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MGC1010 - Management notes.docx

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Dr Tui Mc Keown

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Read all case studies again and the study questions from all the lesson. Extra important PLANNING The SMART model is an approach to determining effective organisational objectives that requires that they be specific, measurable, actionable, reasonable and timetabled S – Specific – objectives need to be clearly defined so that it is easy to understand what is to be achieved and what is considered successful. If the broad goal of Mr Daniel is to grow his company, his objectives might be that he will acquire 5 new clients in his consultation business. M – Measurable – the exact measure must be stated and the objective must be able to be measured through some means. Mr Daniel can measure his progress by measuring the number of new clients he brings on while maintaining his current client base. A – Actionable – an organisation needs to make sure that its business-unit managers have enough authority to take action to make sure the goals are achieved. Mr Daniel can launch a social media campaign and network with local businesses. R – Reasonable – the goals set must be achievable. Unrealistic goals are a disincentive for both managers and their employees. Mr. Daniel believes that additional clients will help his to grow his business and increase his revenue. T - Timetabled – objectives must have deadlines at which progress towards achieving them is measured. Mr Daniel aims to achieve his goal in 3 months. SCENARIO PLANNING – it identifies alternative future scenarios and makes plans to deal with each of them. In a fast changing and unpredictable world, there are pressures that the company faces from different sources. a) External pressures include regulations imposed by the governments like the goods and services tax imposed in Australia, complex and changing technologies like animal cloning, economic uncertainities like the conflicts in the middle east, costs of investment in capital, labour and other supporting resources like increasing costs of office locations, scarce natural resources etc b) Internal pressures include need for operating efficiencies through work practice reforms, new management structures and technologies like virtual teams, increased workplace diversity, heightened job expectations from a tertiary – educated workforce and other related managerial challenges. BENEFITS OF SCENARIO PLANNING 1) Scenario planning improves focus and flexibility – this is essential for successful individual and group performance in highly competitive and dynamic environments. An organisation with focus knows the needs of the customer and knows how to serve them well. An individual with focus knows where he/she wants to go in their career and is able to maintain that objective when difficulties arise. An organisation with flexibility is willing to adapt to shifting changes and an individual with flexibility factors into careers plans the problems of new and developing situations. Example: the challenges and opportunities presented by virtual organisations is an example of the impact of external changes on the individual. 2) Scenario planning improves action orientation – it helps individuals and organisations weather difficult circumstances and stay ahead of the competition. It helps us take the initiative rather than being reactive to situations by making us more result oriented (creating a performance-oriented sense of direction), priority oriented (making sure the most important tasks get first attention), advantage oriented (ensuring all resources are used to their best advantage) and change oriented ( anticipating problems and opportunities so that they can be dealt with in the best way) 3) Scenario planning improves coordination – it creates a hierarchy of aims in which objectives at each level of work are linked together in a means-end fashion. Higher level objectives as ends are linked to lower level objectives as the means for their accomplishment. Example: the corporate level quality objective is to deliver error free products that satisfy customer needs 100% of the time. This translates down and for one of the team leaders it is a formal assessment of to assess the capabilities of machine operators and provide appropriate timing. 4) Scenario planning improves time management – each day the manager is bombarded with a multitude of tasks and demands in a setting of frequent interruptions, crisis and unexpected events. Planning helps reduce the confusions and in turn reduces wastage of time. 5) Scenario planning improves control – when planning is done well, it is easier to exercise control by measuring performance results and taking action to improve things as necessary. Planning makes this happen because the objectives are defined along with specific actions to pursue. TYPES OF PLANS Short range and long range plans A rule of thumb is that a short range plan covers one year or less, and intermediate plan covers between one to two years and a long range plan covers more than three years. Top management is likely to be involved in setting long range plans and directions for the organisation as a whole and lower management levels focus more on intermediate and short range plans that serve the long range objectives. In the absence of hierarchy of objectives and long range plans, there is always risk that pressures of daily events might divert attention from important tasks. Also it is found that due to complexities and uncertainties in today’s world, the long range plans are becoming shorter and shorter. Strategic and tactical plans – strategic plans define long term needs and define action directions for an organisation and tactical plans are developed and used to implement strategic plans. Top management planning of this scope involves determining objectives for the organisation and deciding on the actions and resource allocations to achieve them. A successful cereal company might acquire a clothing company. Operational plans – they are short term plans that define activities to implement strategic plans. a) Production plans - deal with methods and technology needed by people in their work. b) Financial plans – deal with money required to support various operations c) Facilities plans – deals with facilities and work layouts designed to support task activities. d) Marketing plans – deals with the requirements of selling and distributing goods and services e) Human resource plans – deals with recruitment, selection and placement of people in various jobs. POLICIES – it is a standing plan that communicates broad guidelines for decisions and action. Example: typical human resource policies deal with matters like workplace hiring, terminations, performance appraisals, pay increases and discipline. PROCEDURES – They precisely describe actions that are to be taken in specific situations. They define the recommended sequence of events needed to accomplish a task or a set of tasks. Example: The Whistleblowers act clearly outlines procedures on how information should be disclosed and the protection afforded to those disclosing the information. RULES – they indicate what is and what is not acceptable behaviour and often specify the consequences of breaking them. BUDGETS – they are single use plans that commit resources to projects or activities. FIXED BUDGET – allocates resources on the basis of a single estimate of costs. A manager might have $25000 for equipment purchases in a year. FLEXIBLE BUDGET – allows allocation of resources to vary along with the different levels of activity – a manager might have a budget allowance for temporary workers if production costs exceed a certain volume. ZERO-BASED BUDGET – it allocates resources to a project or activity as if it were brand new. ARMS Australia offers assistance to large client organisations by setting up zero based budgets to track project management and asset management especially where true cost of breakdowns and maintenance needs to be incorporated. PROJECT SCHEDULES -they are single use plans for accomplishing a specific major project. PLANNING TOOLS, TECHNIQUES AND PROCESSES FORECASTING – it is the process of making assumptions about the future. They are of two types 1) Qualitative forecasting – it uses expert opinions to predict the future 2) Quantitative forecasting – it uses mathematical and statistical analysis of data banks to predict the future. Time series analysis makes predictions by using statistical routines such as regression analysis to project past trends into the future. The final analysis forecasting always relies on human judgement. Even the results of quantitative forecasting require human interpretation. Large multinational companies like Sony, Ford and News Corporation analyse economic and business forecasts for each region and country. CONTIGENCY PLANNING – it identifies alternative courses of action for use if and when circumstances change with time. Trigger points must be made to indicate that the existing plan is no longer desirable and must be reselected and closely monitored. The more uncertain the planning environment, the more likely the forecasting becomes incorrect. #. Scenario planning is a long-term version of contingency planning. In Asia, Acer has adopted a flexible and dynamic approach to corporate planning because the uncertainties of the technology market coupled with other concerns with China. BENCHMARKING – a technique that makes use of external comparisons to better evaluate the organisation’s current performance and identify possible courses of action. The purpose of benchmarking is to find out what other people and organisations are doing and then incorporate the ideas into the organisation. STAFF PLANNERS – They are employed to coordinate planning for the organisation as a whole or for one of its major components. They need to be skilled in all steps of the formal planning process including benchmarking and scenario planning approaches. A drawback is it might lead to a communication gap between the staff planners and line managers. The resulting plans may lack relevance or the employees might lack motivation to implement the plan. MBO - MANAGEMENT BY OBJECTIVES – it si a process of joint objective setting between a manager and a staff member. Refer to diagram on pg. 180 The types of objectives that can be mentioned in a MBO contract. 1) Improvement objectives for improving performance in a specific way. Example: to reduce quality rejects by 10% 2) Personal development objectives pertain to personal growth activities often those resulting in expanded job knowledge or skills. Example: to learn the latest version of computer software. 3) Maintenance objectives that formally express intentions to maintain performance at an existing level. ADVANTAGES OF MBO – it can focus workers on most important tasks and objectives, focus managers on areas of support by truly helping employees attain the agreed – upon objectives, helps in relationship building, encourages self- management by providing opportunity for participation in decision making. DISADVANTAGES OF MBO – common mistakes to avoid include giving too much attention to easy objectives, requiring excessive paperwork, and having managers simply tell the employees the objectives. PARTICIPATORY PLANNING – it includes people who would be affected by plans and/or whose help is needed to implement them. It includes a level of strategic planning. The more aware all levels are of strategic plans and the more involved they are in helping establish them, the greater the commitment throughout the organisation to their accomplishment. Example: Sustainable Futures Australia works with the local government and regional communities to genuinely facilitate participative planning, working on implementation of plans for policy and governance applications. Refer to diagram on pg. 181 for formal planning process. CONTROLLING CONTROLLING – it is the process of measuring performance and taking action to ensure desired results. RATIONALE FOR CONTROLLING – 1) Control is aimed at ensuring that plans are fulfilled and that performance targets are met. 2) It also ensures that performance is consistent. Controlling requires accurate and timely flows of information on the key operational variables and outcomes. 3) It ensures that people comply with organisational policies and procedures. Example: Xerox in the US is a company that is in need of control mechanisms because it was reporting higher levels of profit that the actual amounts. CYBERNETIC CONTROL SYSTEM – it is a system where the control system is self- contained in its performance-monitoring and correction capabilities. Organisations do not use this form of control system which is used in thermostats. STEPS IN THE CONTROLLING PROCESS 1) Establish objectives and standards – the control process starts with planning when the performance objectives and standards for measuring them are set. The focus of planning should be to describe critical results that will make a substantial difference in the success of an organisation. Example: Mr Daniel wants to get five new clients for his consultation business and he gives himself three months to do this. There are two types of standards common to the controlling process. a) Output standards – they measure performance results in terms of quantity, quality, cost or time. Eg. Percentage error rate, dollar deviations from budgeted expenditures. b) Input standards – they measure work efforts that go into a performance task. Eg. Efficiency in use of resources, work attendance. 2) Measure actual performance – the goal is to accurately measure performance results and they need to be accurate enough to spot significant differences between what is taking place and what needs to be taking place. This can be done quantitatively by analysing statistical data collected by employees or qualitatively by observing employees at work. At the end of three months, Mr Daniel would need to check his customer database to see how many new clients he has attracted and whether he has lost current clients. 3) Compare results with objectives and standards – it can be expressed by Need for action = Desired performance – Actual performance. A historical comparison uses past performance as a benchmark for evaluating current performance. A relative comparison uses performance achievements of other people, units or organisation as the standard and an engineering comparison uses engineered standards that are set scientifically through such methods as time and motion studies. Benchmarking is a popular technique that makes use of external comparisons to better evaluate the organisation’s current performance and identify possible courses of action. Mr Daniel will need to compare the number of new clients he has attracted and the number of clients he set out to attract in the first place. 4) Take corrective action – the control equation indicates that the greater the difference between actual and desired performance, the greater the need for action. MANAGEMENT BY EXCEPTION – the practice of giving priority attention to situations which show the greatest need for action. This approach saves time, energy and other resources, while allowing all efforts to be concentrated on areas of greatest need. Under this approach, there are two types of exception that can occur. a) Problem situation – in which actual performance is below standard. Corrective action is required to restore performance to desired level. b) Opportunity situation – in which actual performance is above standard. Action should be taken to continue this higher level of accomplishment in the future. AFTER-ACTION REVIEW – it formally examines results to identify lessons learned in a completed project or special operation. It is an integral part of the organisation’s continuous improvement process because it makes review a part of the organisational culture and it encourages people involved to take responsibility for their performance and accomplishments. Staff could be asked questions about the objectives, the actual outcomes, the lessons learned and suggestions on how future projects might be best managed. TYPES OF CONTROL FEEDFORWARD CONTROLS – they are also called preliminary controls and are accomplished before a work activity begins, at the inputs stage. They ensure that objectives are clear, proper directions are given and resources are available to accomplish the given task. They are preventive in nature and designed to eliminate potential problems later in the process. Eg. McDonalds requires its suppliers to produce the buns to exact specifications covering everything from texture to colour.it works hard to find local suppliers that can offer dependable quality. CONCURRENT CONTROLS – they are also called steering controls and focus on what happens during the work process. They monitor ongoing operations and activities to make sure things are being done according to the plan. They allow corrective actions to be taken before task is complete to reduce waste in the form of unacceptable products. Shift leaders at McDonalds intervene immediately when something is not done the right way to correct things on the spot. Detailed instruction manuals also steer workers in the right directions. FEEDBACK CONTROLS – they are also called postaction controls and take place after work is completed. They focus on quality end of results rather than inputs and activities. It provides useful information for improving things in the future. McDonald’s employees never know when the corporate evaluator may stop in to sample food and service. However when this does happen, the evaluator provides feedback for improvement. INTERNAL CONTROLS – it allows motivated employees to exercise self-discipline in fulfilling job expectations. It takes places when people are motivated to do their job and are given the chance to do so. It happens when employees have a clear sense of organisational mission, they know their performance objectives, and they have the resources necessary and are trusted to do their jobs well. EXTERNAL CONTROLS – this occurs through direct supervision or administrative systems such as rules and procedures. a) Bureaucratic control – it influences behaviour through authority, policies, procedures, job descriptions, budgets and day-to-day supervision. Organisations generally have policies for sexual harassment to make sure employees are treated with respect. b) Clan control – it influences behaviour through norms and expectations set by the organisational culture. It is observed in the way school children talk, dress and behave in schools among their peer groups c) Market control – it is the influence of market competition on the behaviour of organisations and their members. When an organisation receives positive publicity for the use of renewable energy sources, the competitors are likely to follow suit. ORGANISATIONAL CONTROL SYSTEMS REMUNERATION AND BENEFITS – it’s as simple as if the remuneration is attractive and competitive, employers get the right people for the job, costs are reduced and productivity is boosted over the long term. If the remuneration is unattractive and uncompetitive, it is hard to retain highly competent workers and the less capable the workforce, the greater the reliance on external controls to achieve desired levels of performance. When properly implemented, pay-for-performance and other related plans serve as control systems. It is used in more individualistic countries like Australia, UK and USA. Fringe benefits also affect the organisation’s ability to recruit and retain a qualified workforce. Since fringe benefits are expensive, organisations are encouraging choice of benefits catering to diverse needs. EMPLOYEE DISCIPLINE SYSTEMS – absenteeism, tardiness, and sloppy work can lead to extremes like falsifying records, sexual harassment, and embezzlement. Discipline is the act of influencing behaviour through reprimands. Progressive discipline ties reprimands to the severity and frequency of the employee’s infractions. The progressive discipline guidelines of an university can state “the level of disciplinary action shall increase with the level of severity of behaviour engaged in and based on whether conduct is of a repetitive nature’. The goal is to achieve compliance with least extreme reprimand as possible but this can lead to adverse manager-worker relationships, poor attitudes from people who can’t seem to change and increase in severity of problem if managers wait too long before action. INFORMATION AND FINANCIAL CONTROLS – at minimum, managers should be able to understand and assess financial information for control purposes. Liquidity is the ability to generate cash to pay bills, leverage is the ability to earn more cash than cost of debt, asset management is the ability to use resources efficiently and operate at minimum cost and profitability is the ability to earn revenues greater than costs. Large companies like Luxottica need to be able to control cash flows to be able to open businesses in 38 markets. Budgets are also widely used in planning and control. They are single-use pans that commit resources to activities, projects or programs. OPERATIONS MANAGEMENT AND CONTROL PURCHASING CONTROL – the cost of materials in production are increasing drastically. To leverage buying power, more organisations are centralising purchasing to allow buying in volume. They are committing to a small number of suppliers with whom they can negotiate special contracts, gain quality assurances and get preferred service. Nowadays, parts suppliers keep their warehouses in customer facilities. The customer provides the spave and the supplier does the rest. This helps in lowering purchasing costs and ensures more sales volume. INVENTORY CONTROL – the goal is to make sure that inventory is is just the right size to meet performance needs, thus minimising costs. Economic order quantity (EOQ) involves ordering a fixed number of items every time the inventory falls below a certain point. Just-in-time (JIT) systems try to reduce costs and improve work-flow by scheduling materials to arrive at a workstation or facility just in time to be used. This minimises carrying costs as almost no inventory is maintained. QUALITY CONTROL – this responsibility applies to all aspects of operations, from the selection of raw materials and supplies to the last task performed to deliver the finished good or service. This means to take samples of work and measure their quality. Unacceptable results will require investigation and corrective action will be taken to bring operations back to standard. General Electric’s quality performance tolerates no more than 3.4 defects per million. PROJECT MANAGEMENT AND CONTROL – project management is the responsibility for overall planning, supervision and control of projects. GANTT CHARTS – developed by Henry Gantt, an industrial engineer, it provides a visual overview of what needs to be done on a project. This facilitates control by allowing progress checks to be made at different time intervals. One of the biggest problems of projects, delay in early activities creating problems for later ones, is avoided using Gantt charts by sometimes planning contingencies. Products use complex charts due to their complexity. Refer page 200 if you want to draw. CPM/PERT TECHNIQUES - project planning based on CPM/PERT uses a network chart. The charts are developed by breaking a project into small sub-activities that each have clear beginning and end points. These points become nodes in the charts and arrows between the nodes will indicate the order in which things will be completed. The full diagram shows all the interrelationships that must be coordinated during the entire project. The pathway with the longest completion time from start to finish is called the critical path and represents the shortest possible time in which the entire project can be completed. This technique helps managers to track and control activities, making sure the right sequences happen on time, assuming everything goes according to plan. Refer page 200 if you want to draw. BALANCE SCORECARD – it tallies organisational performance in financial, customer service, internal process and innovation and learning areas. If an organisation has a clear vision and mission, the following question can help develop the scorecard. a) Financial performance – How we should appear to the shareholders to improve financially? Sample goals include survive, succeed and prosper and can be measured by cash flow, sales growth and operating income. b) Customer satisfaction – How should we appear to the customers, to achieve our vision? Sample goals include new products and responsive supply and can be measured by percentage sale from new products, percentage on-time deliveries. c) Internal process improvement – what internal processes must we improve to satisfy the customers and shareholders? Sample goals include design productivity and manufacturing excellence and it can be measured by cycle times and engineering efficiency. d) Innovation and learning – how can we sustain our ability to change and improve to satisfy our vision? Sample goals include technology leadership and time to market and can be measured by time to develop new technologies and time to introduce new product versus competitors. MBO - MANAGEMENT BY OBJECTIVES – it is a process of joint objective setting between a manager and a staff member. Many of Australasia’s large and medium- sized organisations use some form of MBO systems. ADVANTAGES OF MBO – it can focus workers on most important tasks and objectives, focus managers on areas of support by truly helping employees attain the agreed – upon objectives, helps in relationship building, encourages self- management by providing opportunity for participation in decision making. They are beginning to reflect a more team or group perspective especially towards accountability and decision making. DISADVANTAGES OF MBO – common mistakes to avoid include giving too much attention to easy objectives, requiring excessive paperwork, and having managers simply tell the employees the objectives. It also focuses on a most individualistic approach which is not acceptable in most Asian countries and even in indigenous organisations in Australia. ORGANISING ORGANISING – it is the process of assigning tasks, allocating resources and arranging activities to implement plans. ORGANISATION STRUCTURE – it is a system of tasks, workflows, reporting relationships and communication links. Any structure should provide task assignments through division of labour and coordination for performance results. Structure must be dealt with in a contingency fashion. As environments and situations change, the structure should be able to change too. Chaotic systems, such as revolutions and resistance, create new configurations of decision making and power. a) FORMAL STRUCTURE - it represents the way an organisation is intended to function. An organisation chart describes the arrangement of work positions within an organisation. b) INFORMAL STRUCTURE – it is a set of unofficial relationships among an organisation’s members. The lines of informal structure would cut across levels and move from side of side ADVANTAGES 1) Employees gain access to interpersonal networks of emotional support and friendship that satisfy important social needs. 2) They benefit task performance by being in personal contact with others who can help them get things done when necessary. DISADVANTAGES 1) They can lead to increase in rumours being spread. 2) Inaccurate messages might be carried around the organisation 3) The employees might breed resistance to change and can also divert work efforts from important objectives. 4) People who are out of informal groups might feel less part of group activities and might lead to decrease in satisfaction. 5) Staff might consciously or unconsciously exclude new workers from the informal structure DIFFERENT ORGANISATIONAL STRUCTURES The different structures are divided on the basis of a concept called departmentalisation which is the process of grouping together people and jobs into work units. 1) FUNCTIONAL STRUCTURES – they group together people with similar skills to perform similar tasks. Example: a senior management team might have functions of marketing, finance, production and human resources. Under the functional structure, manufacturing problems will be dealt by the production director and employee problems will be dealt with by human resources director and so on. ADVANTAGES a) Economies of scale due to the efficient use of resources. b) Task assignments consistent with expertise and training c) High-quality technical problem solving d) In-depth training and skill development within functions e) Clear career paths within functions DISADVANTAGES a) Difficult in pinpointing responsibilities for problems like timeliness, innovation, cost containment etc. b) The functional chimney problem which refers to lack of communication, coordination and problem solving across functions. A sense of cooperation and common purpose vanishes. c) When problems take place in another unit, they are referred up to higher levels of management without being solved in the same level. Example: the former chairman of Jaguar blamed many of the quality problems on excessive compartmentalisation as the different departments were not communicating effectively. 2) DIVISIONAL STRUCTURES – it groups together people working on the same product, in the same area with similar customers or involved with the same processes. They are common in complex organisations selling multiple differentiated products, pursue diversified strategies and/or operate in various and different competitive environments. ADVANTAGES a) More flexibility in dealing with environmental changes b) Improved coordination across functional departments c) Clear points of responsibility for product or service delivery d) Expertise focused on specific customers, products and regions e) Greater ease in changing size by adding or deleting divisions. DISADVANATGES a) It reduces economies of scale and increases costs due to duplication of resources and efforts across divisions b) They create unhealthy rivalries as divisions compete for resources and attention c) The emphasis on division needs and goals take attention away from the organisation’s goals as a whole. PRODUCT STRUCTURES – they group together jobs and people working on a single product or service. They clearly identify costs, profits, problems and successes in a market area with a central point of accountability. Example: In recent years companies like Apple and Intel have moved away from these structures. GEOGRAPHICAL STRUCTURES – they group together people and jobs performed in the same location. They are typically used when entire products and services need to be differentiated across different regions. Example: French-based global resort and tourism operator, Club Med, puts its operations into five major areas ranging in the different continents of the world. The development of internet based communications has further promoted this type of structure. CUSTOMER STRUCTURES – they group people and jobs that serve the same customers or clients. The appeal is to serve different customers with special needs. Example: BHP Billiton is designed around customer sector groups that focus on customers rather than operations. PROCESS STRUCTURES – they group jobs and activities that are part of the same processes. Example: when a customer orders a product from a catalogue, the process of order fulfilment takes the order from point of initiation by the customer to the point of fulfilment by a delivered order. 3) MATRIX STRUCTURES – it combines functional and divisional approaches to emphasise project or program teams. It is achieved by using permanent cross- functional teams to integrate functional expertise, in support of a clear divisional focus on a product, project or program. It is used in diverse settings like the manufacturing and service industries, professional fields and even not-for-profit industries. ADVANATGES a) Better interfunctional cooperation in operations and problem solving. b) Increased flexibility in making alterations to operations to meet changing demands c) Better customer service as there is always a program, product or project manager capable to answer questions. d) Better performance accountability for all managers. e) Improved decision making as problem solving takes place at team level where all the information is available f) Improved strategic management as top managers are freed from unnecessary problem solving. DISADAVANTAGES a) There is a chance for power struggles as functional supervisors and team leaders will coincide will exercising authority b) It can create task confusion and conflicts in work priorities. c) It can also become time consuming due of increased participation d) Strong team loyalty can lead to lost focus on larger organisational goals. ORGANISATIONAL DESIGN – it is the process of creating structures that best serve a company’s mission and objectives. The main purpose is to create alignment between supporting structures and situational challenges. It is a problem solving activity and must be approached in a contingency fashion. 1) BUREACRATIC DESIGN – a bureaucracy is defined as a form of organisation based on logic, order and the legitimate use of formal authority. It focuses more on a mechanistic approach used when the environment is stable. FEATURES – clear division of labour, strict hierarchy of authority, formal rules and procedures and promotion based on competency. EXAMPLE - A local KFC restaurant is a relatively small operation, and it operates like the other franchise chains according to the rules formed by corporate management. Service personnel work in systematic and disciplined ways but problems quickly arise when the customers’ orders something that is not on the menu or get bored of the menu. 2) ADAPTIVE DESIGNS – they are designs using the least amount of bureaucratic features and encourage worker empowerment and teamwork. They are built on trusting that people will do the right things with their own initiatives. They free capable people from unne
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