Question
Healthy Nation (HN)
Healthy Nation (HN) is a pharmaceutical organization that used to operate in the public sector, selling its medicines (drugs) to hospitals at very low prices.
With increasing government funding over several years, HN increased the number of employees in its Research and Development Department, which was staffed by scientists, and in the Manufacturing Department. However, both departments were inflexible and inefficient. Resources were significantly under-utilized, and innovation limited.
HN’s structure used to be hierarchical, with a very long chain of command and channels of communication. Senior management made the decisions and set the production levels. Consequently, the scientists in the Research and Development Department never developed decision-making skills, and development of new medicines was slow. In 2021, after many years of losses, the government sold HN to a profit-maximizing global pharmaceutical manufacturer, Global Pharma (GP).
To improve productivity, efficiency and flexibility, the management of GP reorganized HN as a shamrock organization by:
outsourcing the production function to a well-known manufacturer
retaining the Research and Development Department, along with its scientists and support staff, and employing additional staff when required.
In addition, two major changes were announced:
Establishing performance-related pay for the scientists based on a new appraisal system to increase productivity levels.
Using an expensive external company to provide cognitive training to the scientists to develop innovative decision-making and improve teamwork.
These changes have proved to be very unpopular, and the scientists in particular are resisting the changes and the short time frame in which they will be implemented.
a.Define the term public sector.[2]
b.Explain one benefit and one limitation for GP resulting from the implementation of the shamrock organization structure for HN.[4]
c. Explain one advantage and one disadvantage for GP resulting from the introduction of cognitive training for HN’s scientists.[4]
d. Discuss two human resource strategies that GP could use to reduce the scientists’ resistance to the changes.[10]
▶️Answer/Explanation
Ans:
a. A public sector is a sector where organisations are owned and controlled by the government on behalf of its citizens to provide essential and affordable goods or services for its citizens that otherwise might not have been produced/provided. The government controls many aspects of the product or service such as the price.
Award [1] for a basic definition that conveys partial knowledge and understanding similar to the above answer. The first mark would typically come from awareness that there is government ownership.
N.B. Do not accept references to run, managed, operated, controlled unless accompanied by some reference to ownership.
Award [2] for a full, clear definition that conveys knowledge and understanding similar to the answer above.
Do not credit an example.
b.
Candidates can explain the shamrock structure and may refer to the three types of functions within the structure.
Benefits:
If GP management restructure HN using the shamrock organization structure, the new structure will accommodate some of their specified plans/enable GP management to achieve its objectives increasing efficiency, flexibility and productivity.
The scientists are the core employees with full benefits, job security, training and a clear career path. The manufacturing department is to be outsourced.
Periphery employees- extra employees to be employed when needed and possibly also include support staff are the flexible internal part of the organisation.
The scientists will become the core employees within the R&D department as the core function. The management values the R&D department and regard it as core activity as they have many manufacturing facilities around the world. Keeping the scientists as core employees, providing them with appraisal and training to improve performance etc., will enable GP to cut costs by reducing the number of employees, improving productivity (which will also cut costs).
At the same time, GP is planning to outsource the production parts. This will clearly reduce costs significantly.
One assumes that some peripheral workers will still be employed to support the scientists. Those employees, possibly including highly qualified scientists might come to support the core workers when needed. Costs can be reduced due to the temporary nature of the contract and payments will be made when needed.
Accept any other relevant benefit explained.
Limitations:
The impact on the core employees/ scientists may be negative. Getting support staff on a short-term basis and when needed can put extra pressure on the core employees especially if they are expected to innovate and the core employees are subject to appraisal for rewards.
Peripheral/non-core employees, some of whom may be highly qualified could suffer from a lack of job security. The impact on their motivation/ the quality of support to the scientists in the R&D department could be negatively affected.
Possible cultural clashes between HN employees and employees from the outsourced manufacturer. There could be miscommunication issues, quality issues affecting the production of medicines resulting in a negative impact on HN
and GP’s image too.
N.B. Do not credit answers which merely describe “Shamrock” without mention of benefits and limitations.
Accept any other relevant limitation explained.
Accept any other relevant benefit / limitation.
Award [1] for each benefit / limitation identified and an additional [1] for development with application to GP. Award a maximum of [2] per benefit / limitation.
[2] cannot be awarded per role if the response lacks either explanation and / or application.
For example:
For an identification or an explanation of and benefit / limitation with or without application [1].
For explanation of relevant benefit / limitation with no application [1].
For explanation of a relevant benefit / limitation and application [2].
c.
PLEASE NOTE: This content is not included in the syllabus for 2024 exams onward. Related parts of this multi-part question may be used.
Cognitive training for the scientists will enable the development of mental skills/to develop, enhance the brain ability to learn and think for the scientists to improve on their current performance. Senior management made all of the decisions and set targets, scientists never developed decision-making skills, which slowed down the development of new medicines. GP management clearly want to enable the scientists in the R&D department to improve on current deficiencies and become more competitive by speeding up the development of new medicine and feel confident to make their own decisions.
However, developing cognitive skills can be very expensive when undertaken by an external provider. GP wants to cut costs. The cognitive training will take time to deliver the benefits and cost savings which GP is hoping to experience.
Accept any other relevant advantage / disadvantage.
Award [1] for each advantage / disadvantage identified and an additional [1] for development with application to GP. Award a maximum of [2] per advantage / disadvantage. [2] cannot be awarded per advantage / disadvantage if
the response lacks either explanation and / or application.
For example:
For an identification or a description of an advantage / disadvantage with or without application [1].
For explanation of relevant advantage / disadvantage with no application [1].
For explanation of a relevant advantage / disadvantage and application [2].
d.
Refer to Paper 2 markbands for 2016 forward, available under the “Your tests” tab > supplemental materials.
In terms of application and evaluation, while the reasons for fear and resistance to change are clear given the stimuli, it is expected that candidates show awareness/ understanding that the current employees of HN especially the scientists have been unproductive. They were protected by the government for a while and were largely inefficient. Now a profit maximising organisation is in control and there will be inevitable changes and tension. So while the resistance can somewhat be understood, evaluation should be centered around the points above- power and necessity of change. The fact that a government owned organisation is to be sold to a profit maximising organisation is the key issue for candidates to incorporate in their evaluation.
The question refers to the scientists. Hence a full discussion of the management of the employees in the manufacturing department is not relevant.
Candidates should show awareness that GP wants to keep the scientists and has got no interest in making the scientists redundant. They are to become core employees. Hence GP’s bargaining power is strong but not without limit so some discussion and compromise might have to be reached.
Possible HR strategies:
Education and communication
Participation and involvement
Facilitation and support
Negotiation and agreement
Manipulation and co-option
Explicit and implicit coercion
Application of motivation techniques
Change of organization structure and leadership styles
The candidates do not have to use the exact terminology above and can evaluate any general HR strategies.
One may argue that GP’s management can implement the proposed changes radically and quickly given their profit maximising objective and the losses/long term contract etc. The scientists and the remaining employees will have to accept the changes but can still express fear. GP has the bargaining power to use more extreme methods such as threats to facilitate its changes.
Negotiation and agreement – GP’s management is to discuss the proposed change- communicate clearly, explain the reason, invite discussion and possibly some negotiation, ask for feedback, emphasize the positive outcome in the longer term but not hide the negative immediate outcome of massive redundancies. To reduce fear and resistance, the scientists should be made aware that they are unlikely to lose their jobs. Perhaps GP should be willing to amend some of the changes but again, GP has the bargaining power. Training is already offered for the core employees to enhance performance and to reduce fear of the unknown and any lack of competencies.
GP’s management may appoint a change champion among the scientists. This strategy could possibly be seen as manipulation.
N.B. Do not reward generic suggestions (max 3 marks) that do not link to the stimulus material.
Marks to be awarded by use of the generic mark bands and the following is to be noted.
Candidates are expected to provide a conclusion with a substantiated judgment.
Marks should be allocated according to the paper 2 markbands for May 2016 forward.
For one relevant modification to the human resource strategy that is one-sided, award a maximum of [3].
For two relevant modifications, but the discussion of both is one-sided, award a maximum of [4].
For two relevant modifications, one treated in a balanced way and another in an unbalanced way, award a maximum of [5].
For two relevant modifications, both treated in balanced ways, but no real conclusion, award a maximum of [6]. Conclusions must be more than nominal (for example, when a candidate opens a final paragraph with “In conclusion . . . “ but then has no real conclusion, award a maximum of [6].
