy.

HRM Guide (n.d.) states “organisations can be regarded as people management systems” as well as “Human resource managers can encourage organisations to adopt strategies (for their structures) which foster both cost-effectiveness and employee commitment”. Particularly important, is the employee commitment that HRM Guide has pointed out, without the full commitment and belief of the employees in the organisation and its strategy, the organisation is going to find it difficult to implement the strategy and the values.

HR-Info (n.d.) explains how “people management professionals” have the role of becoming knowledgeable about an organisation but are often discouraged by jargon and complexity, following this comment we can assume that if the management professionals are discouraged by the complexity of the strategy then most of the employees will be too. It is the job of the management professionals (specifically HR), to, as HR-Info puts it, “demystify” the organisational strategy for the employees and it should be an important part of the HR policy to explain the details behind the organisational strategy.

I also feel that, from my experience, if an employee has full understanding of the goals and vision of an organization – they will perform better and also feel more part of the organisation. Many employees are unaware of the strategy behind an organisation or feel detached from it due to the “higher level” overview carried across in vision and mission statements. If organisational structures are evaluated against internal staff policies this will aide in a more unified vision and understanding in an organisation.

To conclude, it is my view that the vision and mission of an organisation, therefore, should be simplified with regards to the use of jargon and structured in a clear manner which considers the employees of the organisation. Upper management and/or directors of an organization should consult with the HR department when developing, or redeveloping their organisational structure, perhaps to the point where the HR department drafts the organisational structure based on initial instruction of the upper management/directors. Without consultation, organizations run the risk of losing the link between upper management goals and employee participation which make up the day-to-day life of the organisation. Without the alignment of these two, it is difficult to imagine the fruition of the strategy behind the organisation.

References

Buchanan, A. & Huczynski, A. (2010) Organizational Behavior. 7th Edition. Upper Saddle River: Prentice Hall.

HR-Info (n.d.) Demystifying Organizational Strategy [Online]. Available from: http://www.hr-info.com/2011/03/demystifying-organizational-strategy/ (Accessed: 20 March 2011).

HRM Guide (n.d.) Organizational Structure [Online]. Available from: http://www.hrmguide.net/hrm/chap4/ch4-links3.htm (Accessed: 20 March 2011).

Categories
Business Computing Research

IT Positions in South Africa, do they require tertiary education?

In South Africa, there is a strong emphasis on experience when it comes to technical or IT positions. IT job ads in South Africa are generally opened up with a requirement of “IT related Degree or Diploma” but, in my experiences of being an applicant without a degree (only a 1-year Comp Sci. diploma) as well as being in the position of hiring applicants, this is often just a small benefit when it comes to the final choice. In the interviews I have taken part in I have never had an in depth discussion about the qualifications either I myself have or an applicant that I am interviewing has.

In this (IT) industry in South Africa, it’s a known fact that for technical positions (programmers, technicians etc.), salary is almost solely based on the amount of experience an applicant has.

Another point I found when being an applicant with a diploma is that the difference between a 1 diploma and a 3 year degree is quite vast. Not exactly 2 years ahead due to degrees generally being spread out with a lot of holidays and the 1 year diplomas being 48 out of the 52 weeks in the year, but still a very significant amount more learning is gained in the degree program. Yet, job ads were looking for “either a degree or diploma”.

I do keep up to date with job postings for IT related positions in my country and I have found that recently, a number of jobs are asking for a “3 year degree” rather than simply a degree or diploma.

For positions in management, which mainly consist of project manager positions, project management training has always been a requirement in my experience of reading through positions, but along with that comes a requirement of, generally, a minimum of 3 years of experience in project management.

This brings me to the catch-22 of the job market in South Africa that I found in my first 2 years of being in the industry. Practically nobody will even interview you without relevant experience, let alone hire you. Without experience you cannot get a job, and without a job you most certainly can’t get (valuable) experience.

I feel the main area where specific training is not a major requirement is in the field of IT support. Many positions are available in support and most of them involve being trained in the specific scenarios of the organisation on the job. Even with regards to hardware support, I find the most talented hardware support people have learned themselves. The courses such as the A+ and other technical courses, which I have done personally, are almost trivial to someone who has “played around” with computers for a few years. In my opinion, it is difficult to teach such an area as the reasons behind hardware/software failing are not standard, they require trial and error even for the experienced hardware technician.

For technical positions, I have always, and my colleagues in the industry, been given mini-projects to complete and/or written general tests. Personally I give applicants a mini-project as I do not believe that written tests are a good when it comes to programming, specifically. Knowing functions off by heart doesn’t mean much, as generally we all have access to the internet to solve these issues, rather the ability to solve a problem and produce a project with good quality code.

To conclude, the situation in South Africa has become more focused on pre-trained individuals over the years – but this is generally just an initial prerequisite to avoid interviewing potentially mis-fit applicants. The strongest focus does still lie on experience in the specific field that is being applied for. 

Categories
Business Money Research

Competitors are not enemies

A competitor can be defined as “Any person or entity which is a rival against another. In business, a company in the same industry or a similar industry which offers a similar product or service.” (BusinessDictionary.com, n.d.). The word compete brings to mind some form of an enemy who is there to defeat you or to be defeated by you. In the business world, as we can see by BusinessDictionary.com’s definition above, it’s not a far stretch to come to the conclusion that competitors can be beneficial to both sides of the collaboration if they choose to be involved with one another.

Many companies, as with people, have different areas in which their talents shine. If we refer to Hamel, Doz and Prahalad (1988) they refer to General Motors buying cars and components from Korea’s Daewoo and Siemens buying computers from Fujitsu. Their article describes particularly the skill of the Japanese manufacturers with the American capability for distribution. Also, they go on to make quite a valid point, in fact these collaborations are, most of the time, complex outsource arrangements.

In the industry I am working in, there is a vast amount of collaboration between competitors, without which I don’t believe the industry would be able to produce the level of advanced systems that they are currently producing.

To put it in to terms of the web development industry, which is the industry I am involved in, I deal with competitors almost daily. If a client comes to me and wants an aesthetically pleasing extranet or intranet system for their company I will outsource the design to my outsource partners who, themselves also offer development services. Once the designs are mocked up I will then outsource the conversion of the design images in to xHTML with my front-end scripting partners and then I will do the system programming in-house. The same situation goes the other way, many of my clients are web development agencies that outsource the more complex programming requirements to myself.

The cohesion this brings to the industry is great, allowing all the different vendors deliver top class products without losing focus on their specific specialisations. In my past positions working for different companies, the benefits of this arrangement opposed to keeping full staff to cover all aspects of development and design is quite high. Unfortunately the high turnover rate when keeping staff and the budget required to employ all the different specialised staff full time is not always feasible.

We can see other examples of collaboration amongst mobile platform development companies. Particularly with Google’s introduction of Android Operating System which was predominantly released to HTC phones, but has now spread across to other manufacturers, including Samsung. Nokia have also recently (at the time of writing this article) made a controversial partnership with Microsoft to supply the operating systems for their phones and to scrap their own Symbian Operating System.

With the ever expanding software and hardware world the opportunities for outsourcing and mutually beneficial arrangements with competitors is growing. As we can see by reading Hamel, Doz and Prahalad’s 1988 paper, most of the partnerships are still happening today, which goes to show that a business should always consider their options with competitor partnerships.

References

BusinessDictionary.com (n.d.) Competitor definition [Online]. Available from: http://www.businessdictionary.com/definition/competitor.html (Accessed: 13 March 2011).

Hamel, G., Doz, Y. & Prahalad C. (1988) Collaborate with your competitors – and Win [Online] Harvard Business Review. Available from: http://www.stern.nyu.edu/mgt/courses/b2101/lamb/download/collaboratewith%20competitors.pdf (Accessed: 13 March 2011).

Categories
Business Philosophy Research

What makes a good manager? What makes a bad manager?

MAS (n.d.) describes a good manager as a manager that achieves a “hard working, productive and effective workforce that punches above its weight in its performance”. Some qualities a good manager should have, as Gates (n.d.) describes can be summed up as:

  • Working within a field that they enjoy.
  • Not afraid to fire people who are bringing the team down.
  • Uses his resources to create a productive team, whether by financial rewards or better working conditions.
  • Informs employees clearly of what defines success and what the goals are.
  • Interacts with all members of the team and creates a relationship (not necessarily friendship) between all employees.
  • Transfers his/her skills to the employees, train an employee to be better than the manager him/herself.
  • Gives employees a sense of importance, allows them to feel an important part of the company.
  • Is hands on, also takes part in work rather than simply delegates it.
  • Is decisive, must take time to make a clear, first decision and stick with it. Going back on decisions creates doubt.
  • Lets employees know who to please, allows employees to know what to prioritise in their day to day work environments.

About.com (n.d.) did a poll to the public to vote on what makes a bad boss, the results show the following from 19137 votes:

  • 34% – Manager provides little direction
  • 10% – Manager offers little or no recognition for success and hard work
  • 9% – Manager is indecisive and changes direction at a whim
  • 24% – Manager micromanages and nit-picks your work
  • 18% – Manager belittles and puts down staff
  • 3% – Miscellaneous answers

Personally, I would put the 2nd and 5th option on the same level as the 1st option as I feel those issues are all very important when it comes to management.

From my experiences I would consider the following points on good and bad management techniques:

  • Encouraging and motivating the team constantly. If the manager is consistent in their encouragement and positive attitude it is reassuring. A manager that is cynical and unmotivated when ‘relaxed’ comes across as being false when they decide to act motivated on cue when they are required to introduce a new project.
  • Managers who are willing to put in overtime hours with you to get a project done rather than leaving at the assigned closing time has proven to keep myself and my team-mates in these situations more motivated. Keeping a positive attitude rather than a negative one in times of missed-deadlines is also good. It is understandable that sometimes management is unable to stay but in these scenarios, staying available telephonically/via some form of communication is also beneficial.
  • Balancing the work-load correctly, being slammed with 12 hour working days for 3 weeks and then sitting idle for the next 3 weeks can create unnecessary stresses. In quiet times it is a good idea to keep employees working on something.
  • Assigning valuable work to employees. I have been assigned projects which were never reviewed and never used – purely to keep me busy while waiting on other departments. This did not make me feel important or necessary and cast out from the rest of the team.
  • Mutual respect. I have been lucky to deal with mostly managers that share a mutual respect and do not treat me as a “lower being”. Managers that treat their staff as lesser people than themselves, in my experience, alienate themselves from the rest of the company; landing up with nobody liking them at all, purely because of the attitude.

In conclusion, I feel that a manager must, most importantly, be personable and authoritative. They must be open to discussion on decisions but, as Gates (n.d) says, must not go back on their decisions unless absolutely necessary. I do not have a problem with a certain level of “arrogance” but, as with anyone who claims to be something, they must be able to prove their worth and earn their respect by performing their duties efficiently and correctly.

Reference List

About.com (n.d.) Poll Results – What makes a Manager a Bad Boss [Online]. Available from: z http://humanresources.about.com/gi/pages/poll.htm?linkback=http://humanresources.about.com/b/a/257578.htm&poll_id=5738279818&submit1=Submit+Vote (Accessed: 8 March 2011).

Gates, B (n.d.) A good manager has at least 10 good qualities [Online] Business Times. Available from: http://www.btimes.co.za/97/1102/tech/tech6.htm (Accessed: 8 March 2011).

MAS (n.d.) What makes a Good Manager? [Online] Management Advisory Service. Available from: http://www.mas.org.uk/management-advisory-service/what-makes-a-good-manager.html (Accessed: 8 March 2011).

 

Categories
Business Ethics Research

Does team building help the cohesion of a team?

I do believe that team building activities will support cohesion of a group and improve effectiveness. Personally, I have not worked for a company that has sent my team and myself on team building excursions.

From my experience in conversing with colleagues who have been to team building exercises, the team building activities are usually not work-related and aimed toward the general character of the group members on a whole; for example, a male-only team of programmers were sent go-kart racing. Situations like this would set-aside the ‘roles’ of the members in the group and put everyone on a level playing field. All members get to compete with one another in a good natured sporting activity. This allows all members to come out of their shell and shine in a fun situation. One issue I find a bit unusual about this team building approach is that the team members are put against each other instead of together; this seems like an approach that would encourage individualism more than team work.

Another team building exercise that my colleagues have been involved in was a paint-ball game where the team was working together to defeat their opponent team which were just another group of people at the paint-ball game. I think this approach is far more effective towards building a team spirit. Each team member has their role in the “battle” and must look out for one another. In an activity like paint-ball I believe this will also potentially bring out the individual characters, the risk takers, the safe-players etc.

Richardson (n.d.) outlines some benefits of team-building exercises;

  1. Common Goal – Team-building exercises are aimed at working together, they allow the team to work together towards a common goal.
  2. Trust – Team members must trust their fellow colleagues in these exercises. Everyone has the spirit of agreement.
  3. Ideas & Participation – These exercises allow all team members to be involved and give their ideas and work together.
  4. Motivation – Team building exercises “creates an environment that motivates people to achieve the goals and objectives of the organisation while subordinating individual goals” (Richardson, n.d.).
  5. Rapport – Team members learn personal details about their colleagues which enables them to gain rapport for each other as well as increased tolerance towards each other.
  6. Organisational Benefits – Members of the team are driven towards achieving results more than individual recognition which will help the organisation as their employees will be more focused on the organisational goals than their personal goals.

Personally I would welcome more team building opportunities, not only from the view of an employer but also from the view of a team member. A team building event with the teams I work with for different clients as well as my small team of contractors would definitely improve morale. One of my largest clients is suffering from a low morale amongst employees and, from my observations, the employees are feeling disjointed and uninvolved – more team building would benefit them greatly.

Something I am in two-minds about is the possibility of physical team building exercises, depending on the individual team members, may also encourage “bullying” to some degree. If a “leader” is physically passive and a subordinate is physically dominant things may tend to go off track, especially if there are underlying resentments. As much as bullying should be left on the playground (if anywhere at all), adults are quite capable of childishness and bullying.

In conclusion, I think that team building is a good method of getting employees more enthusiastic about an organisation. I do believe it should be encouraged and even if it is not a high-budget exercise, it is better than none at all. As far as the exercise the team should be involved in, I think, it would definitely need to be something that involves the team working together (eg: the paint-ball scenario) rather than against one another (go-karting).

References

Richardson, M (n.d.) What Are the Benefits of Team-Building? [Online] eHow. Available from: http://www.ehow.com/facts_5191806_benefits-team_building_.html (Accessed: 27 February 2011).