Analysis of the International Accounting Standards on Inventory

Analysis of the International Accounting Standards on Inventory This eassy mainly introduced the information about the International Accounting standards of Inventory(IAS 2). First, we introduced the background of the IAS 2; then we discussed the major requirements of the standards and the importance of these requirements; after that we critically evaluate the IAS 2. Background The IASs, International Accounting Standards, which issued with the IASC setting up in 1973, are the common standards followed by accountancy bodies. Then, the IASB with new accounting standards (IFRS) and more member countries was founded to replace the IASC. Both of the two committees concerned with the regulation improvement and global harmonisation of international accounting. Inventory valuation plays a vital role in the profit calculation and assets valuation process. However, method differences and controversy still exist in stock valuation among different companies. In terms of that, a consistent benchmark seems necessary to eliminate them and compare companies profit on the same basis. IAS 2 is such an international standard to offer regulation and method for inventory. Its first draft of Valuation and Presentation of Inventories came out in 1974, and was brought into the IAS one year later. The former standard of stock (IAS 2(1993)) set up in 1993 and it took effect on the date of January 1st 1995. Since IASB replaced of IASC, the modified version was published in 2003 and it took effect in 2005. Aiming to obtain the accurate calculation result of cost and subsequently expense of inventory, IAS2 mainly concern with the write-down to Net Realizable Value. In order to allocate cost to stocks, it provides cost principle as well. To be more specific, IAS2 classifies that the inventory includes finished products, goods in process and raw material. Furthermore, it also contains measurement of inventory, fundamental principle of IAS2, write-down to Net Realizable Value, expense recognition and the required disclosures as well. Requirements and importance of IAS 2 There are many requirements of the inventories in International Accounting Standard, in terms of IAS 2 regulate how to analysis the cost of inventories, how to measure inventories, how to assign inventories etc. The first requirement is that the cost of inventories is the total cost to deliver inventories to their present location and condition. According to IAS 2 (2005) cost of inventories shall comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The second requirement of IAS 2 is that inventories should be measured at the lower of net realisable value and cost on an item by item basis Once measured, the lower of net realisable value and cost must be used as an asset in the balance sheet. When the inventories net realizable value below its cost, it means that the future economic benefits will less than its carrying amount, which are brought to the companies by inventories. Therefore this part of the loss should be deducted from the value of assets, and included in accounting subjects of current profit and loss. Otherwise, there will be the phenomenon of virtual assets. Thus, we should use the lower of the net realisable value and cost in the stocktaking process. The third requirement of IAS 2 is that the cost of inventories should be assigned by using the First-in First-out (FIFO) or weighted average cost formula unless there are some special inventories. IAS 2 does not require that the fairest possible approximation to the cost should be reflected by the formula used. Therefore, the Standard gives the FIFO, as well as the weighted average cost formula for free choice. Accounting to Wikipedia (2009), FIFO is an abstraction ways of organizing and manipulation of data relative to time and prioritization. This method describes the principle of what comes in first should be handled first, what comes in next waits until the first is finished. FIFO is the formula, which is frequently-used, to bear the cost of inventories which are out and which are still in. Weighted average cost formula is easier than others, also when the market price rising up or falling down, this formula is easy to calculate the average unit cost of inventories, in order to s hare the cost of inventory is more trade-offs and objective. Options IAS 2 offers some optional rules for companies to choose. These options, to a certain extent, affect the internationally implement of IAS. The following essay will list three primary options. Firstly, IAS 2 stipulates two alternative formulas for measuring the cost of inventories, which are first in, first out (FIFO) and weighted average. FIFO assumes that goods sold are those produced earlier. That is to say, the cost of inventories is those produced later. This approach may lead to underestimate cost and overestimate gross profit in the year of inflation. Weighted average is the average cost of all units currently in stock at the time of reporting. (kcsi) IAS 2 is not mandatory for which formulas companies should choose. Obviously, these two optional formulas would measure different cost of inventories. Secondly, IAS 2 stipulates that normally expenditure incurred is not recognized as cost of inventories. Nevertheless, IAS 2 supplies option of including some expense of inventories or not in the cost. For example, it is appropriate that non-productive indirect expense could be part of the cost of inventories if they are for special projects. Apart from that borrowing cost of inventories could be included in the cost under special circumstances. Thirdly, there are two optional techniques in the inventories cost measurement, standard cost method and retail method. IAS 2 requests retail industry use retail method to measuring the cost of inventories. However, other industry could apply either retail or standard cost method, which may result in discrepancy between companies that use different methods. Applicability At present, IAS 2 is widely implemented in Asia and Europe, while US GAAP plays a significant role in North America. This becomes a critical restriction factor of the applicability of IAS 2 internationally. Most stock exchanges in the world incline that quote companies should treat IAS 2 as financial report benchmark. It could improve the transparency and reliability of inventories information if listed companies apply IAS 2. Besides, more and more multinational corporations apply IAS 2 on their own, such as Air France, Nestle and Adidas. Owning to multinational corporations have companies in more than one country, it would be convenient for parent companies to consolidate statement if parent and subsidiary companies all implement IAS 2. Although IAS 2 has been applied by most countries worldwide, during the process of applicability IAS 2 internationally, some deficiencies still have arisen inevitably. Take net realizable value as an example. IAS 2 prescribes it as the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale(Birzeit Consulting). With regard to costs of completion and costs necessary to make the sale, IAS 2 does not list exact items, which implies lacking comparability between companies. The defects cause that some countries apply their own national accounting standard which are related to their national conditions. Opportunities for creative accounting The item inventory plays a significant role in companies operation and financial performance since it is not only determines the computation of profit, but also impacts the valuation of assets which displayed on the balance sheet. IAS 2 probably is a comprehensive guidance which prescribes systematic accounting treatments for inventory in terms of the determination of inventorys cost, the recognition of correlative expense, and the formulas for assigning costs to inventory. Despite the constraint of IAS 2, it is acknowledged that there are several stratagems for those unethical companies to manipulate their valuation of inventory, thereby expressing a fictitious favourable performance to the authorities and public. A study from Committee of Sponsoring Organizations of the Treadway Commission (COSO) described that there is no area of accounting provides more opportunities for subjectivity and creative accounting than the valuation of inventory. More precisely, because of the close relationship between the inventories and revenues, companies often tend to inflate their revenues by overstating the value of inventories which is a direct and effective measure. There are a number of approaches to manipulate the value of inventory and those methods are mainly categorized into three aspects which are time horizon, NRV and overhead. Firstly, because IAS 2 do not have detailed guidance in respect of time dimension, companies usually like to employ tricks at the end of fiscal year by utilizing cut-off procedures. Assume that goods are delivered to a company at the last day of fiscal year 200X but the invoice date is at the first day of next fiscal year. In this situation, the company probably takes the goods into inventory immediately but not records the purchase invoice. The premature recording of inventory leads to the automatic increase of revenue which displays a false boost on the financial report. Furthermore, companies can falsify a transfer of non-existent inventory at the year-end which is difficult to confirm by auditors. Thus, the overstated value of inventory will generate from these fictitious in transit inventories. Secondly, IAS 2 adopted a specific method which is use the lower figure of net reliable value and cost to measure inventory. This measurement concerned the true value of inventory in a large extent and let this valuation reflects the real market appropriately; on the other hand, it also provides opportunities for frauds because the calculation of NRV is largely depends on accountants anticipations. More specifically, it is obvious that the extent of provisions should be reduce to NRV are highly subjective and manipulative. Just like Barry Elliott argued that a provision is an effective smoothing device and allows overcautious write-downs to be made in profitable years and consequent write-backs in unprofitable ones. Thirdly, although IAS 2 provides guidelines for allocating appropriate overhead into the cost of inventory, the distinctions between diverse of overhead are still hardly to be distinguished exactly. Companies might find opportunities of manipulation and include those overhead which indirectly attributable to production in the inventory valuation, thereby differing the influence of overhead and so rising profits. Weaknesses and Improvement Overall, the statements about the inventory at the International Accounting Standards (IAS) are understandable and comprehensive. However, it seems that problems still obviously exist in the inventory standards. Firstly, the calculation methods for the same industry are not unified. Although IAS2 has cancelled LIFO method, two different methods are still available: FIFO and weighted average method. Different methods of calculation will produce different results. Thus, it makes no sense for the companies of the same industry to compare the ratio results. Therefore, the standard should be more detailed. First, it should select the most appropriate measurement based on the characteristics and nature of various industries. Second, it should be clearly defined that all the companies in the same industry should adopt the same measurement method. These two measures help to eliminate difference, and subsequently to promote development of harmonisation. Secondary, it offers the opportunities for creative accounting. There are many cases about listed companies involved in the stock fraud, and the most famous one is the U.S. Fallmos case. Its creativer Monas first get a pharmacy located in Ohio, and in the subsequent decades, he acquired another 299 stores, then he formulated a company called Fallmo. Unfortunately, all of these brilliants are fraud based on the overestimation of the inventory. Such a fraud ultimately led to the bankruptcy of Monash and his company as well. At the same time, the Big Five firm who provided audit services to it also lost millions of dollars. From these cases, it seems that fraud happened owing to the inadequate inventory management system. In order to prevent companies from cheating by inventory, the standards should require the audit firm to check the companys inventories regularly. The third one is that the International Accounting Standards failed to keep pace with the times process. With the development of enterprises, it generates a lot of new inventory management methods, such as the Just-In-Time (JIT) method. JIT originated from Toyoda in Japan, it was created by Sakichi Toyoda, the founder of Toyota, his son Kiichiro Toyoda and the engineer Taiichi Ohno. Toyota implemented the Kanban management which runs with the physical. For example, when an order which includes the requirements of the delivery time is proposed, Toyotas workers entered these information on the Kanban. The ordering department get the ordering information through Kanban and give the new order to the production department through Kanban, and so forth; all orders will be connected to the entire department. Aiming to eliminate waste, reduce costs and improve economic efficiency, its core is to seek a non-stock production system or to minimize inventory production system. In that case, it is the reverse order of the traditional mode which product first then looking for customers. Although the demands of JIT are high, many companies have adopted this approach, such as Dell Inc. In the JIT, the zero inventory is the main goal. Thus, the traditional methods such as FIFO and weighted average method lost the meaning of their existence, and the traditional fields of the closing stock inventory system and the perpetual inventory system also appears to be meaningless.

Family And Literacy

As a child growing up, my parents had already shared to us different stories from mythical/folk tales to the tales of other family members. The typical childhood stories, i. e. The Three Little Pigs, Little Red Riding Hood, etc. , were not also lost in the classroom arena as well. These stories were the first glimpses of the moral backbone that one adopts and also served as the first taste of reading and writing, the fundamental necessities in formal learning.Concerning the moral background, these stories had taught me the valuable lesson of integrity, empathy, sympathy, kindness, and the lesson that two wrong could not make a right, and elders should be respected. Telling and reading stories with a child could definitely give the child certain ideas. My mother rarely read me stories but I still developed a knack or liking for reading novels and poetry. The precious times that the stories were told had given me this certain enthusiasm. It has driven me to have a certain passion to le arn how to read and write on my own and these were powerful backgrounds to help me in my formative years.Being a parent, an aspiring teacher and a former child, I could draw a conclusion that parents could help pave the way for children to easily adjust to formal schooling. Parents could further develop the basic learning abilities of children by encouraging their natural curiosity and imagination. A child’s learning usually starts at home with the parents and the development of these first steps could be furthered by the school. It was said that the child could learn with the help of the parents through constant exposure to Environmental Print (Jo Anne L. Vacca, 2005).The parents could do this by accessing what is readily available at home. They could make use of the television set. A parent then could sit down with the children and explain what could be seen. They could devise a plan where their children could do some activities concerning the television show like scribblin g down some words that they had encountered while watching. This just a start and a glimpse to the help that parents could extend to their children. REFERENCE Jo Anne L. Vacca, R. T. V. , Mary K. Gove, Linda C. Burkey, Lisa A. Lenhart, Christine A. McKeon. (2005). Reading and Learning to Read (6th ed. ). Boston: Allyn & Bacon.

How Does the Writer of This Text Use Language and Grammar Essay

The author uses jargon, puns and compound sentences to shape his readers response. This is done by paying attention to his audience which is the readers of the Metro, which are public transport users. Also to his purpose which is to entertain his audience. Puns are used to give a light-hearted effect to entertain his audience. This is evident where the author says â€Å"A new musical talent spreads his wings†. This provides entertainment to his readers in the form of comedy. Additionally the words he uses acts as a metaphor, yet in this case the phrase is quite literal as he is talking about a fly. This quite an effective pun. The use of puns provides amusement to his audience and by placing this pun at the beginning of this article it makes the reader intrigued to read on. Furthermore puns are used throughout the article to keep the reader engaged. Jargon is used also as a way to present his readers with photography knowledge. He uses a quote from the photographer which says â€Å"†¦to give a refreshing view on insect marco-photography†. By using this the author gives the public a small insight to what technology goes into taking these photos. This uses of jargon also presents another purpose as it shows the photographer of these fly photos to be a professional within this business. Also that it makes it easier for people who know about the subject to follow, as specialized terms can be used without losing information. This is useful as he has a very wide audience and some may understand these terms. The use of compound sentences adds more detail and information. The author says â€Å"Nearly all the photographs of Mr Fly, whose first name was Gerald, were taken in Mr Hendrickx’s bedroom, using mostly natural light and a small eight megapixel camera.† By saying this the author adds more richness to the sentence and therefore by doing so adds more information to his readers. By adding more information the author can entertain his audience which are on the public transport on their journeys. Furthermore that by using compound  sentences it is more effective in creating a balance between two important pieces of information, thereby leaving the reader with a better understanding of the article. To conclude by using all this techniques the author of the text can keep his audience engaged and entertained while reading his article and furthermore provide them with information which they may not of known prior.

How Does the Writer of This Text Use Language and Grammar Essay

The author uses jargon, puns and compound sentences to shape his readers response. This is done by paying attention to his audience which is the readers of the Metro, which are public transport users. Also to his purpose which is to entertain his audience. Puns are used to give a light-hearted effect to entertain his audience. This is evident where the author says â€Å"A new musical talent spreads his wings†. This provides entertainment to his readers in the form of comedy. Additionally the words he uses acts as a metaphor, yet in this case the phrase is quite literal as he is talking about a fly. This quite an effective pun. The use of puns provides amusement to his audience and by placing this pun at the beginning of this article it makes the reader intrigued to read on. Furthermore puns are used throughout the article to keep the reader engaged. Jargon is used also as a way to present his readers with photography knowledge. He uses a quote from the photographer which says â€Å"†¦to give a refreshing view on insect marco-photography†. By using this the author gives the public a small insight to what technology goes into taking these photos. This uses of jargon also presents another purpose as it shows the photographer of these fly photos to be a professional within this business. Also that it makes it easier for people who know about the subject to follow, as specialized terms can be used without losing information. This is useful as he has a very wide audience and some may understand these terms. The use of compound sentences adds more detail and information. The author says â€Å"Nearly all the photographs of Mr Fly, whose first name was Gerald, were taken in Mr Hendrickx’s bedroom, using mostly natural light and a small eight megapixel camera.† By saying this the author adds more richness to the sentence and therefore by doing so adds more information to his readers. By adding more information the author can entertain his audience which are on the public transport on their journeys. Furthermore that by using compound  sentences it is more effective in creating a balance between two important pieces of information, thereby leaving the reader with a better understanding of the article. To conclude by using all this techniques the author of the text can keep his audience engaged and entertained while reading his article and furthermore provide them with information which they may not of known prior.

Study of people and change - Free Essay Example

Sample details Pages: 10 Words: 3038 Downloads: 6 Date added: 2017/06/26 Category Uncategorized Essay Type Argumentative essay Did you like this example? Change, change, change were all for change. We want to see him change, her change, them change. We want to see the organisation change. Don’t waste time! Our writers will create an original "Study of people and change" essay for you Create order We want to see everyone change. We want to see everyone else change. Yes, were all for change as long as we dont have to change, but its a fact of life; we are all changing every day. Our environment is changing, our culture is changing, and the way we work is changing. The outside dynamics, technologies, strategies and plans are continuously changing. We are left with three options: We can fight it and delay it, but well change eventually. We can ignore it and hope it will go away but it wont, and well be overcome by it. We can embrace it, look forward to it, and well find our trip through life much more interesting, controllable, and enjoyable. (Buchanna, 1999) Process of Change Source: According to the given case study of Mybank there is also an element of change which the senior management tried to implement because of the external environment factors and the change which they tried to implement is quality management programme with the focus on cost reduction means they just formed a team of their employee and ask them to remove the inefficiencies that occurred during the process of change. As we move further we will discuss various drivers and restrainers of the Mybank, typology of the change, role of change agent, change management models and various outcomes from the learning from the case of Mybank and suitable recommendation for the better change. Drivers and Restrainers The forces helps organisation to move ahead with aim of implementing the change in successful manner but there are certain forces which pushes back the organisation objective of implementing the change. These forces are known as drivers and restrainers (Johnson, 2005). When any organisation plans for change they will need a drivers which facilitate their process of change but during this process the organisation can face obstacles also which are restrainers and during the implementation of change in Mybank case there were several drivers and restrainers which comes on the way of implementing the change. These drivers were the senior management who started the change by trying to present the quality improvement programme with consideration of better quality service to its customers and this was done by formation of teams of its employees which will remove the inefficiencies. Moreover, they consulted the consultants also to ease the process of change because they have more experience . But all these changes were considered by not ignoring the fact of cost Mybank was very specific and focused about the cost reduction. So when the implementation was on its way Mybank suffered with restrainers also that were the difference between the employees because everyone had different point of view regarding to change. Ego clashes between the departmental managers and regional lending managers, rejection of recommendations by senior managers, work over load for employees after the change, and the two separate lending loans section which resulted in ambiguity of data of clients. These all were the restrainers. Below Section will discuss more about the force field analysis Force Field analysis A force field analysis is a problem solving tool used to identify the reasons (forces) that support or oppose two positions to a question and the strength of each force. Kurt Lewin (1947) was the originator of the concept. Force field analysis could be used by to answer question, What factors affect the acceptance or resistance to a particular change? the assumption of a force field analysis is that it is easier to reduce the factors that are resistant than to increase the strength of the driving (supporting) forces. Below is the view of force field analysis. Force Field Analysis Source: (Stacey, 1993) Typology of change Tuning: It is very minute change that made by the change agents for the betterment of the organisation. It mainly focus on the customer satisfaction and this change is anticipatory change and according to the Mybank case the small change of quality for the better customer satisfaction has been implemented. Adapting: This change occurs with respect to the external activity like competitors new form of service and customer unpredictable reaction about the product and this change is reactive. With consideration of the fact of external environment Mybank hired the outside consultant to have competitive edge and ease the process of the change. Reorientation: This is one of the major organisational change that come on the way of process. In Mybank case the major change occurred when they got to know that they have to integrate the two lending loan section. This change is also anticipatory change. Recreating: This change gives response to the major changes in the form of dramatic shift. This is also reactive change. (Stacey, 1993) Change Management Models Anticipating Change It is the process which is having the very well defined and crystal clear model for the forces and the change in an organisation. There are two ways of doing the change i.e. planned change and unplanned change. As name suggest the planned change is the proper planning for the making the implementation of change in successful manner and this change and it is very important because the organisation do a lot of research with proper planning(Nilikant and Ramnarayan, 2006). On the other side unplanned change is the change when some mishappening occurred in the team like different member have different point of view in respect to change and it is very difficult to control the unplanned change because it comes suddenly during the process of change. Appreciating change makes the organisation aware that what is the requirement of change, what the results of the chosen change are and what are the best possible option available that help organisation with the aim of cost balancing. It compris es of 2 views i.e. Mental Models and Content Change. When we look at the case study of Mybank there were need of the change of quality and the implementation is done by making the inner teams which further remove the inefficiencies occurred during the implementation of change. (Nilikant and Ramnarayan, 2006) Content of Change Some ethics and principle means a lot to the organisation and they stick to that only. With global environment changing day by day and lot of organisation make changes according to this active and competitive environment. With respect to these changes an organisation can make a start from quality, marketing, technology and marketing(Nilikant and Ramnarayan, 2006). Technology changes frequently and it is not about only the technical side but it is more into collection knowledge, data and activities which further help organisation to achieve the desired outputs. To sustain and maintain the brand in this competitive environment is the daunting task for any organisation. There are two thing that occurred in Mybank case i.e. they focussed on the Multiskilling of the staff because they want to meet the expectations of the customers because they knew that they are only who drives any organisation and if they able to meet the expectation of the customer it means they are on the right path and if not then they have to reconsider the change(Nilikant and Ramnarayan, 2006). Now comes the element of cost which is again the difficult task for an organisation because cost balancing is very difficult to maintain and in Mybank main focused was on the cost reduction with parallel implementation of quality programme. Now the final content of change is Marketing which can be done by giving good service to the customers and exploring various distribution channels. Mental Models This model is well defined by the Senge and he believes that organisation is generally not aware of the mental models and their effects on the individuals behaviour of an organisation. Mental Model are having two form one form consists of simple straight strategy which is known as the strategic planning which consists of SWOT analysis i.e. strengths, weaknesses, opportunities and threats. Other form or mental model create a lot of impact on the organisation failure and success. Mental model helps organisation to get the best output . (Nilikant and Ramnarayan, 2006) Mobilising Support When Organisation decides for the change and with the help of staff only they will able to implement the change. For this, the senior level management has to convince the staff and the other people which are linked to the organisation because with the full participation, involvement, dedication, commitment of the staff they change will get successful. Mobilising support is not an easy process because to control the staff and to convince them for the change requires lot willingness and patience. According to the Mybank case the senior management tried to hire consultant which further tried to convince staff to focus on the strategies that has been advised by consultants. At the end they want the employee full dedication for the change. (Nilikant and Ramnarayan, 2006) Executing Change Execution phase is very critical for the organisation and most of the organisation fails while implementing the change because of improper execution change. The organisation is having different kind of resources like finance, staff which plays a very important part in implementation of the change and requirement of these resources needed when quick change occurs in environment like competitor developed new product and services and it is believed that organisation always lack these resources when sudden change occurs and an organisation needs proper strategy to overcome this problem of resources. According to the case study Mybank implemented both the top down and bottom approaches with the help of consultants to get the desired aim of achieving the quality. (Nilikant and Ramnarayan, 2006) Building Change Capability To built the change capability is again a daunting task for any organisation and it is said that organisation always lack this capability. Organisation always ready to invest and build the capability to move forward which helps them to fight with the change but only few of them able to overcome. If they able to achieve the building capacity change then they can quickly able to achieve their targets and aims. In a nut shell capability change is very important part that organisation has to consider. According to the case Mybank tried to multiskill their employees and trained them because by investing on employees they can eradicate the difficulties that come their way. (Nilikant and Ramnarayan, 2006) Change Agent Cummings and Worley (2005) define a change agent as a person who attempts to alter some aspect of an organisation or an environment. Change agent may come from inside an organisation, in which case they are called internal consultants, or they may come from outside an organisation, in which case they are called external consultants (Stacey, 1993) Kotters view of change There are right mistakes organisation make while attempting to implement change. The eight mistakes include allowing complacency, failing to create a powerful guiding coalition, underestimating the power of vision, under communicating the vision, permitting obstacles to block the new vision, failing to create short-term wins, declaring victory too soon, and neglecting to anchor change firmly in the corporate culture. Each of these mistakes will be discussed in more detail below. Kotter (1996) proposes eight steps to leading organisational change and a procedure to overcome the aforementioned mistakes. Step one is to establish a sense of urgency by examining the market and competitors and identifying potential problems and major opportunities. Step two suggests leaders create a guiding coalition by assembling a team of people with sufficient power to lead the change to fruition while continuing to work as a team. Step three is to develop a vision and strategy to direct the cha nge effort while developing solid strategies for completion. Step four is to communicate the vision to all employees and subordinate leaders. Step five involves empowering broad-based action by getting rid of obstacles, changing systems or structures as necessary, encouraging risk taking, and generating new ideas. Steps six to generate short-term wins and recognise the people who make the wins reality. Step seven is to consolidate gains and produce more change by hiring, promoting, and further developing change agents in the organisation. Finally, step eight in the change process advocates anchoring new approaches in the newly defined culture, thereby more value for the customer and employees alike. Kotter change model places significant emphasis upon the senior leaders in organisational changes efforts. Kotters Eight Stages Model Source: (Stacey, 1993) People and Change William Bridges transition model is concerned with how change affects individuals. It examines the psychological transitions that people go through when they are exposed to change and pattern that these transition follow. Because organisations change when people in them change, it is important to understand the pattern of psychological changes within individuals undergoing an organisational change. According to the bridges, these are the phases people go through as part of a significant change. The phases are (1) letting go and ending phase, in which people need time to grapple with losing something that has become familiar and safe;(2) neutral zone, during which people need time to comprehend what the new order will be like once the change is implemented and how they can fit into it and be productive; and (3) new beginning, where people begin to behave in the new ways that are required by the change (Stacey, 1993). Bridges claims that one of the biggest challenges of leading chang e occurs because the leader knows about the change long before others in the organisation. Therefore, he or she spent time in the first two phases, at least, before the change is announced to most employees. Forgetting that they themselves took time to go through the phases, leaders see employees who are just beginning the letting phase as rigid or even hostile to the change. Another main point here in Bridges Model is that at any time people who are higher in management have had more time to learn about the deal of the change-so they are farther along on the psychological transitions path. Because it is hard for them to remember how it felt to be in previous stage, they see people in the earlier stages as hostile to the change when they are actually just in the earlier stages of the processing it and its effect on themselves. Bridges Model of Transition Source: (Johnson, 2005) Learning Single Loop and Double Loop learning When something goes wrong, many people look for another strategy that will address and work within the governing variables. In other words, given or chosen goals, values, plans, and rules are operationalised rather than questioned. This is single loop learning. An alternative response is to question the governing variables themselves and to subject them to critical scrutiny. This is described as double loop learning. Such learning may then lead to an alteration in the governing variables and thus a shift in the way in which strategies and consequences are framed. This is how Argyris and Schon (1978) describe the process in the context of organisational learning. Single loop learning is like a thermostat that learns when it is too hot or too cold and turns the heat on or off. The thermostat can perform this task because it can receive room temperature information and take corrective action. Double loop learning occurs when errors are detected and corrected in ways that involve th e modification of an organisations underlying norms, principles, policies, and objectives. (Nilikant and Ramnarayan, 2006) Single and Double Loop Learning Source: (Johnson, 2005) Recommendations for Mybank Four Core managerial competencies Decision-Making: This includes intuition and vision, the ability together and utilise information, understanding the practical and political consequences of decisions, the ability to overcome resistance, the skill to understand and synthesise conflicting views and to be able to empathise with different groups. Coalition-building: This comprises the skills necessary to gain the support and resources necessary to implement decisions. These include checking the feasibility of ideas, gaining supporters, bargaining with other stakeholders and presenting new ideas and concepts in a way that wins support. Achieving Action: This includes handling opposition, motivating people, providing support and building self esteem. (Stacey, 1993) Maintaining momentum and effort: This involves team building, generating ownership, sharing information and problems, providing feedback, trusting people and energising staff. An effective change Team It is necessary for the management to identify a team of people who will be responsible for promoting the changes required through commitment, communication and the provision of resources. Communicate the need for change Organisation and staff have a natural resistance to change as it challenges the organisations culture and often means additional work. It is therefore essential that the need to change is communicated clearly and convincingly in order to break down resistance. Employee commitment and involvement It is essential to ensure that the new way of working becomes integrated into organisations culture. The main way of gaining commitment to change is by involving staff in the development of potential changes and then in their subsequent introduction. Induction of change at the appropriate level Very few changes affect the entire organisation and when considering what needs to be different, it is important that managers identify exactly what and who needs to change. This is to ensure that proposed change will bring about the desired outcome. Sufficient Resources The introduction of change needs to be supported by the appropriate resources, such as money, staff training and staff time. Although money is important, allowing adequate staff time to develop and implement the change is even more so. Rewards and Recognition If you change the process and want to change individual behaviour patterns, you need to change the way you reward and recognise your staff. If you reward the people in the old way, theyll behave in the same old way. Considering Options The 5Cs of decision-making is a useful reminder of the process ahead of implementation: Consider -clarify the nature of the project, time and other constraints -identify the objectives Consult -gather the maximum amount of information available -call a meeting of those involved or their representatives. -decide at which point the consultation will stop Crunch review all the options and take decision -write down implementation plan. Communicate provide briefings on what will happen, why, and who the decision affects -make sure that everyone understands when decision is implemented