BUSINESS CASE STUDIES

General Editors: R. G. BURNS and K. MIDGLEY

The object of the series is to enable students to gain

experience in analysing actual business problems and
making the decisions necessary to solve these problems.
The student is, of course, keen to become skilled at
solving both actual business problems and examination
problems and another of the objects of this series of books
is to demonstrate that case studies provide a positive link
between business problems and examination problems.
Each book consists, firstly, of case studies which either
reproduce actual business problems or closely resemble
them and, secondly, of a selection of examination prob-
lems which students should be able to answer more
readily after having studied and discussed the case studies.
Mter each case study, there is a series of problems
designed both to test students' understanding of the facts
contained in the case study and to provide the opportunity
for solving actual business problems. All the questions set
have guidelines to solutions provided. The guidelines are
not complete answers but more in the nature of clues as
to the means of arriving at answers and starting-points
for calculations thereto. The guidelines will be particu-
larly useful for students who are studying without the
benefit and stimulation provided by the frequent sharing
of ideas in group discussion.
Where appropriate, brief comments on examination
questions are also provided.
The earlier volumes in the series give most emphasis to
the main business function which is being considered in
the volume, e.g. finance, marketing, personnel, etc.
Complementary functions are discussed in less detail.
Later in the series there is a change of case-form to multi-
subject cases, and the emphasis is then on the integrated
nature of business activities.
For titles of other volumes in the series see p. 2.
BUSINESS CASE STUDIES
Edited by R. G. BURNS and K. MIDGLEY

Published
CASE STUDIES IN BUSINESS FINANCE AND FINANCIAL ANALYSIS
K. MIDGLEY and R. G. BURNS

CASE STUDIES IN HUMAN RELATIONS

KENNETH V. PORTER

CASE STUDIES IN MARKETING

CHARLES DUNN

ACCOUNTING CASE STUDIES

K. MIDGLEY and R. G. BURNS

CASE STUDIES IN BUSINESS DATA PROCESSING

F. W. PURCHALL and RAYMOND S. WALKER

CASE STUDIES IN BUSINESS ADMINISTRATION

C. S. DEVERELL and others
Case Studies in Business
Administration

C. S. DEVERELL and others

Palgrave Macmillan
 ISBN 978-0-333-13623-2 ISBN 978-1-349-01533-7 (eBook)
DOI 10.1007/978-1-349-01533-7
Chapters 1 and 2 © C. S. Deverell 1972
Chapter 3 © C. G. Charron 1972
Chapter 4 © J. B. Boughton 1972
Chapter 5 © A. W. Ingram 1972
Chapter 6 © B. J. A. Pitt 1972
Reprint of the original edition 1972
All rights reserved. No part of this publication may be reproduced or
transmitted, in any form or by any means, without permission.

First published 1972 by

THE MACMILLAN PRESS LTD
London and Basingstoke
Associated companies in New York Toronto
Dublin Melbourne Johannesburg and Madras
SBN 333 13623 3

The paperback edition of this book is sold subject to the condition that it shall
not, by way of trade or otherwise, be lent, resold, hired out, or otherwise
circulated without the publisher's prior consent, in any form of binding or
cover other than that in which it is published and without a similar condition
including this condition being imposed on the subsequent purchaser.
Introduction to the Series
The case-study method of teaching has become increasingly
popular over the last decade, particularly in the field of
management education. It is a method which incorporates
several ofthe tenets of sound educational theory: it aims to build
up understanding on a framework of experience, to encourage
learning by doing, and to promote interest and enthusiasm by
requiring the student to solve problems in realistic situations.
Case studies may be the subject of group study or may be
tackled by individuals: dramatised situations may be employed
and case studies may incorporate the use of documents and
visual and audio aids.
Unfortunately there is still a comparative shortage of pub-
lished case studies in this country; and, in particular, students
on the fringe of management studies and those without access
to college courses may rarely have the opportunity to work
through case studies.
This series not only aims to expand the number of studies
available for use on courses in colleges and universities, but
also to make available case studies which can be used by
students in private study.
There is no unanimity among educationists as to the nature
and format of case studies. Is it essential that cases be written
about real situations? Should solutions be provided for the
problems set? The criterion which we have applied is that
the cases should be presented in such a way as to ensure that the
student has the maximum opportunity and incentive to learn
by analysing situations and making decisions, where appropriate.
In most instances, in order to ensure the verisimilitude of the
cases, real situations form the bases of the studies. As for
solutions, while we feel that it can be discouraging for students if
no answers to problems are provided, we must take account of
the fact that there is frequently more than one solution to a
5
problem. Consequently, we offer guidelines rather than
solutions to cases, though clearly some problems call for more
incontrovertible and accurate treatment than others.
While it is our hope that this series will prepare the student
for dealing with real-life situations in business and administra-
tion, we are aware that he is naturally and rightly concerned to
prepare himself to cope with examinations. In fact many
examination questions take the form of miniature case studies:
circumstances are set out briefly, and a solution to a problem
is required. This may not always be so - some examination
questions simply call for information - but nevertheless, in that
case studies can enrich the understanding of a subject, they
can play an important role in the preparation for examination
hurdles. For these reasons examination questions are set out at
the end of each book, and though they are not always exactly
related to the case studies therein, there is sufficient in common
to ensure that each booklet taken as a whole, with case studies,
guidelines, examination questions and comments, provides a
valuable and stimulating supplement to the reading set out in
the bibliographies which are also provided.
R.G.B.
K.M.

6
Contents
Introduction to the Series 5
Preface 8

Case Studies

1 Buying and Stock Control Procedures in an Engineer-

ing Company C. S. Deverell 9

2 Training, Supervisory Structure and Communication

Networks in a Servicing Industry C. S. Deverell 24

3 The Northern Systems Co. Ltd: A Case Study in the

Introduction of Job Evaluation C. G. Charron 33

4 Jacobs Print Ltd: A Case Study Concerning the

Organisation of an Accounts Department
J. B. Boughton 48

5 Planning with Networks: A Case Study III Project

Management A. W. Ingram 53

6 The Day to Day Problems of a Technical Representa-

tive in the Paint Industry B. J. A. Pitt 58

Guidelines 64

Examination Questions 92

Bibliography 95

7
Preface
This book of six cases has been prepared with the object
of illustrating a wide variety of subject areas within the scope
of business administration. It should prove a beneficial supple-
ment to the textbook reading recommended for an appreciation
of the theory contained in those broad syllabuses of such
subjects as business administration and business organisation,
subjects which appear in many business study and other degree
and diploma courses.
These six cases examine problems in a wide range of business
activities, including purchasing, stock control, stock records,
training, supervision, communications, aspects of behavioural
science, salary administration, job evaluation, delegation of
activities, accounts administration, critical path/network analy-
sis, marginal costing, customer relations and trouble-shooting
on the sales side. This collection of topics is featured in a variety
of industries including mechanical engineering, gas conversion,
electronic engineering, printing, building and paint manu-
facture. However, in most instances the problems examined
are not specific to those industries; they could be encountered
in many others.
A careful reading of the cases and a diligent attempt to
solve the case problems, followed by a comparison of one's
own solution with that suggested by the author, should prove
rewarding, be it in preparation for an examination or for an
appreciation of the variety of problems met with in business.
When using these cases, one should allow more time for
case 3 than for the others. The time required for this case
depends upon whether problems are solved individually or
in groups. Up to a whole day could be required if individual
solutions and discussions are employed throughout.
R. G. BURNS
K. MIDGLEY

8
I Buying and Stock Control
Procedures in an
Engineering Company
c. S. Deverell, M.A., B.Sc.(Econ.), B.Com., F.C.I.S., A.M.B.I.M.
INTRODUCTION
Inefficiencies in buying procedures, the recording of receipt of
goods, and stores and stock control can multiply insidiously in
an expanding business, especially where the company has
embarked on a policy of product diversification or perhaps is
drifting less purposefully into such diversification. What seem
on the face of it to be no more than minor expenditures on
clerical procedures may well be tying up substantial amounts of
capital, with all the costs which that implies.
It is not difficult to state the aims of purchasing and stock
control systems:
(a) To ensure that the materials and components required
for manufacturing operations are available in the right
quantity and quality at the time and place they are
needed.
(b) To keep the level of stocks as low as possible in order to
economise on the use of working capital and to avoid the
excessive occupation of factory space.
(c) To provide accurate and timely information for purposes
of financial control. Under this heading come the
maintenance of records of receipts, storages and issues,
and of balances and values in relation to the materials
and components involved.
(d) To safeguard stores from waste and pilferage.
(e) To provide a basis for perpetual inventory checks and
thus reduce the amount of resources and time devoted
to stocktaking.
(J) To make possible the quotation of firm delivery dates.
Engineering production in the larger and more diversified
firms may well entail the stocking of a very wide range of spare
9
parts and components, machined items, miscellaneous parts
and raw materials. A lot of capital may be locked up in such
stock, and a management is often torn between the need to
maintain an effective control of stores and a concern to see
that operating departments have their requirements promptly
met while perhaps paying less attention to cost control than
they might.
The Wessex Precision Engineering Co. Ltd which provides
this case study has several factories, the one immediately
concerned employing 2,300 personnel. There are a number of
distinct product groups, and many requisitions come from
machining departments for jobs or parts. Each has to be
covered in the first place by the raising of a works requisition.
A foreman is empowered to raise this, as are any of the persons
who have authority to ask for maintenance service.
A requisition card is completed. On the face of it are recorded
details such as the time required for the job. On the back is
given information relevant to the particular parts or job
required.
When work has to be carried out to meet the requisition,
the card is given, after the completion of the job, to the office
of the machining department. Useful information is copied
from it into plant information records, kept on a Kardex system.

CASE STUDY

Whenever a component or part is first introduced to the plant

at Wessex Precision Engineering it is allotted a group code
number by the works accounts office. In every subsequent
action performed in relation to any of these components or
parts, the relevant code number is quoted.
Parts which come into the factory from outside suppliers go
successively into the following departments:
(i) goods inwards;
(ii) inspection;
(iii) one of the six Stock Groups, i.e. separate stock centres,
which are maintained.
Some explanation of the nature of these six Stock Groups will
probably make the case much easier to follow.
10
 As already mentioned, the company makes a wide range of
products. These are arranged in six distinct product groups or
categories. Each such product group has associated with it all
the components or parts which are to be used in the manufac-
ture of that particular product group. Such components or
parts therefore form a distinct Stock Group, and just as there
are six product groups, so there are six Stock Groups, one
for each product group. The basic reference number for a group
of products is also used to identify the Stock Group attached
to it.
However, as it happens, there are a number of components
which are common to two, three or more product groups and
therefore the items of stock which are kept for the first product
group may well be duplicated in the stock kept for the second
product group, or the third, and so on. As we shall see below,
there are two particular items of stock which occur in all six
product groups and are stored in six separate places.
Each part is given a stores location code number, and as
there are six distinct Stock Groups, identical parts can be
found in two or more locations, e.g. part no. 663753 is used on
four different products and is stored in four separate locations,
as follows:
Stock Group No. Location No.
165 C23
166 E45
167 C40
169 C33
To summarise, the system not only has six Stock Groups, but
each of them is kept physically separate from the others, in
its own stores location.
Whenever an authorised requisition is presented to the stores,
the parts named on it are issued from the stock associated with
the particular product group to which it relates.
It does happen that where the Stock Group associated with,
say, product group no. 165 has nil stock of an item requisitioned,
product group no. 167 will have identical parts in stock in its
own Stock Group. To release such items from that group for
the requisition, the progress section must raise a stock transfer
requisition so that the needs of no. 165 can be cleared.
However, the system demands that in such circumstances
the Stock Group relating to product no. 167 must at a later
11
date receive back an equal quantity of the part in question:
debit and credit requisitions are raised, with extra documenta-
tion, so that production may be kept moving.
For costing purposes it is found necessary to associate each
requisition with its particular product group: therefore a work-
in-progress code is printed on the requisition. This work-in-
progress code will have been allocated to the job, i.e. to the
relevant product group in the manufacturing department. As
regards stores issues, it will enable one to check that the items
issued are debited to that particular job.
The requisition must also be related to a stores location
number. To enable the part to be found and issued, stores staff
refer to the parts location file which is kept numerically under
part numbers. On the location card will be written the Stock
Group number or the location number. This is noted and
written down on the back of the issuing requisition.
The correct location code number must be read from the
location card file, e.g. part no. 663753 has four different
locations. When the parts are required for product no. 165
they will be taken from location C23 and nowhere else, unless
the position of nil stock mentioned above arises. Care is there-
fore essential in reading the location card.
A total of 3,425 parts are held in store. Of these, 2,477 have
only one location apiece, the balance being made up as
follows:
181 with 2 locations 362
lO 1 with 3 locations 303
54 with 4 locations 216
II with 5 locations 55
2 with 6 locations 12

948 parts

The stock control department is responsible for maintaining

the stock records. For every part in stock there is a card on
which is recorded all parts ordered, received and issued.
The system may be thought complex. The amount of clerical
work it generates may confuse any newcomer to it but obviously
emanates from the original decisions to divide the company
products into a number of homogeneous groups and to divide
the stock similarly. These are the two decisions which must be
12
supported by additional documentation. Nevertheless, the
system has worked passably well. To prevent the appearance
of false stock figures it is more than usually important that all
documentation received be recorded on the relevant card,
while the only way of clearing up errors and discrepancies is
to check individual stock records. The student will appreciate
that much of the difficulty in solving this administrative
problem lies in disentangling the intricacies of the procedures.
He will find that he has to work slowly through the information
given above in order to grasp it.

PROBLEM

1. What improvements in the control system can you

recommend, particularly with a view to co-ordinated adminis-
tration of stores?

The purchasing department is divided as shown on the

organisation chart (Fig. 1.1) into four main buying sections
and a progress section, the department being controlled by a
chief purchasing officer and his deputy.
The filing and retrieval of information in the department
are not altogether satisfactory. Duplication of effort occurs
whenever two or more buying sections order from a vendor
who supplies a range of products, e.g. where tools and electronic
components are ordered from the same catalogue.
In operating the system there are many occasions on which
purchase contracts and correspondence cannot be found
without considerable delays. Moreover, a sizeable proportion
of total staff time has to be devoted to filing activities.
Files are constantly in use by all office staff. If purchase
orders, correspondence, and commercial and technical litera-
ture are not filed daily, it will lead to confusion and frustration,
while there will be a risk of incorrect or out-of-date information
going out from the department.
Another branch of filing activity occurs in relation to the
receipt of such technical literature from the vendors. When the
literature comes in it is directed to the relevant buying section
to be perused. It is subsequently filed in vendor order for future
13
 Purchasing Officer

Assistant Purchasing Officer

I---~--~~I I I I
8Y.YM BUy'er BUYM BUy'er Progress
(electronic components (raw materials (tools and (subcontracts) Section Head
and units) and mechanical consumables) I I
I components) I . Progress Chasers
I Technical
Technical Assistant (3)
Technical Technical Technical Assistant I I
Assistant Assistant Assistant I Asst. Buyer Clerical and
I I I I Asst. Buyer I Typing Staff
Asst. Asst. Asst. Asst. Buyer I Typist
Buyer Buyer Buyer I Typist
__ I ~ Clerical and Typing
~ Staff
Clerical and Typing
Staff
Fig. 1.1. Organisation chart of purchasing department
reference by buyers, project engineers, the quality control
department, goods inward inspection and the plant engineers.
The flowchart reproduced on pp. 16-20 shows the sequence
of operations and inspections involved in the existing system,
depicted in outline. The starting-point is the receipt of the
requisition in the purchasing department, the finishing-point
is the filing in a permanent file of the purchase order on
completion.
Readers will realise that the system may have a number of
variations, e.g. operations 37 to 44 inclusive may be repeated
many times, according to the number of items on anyone
order and the number of scheduled deliveries requested.
The more detailed description of the existing procedures
which follows may be read in close conjunction with the process
or flowchart:

When a purchase requisition is received, a progress section

clerk records the date of receipt and the part number in a
receipt book. Part cards are filed in numerical order and contain
the complete history of a purchased item. When a purchase
order is raised it is necessary to record the date of the order,
its number and quantity, price, vendor, delivery, unit rate and
account code on the part card.
After the withdrawal of the part cards from the file they are
collated with the requisitions. This enables the clerk to deter-
mine the commodity, as this is not shown on the requisition.
The requisition and part card are then given to the buying
section responsible for the commodity, e.g. electronic compo-
nents or raw materials.
Where necessary, application is then made by the buying
section for three or more drawings for each requisition. When
the drawings are received they are collated with the requisition
and part card and are handed to the buyer to determine who
the vendors shall be.
Inquiries are prepared by the buyer and the requisition is
filed in number order and in supplier's order; the part card
is filed in numerical order within the buying section concerned.
The inquiries mentioned in this paragraph are typed with two
carbon copies and given a reference serial number. One copy
is retained by the typist and filed in date order. The top copy,
the remaining carbon copy and the drawings, where these
15
 have been supplied, are passed to the section clerk, who checks
the inquiry for mistakes.
One copy of the drawing is attached to the potential sup-
plier's copy of the inquiry; two drawings are attached to the
retained copy. The serial number is entered in a brought-
forward diary about ten days after the typing. The inquiry is
then filed and the potential supplier's copy is passed to the
section buyer, who appends his signature. The inquiry is then
posted.
If a quotation is not received within about ten days, progress

Requisitions received

Enter requisitions in receipt book

Withdraw part cards

Collate part cards with requisitions

Inspect to determine commodity

required
Distribute to buying section

Apply for drawings

Receive drawings

Collate drawings with part card and

requisitions
Inspect to determine the vendor

Prepare inquiries

Type inquiries

Check inquiries

Attach drawing to vendor's copy of

inquiry
Sign inquiry

Dispatch

Progress quotation if necessary

16
 Receive quotations----I
Collate quotations with existing
documentation
Inspect 'quotes' to select source
of supply
·Prepare purchase order

Type purchase order

Check purchase order

Attach drawings and correspondence

to order

17 File part card in card file

Order countersigned by
purchasing officer and supplier's
copy dispatched
Six copies returned to general
office with requisition
Remove requisition and enter order
number in receipt book
Return requisition to inventory control
Separate and distribute
copies of order

action is taken by post, telex, telephone or telegram, as deemed

appropriate.
When a quotation is received it is collated with the original
inquiry, requisition and part card. The reference serial number
is deleted from the brought-forward diary and all correspon-
dence and documentation is handed to the buyer. He examines
the quotations and selects the most appropriate.
The order is then prepared and the details are filled in on
the part card and requisition. The purchase order is then typed,
with the following copies:
2 copies for suppliers (one to be signed and returned as an
acknowledgement)
I (yellow) - buying section
17
 1 (blue) - inventory control
1 (green) - works accounts
1 (orange) - progress section
1 (pink) - goods inwards
1 (white) - purchase records.
The typed order is then passed to the section clerk. It is
checked by him and the number is entered on both the part
card and requisition.
If a drawing is involved, one copy of it is attached to the
vendor's copy of the order. The inquiry, quotation and other
correspondence are attached to the copy for the buyer's
section. The part card is removed and filed numerically.

Withdraw
29 from file after
approximately
ten days
6 Inspect for
acknowledgement
Progress
30 ~~~n~e~~~~~~ment
in B/F diary

Receipt of
acknowledgement

32 Withdraw order
from file

rnspect
acknowledgement
with order

Enter order
33 number in
B/F diary

18
 Withdraw
from file

Progress goods

Receipt of go.ods
Order withdrawn
from file

Note receipt of
goods on order

Type goods
inwards note

40 File order with

dispatch note

Send pink copy

of goods inwards
note to purchase
dept.

Withdraw order
from file

Note receipt of
goods on order

Pass goods inwards

note to works
accounts

Part cards are later transferred to a general file which serves all
sections and again are filed numerically by the section clerk.
This general file is located in the progress section of the purchas-
ing department.
The section buyer signs the order and passes it to the pur-
chasing officer, who countersigns it. The vendor's copy is
sent to him, the others are returned to the progress clerk. The
19
 Stamp order
'Completed'

Pass order to
buying section

Buying section
withdraw yellow
copy of order

Yellow copy
is filed in
temporary
filing cabinet

51 Orange copy filed

Yellow copy
transferred to
first-stage permanent
complete file

Operations (53)= 0 Second-stage

permanent
Inspections (7) = D complete file

requisition is removed and the order number and details of

the vendor are logged in the receipt book, the requisition being
then returned to inventory control.
Internal copies of the order are separated and consigned to
their respective destinations, with the exception of the green
accounts copy, which is sent to the print room to have a Xerox
copy taken. The blue copy goes to inventory control, the green
copy to works accounts, the Xerox copy to goods acceptance. The
white copy is retained and filed numerically in a lever-arch file.
It is for record purposes only and should not be removed.
20
 The orange copy is also retained by the progress section. The
order number and the name of the vendor are entered in a
brought-forward diary some ten days after the date of the
order, and the order is then filed in the relevant vendor's file,
which in turn is filed alphabetically in a suspension file. The
yellow copy of the order, with all the relevant correspondence,
is retained by the buying section and is filed alphabetically in a
suspension file. The pink copy goes to goods inwards.
The progress section clerk withdraws the progress section
order on the due date indicated in the diary. The order is
checked to ascertain receipt of acknowledgement. If this is
not received, the vendor is approached and details are once
more entered in the brought-forward diary some ten days
hence.
On receipt of the acknowledgement, the order, i.e. the
orange copy, is withdrawn from the file. Information on the
acknowledgement is checked to see if price, delivery and item
correspond with purchase order. The acknowledgement is then
stapled to the order and the order number and details of vendor
are re-entered in the brought-forward diary at a date two
or three days prior to the requested delivery date of the goods.
The order is again filed.
On the due date the order is withdrawn from the files. If
goods have not been received, progress action is initiated.
On receipt of the goods in the goods inwards department,
the dispatch note is removed from the consignment and the
pink copy order is withdrawn from the file.
The quantity of goods received is recorded on the reverse
side of the order and the dispatch note is stapled to the order.
A goods inwards note is typed and circulated to all areas which
received a copy of the purchase order. The goods inwards copy
of the order and dispatch note are filed. The pink copy of the
goods inwards note is then sent to the purchasing department,
progress section. The relevant orange copy of the order is
withdrawn from the file. The quantity of goods received, the
advice note number and the outstanding balance, if any, are
recorded on the reverse side of the order.
The pink copy of the goods inwards note is passed to the
works accounts office to enable the invoice to be cleared for
payment. The orange copy of the order is stamped to show
the date of completion and is passed to the buying section
21
which raised the order so that the staff of the section can
withdraw the yellow copy from the open file. The yellow copy
of the order is stamped 'Complete' and is then filed in a
temporary filing cabinet for completed orders.
The orange copy is returned to the progress section and is
filed in numerical order irrespective of vendor in a lever-arch
file.
The yellow copy is later transferred to the first-stage perma-
nent completed file in alphabetical order; at a later, second,
stage it is transferred in the storage cases to a permanent filing
room.
The system as described above has many variations in
practice, but the outline process chart drawn records that
there are seen to be some 53 operations, of which a total of 19
directly involve a filing operation, 17 of these taking place
within the purchasing department. There are also 7 inspections.
The main criticisms made of the existing system are:
(a) The time spent by senior staff on filing activities when
they could have been more advantageously employed
on other duties. An activity sampling study pointed to
the fact that at least forty minutes per head per day were
spent in filing.
(b) The repetitive paperwork in the purchasing department,
e.g. three copies of one purchase order, with constant
movement of two of the copies.
(c) The frustration experienced when purchase orders cannot
be located.
The staff of the department meet a number of practical
difficulties:

(i) When a vendor receives an order from the company

he may phone back at once to settle a query. The buyer
of the section which answers the telephone inquiry is not
sure whether the office copies have yet been distributed
after being signed by the purchasing officer, or whether
they are still waiting to be filed. He may search through
the files where the yellow copy will ultimately be stored;
if he does not find it he must either trace where the
unfiled copies are temporarily stored, or must sort
through the A-Z files on the assumption that it has been
22
 misfiled. This sort of frustration is a direct result of the
excessive amount of filing activity demanded by the
system.
(ii) There are other queries which emanate from the accoun-
ting division, e.g. queries on invoices which entail
reference to completed orders, whereas the latter may
still be in the office.
(iii) Requisition queries create similar searches.

PROBLEM

2. Given the system, how can one set about evaluating it,
and what improvements might one expect to introduce?

23
2 Training, Supervisory
Structure and
Communication Networks
in a Servicing Industry
c. S. Deverell, M.A., B.Sc.{Econ.}, B.Com., F.C.I.S., A.M.B.I.M.
INTRODUCTION

The development of an entirely new material, the discovery of

an additional major source of supply, radical changes in a
product or the processes of manufacture can be a prelude to a
period of extremely fast expansion. It is true that in many
marketing situations the demand from consumers for a new
product has to be built up gradually from small beginnings by
sales promotion and advertising. It does not appear overnight
as a high-volume demand. Apart from such market considera-
tions, another limitation may lie in the minimum length of
time needed to increase the supply of the product. Yet there are
exceptions to this slower rate of growth. Some industries may
be launched almost from scratch into full-scale production
and distribution.
A recent instance is the gas conversion industry based on
the North Sea natural gas discoveries. Even if we assume that
the very considerable technological difficulties of tapping new
sources have been surmounted, there is still the task to be
accomplished on a limited time schedule of the fitting and
conversion of thousands of households. For a company which
takes up contracts to carry out the conversion, a new labour
force has to be created and an organisation structure devised;
the exercise has been compared with the early years of railroad
construction, with its mass recruitment oflabour, its peripatetic
character and its disturbingly rapid rate of expansion.
In brief, the sequence of events is for the conversion company
which has its contract with the gas supply industry to recruit
and train its labour, make or purchase its conversion equip-
24
ment, buy its vans and mobile centres and arrange the sequence
of towns for its operations in the area of its contract. Its teams
move into the first of the towns or other areas with its vans and
in a matter of weeks will have completed the conversion,
proceeding thence to the next town.
Let us call the company which is described in this study
Doggergas Ltd. The case study originates from work with more
than one such company and contains features drawn from differ-
ent sectors of this industry rather than from one enterprise. It is,
however, a composite picture of the typical difficulties exper-
ienced in organising the work. Some of the figures quoted do
come unchanged from questionnaires included in actual studies.
Doggergas starts with a labour force of 25 men, and by the
time the conversion gets under way the company will have
recruited some 400 men, distributed among the grades of
fitter, converter, working foreman and supervisor. These are
the basic grades which make up the field force. A fitter is a
man technically qualified, e.g. by City and Guilds Certificate,
and experienced in industrial :fitting. A converter has been
given a short training course by Doggergas and is limited to
converting domestic appliances.
The men are sent or transported on location to the town
which is to be converted. Their first task is to find themselves
accommodation. When the job starts they will be working
long hours; by doing so they earn high wages. Most return
on Friday evenings to their own homes for the weekend.
Although there are few existing signposts for such a company,
an adaptability of organisation structure and of communica-
tion networks is particularly important in this new and expand-
ing industry if the sudden access of business is not paradoxically
to bring on disaster.
With some particular reservations, although the company ex-
perienced a high rate oflabour turnover, particularly of wastage
during training, morale is good. There is a great deal ofloyalty
to the firm and interest and enthusiasm in the project.

CASE STUDY

1. Training
The company itself was aware of the need for training. Al-
25
though it had to recruit labour hurriedly on an emergency
basis in conditions of shortage, it did have a programme,
which for the individual trainee lasted for three weeks full-time
in a training centre.
Induction procedure was rudimentary; it often failed to
dispel a man's illusion that his personal progress and pro-
motion in the firm would be very rapid indeed. 'This is a new
industry and we are first in and therefore will rise with it' was a
frequent reaction from new employees.
Consultants, who were called in to report and advise on the
situation, carried out an interviewing programme and ad-
ministered a questionnaire to employees of Doggergas Ltd.
The two basic grades involved were converters and fitters. A
sample of 50 personnel drawn by the company on the basis of
two personnel per van were interviewed - 34 converters and
16 fitters. Interviews were structured and included about
sixty questions, a quarter of these being open-ended. .
In the answers to the questionnaire, more than 60 per cent
of fitters and converters expressed the view that the quality of
the training given was poor and did not equip them to do a
good job in the field. 45 per cent of converters wanted more
training with an experienced man while actually in the field as
opposed to training in the instruction centre itself. 79 per cent
of the converters and 88 per cent of the fitters felt that training
did not sufficiently resemble the actual work in the field to be
really adequate.
Only 26 per cent of those interviewed were satisfied with
that part of training which related to dealing with con-
sumers. One-half of the converters and one-third of the fitters
thought that more of this training should be given.
There was thus no doubt about the desire among the men for
more training. For example, consider the following abstract
from the questionnaire:

Q.22. Do you think that more initial training would be a

good idea?
Converters Fitters Total group
Number % Number % Number %
Yes 30 88 14 88 44 88
No 4 12 2 12 6 12

26
The suggested directions that such additional training should
take were varied:
Total group
More practical work in the workshop 15
Dealing with a much wider range of domestic appliances 12
More time under an experienced man in the field 32
Training should be more realistic 12
More individual attention needed 5
Dealing with a range of industrial appliances 17
Existing training too theoretical 7

PROBLEM

1. What sort of training programme will meet the situation?

2. The Supervisory Structure

There are really only two levels of supervision. One is the
experienced fitter who has been given the role of a working
section leader or foreman for van crews. The other is the
senior supervisor who does not personally carry out any of the
converSIon process.
The nature of the job means that supervisors at any level are
out on their own as part of the management team. It is not
practicable for them to dash back for consultation with higher
management at a minute's notice. The labour force is peri-
patetic. Even while stationed in one particular town it is not
static. Nor is it an easy one to control, containing as it does a
high proportion of rovers and individualists and probably a
few whose domestic life has been disturbed.
There were never more than twelve of the higher supervisors
as such, although in addition rather more than that number
functioned in fact as working foremen, closely associated with
their fitters rather than with management. Their job know-
ledge was much appreciated by the fitters. They are the working
section leaders mentioned above. It was the supervisors of
whom the comment 'unapproachable' was often made.
The main problems of the foremen were: faulty conversion
kits; absentees; awkward consumers; too much paperwork;
the supervisors' lack of technical knowledge; and the absence
of facilities for training in the field. They themselves expressed a
27
sense of having a closer allegiance to their fitters than to the
supervIsors.
Interviews with the supervisors showed them to be, as a group,
sure of themselves, good company men, ambitious, keen,
anxious to preserve their status and having a tendency to
exercise an autocratic style in controlling their teams. The
nature of the job may well have tended to throw into promi-
nence the need for strong discipline. All the same, the reactions
of subordinates were unfavourable to what was described as a
remote and unapproachable attitude by supervisors.
Supervisors themselves often expressed the belief that
insufficient attention to their opinions was paid by manage-
ment and that the suggestions which they put forward were
disregarded. They as much as the other grades would clearly
have welcomed more information on future security in the job.
Apart from charges of authoritarianism, comments on
supervisors were often to the effect that they were lacking in
technical knowledge. Their strict adherence to finishing times
for each job was felt to be the cause of many call-backs to jobs.
It also sometimes reduced the length of meal-breaks. There
were instances of men being afraid to take their problems and
suggestions to their supervisor. The sort of comment made was
that a supervisor was appointed on 'who you knew' rather
than on ability. Some fitters thought there were too many
supervisors, others that the work was unfairly distributed.
This was interesting. It has often been maintained, e.g. by
Miss Joan Woodward, that a very important factor in deter-
mining the actual span of control for a manager or supervisor
in a given enterprise is the nature of its technology. Here we
have an unusual instance. The men for whom a supervisor is
directly responsible are out of his personal control for much
of their working day; this is an environment very different
from that of a factory with its employees at more or less
permanent stations within the premises. It is not even like
the delivery service staff of, say, a milk retailer, where they
can be given direct incentives on sales made. One is likely in
the conversion organisation to see some very clear-cut clashes
between formal and informal organisation.
Good supervisors are indeed hard to find. How many do you
want in a situation such as this? How many grades of foreman
and supervisor?
28
PROBLEM
2. Suggest methods of improving the effectiveness of super-
vision.

3. Motivation and Morale

Data on this were obtained from the questionnaires. The terms
of reference were:
(a) Why men came to work for the company.
(b) Why labour turnover was so high.
(c) What steps the company might take to improve pro-
ductivity and reduce labour turnover.
Some replies made by the men were outside the scope of the
structured questions. Nevertheless, they were recorded and
analysed.
A wide divergence of viewpoint showed itself between
converters and fitters. There were, of course, differences in skill,
experience and training, but also in age and marital st~tus,
the fitters being twice as likely to be married and several years
older than the converters.
In both groups a majority wanted an opportunity to earn
more money, with a more interesting and secure job which
carried with it prospects of promotion. A mobile, partly
outdoor life was preferred to factory work. As to moving
aroundj from town to town, 4 per cent disliked it, 36 per cent
had no feelings either way, 54 per cent quite liked it and 6 per
cent liked it very much.
Some converters had believed when coming into the job
that it offered a chance to learn a trade and to find a place in
the early stages of growth of an up-and-coming industry. In
the upshot, the disappointing levels of earning opportunities
and virtual non-existence of promotion prospects led to a
widespread sense of disillusionment.
In general, converters were far less contented with their
situation than fitters. They felt that they were undertrained,
underpaid and poorly supervised. Nor did the sources of dis-
satisfaction derive fundamentally from the nature of the work.
Both groups freely accepted the fact that the job took them
away from home for most of each week; generally they liked
moving around and meeting customers.
29
 We might list:
(i) Events which gave satisfaction
A sense of achievement when delays did not hold up progress
and the work was completed at a good pace.
The consumer's expression of gratitude.
Favourable reports in the press.
A feeling that team spirit existed.
(ii) Events which caused displeasure
Delay in getting conversion kits.
Awkward consumers.
Working in dirty households.
Lack of interest by the supervisor in the man's problem.
Difficult appliances.
Being reprimanded in public by a member of management.
Adverse publicity.
As to recognition from the company when you felt you had
done a good job, 84 per cent felt they did not get it.
88 per cent were not satisfied with the service of kits of
parts and materials from stores. The reasons for dissatisfaction
could be analysed as follows: 48 per cent, wrong parts/kits
supplied; 21 per cent, parts/kits not there on time; 31 per
cent, faulty materials.
Morale would not necessarily be raised merely in response
to decent pay, good working conditions and improved super-
vision, although shortcomings in these respects undoubtedly
created dissatisfaction. Discontent was generated by the
blocking of opportunities for recognition and meaningful
achievement.
Essentially, the job in its present form can hardly be a per-
manent one. Two, three or four years of long working hours,
under pressure and earning good wages, but then? Most of
the men were continually aware of this aspect of the situation.

PROBLEM

3. How would you handle the problems of motivation and

morale?

30
4. Communication
Where a labour force of several hundred men works at a dis-
tance, perhaps fifty miles, from the headquarters of the company
and its principal centre of management, its planning and
control of projects, one can hardly hope to escape some of the
less tractable problems of co-ordination and communication.
If one adds to this the fact that the scene of operations shifts
from one town to another every two to three weeks, that the
men are lodging away from their homes as well as away
from company headquarters, and are grouped in their job
into a considerable number of operating teams of four or five
people, one begins to understand the nature of the problem.
Some time ago the company had set up formal machinery
for joint consultation, but this had gone into a decline and had
latterly fallen into almost complete disuse. Many people
claimed to be too busy to attend to it. Meetings took place at
very irregular intervals and there were few opportunities for
reporting back to workers from those meetings which were
held.
The gaps in communication channels and the lack of
information coming through had created feelings of insecurity
and frustration among fitters and converters, and also among
supervisors. Fitters were often of the opinion that they would
like more information on developments and reorganisation
within the firm, its future plans and immediate commitments.
To the question 'Do you get enough advance warning about
changes in the job (methods, area, etc.)?' 70 per cent of con-
verters and 68 per cent of fitters said 'No'.
Not only had management contacts with the field force to
be considered, but also relationships with consumers. In the
gas conversion industry working teams who carry out their
job in domestic households rely to some extent on the ex-
planatory matter already given to consumers by the Gas
Board for the area and on the public relations information
service generally. Converters themselves had some comments
to make. They felt that it was a mistake to give a consumer
the impression that this was a ten-minute job when it could
last two whole days; equally unfortunate was it for the im-
pression to be given that recently purchased appliances were
not in need of conversion.
Yet their own approach to consumers also mattered in
31
establishing the right relationships. Here was a problem
linked to the wider one of initial training given to recruits.
How can the deficiencies in communication be tackled?

PROBLEM

4. How does one meet the special difficulties of communi-

cation inherent in this type of operation?

Four problems have been introduced - a large number, but

they all relate to the formation, operation and control of an
organisation structure in a novel situation.
For instance, when one examines training requirements,
one is inevitably drawn also to look at the supervisory structure
and the behaviour of individual supervisors and how they cope
with their span of control. The success of supervisors itself
depends partly on the ability to sustain the motivation to
work of the operatives. This motivation cannot be achieved
unless the networks of communication enable the organisation
to be operated efficiently.
What has to be done is more than to accept or turn down a
series of recommendations. One has to put forward an inte-
grated programme of changes in training, supervision and
communication which will improve performance and check
labour turnover.

32
3 The Northern Systems Co.
Ltd: A Case Study in the
Introduction ofJob
Evaluation
C. G. CharronJ B.A.J A.M.B.I.M.

INTRODUCTION

This case examines the introduction of job evaluation in an

electronics firm. No prior knowledge of job evaluation theory,
or experience of its application, is assumed.
The case problems can easily be divided among members of a
group if group working is envisaged. If individual solutions
are attempted, it would be best to allow up to a whole day.

CASE STUDY

The Northern Systems Co. Ltd is the young and vigorous

European subsidiary of the Canadian Electronics Corporation.
The company was created especially to exploit the marketing
potential of very advanced micro-circuit and semi-conductor
devices invented by research engineers at the Corporation's
laboratories in Montreal.
The European headquarters and the research laboratory of
Northern Systems have been established in England for more
than two years. A manufacturing plant started production
six months ago.
Marketing offices are functioning in Germany, Belgium,
France and Italy, to provide sales outlets as well as customers'
servicing centres for the Continent. Two new agencies are due
to start operations in the next three months, one behind the
Iron Curtain, in Czechoslovakia, and the other in North Africa.
Northern Systems now employs over 500 people.
33
Personnel Policy
The General Manager Europe - Head of Northern Systems
Co. Ltd - is very well aware of the competitive markets his
company is operating in. The initial development of his organisa-
tion depended on his ability to find and attract outstanding
engineers with management potential. He is therefore acutely
conscious of the shortage of the type of electronic engineers-
those with a flair for marketing - which his company requires to
achieve successful results.
Northern's personnel policy, following that of the parent
Corporation, is progressive; principally it states that the in-
tention is 'to attract and retain high-performance personnel'.
As a result, remuneration at Northern's both in terms of
direct pay and indirect benefits, is substantially better than
among its competitors.

The Case Project

The new post of Head of Administration and Personnel has
recently been filled by Hugh Denton, until then a senior
consultant in one of the major firms of personnel management
specialists.
The General Manager gave him his initial directive in these
terms:
I cannot but agree with the recommendations of your
personnel survey, Hugh. Since you leave me the choice
between two alternatives, I consider that we should give
priority to the preparation of a salary administration
programme to cover the whole of our European organisation.
You know that it-will be a major task; we have grown rather
quickly in the past twenty-eight months and our staff now
numbers almost as many clerical and administrative staff
as engineers, including our research specialists and the sales
and servicing engineers.
Hugh Denton having indicated that he has completed an
initial manpower inventory, the General Manager concludes:
'Well, it is agreed then. I would suggest that you meet the
management team in a fortnight and give them an outline
of your plan and method for a salary administration project.'
Hugh Denton retired to his office to prepare his presentation.
He decided to approach the task by trying to anticipate the
34
type of questions likely to come from the management team
(or for that matter from you, the reader). These are the typical
questions which he considered his presentation should answer:
What is the objective of the proposed salary administration
programme?
What are the main elements constituting such a programme?
What are the major tasks comprising the design and imple-
mentation of a programme?
What should be the time-table or schedule for the proposed
project?
What in brief is the point system in job evaluation? What
are its main advantages and disadvantages, and what is the
principal reason for its choice?
He then produced an outline presentation as follows:

PRESENTATION BY HUGH DENTON (HEAD OF ADMINISTRATION

AND PERSONNEL) TO THE MANAGEMENT TEAM

SALARY ADMINISTRATION PROGRAMME

Objective
The objective reflects Northern's personnel policy, and can
be stated in the following terms: 'To create a salary structure
which will ensure internal equity and external competitiveness.'
Elements of the Programme
A salary administration programme is made up of two major
elements:
1. Job evaluation, consisting of:
(a) job analysis;
(b) job descriptions;
(c) evaluation system.
2. Salary structure:
(a) salary survey;
(b) salary structure design;
(c) administration programme (revision and updating).
Major Tasks
There are seven major tasks involved 'in the development of
a salary programme:
1. Planning and policy-making for the programme.
2. Selection of the group of jobs to be evaluated.
35
 3. Selection of a job evaluation method.
4. Job analysis and job descriptions.
5. Evaluation of jobs.
6. Pricing the jobs.
7. Continuing administration and control.
Time-table
Activities Time scale (months)
Start 1 2 3 4
Preliminary planning
Decisions and communication of
programme project
Selection and preparation of
benchmark job descriptions
Evaluation of jobs
Salary survey
Salary structure development
Programme implementation

Job Evaluation Methods

Job evaluation is the task which will principally involve the
management team and the employees as a whole. The actual
design of the salary structure is more of a specialist task, which
will remain the province ofa personnel specialist. Consequently,
the greater part of our effort will be devoted to explaining and
getting acceptance for the evaluation plan and method.
Definition of Job Evaluation
Job evaluation consists of an analytical study of the contents
and functions of all jobs in order to develop a description of
their characteristics, to appraise these characteristics according
to their relative importance and value, and to establish a sound
basis for setting equitable rates and ranges.
Principles Governing Job Evaluation
The following are the principles governing job evaluation:
1. The scheme must be designed to suit the particular
industry in which it is used.
2. The scheme should evaluate the 'threshold' of the job, i.e.
attention is drawn to the assessment of the minimum
requirements which an operator must have to tackle the
job and to perform it satisfactorily.
3. The scheme should be impersonal. Evaluate the job, not
the man or traditional importance in an organisation.
36
 4. An evaluation scheme should be operated by assessors
experienced in a wide range of the class of jobs being
considered. Choose the assessors carefully, train them and
provide them with clear instructions and procedures.
5. Any job evaluation plan should be capable of full dis-
closure.
6. The scheme must be simple.
7. The scheme should allow for averaging the opinions of a
number of assessors. Evaluation is an attempt at objective,
informed judgement.
8. Jobs should be observed by all assessors simultaneously
before assessments are made.
Other considerations are those of cost and time requirements;
these can only be adequately measured by direct reference to
the objectives as already defined.

Job Ana[ysis and Job Description

Systematic job analysis, as described in the preceding section,
should yield a completed work sheet. The next step, the
writing of job descriptions, is a sifting process to organise the
job facts in a clear, accurate order.

Point Rating
Characteristics or factors common to alljobs,suchasknowledge,
experience, judgement and physical requirements, are defined;
graduations or degrees for each factor are then determined, and
a point value is assigned to each degree under each factor.
Jobs are compared with the resulting evaluation scales, and
total relative job value is obtained by adding the points values
assigned under each factor.
Advantages:
(a) Concentrates much of the judgement within carefully
defined parameters.
(b) Provides more substantiating data to potential critics.
Disadvantages:
(a) Selection and definition offactors and degrees is difficult
and, to an extent, arbitrary.
(b) Rating time is consuming.
(c) Factor weights (if employed) set upper extremes and
37
 limit application of any single plan to a specific group of
jobs (e.g. clerical and administrative).
Prerequisites:
(a) Job descriptions.
(b) Factor definitions.
(c) Degree determination.
(d) Points allocation.
(e) Formal Evaluation Committee consisting of representa-
tives from the technical and administrative staffs.

Proposed Method
It is proposed to use the point system for two main reasons: it
is an easier method to apply to the two different categories of
employee found in the organisation (it is to cover all weekly-
and monthly-paid staff, excluding hourly-paid and the senior
management); and the system is also easier to explain at large,
since the relationship between point totals and salary levels is
readily identifiable.

Start of the Project

The Head of Administration and Personnel (Hugh Denton) is
presently chairing a meeting of a group of staff members, who
have been selected to constitute the Evaluation Committees.
Present are clerical and technical staff (one of whom is a DATA
representative from the drawing office, and another the leader
of the clerical section of A.S.T.M.S.), two laboratory section
leaders, two sales engineers, the deputy contracts manager,
the financial accountant, the purchasing officer and the pro-
duction controller.
Hugh Denton opens the meeting with the same outline of
plan and methods which he gave earlier to the management
team; he is about to embark on a more detailed explanation of
the role of the Evaluation Committee and the scope and tech-
nique of the point system:
The personnel assistants have completed a comprehensive
analysis of each separate job in the company. Also, as you
have already witnessed, job descriptions have been agreed
throughout and this task is virtually completed ...
continues Denton.
The financial accountant interrupts him:
38
 Fine. But there is a wide range of jobs in this firm, broadly
dividing into two main types, one an administrative and the
other a technical/engineering category. Can your proposed
system produce an adequate evaluation for the whole lot?
It seems to me that my job needs quite a different measure-
ment from that of a research engineer, for example.
Denton reassures him:
Indeed, but it is possible to cater for this situation by an
adaptation of the evaluation method which we have selected.
In this case, two Evaluation Committees are constituted,
one for the technical/engineering group of jobs, the other
for the clerical/administrative range. Our basic point
system is also slightly modified, by defining somewhat
different factors and degrees for each category of job. . . .
The meeting continues •••
At the end of the meeting, Hugh gets down to preparing for
his consultation with the Evaluation Committees, and he plans
the presentation by trying once more to answer representative
questions expected to come from the committee members (and
also from you, the reader). These questions are:
What is the role of the members of the Evaluation Committee?
What should be the nature of the point system?
How would one construct a point system?
What is meant by factors and degrees in a point system?
How would one rate the factors and set a point value for
each of the degrees?
As a result, the outline of his presentation takes the following
form:

PRESENTATION BY HUGH DENTON TO THE JOB EVALUATION

COMMITTEES

Role of Evaluation Committee

To assess the relative importance and value of jobs within the
firm.
To create a ranking ofjobs in order of relative importance and
value within the firm.
To agree on definition and rank order of job factors selected.
39
 To agree on definition and value of degrees for each factor.
To allocate point totals to each job.
To review and maintain the evaluation system (normally
done by a smaller committee of permanent members).

Scope and Nature of the Point System

The system should evaluate the 'threshold' of the job (i.e.
assess minimum requirements which an employee must have
to tackle the job and perform it satisfactorily). The system
should be impersonal (evaluate the job, not the man or
traditional importance in the organisation).
The point rating method measures each job by comparing
it with a rating scale. However, the point rating method
employs a rating scale for each selected job factor, then totals
all the factors to obtain an overall value or ranking.
The most common compensatable job factors (those which
contribute to the value of the job) are:
Education.
Experience.
Initiative.
Physical demand.
Mental or visual demand.
Responsibility for equipment or process.
Responsibility for material or product.
Responsibility for safety of others.
Responsibility for work of others.
Working conditions.
Unavoidable hazards.
Factors are not all of equal importance. To arrive at a
proper value for a job, the difference in relative importance
of the various factors must be determined. Each factor is then
subdivided into several degrees.

Constructing a Point Rating System

There are seven steps involved in this process:

Step 1. Types ofjobs

Determine range of jobs to be evaluated, e.g. administrative
and technical jobs together or technical jobs only. Carry out
job analysis and prepare job descriptions.
40
 Step 2. Select the factors
Certain rules must be followed:
(a) Factors must be rateable. The amount offactor required
must vary from small to large amount (e.g. if jobs selected
are all below supervisory level, there is no valid factor
for supervision).
(b) Factors must bejudged important. Do not compare with
employee's characteristics.
(c) Factors must not overlap in meaning. Each should be a
member of one and only one aspect of the job.
(d) Factors must meet both employer's and worker's
standards.
(e) Factors must be applicable to all the types of jobs for
which the system was constructed.
(f) Use a simple scale.

Step 3. Define the factors

The meaning must be clear. There should be a formal state-
ment of the meaning or significance of the title word or phrase.
Each factor should represent one aspect of the total job value.

Step 4. Define degrees for each factor

The problem is to decide what amount to use for the degrees.
Whether arithmetic or geometric progression of points is used,
error will occur unless the appropriate progression of degree is
used. This means that for the difference between two degrees to
be perceptible, the degrees must be increased in value or diffi-
culty by successive multiplication by a constant. For example, it
would be easier to make accurate ratings on experience re-
quired if the degrees were I month, 3 months, 9 months, 27
months, rather than I month, 2 months, 3 months, etc.
The following rules are useful when defining degrees:
(a) The difference between degrees must be sufficient to
permit sound and consistent judgement when com-
paring jobs.
(b) Select degrees so that jobs fall at each level; this makes
the system more acceptable.
(c) Use terms that workers understand.
(d) Avoid ambiguous terms (e.g. 'intelligence', 'character'
and 'sociability').
41
 (e) Definitions of degrees should be written in objective
terms (in terms of what the worker must do on the job,
i.e. in terms which do not depend on judgement).
(f) Use examples as much as possible.

Step 5. Determine the relative values ojjob factors

Relative values can be assigned on a percentage basis according
to the proportionate amount each factor contributes to the
total worth of the job. For instance, skill normally receives the
highest percentage, and working conditions the lowest.
Methods of determining the relative values:
Each member is asked to rank the factors in order from the
one which contributes most to the total value of the job
to the one which contributes least.
Assign percentages to this ranking.
Relative values so obtained are averaged.

Step 6. Select degrees (i.e. the amount by which afactor is present)

and assign point values to degrees
Once the relative value of each job factor has been obtained,
the next step is to assign points to the degrees in each factor,
using either arithmetic or geometric progression.

Step 7. Evaluate jobs

Each job is evaluated factor by factor and the appropriate
degree for each factor is recorded on a factor analysis sheet.
Then all the points are totalled to obtain the value for each
job.

The Evaluation Committees, under the overall direction of

Denton, then proceeded with the task of agreeing the definitions
and the value of the job factors and degrees.
The Engineering and Technical Committee has finally agreed on
their factors and definitions.
The Clerical and Administrative Committee for its part has given
consensus to the following factors and defined them thus:
1. Education. The formal minimum educational level or
equivalent standard of knowledge required to qualifY
for the job being considered.
42
 2. Experience and/or training. The period of time spent in a
function and/or the average training period considered
to be a minimum requirement for performing the job
satisfactorily.
3. Responsibility for supervision. The amount and type of
supervision exercised by the job holder based on the
numbers supervised and/or the variety and complexity of
the subordinates' duties.
4. Responsibility for process/product. The importance attached
to the processing of information, the preparation and
maintenance of records and the accounting for and safe
keeping of assets.
5. Initiative. The scope for independent action in the organi-
sation of the tasks, the degree of planning or scheduling
performed, the type of decisions taken and their effect
upon the company.
6. Complexity of tasks. The variety and complexity of the
tasks performed and the extent to which interpretation
of policy or application of procedures is required.
7. Contacts. The degree of social skills and resourcefulness
required in dealing with others within and outside the
company in terms of the contribution these contacts make
to the objectives of the company and the maintenance or
furtherance of goodwill.
8. Dependability and accuracy. The degree of freedom from
regular supervision and review the tasks are submitted to,
and the amount of loss or damage which might occur
through undetected errors.
9. Plrysical demand. The degree of physical application and
skill that might be required in terms of frequency and
concentration.
10. Working conditions. The degree of discomfort or monotony
which may be present in the working environment due
either to surroundings, noise or other similar conditions.

PROBLEM
1. As members of the Clerical/Administrative Committee,
you are required to:
(a) determine the relative importance of the factors by
43
 glvmg them a percentage weighting and allocating a
corresponding number of points to each factor;
(b) determine the number of degrees applicable to each of
the factors, define each degree, and allocate a points
score to each degree within the total number of points
available for each factor.
(Check your solutions with the method outlined in the guide-
lines to Problem 1 (pp. 70-5 below) before proceeding further.
In particular a reading of our method of allocating points
to degrees may prove very helpful.)

The members of the committees have now completed the

preparation of the point system to be used; they are ready to
proceed with the next step, the evaluation task proper.
At this point, Hugh Denton suggests that the evaluators
should test the validity of their system and carry out evaluation
of a number of benchmark jobs, i.e. jobs which are most
commonly found in any organisation, such as that of mail
clerk for instance. This would also serve as a useful familiarisa-
tion exercise for the members of the committees. Among the
benchmark jobs chosen by Denton are the following:
A. Mail Clerk.
B. Supervisor, Book-keeping Section.
C. Field Sales Engineer.
D. Country Sales Manager.
The following are the job descriptions prepared by the
personnel department analysts for jobs A and B:

A. Mail Clerk
Department
Administration.
Outline
Under the general supervision of the Mail Room Supervisor,
performs routine duties, consisting of sorting, distributing and
stamping all mail.
Duties
1. Opens all mail (except personal mail) and sorts according
to department and location.
44
 2. Receives and packages mail from the various internal
sources, weighs and stamps and prepares for G.P.O.
collection.
3. Operates the stamp meter machine, correctly setting it
for date, class of mail, weight and amount of postage.
Maintains the machine according to operating instructions
and keeps daily records.
4. Maintains personal files.
5. Prepares requisitions for necessary office supplies.
Personal Specifications
1. Education requirements are for '0' levels in at least three
subjects including English.
2. Knowledge of office procedure and particularly of mailing
office routine for a minimum of four months.
3. Ability to operate and maintain a stamp meter machine
and keep accurate records, in addition to a general
knowledge of postal regulations.
4. Attention to detail.
5. Knowledge of company organisation structure in broad
terms.
6. Working conditions are those of normal office surround-
ings, requiring a greater part of the day standing and
some lifting and carrying of light weights.
Supervision Given
None.
B. Book-keeping Supervisor
Department
Accounts.
Outline
Under the general direction of the Cost Accountant, supervises
the activities and the personnel of the book-keeping section, the
key punching and verifYing of billing records.
Duties
1. Prepares and maintains files from source documents;
lists, amends and cancels codes; staffs the section.
2. Devises and revises procedures in accordance with
policies.
45
 3. Maintains co-ordination with other accounting units.
4. Compiles and submits regular status reports.
5. Reviews the work of subordinates; checks and corrects
errors in billing records.
6. Advises his superior on trainees' development require-
ments and performance results.

Personal Specifications
1. Education to 'A'-level standards, including English and
mathematics, with basic qualification or equivalent III
accounting.
2. Experience of two years in accounting work.
3. Knowledge of book-keeping procedures; general know-
ledge of other departments' procedures and of inputs.
4. Ability to co-ordinate the work flow of the unit and
devise work standards.
5. Knowledge of the key punching and other specialised
equipment operations as well as maintenance requirements.

Supervision Given
Twelve other staff.

PROBLEM

2. As members of the Clerical/Administrative Committee,

you are now asked to evaluate the benchmark jobs A and Band
to record your findings.

CONCLUSION

The members of the committee went on from their successful

preliminary evaluation to complete the task for all the other
jobs in the company.
Finally, pushing his chair back from the table, one member
appears to express the feeling of all the others when he com-
ments: 'Well, I must say that the effort seems worth while after
all. This list of jobs, all arranged in order, has a sensible
look about it!'
'What happens next?' asks the Deputy Contracts Manager.
46
 Hugh Denton reminds everybody of the steps contained in
the outline plan presented to them some weeks earlier. He
explains that, having determined the relative order of im-
portance of the jobs within the company, the task remains of
'pricing' each job against its market value, through a wage
survey. This, as he points out, is a more specialised task which
can best be carried out by his department.
'But there is also another aspect of the committee's respon-
sibilities which must be kept in mind,' continues Dentoh, 'and
that is that of the administration and maintenance of our
evaluation system. However eager you are to be free again, I
am afraid that some of you will have to serve for some time
yet.'
He then proceeds to illustrate what the main functions of
administration consist of, what information can be acquired
to check that the programme is functioning well, and what the
role of the Evaluation Committee is in terms of maintenance.
Before the meeting is closed, a new and smaller committee is
elected from the members present. Known as the Evaluation
Control Committee, its chief task from now on will be to ad-
minister the programme.

PROBLEMS

3. What should be the mam functions of the Evaluation

Control Committee?
4. What sources of information should be considered in
monitoring the functioning of the programme?

47
4 Jacobs Print Ltd: A Case
Study Concerning the
Organisation of an
Accounts Department
J. B. Boughton, F.G.A.

INTRODUCTION

Though the accounts department may occasionally be referred

to as a necessary evil, it is in practice a vital part of every
business. Certainly, it is not a production department, but it is
a service department providing a service to people within and
outside the business and without which no business can survive.
It is only when the performance of the department drops
below acceptable standards that it may be described as an evil
- but then it is an unnecessary evil, one of which the business
should divest itself immediately by raising the standard of
the department to a proper level.

CASE STUDY

The case we are considering concerned a company in the

printing industry with about 500 employees, which had been
formed about fifteen years previously and had recently been
acquired by a public company. The profit rate has not been
very high, but nevertheless cash flow is not as big a problem as
for some other companies because expenditure is financed by
the parent company.
The financial accounting section, with which we are solely
concerned in this case, numbers ten people. (Costing aspects
are not dealt with in this case, though there was a small
costing section supervised by a cost accountant.)
A new chief accountant/company secretary has recently
been appointed, and he saw the main functions of the financial
accounting section as follows:
48
 1. To ensure that there is sufficient money in the bank to
pay the work-force every pay-day.
2. To ensure that there is sufficient money in the bank to:
(a) pay the business's creditors for materials and services
supplied as and when payment becomes due;
(b) make payments to government departments, e.g.
national insurance, PAYE income tax, graduated
pension, purchase tax, and other taxation or non-
trading payments such as capital expenditure or
dividends.
3. To maintain an adequate system for obtaining payment
from the business's customers in respect of the sales
made to them, which, assuming that the business was
trading profitably (and attention given to points men-
tioned in (4) below), would enable funds to be available
to make the payments detailed in (1) and (2) above. It
would also be necessary to ensure that non-trading
receipts, such as investment grants or other regional
disbursements, etc., from government departments, are
obtained promptly.
4. To maintain adequate controls on stock levels and on both
revenue and capital expenditure in order to hold down
the capital employed to the lowest possible level, thereby
reducing the pressure on cash.
5. To provide management with the information it may
require' in respect of the trading position and financial
affairs (e.g. balance sheet position), drawing attention
to the strengths and weaknesses and, if appropriate,
indicating the requirements for additional capital and
whether it should be short-term (probably by way of
bank overdraft) or long-term (from shareholders or
outsiders). The points outlined in (1) - (4) above will help
to contain the amount of capital required to run the
business satisfactorily.

The number of people in the department seemed to be about

right, there were two accounting machines on which the sales
ledger, bought ledger, impersonal (or nominal or general) ledger,
cost records and wages records were prepared and the ledgers
balanced monthly; on the surface the situation appeared to be
orderly.
49
 The accountant quickly discovered that the supervisor
was reluctant to accept even the smallest out-of-the-usual
task, her stock reply being that 'the previous accountant always
did that'. The action taken to ensure that cash was available
for the weekly payroll was typical of the previous accountant's
involvement. He telephoned two or three large customers
and requested payment of accounts which would be sufficient
to cover the wages cheque. He wrote to other customers if
they did not pay their accounts, but only when three or
four months had elapsed. Naturally, this lack of attention
to collection of amounts due to the company meant that it was
difficult to make payments to creditors in accordance with
terms. Factors such as this convinced the new accountant of the
need to review the organisation of the department and effect
the improvements required.
The review revealed the following facts:

Sales Ledger
There were about 500 live accounts in the sales ledger (i.e.
accounts with balances), and about 600 or 700 invoices were
issued each month, mostly for fairly large amounts. Some of
the invoicing was rather late in completion. An 'aged' analysis
of the sales ledger balances was prepared on the accounting
machine each month so that a good idea of the credit taken by
customers could be obtained. An outline of the existing pro-
cedure has been mentioned above.

Bought Ledger and Bought Ledger Payments

About 400 invoices were received from suppliers each month
and these could not be posted to the company's ledger until
they had been checked by the buying department for descrip-
tion, price charged and quantity ordered and checked with
delivery notes for description and quantities received.
During the month suppliers' statements, which are copies
of the company's accounts in the suppliers' ledgers, were
received, and it was necessary to match the balances as per the
statements with the balances as per the ledger to ascertain
the payments to be made at the end of the month. In many
instances the two would agree, particularly on accounts where
there were only occasional entries. In many other instances they
would not agree, and a reconciliation had to be made which
50
 was written on the statement to ascertain the payment to be
made, which would normally be the amount on the bought
ledger. The previous accountant used to reconcile the larger
and more active accounts himself.
His involvement with reconciling the statements arose for
various reasons, e.g. there were occasions when invoices for
two months or more previously had not been posted to the
ledger and the internal system made it very difficult to locate
the cause of the build-up, or indeed to ascertain if an invoice
had ever been received. Often the supervisor had some other
urgent task to attend to and had insufficient time for purchase
ledger work.
When the reconciliations had been completed, remittance
advices were prepared in order that the suppliers should be
aware of the make-up of the cheques to be paid to them. The
remittance advice was prepared on a standard form which
gave the reconciliation details.
Once all the suppliers' statements had been reconciled, a list
of all amounts to be paid (those in the ledger at the end of the
previous month) was made on an add/list machine to ascertain
the total payment due. No invoices were paid if they did not
appear on a supplier's statement until after a check had been
made to ensure that they had been posted to the correct
account. Certain accounts were paid more promptly if discount
was received for making earlier payment.
The machine operator prepared the cheques on the account-
ing machine and simultaneously posted the payments to the
bought ledger cards and also prepared a list of the payments
which was kept in a binder and served as a cash book for bought
ledger payments. The totals of the bought ledger cash-book
sheets were entered in the main cash book.
The clerk would then place the individual cheques, state-
ments and remittance advices together and pass them to the
chief accountant, who would sign the cheques. Mter having
been countersigned by the managing director, the cheques and
remittance advices would be forwarded to the suppliers. The
accountant did, however, first check that presentation of these
cheques would not cause the bank facility to be exceeded.
The suppliers' statements were retained and filed with the
statements for the previous months, thereby retaining the
copies of the company's accounts in the suppliers' ledgers.
51
PROBLEMS

1. Assess the organisation of the accounts department as

far as is possible from the information provided by the case.
2. Suggest possible systems improvements in the accounts
department.
3. In a reorganised accounts department, what tasks
should be undertaken by the accounts supervisor?
Note: Not all the activities of the department have been
included in the case; you should use your own experience or
library research and include relevant non-listed activities.

52
5 Planning with Networks:
A Case Study in Project
Management
A. W. Ingram, C.Eng., M.LE.E., M.B.I.M., M.O.R.S.

INTRODUCTION

This case study incorporates an application of network analysis;

it is assumed that readers are familiar with the theory of net-
works and with the associated terminology.

CASE STUDY: PART I

Background Information
Chas. Hellier & Co. Ltd is a small firm of jobbing builders and
factory plant installation specialists who have, over the last
twenty years or so, built up a worthy reputation among th{
larger manufacturing concerns on an industrial site in a
South Hampshire town.
The firm's speciality consists of installing new pieces of
manufacturing plant together with any associated buildings and
engineering services as a packaged deal. This relieves the factory
owners of the irritating and sometimes protracted problems
associated in dealing with architects, planning authorities
and the public utilities.
Charles Hellier, the chief executive and founder of the firm,
employs some fifty men of various trades and callings, all of
whom can turn their hand to most of the work associated with
their type of business. He is assisted by his son, Harry Hellier,
who has had the advantage of a technological education and is
a chartered mechanical engineer. A small drawing office, ad-
ministrative office, and an office manager who doubles as com-
pany secretary and accountant, completes his team.
Ever since the early days of the firm, it has been Charles
Hellier's practice to tender for all work suitable for the company,
53
whether it be large or small. Where the task exceeds the
capability of his own immediate resources, he temporarily
hires specialist plant and equipment or he may have recourse
to subcontracting, since this avoids the high indirect costs
associated with maintaining a larger labour force than can be
continually employed.

The Current Situation

The company has recently won a contract for the installation
of a new die-casting machine and its associated building con-
struction works at the local factory of a large national firm of
electronic engineers. This plant, which is an integral part of a
new manufacturing process, requires a small building to
house it together with the usual engineering services of elec-
tricity, gas heating and mechanical handling plant.
The work involved in this modest project had been analysed
and estimated by the younger Hellier in his capacity as Tech-
nical Director. His analysis shows it to comprise the activities
listed in Table 5.1.
TABLE 5.1
LIST OF ACTIVITIES AsSOCIATED WITH
DIE-CASTING MACHINE PROJECT

Activiry Description Duration

(days)

A Prepare foundations and underground services, 6

erect main building frame structure
B Fabricate and part-assemble steel frames to 5
support machine
C Collect die-casting machine and associated 2
control gear from manufacturer
D Assemble and check control gear 2
E Fit control gear on steel frames and install 3
F Fit aluminium sheet wall cladding and roofing 4
G Erect assembled plant on to prepared 7
foundations and frameworks. Connect services
H Erect mechanical handling plant on to prepared 5
frames
J Fit ventilation and fire-protection system 4
Logical Sequence of Work
The project, which consists of the nine major activities listed
above, can start with activities A, Band C, each of which is
not dependent upon any other activity being complete, other
54
than that of the usual general approvals which, for the purpose
of this study, can be assumed to have been obtained.
Activity D is dependent upon the completion of activity C,
whilst activities E and H require both Band D to be complete
before they can be started.
When both A and E are complete, two further activities, F
and G,may now commence.
When F is complete then J may proceed. The project is
complete when activities G, Hand J are finished.

Network Diagram
From his study of the project, the Technical Director intends to
prepare a network diagram illustrating the logical sequence and
durations of all the activities comprising the project. The
subsequent time analysis of this diagram will then enable him
to discover the 'critical path' of the project and all the earliest
and latest starting times of each activity, if the work is carried
out under normal conditions.

Costs
Estimates of the direct costs associated with the proposed
work have, in the first instance, been based on the use of the
company's own resources of men, materials and equipment.
These have been calculated to be as shown in Table 5.2.

TABLE 5.2
DIRECT COSTS
(NORMAL WORKING)

Activiv Duration (days) Cost per day (£)

A 6 60
B 5 72
C 2 50
D 2 60
E 3 42
F 4 60
G 7 72
H 5 48
J 4 54

In addition to the direct costs involved in the project, there

are, of course, the overheads or indirect costs associated with
the company generally. These depend to a certain extent on
55
the type of project and on the particular demands it makes
on the company's various resources. These will vary according
to the total duration of the project, since the larger the project,
the more indirect costs it must bear.
These have been estimated for this type of project by the office
manager to be as shown in Table 5.3.

TABLE 5.3
RELATIONSHIP BETWEEN PROJECT
DURATION AND INDIRECT COSTS

Total project
duration (days) 11 12 13 14 15 16 17 18
Corresponding
indirect costs (£) 420 490 600 770 1,050 1,400 1,750 2,270

PROBLEM

1. From the information given in Tables 5.1, 5.2 and 5.3,

together with the logical sequence of work list, what would
Harry Hellier calculate to be the duration of this project and
its total cost? Assume that the work proceeds in accordance
with the network produced from an examination of the
sequential logic given and that normal working conditions
prevail.

CASE STUDY: PART II

Additional Information
Charles Hellier, who had never been too sure about this
'critical path stuff' or any of these newfangled techniques for
that matter, carefully studied the list of activities prepared by
his son, paying particular attention to their estimated durations.
His business had been built on speedy service to the customer,
and he knew that the factory manager was anxious to get
the new plant into commission.
Drawing on his past experience in discussion with his son, he
was able to suggest some alternative ways of tackling most
of the activities that had to be done. His son pointed out that
these speedier methods usually incurred the penalty of some
56
increased cost either in manpower or in the use of specialised
facilities which might have to be hired.
Together they reviewed the list of proposed activities to see
by how much their durations might be pruned and what the
attendant extra costs would be. Mter a close examination,
Harry Hellier was able to produce another table of working
costs - this time incorporating the special provisions suggested
by his father - reproduced as Table 5.4 below.

TABLE 5.4
AMENDED DIRECT COSTS
(INCORPORATING SPECIAL PROVISIONS)

Activiry Revised duration Revised cost

(days) per day (£)
A 4 120
B 4 160
C 2 50
D 2 60
E 2 90
F 2 290
G 6 120
H 5 48
J 4 54

PROBLEM

2. The problem now facing Harry Hellier was to decide

which of the amended methods of working should be incor-
porated into the revised plan. He realised that he still had a
duty to plan for minimum cost - to determine what that
minimum cost should be and which activities must be amended
in order to achieve it.

57
6 The Day to Day Problems of
a Technical Representative
in the Paint Industry
B. J. A. Pitt

INTRODUCTION

There are approximately 500 paint manufacturers in the U.K.,

the annual total turnover being in the region of £160 million;
the growth rate is 3 per cent. 50 per cent of the turnover is
generated by six firms. There has, in the last decade, been
a movement towards larger groups through mergers and
take-overs. Exports of paint amount to approximately £16
million, but this has decreased considerably in the past few
years, as large firms have tended to open or acquire factories
overseas, mainly because of the prohibitive costs of shipping
and insurance.
The most rapid growth area in sales has been in the in-
dustrial finishing line. The majority of current industrial
finishes are really chemical coatings and are developed in
close relation to plastics and synthetic fibre technology through
the development of chemical polymers. In the do-it-yourself
trade there has been an increase in selling through super-
markets and chain stores, but the greater part of paint sales
is through merchants and DIY shops who are able to give
advice and personal service.

CASE STUDY

Superpaints is a division of a larger paint company and

operates depots throughout the country, which is divided
into geographical sales areas which in turn are subdivided into
representatives' sales areas. Each regional area operates a
depot with approximately four representatives responsible to
an area manager. The paint products marketed are for use in
58
the decorative and maintenance fields, and are sold both
through direct supply and through merchants. Big customers
include petro-chemical companies, factories and local authori-
ties. The function of the depot is to receive orders, dispatch
paint and maintain buffer stocks for the area in which it is situ-
ated. The organisation of such a depot may be seen in Fig. 6.1.
and the path of a customer's order is traced in Fig. 6.2.

Area Manager
I
I I
Representatives
I
Warehouse
Order Office
I I
Secretaries Foreman
Order Clerks
Stock Controller
I
Staff and Drivers
Fig. 6.1 Organisation of a regional area depot

Order phoned or received in

post from customer
t
Order written on order pad

Sent to stock controller

Passed back to order clerk

Order set made out (7 copies);
Dispatch and carrier's copy
File
Warehouse
Customer
Representative sent to computer section for
Invoice copy - - - - - pricing and invoicing
t
If paint not in stock,

I~"_
order to works main
stock holding Paint dispatched
t
If main stock holding
: to area depot
for forwarding
to customer
has none, put on to works
for manufacture
Fig. 6.2 Path of a customer's order
59
 The incidents in this case study concern one of Super-
paints' depots. The company had been operating for thirty
years from the depot, but owing to increased business it had
outgrown the present premises. As it was not possible to expand
on the site, a decision was made to move the depot to a new
industrial estate twenty miles inland. As well as giving the
necessary increase in space, other benefits were gained in
having a more central position between the larger cities with
good transport facilities both north and south, and improved
access to the manufacturing works.
The following incidents are based on the day-to-day prob-
lems encountered by a technical representative operating
in the area.

Incident 1
Apart from administrative difficulties arising out of a move to
another site, one of the main problems encountered was that
of maintaining existing accounts which had been built up
around the area of the old depot, from which customers had
been accustomed to collecting paint. Quite a large number of
such accounts had been built up in the surrounding neighbour-
hood; these were mainly small accounts, but nevertheless,
cumulatively, they were worth while (approximately £2,500
of business per annum). In addition to gross profit margins, a
further advantage of sales to such customers was that they
were in the habit of collecting material themselves and paying
cash on collection, which saved the company administration
and distribution costs. This type of account could be divided
into three categories:
(a) Small decorators and jobbing builders who called for
their paint as and when required. This business was
likely to be lost following the move, as customers would
not bother to telephone for small orders and await
delivery.
(b) Engineering works making plant and equipment for
large industrial companies. Failure to give adequate
service to these outlets would create two problems, the
first being loss of this business, and the second the loss
of the goodwill of bigger customers who had specified
the use of Superpaints' specialised materials on their
plant and equipment.
60
 (c) Factories using paint for maintenance of premises.
These included food factories employing one or two
painters to carry out maintenance painting throughout
the year. This business could be lost for reasons similar
to those mentioned under (a) above.

PROBLEM

1. How could these three categories of customer be retained

and serviced from a reasonably distant locality?

Incident 2
A merchant, Jenkins, has an expanding business dealing
mainly in supplies of glass, timber and sundries for the do-it-
yourself trade in an industrial area. In addition to the DIY
business, considerable turnover has been built up over the
years through supplies to local factories and industries of
brushes, tools, paint and building maintenance materials. The
paint side of the business has increased greatly, with the result
that he intends to extend his premises to enable him to stock
larger quantities of paint. His turnover with Superpaints has
also grown steadily to the extent where he feels he should be
given more favourable terms.
Another merchant, Jennings, owns a similar-sized business
in the next county supplying wallpaper, paints and decorative
sundries to decorators and painting contractors. His business is
therefore more geared towards paint sales. He enjoys more
favourable terms, partly because he is more of a paint man,
but mainly because he is operating in a more competitive area.
Superpaints' technical service representative made a call on
Jenkins in order to explain the company's proposed new
5 per cent overall price increase. His reception turned out to be
even more chilly than expected when Jenkins produced an
invoice for several items relating to Jennings, which had been
sent to him in error, owing to the similarity in their names.
From these invoices it was clear that Jennings was receiving
supplies at much lower prices, and because Jenkins had always
understood that his terms were the best that Superpaints could
offer, he was most reluctant to accept any further increases.
61
PROBLEM

2.(a) Maintaining the goodwill of Jenkins is of great im-

portance, particularly since the possible increase in his turn-
over over the next few years could benefit Superpaints. How
were his ruffled feathers to be smoothed?
(b) While a customer's goodwill is essential, the company's
profit margins must be maintained and the necessary price
increases put into force. How can the two be reconciled?

Incident 3
A large light engineering company instructed a painting con-
tractor to repaint the floor of its factory. The painting con-
tractor contacted Superpaints for materials to apply to a trial
area. The paint was supplied but a complaint was received
that the material had taken eighteen hours to dry, a far longer
period than that stated by Superpaints.
A check was made by the paint manufacturer on the batch
of material and it was found to dry in six hours. A visit was then
made to the site and it was established that the factory
operated on a shift system from 0700 to 1700 hours and from
1700 to 2200 hours, which left too little time to carry out
painting of the floor and to allow adequate drying time of the
surface coating, even if surface conditions were similar to
those used to test the batch.
A faster-drying material was required, so tests were carried
out by the contractor with an alternative Superpaints product
in an area of the warehouse. These tests were successful and
the contractor was instructed by the client to continue painting
the factory floor. A few weeks later the painting contractor,
somewhat agitated, contacted Superpaints' technical representa-
tive, stating that they were in further difficulties with the
floor. Flaking and lifting were occurring, and the contractor
intended to claim the £250 wages paid to his men for work
carried out on the floor during Bank Holiday, and which
could not be passed by his client as a satisfactory job. The
contractor placed the entire blame for the flaking and lifting
on Superpaints, stating that faulty material had been supplied.
A further visit was made to the site and it was found that
lifting of previous coatings was occurring, back to the original
62
concrete. Sample flakes were sent for laboratory examination
and it was found that the underside of the base coating was
contaminated with coffee, tea and sugar.
On further inquiry it was discovered that the affected areas
had originally been the sites of tea and coffee vending machines.
The faster-drying materials used in the second attempt to
paint the floor contained stronger solvents which had penetra-
ted the original coating. This would not have been a problem
had the floor been clean underneath, but the solvents had
softened the contamination, causing the original coating to
lose adhesion. When the material under complaint was
tested on a clean surface there were no signs of adhesion
problems.

PROBLEM

3. How can Superpaints enable the contractor to complete

the job satisfactorily, maintain the original goodwill of both
client and contractor and minimise the possibility of involving
themselves in financial loss ?

63
Guidelines
BUYING AND STOCK CONTROL
PROCEDURES IN AN ENGINEERING
COMPANY
1. What improvements in the control system can you recommend,
particularly with a view to co-ordinated administration of stores?
In this matter of the administration of a number of Stock
Groups, one approach which quickly suggests itself is the sub-
stitution of a single central system for the six separate groups
at present being maintained. It could of course be the case that
there were some overriding operating reasons for maintaining
six distinct groups, but in fact the investigation did not reveal
any such reasons.
As regards clerical work, an integrated system would in-
stantly reduce the number of cards to be kept by some six
hundred, a number which can be reached by simple calcula-
tion. It would do this by keeping only one card for each part
number, with all the documentation recorded on the one card.
As regards the actual stores, the part location card would
then be used to signal one location from which the part
would be issued, irrespective of the stock code on the issuing
requisition. What reduction in the total number of storage
locations would this effect? Hitherto, there have been 3,425.
Again, it can be demonstrated quite simply that this figure could
be reduced by some six hundred.
Many of the advantages can now be listed. Here are some:
1. The stock control department now has to control one
Stock Group instead of six, with fewer security problems
(there is only one location) and the simplification effected
by all the stock of a given part being in one place.
2. One will be rid of some of the duplication of the work of
preparing and maintaining cards.
3. The number of errors made in recording should be
smaller.
4. The amount of documentation through stores to stock
control will be reduced.
5. Progress staff will find that their job is made lighter by
64
 having to deal with fewer references. 'Nil' stock will
mean just that - not a possibility that stock is available
in any of five other locations.
Irrational though resistance to the new, integrated system
may be, one must be prepared for the fact that it may not
immediately receive a universal welcome. There will no
longer be the opportunity for the insecure individual to make
his own personal stock checks with a view to substantiating the
figures recorded on the cards; but perhaps an awareness of
the existence of this last line of checking had an adverse effect
on the accuracy of entries. Moreover, it was quite unnecessary.
The next step is the implementation of any proposed solu-
tion. There will be a number of actions which the stock control
department must take:
(a) Select a date for the introduction. Any outstanding
documentation must be cleared before that date.
(b) The existing cards must be withdrawn and fresh ones
issued.
(c) The summary of stock in hand and outstanding orders
has to be completed.
(d) All cards in the new system have to be filed in numerical
sequence in one file.
(e) When the new system first operates it will be advisable
to take spot checks to see how it is working. (The old
duplicate cards might be retained for a while.)
The stores department must:
(i) Select a date for the closing of the stores - a weekend?
(ii) Have a copy of the schedule of stock in hand so that
part numbers can be located.
(iii) Take decisions on the suitable location of the amalga-
mated stocks.
(iv) NotifY location code numbers to stock control and
advise them of any alterations made necessary.
The costs of the changeover should not be significant, in-
cluding only a few days' additional work by female clerks, a
weekend at work by, say, six stores supervisors and minor
printing costs for cards.
2. Given the purchasing system, how can one set about evaluating
it} and what improvements might one expect to introduce?
65
 This problem came to notice because the clerical problems
and the filing practices of the purchasing department were
so intricate as to be obstructing progress.
First, one would have to establish exactly how much dupli-
cation and ineffective activity there was. What techniques
would reveal this sort of information? One approach would be
to make out a process chart showing the operations and in-
spections involved in the ordering procedure similar to that
produced in the case study and found to reveal unnecessary
duplications, etc.
What happened in fact was that an activity sampling
exercise was undertaken. This revealed that 6 per cent of the
total work effort, including senior staff but excluding typists,
was spent on filing and 3 per cent on searching and withdraw-
ing from the files - about forty minutes per head per day on
filing. The true percentage was almost certainly higher. Some
correspondence and technical literature was hurriedly stored
in any convenient area, to be filed at a later date.
One might see whether any of the copies taken of each
purchase order could be spared. The yellow copy might go to
goods acceptance instead of a Xerox copy, thus getting rid of
seven operations in the buying section.
The orange copy might suffice for the needs of the depart-
ment and offer the advantage of having all the documentation
on one copy order. It could be filed in a centralised filing
section, manned by two clerks. They could be transferred
from the progress section. Personnel who wished to withdraw an
order from the filing section would make application there
accordingly and sign for it.
Upon completion of a 'purchase order, details could be
recorded by a filing clerk on an index card, an example of
which is shown below.
This would give buyers an up-to-date picture of the amounts

SUPPLIER
ACCOUNT CODE
ADDRESS

Part Order Date of Date Total value Cumulative

number number order completed of order total

66
spent and the range of parts bought from anyone supplier
over a period of time, showing instantly the trend of rates of
purchase. In many organisations the basic figures might in fact
be obtained by telephone from a purchase ledger department
or section, but one practical difficulty in the Wessex Company
was the location of purchase ledger work in another of the
company's factories, at a distance from the one we are con-
sidering. Moreover, members of buying staffs did contend
strongly that a picture of the trend of purchases was what
interested them even more than the existing balance on the
vendor's account.
Mter this information has been extracted, the order can be
filed numerically in a suspension file. In due course the com-
pleted orders would be transferred, still in numerical order, to
paper storage cases.
Technical literature could be passed to the filing section
after perusal by the buyers and be filed in vendors' order. It
could be withdrawn on request, against a signature.

TRAINING, SUPERVISORY STRUCTURE

AND COMMUNICATION NETWORKS IN A
SERVICING INDUSTRY

1. What sort of training programme will meet the situation?

Gas equipment conversion is not a job into which you throw
a newcomer unprepared, and expect him to cope adequately
with all the very different circumstances he is likely to meet.
To begin with the problem of training, how satisfactory is
the existing induction procedure? Could it be amended by
Doggergas, e.g. so as not to encourage illusory hopes of instant
promotion?
In what ways might training be made more thorough and
above all more realistic? What should it include? How long
should it take - not forgetting the pressure to get the conver-
sions completed and the economic costs of long periods of
training? Would it be helpful to build into the training work-
shop itself some awkward and cramped working places and a
number of appliances which obstinately resisted conversion?
And when instruction is given in the field, could employees
be given more guidance in dealing with consumers? How
67
much preparation in public relations do fitters and converters
need?
How should instructors themselves be trained? It may be
that the company could adopt the type of job instruction
course associated with Training Within Industry (TWI).
Also, should time under the supervision of experienced men
on the job be given to new employees? One solution proposed
was that in each team one first-class fitter should be trained as
an instructor. Each newcomer would be given a month of
training under this instructor, who could revert to normal
fitter duties when not instructing.

2. Suggest methods of improving the effectiveness of supervision.

In relation to the problem of supervisory practice, many
complaints derive from arbitrary and ill-judged actions,
unfair distribution of work to employees and lack of leadership
in the field.
One might therefore try to modifY some of the attitudes of
supervisors, presumably by some form of development pro-
gramme. The needs of the job point to the holding of residen-
tial weekend courses in order to interfere as little as possible
with the operating side of the job and to get a considerable
number of supervisors together and thus reduce their own
feelings of isolation.
A formal short meeting for supervisors might be held each
week.
To cope with these demands, as well as for those arising
from training, some additional management appointments
would have to be made.

3. How would you handle the problems of motivation and morale?

Here, the company has to discover the root causes of low
morale. To do this is seldom easy. Moreover, it is probable
that such causes are endemic to this kind of job situation. For
instance, what basic rates of pay and earnings potential can
compensate for the disruption of normal home life?
One would have to be scrupulously careful to make sure that
employees were not out of pocket after meeting the additional
expenses incurred in living away from home. How promptly
are overtime and allowances paid? It would seem to be folly
to have to squander valuable time in disputes over allowances,
68
 especially in the light of the difficulties in the way of getting
opportunities for discussion at headquarters.
Should management show themselves to the fitters more
often? If so, what sort of occasions exist or can be created?
Could a job evaluation and a simple merit-rating scheme be
introduced to reinforce individual motivation? Consider, for
instance, how far a work-measured incentive scheme is applic-
able to the circumstances. There will certainly be obstacles and
limitations, while the existing climate of industrial relations
must be good for it to succeed at all in this kind of job. Might
a group scheme fare better? On what unit of work should
such a group incentive be based? Perhaps by the number of
households converted? But how many appliances in each?
And what should be the size of the group?
As regards consumer relations, it was remarkable how much
a succession of consumer complaints adversely affected morale.
The converters and fitters really were disturbed when this
happened.
Accurate record-keeping will establish the actual rate of
complaints made. An analysis of causes will disclose the
frequency and seriousness of each type of complaint.

4. How does one meet the special difficulties of communication in-

herent in this type of operation?
As regards communication, ought there to be a liaison
officer specially appointed? What personnel administration,
welfare and training functions might he also cover? Is the
improvement of communication important enough to justify
such expenditure on staff salaries?
For instance, on the vexed problem of employee lodgings,
70 per cent admitted that getting these was 'a very big problem'.
68 per cent would welcome some help in the matter from the
company. A liaison officer might make available to the men
in advance information such as the addresses of lodgings open
to them.
On communication generally, a small notice-board might be
installed in each transit van taking crews to the jobs. This
is the one location where men would be likely to read such
notices. Site changes could be quickly conveyed to the men.
Might not the practice of joint consultation be revived,
beginning with a regular meeting at established times so that
69
the members of such a committee would have every chance
to schedule their other duties in such a way as to be free to
attend? What would be the principal difficulties in keeping
such revived consultation effective? How would you arrange
for reports back?
There could be a regular company bulletin directed to
the men engaged on conversion. This might be issued either
monthly or quarterly.
The personnel liaison officer appointed might explore the
possibilities in each town of having local social facilities opened
to the men. Terminal interviewing might be made a universal
practice in job procedure, while a suggestions scheme could
well prove successful in an industry where so many unusual
job ~ituations were likely to arise.
Would speed in trouble-shooting, in dealing with grievances,
prevent these from growing into major complaints? How far
is consultative machinery equipped to deal with them? Only
partly, of course; queries about amounts of pay and allowances
need to be settled more quickly than formal consultation can
hope to do.
A liaison officer might also collect data on training needs
from the men and could explain company rules and policies.

THE NORTHERN SYSTEMS CO. LTD

1. As members of the Clerical/Administrative CommitteeJ you are

required to:
(a) determine the relative importance of the factors by giving them
a percentage weighting and allocating a corresponding number of
points to each factor;
(b) determine the number of degrees applicable to each of the factors J
define each degree, and allocate a points score to each degree
within the total number of points available for each factor.
(a) Job requirements vary from one job to another, and
similarly the relative importance of the compensatable factors
varies. For example, the evaluator must ask himself: 'If I were
to consider the jobs in the clerical and administrative category,
what percentage of their total value can be attributed to each
factor?'
70
 The answer could look something like this:
Factor Weight Point score·
(%)
1. Education lO lOO
2. Experience/training 12 120
3. Responsibility for supervision 15 150
4. Responsibility for process/procedure 9 90
5. Initiative 14 140
6. Complexity of tasks 12 120
7. Contacts 9 90
8. Dependability and accuracy 11 110
9. Physical demands 5 50
10. Working conditions 3 30

Totals lOO 1,000

·The percentage weighting forms the basis on which to allocate points
to degrees attributed to each factor.
(b) Before determining the number of degrees and their
definition for each factor, we illustrate below our method of
allocating points to degrees.
First, the lowest degree for each factor is given a number
of points equal to the percentage weighting of the factor,
and the highest degree of each factor is given a number of
points equal to the total point score of the factor. Then the
intervals between minimum and maximum for each degree are
calculated using a geometric progression by multiplying
the lowest degree score by the highest common ratio (r),
which is derived as follows:
r = n _ l)highest degree
lowest degree
i.e. in the case of education (assuming 6 degrees for that factor)

r= 5)100 = 1·58.
10
Multiplying each successive degree value by 1·58 we obtain the
following degree points:

Education
1

lO
2

16
3

25
4

40
5

63 I: I
71
 It should be noted that the choice of interval between
degrees - in this case geometric - depends entirely upon the
differences in value built into the degree definition. The use
of geometric progression tends to provide a more realistic
reflection of fhe difference between the relative worth of each
degree. Factors need not necessarily all have the same number
of degrees.
One interpretation of the number of degrees, their definition,
and points allocation for each of the clerical and administrative
job factors, is given below.

1. Education
Degree Definition Points
I Secondary-school level or equivalent ability to read, 10
write, calculate and/or type
II '0' level with passes in English and arithmetic as a 16
minimum, or equivalent
III 'A' level or O.N.C. qualifications or equivalent 25
standard
IV Basic professional examinations in commercial or 40
business subjects or equivalent knowledge
V Advanced knowledge in specialist subjects equivalent 63
to R.N.C.level
VI University degree or equivalent professional quali- 100
fications or other equivalent specialist knowledge

2. ExperienceI Training
Degree Definition Points
I Maximum of six months' experience and informal 12
training period on the job
II Up to twelve months' experience with formal train- 21
ing in the job
III At least two years in the job, with practical know- 38
ledge of all aspects of the job
IV At least five years in a specialisation, with general 68
knowledge of all the tasks and the general organi-
sation
V At least ten years in a specialisation, with detailed 120
knowledge of the whole range of jobs within it

3. Responsibility for Supervision

Degree Definition Points
I Little supervision exercised, mostly showing others 15
how to perform routine duties
72
 II Supervision of routine and repetitive duties, involv- 27
ing a few employees only
III Supervision of a few employees involved in a wide 47
range of varying duties, or a larger number of em-
ployees doing standard duties
IV Supervision of a large number of employees engaged 84
in varying and sometimes complex duties
V Supervision of a very large number of employees 150
performing routine or standardised duties, or of a
smaller group of specialists engaged in varied and
complex tasks

4. Respcnsibility for Process/Procedure

Degree Definition Points
I Little or no responsibility for the control or main- 9
tenance of a routine procedure or process
II Under general supervision, operates or maintains 16
some parts of a process or procedure
III Responsible for the operation or maintenance of 28
varied and complex processes or procedures, and
for the accuracy and timely preparation or process-
ing of important operating information
IV Responsible for the operation or maintenance of 51
varied and complex procedures or processes where
inaccuracies or errors would cause significant
losses and difficulties for the company
V Responsible for the organisation and application 90
of complex and varied procedures or processes
representing an important aspect of the company's
operations

5. Initiative
Degree Definition Points
I Works under close supervision, on routine and simple 14
tasks requiring little individual judgement
II Works on standardised tasks requiring only minor 25
decisions within well-defined procedures
III Works within established procedures with decisions 44
on how and when to schedule the workload, with
range for independent action and judgement
IV Plans and organises the work programme and uses 79
judgement and ingenuity in arranging priorities and
devising methods where the scope for decisions is
not specifically answered by established policies or
procedures
V High degree of judgement required in the planning 140
and operation of the tasks; significant amount of
73
 independent decision-making and need to be
creative

6. Complexity oj Tasks
Degree Definition Points
I Routine, repetitive work done within standard 12
procedures
II Routine tasks with little variation in methods re- 21
quiring minimum training and adaptability
III Varied tasks requiring a range of skills and some 38
considerable adaptation where mental application
is regularly present
IV Numerous and varied tasks subject to changes and 68
demanding a wide range of skills and great adapta-
tion at short intervals
V Complex and varied tasks requiring a wide range 120
of skills and a high level of mental ability

7. Contacts
Degree Definition Points
I Only contacts with immediate colleagues 9
II Routine internal contacts at own level and occas- 16
ional external contacts of a courtesy nature
III Internal and external contacts with senior people 28
requiring tact and flexibility in the exchange of
information
IV Internal and external contacts with many levels 51
requiring considerable skill in exchanging informa-
tion, transmitting and obtaining decisions
V Internal and external contacts at all levels to com- 90
municate information, orders, decisions, obtain
agreements and influence the operations of the
company

8. Dependability and Accuracy

Degree Definition Points
I Works on regular and routine assignments, under 11
close supervision, where errors are easily detectable
and corrected
II Works from standard procedures with occasional 24
scrutiny from supervisor and where errors are usually
detected in later operations
III Works independently and receives only indirect 51
scrutiny; undetected errors could cause consider-
able delay or loss to the company
IV Sets own standards in the planning and performance 110
74
 of tasks; undetected errors could cause serious delays
or losses to the company

9. Physical Demands
Degree Definition Points
I Performs routine clerical work with low level of 5
manual application and physical dexterity involved
II Performs tasks requiring a moderate level of atten- 11
tion and manual application for a part of the day,
or a basic skill such as typing, drawing or operating
equipment
III Performs tasks requiring highly developed skills or 23
co-ordination for the greater part of the day
IV Performs tasks requiring fully developed skills or a 50
high degree of co-ordination for the whole day, often
involving overtime or shift work

10. Working Conditions

Degree Definition Points
I Performs work in average office or factory environ- 3
ment
II Performs in unpleasant conditions of noise, tem- 6
perature or lighting, or spends long periods in un-
comfortable positions
III Performs work for long periods, or most of the day, 14
in uncomfortable conditions of noise, temperature or
posture
IV Works in conditions requiring special protective 30
equipment or where occasional danger to health or
person may occur

2. As members of the Clerical/Administrative Committee,you are now

asked to evaluate the benchmark jobs A and B and to recordyour findings.
The results of the Clerical/Administrative Committee evalua-
tion exercise for jobs A and B were as shown in the chart
on p. 76.

3. What should be the main functions of the Evaluation Control

Committee?
As defined by Denton, the main functions of the Evaluation
Control Committee are:
To evaluate each new job being created.
To review periodically the job descriptions and classification.
To re-evaluate jobs in case of litigation.
75
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To ensure, in co-ordination with the personnel function, that

the salary scale remains internally equitable and externally
competitive.
To ensure, in co-ordination with the personnel function, that
the policy and procedures relating to the salary administra-
tion programme are clearly defined and put into force.

4. What sources oj information should be considered in monitoring the

functioning oj the programme?
76
 The sources of information necessary to monitor the systems
are:
Record of job descriptions.
Record of job titles and their classification.
Salary curves - with maxima, mid-points and minima.
Record of each employee's salary.
Merit-increase procedure.
Procedure for salary changes, recruitment, promotions
and transfers.

JACOBS PRINT LTD

1. Assess the organisation qf the accounts department as far as is

possible from the information provided by the case.
The department was not functioning properly in a number of
respects. Owing to the lack of delegation, the previous account-
ant had carried out many tasks which could and should have
been carried out by members of the department, and the ac-
countant, because of pressure of work, was unable to see to
other, more difficult work and policy decisions which could
not be delegated. Conversely, in the company in which this
case is based several members of the staff had insufficient
work and were not being utilised properly. It was essential,
therefore, to install a suitable system of control and to delegate
clerks for the various tasks immediately.
The previous accountant spent too much time correcting the
manifestations of system weaknesses, e.g. chasing debtors and
mislaid purchase invoices, instead of correcting the system.

2. Suggest possible systems improvements in the accounts department.

(a) Improvements to debtors' control
The first need for the sales ledger clerk was to examine each
live account to agree that the invoices which appeared to be
unpaid totalled up to the balance on the account and to
ascertain the reasons for discrepancies and settle queries
thereon.
Having ascertained the situation on the ledger, a monthly
routine was required to obtain a regular cash inflow with the
aim of reducing the amount due to the company by its debtors.
77
 In the company concerned, the following steps were decided
upon:
(i) All invoices to be raised promptly and invoicing to be
completed by the second working day of the following
month.
(ii) All posting to ledger to be completed so that statements
could be forwarded to customers within one week of
the end of the month.
These two steps ensured that the customers were charged
promptly and that they were informed of the total amount
which they owed to the company.
If all customers paid according to the terms of credit allowed,
which in this case were monthly account (i.e. payment due on
the last day of the month following month of invoice), no
further action would be necessary. However, this is never the
case, and the following 'follow-up' letters were instituted for
those cases in which customers failed to pay according to
terms:
(i) First reminder forwarded with statement one week after
payment due informing customer that payment was due.
(ii) Second reminder forwarded three weeks later pointing
out the company's terms and requesting payment or
alternatively reason why payment was withheld.
(iii) Third reminder forwarded three weeks later stating
regret that payment had not been received despite
previous letter and requesting payment within seven
days.
(iv) Fourth reminder forwarded ten days later stating
further regret that account remains unpaid and in-
forming customer that legal action would be taken
unless payment was received within seven days.
Such a system could not be operated without checks being
built in to pick up posting errors or instances where the
customer was dissatisfied with the goods supplied, as it was
realised that steps should be taken to preserve customers' good-
will towards the company. In order to ensure that the current
situation was known, the 'aged' analysis prepared monthly on
the accounting machines was marked up daily as remittances
were received. It was decided, therefore, that the third reminder
78
should not be sent out until the invoices in question had been
examined to ascertain that they had been charged to the correct
account and inquiries made of the works and sales offices to
ascertain that the customer had raised no queries on the goods
concerned. As a further safeguard, the fourth reminder was to
be signed by the chief accountant after he had satisfied himself
that the action was in order.
If no remittance was received in reply to the fourth reminder
within ten days, the matter was referred back to the chief
accountant for him to decide the action necessary. Unless there
were good reasons to the contrary, legal action was taken
immediately. If the total outstanding on individual invoices
was below £750 a County Court summons would be taken out.
This is a cheap and simple method of debt collecting. If at least
one of the invoices was in excess of £750, it was necessary to
place such invoices in the hands of the company's solicitors for
them to take out a High Court summons.

(b) Improvements to control of purchase invoices

It was decided in the company concerned that, as an essential
part of the bought ledger system, an invoice register should
be maintained in which every invoice would be entered im-
mediately upon receipt, with columns for date of receipt, date
of invoice, name of supplier, amount of invoice, date sent to
buying department, date returned from buying department,
and invoice number allocated by the company. Invoice
calculations were checked and invoices numbered in numerical
sequence by the accounts department. The invoice register was
obviously outside the books of account, but it provided a
history of every invoice and until each column in the register
had been completed an invoice could not be posted to the
bought ledger.
It was important to post as many invoices as possible to the
ledger each month. Before the monthly closing the bought
ledger clerk would look through the invoice register to find
out which invoices had not been cleared by the buying depart-
ment. The clerk would then 'chase up' the buying department
to clear as many invoices as possible so that they could be
marked up on the invoice register and posted to the bought
ledger.
Ifinvoices were not posted to the ledger within two months of
79
appearing on the supplier's statement, the bought ledger clerk
was to take steps immediately to trace the whereabouts of these
particular invoices. The first step was to look through the
invoice register to check if an invoice had been received. Ifso, the
invoice register may disclose that the buying department had
returned it after the ledger had been closed for the previous
month, and as the invoice would be posted to the ledger during
the current month, payment would be made in due course.
Alternatively, the buying department may have had the invoice
under query; if so, the reason was ascertained in order that the
supplier could be informed of the reason for non-payment. A
search of the invoice register may have shown that the invoice
had not been received by the company and a standard letter
would be sent to the supplier requesting a copy. When the
copy was received it was particularly important to check before
entering it in the invoice register that it was chargeable to
the company, as the supplier may have posted it to the com-
pany's account in error. If this was the case, the supplier was
requested to make a correcting entry in his books.
(c) Remittance advices
As an alternative to preparing remittance advices separately,
they could have been prepared by being placed in front of the
ledger card so that as the ledger card was posted another
copy was produced simultaneously. Another alternative would
be to take a photocopy of the ledger.
(d) Improved delegation
To enable the accountant to have time to compound the new
ideas listed in (a)-(c) above, he should be relieved of the type
of detailed work mentioned in the guidelines to problem 1.
3. In a reorganised accounts department~ what tasks should be
undertaken by the accounts supervisor?
Under the previous accountant the supervisor's duties in the
company on which this case is based comprised cashier and
petty cash functions, preparing weekly and monthly salaries
and assisting with wages. Those duties restricted the supervisor
almost entirely to detail and largely non-supervisory work.
Consequently, she had little time available for supervision,
and the standard of work of those persons she was responsible
for was far too low.
80
 The appointment of sales and bought ledger clerks had
relieved both accountant and supervisor of a considerable
amount of detailed work.
The supervisor was further able to relinquish the cashier's
role and a clerk became cashier. The number of entries in
the cash book had been greatly reduced by the use of sub-
sidiary cash books for bought ledger payments and sales ledger
receipts, and this was useful. Each month the cash book was
balanced and reconciled with the balance shown on the bank
statement. This meant taking into account cheques which had
been paid out in the cash book but which did not appear on
the bank statement, and receipts which had been paid into the
bank but not credited on the statement. So that the accountant
was kept aware of the cash-book position, a form was completed
weekly summarising the cash movements for that week. The
cashier was responsible for paying into the bank daily all
remittances received and for the dispatch of cheque payments.
To complete the subordination of work, a nominal ledger
clerk had been appointed who was responsible for preparation
of work for posting to the nominal ledger, which contained the
accounts from which the company's monthly (management)
accounts and annual (statutory) accounts were compiled.
The accountant prepared the work for this ledger beforehand.
Petty cash was not subordinated to another clerk, and the
supervisor retained this fairly small task as it was desirable
that cash should not be handled by a less senior person. To
maintain strict control, payments were not made unless vouch-
ers signed by the recipient and countersigned by an authorised
official were presented. As a check on the amount of cash paid
out each week petty cash was kept on the imprest system,
whereby the cheque drawn to reimburse the petty cash float
was equal to the payments in that week, thereby maintaining
the float at a fixed level. The supervisor also retained respon-
sibility for some of the more confidential aspects of payroll,
namely preparing the weekly and monthly salaries. Her con-
tact with the wages payroll was confined to settling the more
difficult queries.
The supervisor now had more time to control the distri-
bution of work between staff and to ensure that every effort
was made to complete work by the terms of the time-table
agreed between her and the accountant.
81
 The reallocation of work not only increased the standard of
performance by the staff, but also increased the flexibility of
the department, as the supervisor now had time to help indi-
vidual clerks at peak times, deal with queries, and assist if
clerks were absent.
The organisation chart (Fig. G4.1) shows clearly the various
Chief Accountant/
Company Secretary

I
Secretary /
I I
Accounts Cost Accounfant
Typist Supervisor and Staff

I
Sales Bought Cashier Nominal Wages Machine
Ledger Ledger Ledger Clerks Operators
Clerk Clerk Clerk (2) (2)
Fig. 04.1. Organisation chart of accounts department

sections of the accounts department, and the case and guide-

lines have set out the need to delegate work and the futility of
the departmental management allowing itself to undertake too
much detailed work. In any case, detailed work is handled
much better by a staff which has been clearly shown the manner
and method in which to work.
An academic knowledge of book-keeping is an obvious
essential for the departmental management, but the success of
the department depends on the realisation that a clear plan is
necessary to cope with and anticipate the practical problems
which continually occur.

PLANNING WITH NETWORKS

1. From the information given in Tables 5.1~ 5.2 and 5.3, together
with the logical sequence oj work list~ what would Harry Hellier
calculate to be the duration oj this project and its total cost? Assume that
the work proceeds in accordance with the network produced from an
examination if the sequential logic given and that normal working
conditions prevail.
82
 The project duration can be calculated from a time analysis
of the network diagram. The sequential logic suggests that the
diagram takes the format shown in Fig. G5.1; the time-
analysed network is shown in Fig. G5.2.
Thus shortest duration of project
= critical path=B+E+F+J
= 5 +3 +4+4= 16 days.
Total Cost
(a) Direct costs
These can be calculated from Table 5.2 as shown in Table
G5.1 below.
TABLE G5.1
COST OF DIRECT ACTIVITIES

Activity Estimated Estimated Estimated

duration cost per day total cost

A 6 60 360
B 5 72 360
C 2 50 100
D 2 60 120
E 3 42 126
F 4 60 240
G 7 72 504
H 5 48 240
J 4 54 216
Total cost of direct activities £2,266

(b) Indirect costs

The time analysis of the network diagram reveals that the cri-
tical path is 16 days long. Thus the anticipated duration of
this project under normal working conditions is 16 days.
From Table 5.3, the indirect costs associated with a project
of this duration are £1,400.

(c) Total project cost

Total proj ect cost = Direct costs + Indirect costs
=£2,266+£1,400
=£3,666.

2. Which oj the amended methods oj working should be incorporated

into the revised plan?
83
 Erect assembled plant
n prepared foundations Fit
G ventilation
system
J

H
Erect mechanical
handling plant

Fig. GS.l. Die-casting machine erection project: network diagram

Event number

Earliest_~_Latest
start time\.6) siart time
denotes
- - I t - - t..... critical
path
Fig. GS.2. Time-analysed network diagram
 To secure a reduction in overall project time it is necessary
to reduce the duration of those activities lying on the critical
path. However, care must be taken to check that when 'critical'
activities are reduced in duration, the immediately 'sub-
critical' activities do not in fact now become critical. A close
study of the float available will prevent this.
In this case study a 'day-by-day' step reduction in project
time is advocated.
Trial 1: 15 days' duration
Since the critical path consists of B-E-F-J a IS-day project
can be achieved by reducing the duration of either B, E, F
or J by I day, if this is possible. Reference to Table 5.4 shows
that no opportunity exists to reduce J.
A review of the relative increased costs incurred by effecting
a time reduction will give some indication of the most economic
step to take (see Table GS.2).
TABLE G5.2
ADDITIONAL COSTS INCURRED BY REDUCING DuRATIONS OP

Activi91 Normal working SPecial provision Increased

costs (£) costs (£) cost
(from Table 5.1) (from Table 5.4) (£)
B 5 x 72=360 4x 160=640 280
E 3x42= 126 2x 90=180 54
F 4x60=24O 2x290=580 340*
• The minimum reduction applicable to F is 2 days.
Thus the cheapest way of effecting a IS-day project is to shorten
E by 1 day at an increased cost of £54.
The new total project costs for a 15-day duration project are
therefore:
Direct costs:
as originally £2,226
+ extra for I-day reduction in E 54

£2,320
Indirect costs:
now a I5-day duration project £1,050

Revised total £3,370

(with E shortened by 1 day)
Note: The critical path is still the same, i.e. B-E-F-J.
85
Trial 2: 14 days' duration
A 14-day project can now be tried by a further reduction from
trial I by reducing B from 5 to 4 days at an additional cost of
£280.
Thus total cost of reducing project by 2 days
=£54 for reducing E by I day
+£280 for reducing B by I day.
Total = £334 extra for 2 days' reduction.
An alternative is to leave activities Band E alone and to
reduce F by 2 days at an increased cost of £340.
It is thus more economical, if a 2-day reduction should be
required, to go for a I-day shortening in both Band E.
Thus new total project costs for a I4-day duration project are:
Direct costs:
as originally £2,266
extra for I day off B 280
+ extra for I day off E 54

£2,600
Indirect costs:
now a 14-day duration project £ 770

Revised total
(with Band E shortened by I day each) £3,370

Note: By reducing the duration of B from 5 to 4 days, three

other activities, A, C and D, are also made critical. The critical
path now consists of A-B-C-D-E-F-J.
If the alternative of reducing F from 4 to 2 days had been
adopted, then in order to shorten the overall project duration
by 2 days it would have been necessary to reduce G from 7
to 6 days at a further increased cost of £720-£504=£216.
This would also have the effect of adding G to the list of
critical activities.

Trial 3: 13 days' duration

A 13-day project duration can be achieved by a reduction of
either B or E by 1 day as before plus an additional 2 days'
reduction in F. As E is cheaper to reduce than B, it is preferable
to consider achieving a 13-day project by reducing E by 1 and
F by 2. Remember that reducing F by 2 automatically entails
reducing G by 1.
86
 Thus new total project costs for a 13-day duration project are:
Direct costs:
as originally £2,266
+ extra for E-l 54
+ extra for F-2 340
+ extra for G-l 216

£2,876
Indirect costs:
now a 13-day duration project 600

Revised total £3,476

Note: In this method the critical path now consists of B-E-F-

G-J.

Trial 4: 12 days' duration

A 12-day duration project can be achieved by including the
already calculated extra cost for reducing B by 1 day;
Thus new total project costs for a 12-day duration project are:
Direct costs:
as originally £2,266
+ extra for B-1 280
+ extra for E-I 54
+ extra for F-2 340
+ extra for G-l 216

£3,156
Indirect costs:
now a 12-day duration project 490

Revised total £3,646

=
Note: By this method A, C, D and G are added to the original
critical path, which now becomes A-B-C-D-E-F-G-J:
a very difficult state of affairs to manage!

Conclusion
An examination of the various trials 1 to 4 reveals that a
minimum cost target can be achieved with either:
(i) a 15-day project based on reducing E by one day; or
(ii) a 14-day project based on reducing both Band E by one
day.
87
 The selection of the appropriate choice will no doubt provide
a fruitful source of discussion between the Chief Executive and
his Technical Director.

THE DAY TO DAY PROBLEMS OF A

TECHNICAL REPRESENTATIVE IN THE
PAINT INDUSTRY
1. How could the three categories of customer mentioned be retained
and serviced from a reasonably distant locality?
The possible solution would be to put the thirty or so
accounts through one of the merchants established in the area
of the old depot, because this would improve the service to
customers and cut down on the invoicing and delivery charges.
It is interesting to consider some of the problems that might
be met by the company when implementing these proposals.
For example, Superpaints is likely to have business with a
number of merchants in convenient areas, and deciding
between, say, three of them could typically have raised the
following problems:
Merchant A. A large merchant outlet carrying a number of
competitors' materials, whose business is largely
bulk purchases of gloss and emulsion paints at
special prices.
Merchant B. A merchant whose business with the company
is decreasing owing to a decline in his paint
sales in conditions of increasing competition.
Merchant C. A smaller merchant whose business is increasing
steadily.
Merchant A may agree to continue to supply Superpaints
materials where they are specified, but where decorators and
factory maintenance accounts are concerned, it is likely that
A would be inclined to offer them competitors' materials, from
whom he might be getting better terms.
Merchant B might be prepared to have the extra business,
but it is likely that Superpaints would not gain any extra
business as B may not be prepared to take steps to increase his
paint sales or stocks of Superpaints materials.
Merchant C, however, is likely to be prepared to service the
accounts and increase his stocks.
88
 It would therefore be decided to channel the accounts
through merchant C. A letter would be sent to all customers
in the area stating that, in order to maintain Superpaints'
service, a merchant had been appointed as their stockist and
future orders for Superpaints materials should be sent through
him. A list would be enclosed setting out the merchant's
other items available, e.g. brushes, wallpaper and decorating
sundries. Superpaints' representative would make follow-up
visits to the customers to explain the new system, which will
probably be accepted by the majority of accounts. Some
customers, however, may prefer to continue to place their
orders with the depot, and these orders will be delivered
direct to the customer but invoiced to the merchant. The
main advantage to the company with this system is that pay-
ment of all these accounts is received from one source. The
main advantage to the merchant is his increased turnover with
good profit margins.

2.(a) Maintaining the goodwill oj Jenkins is oj great importance,

particularly since the possible increase in his turnover over the ndX.t
few years could benefit Superpaints. How were his ru.fJledfeathers to be
smoothed?
(b) While a custo~s goodwill is essential, the company's profit
margins must be maintained and the necessary price increases put into
force. How can the two be reconciled?
(a) It is likely that Jenkins will have made inquiries to
establish the size of Jennings's business, but it is probable
that he will not clearly realise the kind of outlets that Jennings
is supplying. If that is the case, it should be explained that
Jennings operates in a slightly different sphere from Jenkins,
being not so involved with factory maintenance but more
with supplies to contractors. Emphasise that Jennings is in a
more competitive field. Point out to Jenkins that the invoices
relating to Jennings only cover a small number of items and
therefore do not give the whole picture. In fact, on certain
items Jenkins will probably be receiving more favourable
terms than Jennings, and this point should also be emphasised.
(b) A more flexible increase in prices could be attempted;
for instance, Jenkins could be promised a careful investigation
of all his prices, and instead of an overall increase of 5 per cent
as originally proposed, each individual product price could be
89
examined, which in certain cases might possibly mean a price
reduction. It could also be suggested that in view of Jenkins's
plans to extend his premises, when he comes to place bulk
orders with Superpaints, price reductions for bulk buying
would then be discussed and arranged. Jenkins will almost
certainly readily agree to this.
Note: The area manager of Superpaints should be advised
of the accounts office error and a strongly worded letter be
sent to the accounts department.

3. How can Superpaints enable the contractor to complete the job

satisfactorily, maintain the original goodwill if both client and
contractor and minimise the possibility if involving themselves in
financial loss?
The problem of contamination was likely to occur over the
entire floor, as tea and coffee would have been taken back
to the work-benches and spillage would have occurred over
large areas (apart from the warehouse areas where the tests
had been carried out!). The only real solution to the technical
problem would be to remove the coatings from the floor and
clean it thoroughly, but the cost of this would be prohibitive.
The practical solution was for further tests to be carried out
using a variety of materials until one was found which would
dry quickly but not cause lifting, and then to recoat the badly
affected areas.
The contractor's claim on the company for the supply of
faulty material was invalid, although the contractor main-
tained that Superpaints' original recommendations were at
fault. The contractor should have tested the second batch
of material under several different conditions, which should
have included a test patch in a 'dirty' area. Clearly, there may
have been faulty communications between the contractor and
the manufacturer.
Superpaints is in an awkward situation, because even if it
can prove itself innocent of supplying faulty material, it is
likely to upset the contractor by implying that the surface
had not been properly prepared and cleaned, and so lose
further business with him. Also, if the contractor does not
rectify the complaint, some measure of blame may be appor-
tioned by the engineering firm to Superpaints, which again
might adversely affect future sales.
90
 Perhaps the measure to be adopted by Superpaints when
dealing with this incident would be to try to satisfy both
parties at minimal overall cost by using its own staff to recoat
the floor area, even though this exceeded its moral liability.

91
Examination Questions
We should like to thank the following bodies who have per-
mitted us to publish some of their examination questions:
The Association of Certified Accountants (AC.C.A)
The Chartered Institute of Secretaries (C.I.S.)
The Institute of Cost and Works Accountants (I.C.W.A.)
Other questions have been produced from the following:
B.Sc.(C.N.AA.) (B.Sc.)
Higher National Diploma in Business Studies (H.N.D.)
Internal College Questions (I.C.)
1. Assuming that you have been detailed to carry out an
organisation and methods review of a purchasing department,
prepare a list of the questions which you would ask in order to
ensure that you were able to obtain a reasonably complete
picture of the activities and operations of the department.
(I.C.W.A.)
2.(a) What are the functions of a purchasing department?
Show how the efficient performance of these contributes to
the profitability of the business.
(b) State the arguments for and against the centralisation
of purchasing in a large company with a large number of
varied activities. (I.C.W.A.)
3. Discuss the nature of co-ordination and its importance in
business administration.
What problems are likely to arise in an acute form in an
enterprise which has a number of geographically separate plants
or a labour force which works largely away from its head-
quarters? (I.C.)
4. Discuss the means of reducing paperwork without loss
of efficiency in a group of companies in the retail trade with
about one hundred multiple branches. (A.C.C.A)
5. Consider the qualities of skill and judgement required by a
chief purchasing officer. (A.C.C.A.)
6.(a) What do you understand by the term 'morale'?
(b) How would you seek to measure the morale of individ-
uals and of working groups?
92
 (c) What relationship do you see between the level of morale
and productivity?
(d) What factors operate in a large company to affect
morale adversely and what basis of organisation would you
advocate to overcome these difficulties? (I.C.W.A.)
7. In any particular business which you choose, state the
role of the first-line supervisor. List his duties and responsi-
bilities and design an effective training programme for men
entering this type of function. Show the supervisor'S position in
the management hierarchy and trace the effect of automation
on his role. (I.C.W.A.)
8. Discuss the significance of rates of labour turnover. What
are the main reasons for such turnover and what records would
you keep in the personnel division? (I.C.)
9. Why is it important to have a defined training policy
within a company? Show how you would set about defining a
company policy for operator training using the following
headings as a basis for your answer: (a) needs; (b) aims; (c)
organisation; (d) procedures; (e) staffing; (f) control.
(I.C.W.A.)
10. 'Job evaluation is used primarily by employers and unions
who wish to introduce a new pay structure or to reform an
old one. . .• The Prices and Incomes Board favours the use
of job evaluation because it makes for fairness and equity.'
Suggest reasons for the above. (I.C.)
11. It has been authoritatively stated that job evaluation
is not an exact science; it has also been stated by the same
source that job evaluation makes for a fair system of remunera-
tion. Are those two comments sensibly reconcilable? (I.C.)
12. Describe the technique of job evaluation. What are the
uses and limitations of job evaluation? (A.C.C.A.)
13. 'The modification of existing attitudes is a necessary
preliminary to changes in organisation and technique.' Row
may attitudes be (a) ascertained, (b) modified? (R.N.D.)
14. 'One of the qualities ofa good administrator is the know-
ledge of how and when to delegate.' Discuss this statement and
comment upon the opinion that there can be over-delegation.
(C.I.S.)
15. Describe the technique of critical path analysis and show
in what ways it is superior to other forms of planning. (H.N.D.)
16. The network overleaf shows the activities involved in
93
developing a new product. Determine the critical path by means
of C.P.A. (Activity times in months.)

How might the development manager use the results from your
C.P.A. as a basis for reducing the time taken for completion?
(B.Sc.)
17. The accompanying table gives the durations of activities
involved in the installation of a new piece of equipment.
Determine the critical path by means of a network analysis,
briefly explaining the steps carried out.
It is important to install the equipment as soon as possible.
Suggest lines of inquiry the installation manager might follow
on receiving the results of the analysis.
Origin node Terminal node Activiry duration
(weeks)

1 2 8
1 5 7
2 3 12
2 4 5
3 7 3
4 6 8
4 7 12
5 6 9
6 8 1
7 8 5

18. 'The customer is always right.' Discuss the validity of

this statement in practice.

94
Bibliography
P. H. J. Baily, Purchasing and Supply Management, 2nd ed.
(Chapman & Hall, 1969).
M. C. Barnes, A. H. Fogg, C. N. Stephens and L. G. Titman,
Compa11:Y Organisation: Theory and Practice (Allen & Unwin,
1970).
A. Battersby, Network Analysis for Planning and Scheduling,
2nd ed. (Macmillan, 1967).
M. Brown and E. Sidney, The Skills of Interviewing (Tavistock,
1961).
C. S. Deverell, Business Administration and Management, 2nd ed.
(Gee, 1968).
C. S. Deverell, Management Planning and Control (Gee, 1967).
C. S. Deverell, The Techniques of Communication in Business
(Gee, 1964).
P. F. Drucker, The Practice of Management (Pan Books, 1968).
C. R. Dunn, Case Studies in Marketing (Macmillan, 1971).
K. Lockyer, Critical Path Analysis (Pitman, 1964).
National Board for Prices and Incomes, Report No. 83: Job
Evaluation (H.M.S.O., Sept 1968) and Supplement (Dec 1968).
J. L. Otis and R. H. Leurkart, Job Evaluation: A Basisfor Sound
Wage Administration (Prentice-Hall, 1965).
J. A. Patton, C. L. Littlefield and S. A. Self, Job Evaluation:
Text and Cases (Irwin, 1964).
K. V. Porter, Case Studies in Human Relations (Macmillan, 1971).
The Practice of Organisation and Method, 2nd ed. (H.M.S.O.,
1965).
D. S. Pugh, D. J. Hickson and C. R. Hinings, Writers on
Organisation (Hutchinson, 1964).
H. A. Simon, Administrative Behaviour (Macmillan, New York,
1957).

95