B. S. Sahay and A. Maini Balakrishnan Parasuraman and Rienk Goodijk Unnikammu Moideenkutty Daisy Chauhan and S. P. Chauhan Kamal Kishore Jain J. P. Singh and P. Dey Devashis Rath Raj Agrawal Parol Rishi C. V. Ramanan Bhaskar Majumder Jamal Khan Vinay Auluck
,
Supply Chain Partner Relationship: A Study on Implications and its Importance Work Councils in the Netherlands and their Impact on Company Performance and DecisionMaking Process: A Study Equity Sensitivity, Organizational Justice, and Organizational Citizenship Behaviour: A Relational Study Future Directions for Human Resources Development: Aligning the HR Function to Organizational Goals Bringing Change: An Experiment Stakeholder and Force Field Analysis
with
Value at Risk: A Critique Leadership and Corporate Downsizing: The Legitimacy of Expercising Strategic Choice Implementation of WTO Agreements: Major Issues and Problems for Developing Oountries Need for Attitudinal Assessment in Managing Protected Areas: A Study Potential Appraisal: A Tool for Development Non-Useof Fly ASH in Conventional Clay Brick Plants in Uttar Pradesh: Reasons and Remedies Development Management: Reflections on Recent Development Encyclopaedia Britannica 2002: A Case Study
BOOK REVIEWS
,I
The Journal of the Institute for Integrated Learning in Management, New Delhi
Management & Change The Journal of the Institute for Integrated
Editor
Learning in Management
(IILM), New Delhi
GAUTAM BHATIACHARYA
Editorial Advisory Board Agrawal
L. Mohan
Ahmed
'Abad
Halachandran Haxi
V. Hal a
Chetan
Hutler
Chatterjee
Joseph
Jain
of Management. University
Management
Dean-Emeritus.
Development
Robert Morris College,
Director,
Il K.
Professor.
Indian Institute of Technology. Shri Ram Centre for Industrial
Khan
ivI. Y.
Professor.
(Deptt. of Financial
Professor.
Faculty of Management
Pandit Sheth
K.
Director-Research. V. R.
Indian Institute
Delhi School of Economics.
Ex-Director.
,T.
D.
Prem
Manuscript
University
New Delhi of Delhi
University
Council,
of Delhi
New Delhi
Director. RIS for Non-Aligned and Developing Countries. New Delhi Professor,
N. R.
L'SA
New Delhi
Studies.
Professor.
Gyorgy
USA
Relations.
Productivity
V. N.
Singh Vrat
National
Studies!.
I. M.
Szell
UK
IILM, New Delhi
Professor,
Panchmukhi
Guc~aon
of Bradford.
Pittsburgh.
J. Rama
Nair N. K.
of
IILM, New Delhi
Joshi
Pandey
Institute.
Centre, University
Professor, Stern School of Business. New York University.
A. Rizvi
Mamkoottam
Lucknow
of Delhi. Delhi
J. L. Kellogg Graduate School University. Evanston. USA
Professor, Northwestern
Management
Professor,
Avijit
Irfan
Distinguished Management. Professor.
N. R.
Correa
Indian Institute
Dean-Research,
Richard
Ghosh
Professor,
Ex. Pro-Vice Chancellor.
Indian Institute
Professor,
International
Professor.
University
Director.
of Management.
Ahmedahad
University
of Management.
Management
Institute.
of Delhi. Delhi
Ahmedabad New Delhi
of Os nab ruck. Germany
Indian Institute
of Technology.
Roorkee
Submission
Manuscripts are invited on all aspects of management. For style sheet. please refer to the inside hack cover. Enquiries should be directed to the Editor. (gautam@iilm.edui
Frequency
and Subscriptions
Management & Change is published twice a year (No. I: Summer: No." Winter). Annual subscription rates are as follows: For India-Institutional: RS.300: Individual: Rs200 International-USS 120 (Air mail): Asian countries-USS40 Demand Draft should be drawn in favour of: Instilllte fiJI' Integruted Learning in Management. payable at New Delhi.
EditoriaUSubscription
Information
Please call or write the AdminIstrative Coordinator. Mana)!emcnt & Change. Institute Integrated Learning in Management. Lodhi Institutional Area. Lodhi Road. New Delhi-II 0 Phones:'91-1 1-24631033.24647821 Fax: 91-11-24647796. E-Mail: YIIHlf@iilm.edll
Yusuf Siddiqui-Administrative
for
om.
Coordinator
Management & Change. its editor. and publisher, IlLM. New Delhi disclaim responsibility liability for any statement of fact or opinion made by the contributors. Copyright 6 2002 Institute for Integrated Learning in Management. All Rights Reserved.
and
Management & Change VOLUME
SUMMER
NUMBER 2
6
2002
ARTICLES Supply Chain Partner Relationship: A Study on Implications and its Importance
B. S. Sahay and A. Maini
251
Work Councils in the Netherlands and their Impact on Company Performance and Decision-Making Process: A Study
Balakrishnan Parasuraman and Rienk Goodijk
265
Equity Sensitivity, Organizational Justice, and Organizational Citizenship Behaviour: A Relational Study
Unnikamrnu Moideenkutty
279
Future Directions for Human Resources Development: Aligning the HR Function to Organizational Goals
Daisy Chauhan and S. P. Chauhan
295
Bringing Change: An Experiment with Stakeholder and Force Field Analysis
Kamal Kishore Jain
309
Value at Risk: A Critique
J. P. Singh and Parikshit Dey
319
Leadership Corporate Dowr.sizing: The Legitimacy of Exp~rcising Strategic Choice
Devashis Rath
329
Implementation of WTO Agreements: Major Issues and Problems for Developing Countries
Raj Agrawal
347
Need for Attitudinal Assessment Managing Protected Areas: I•.Study
Parul Rishi
365
c. V. Ramanan
379
Bhaskar Majumder
385
Reflections on
Jamal Khan
407
2002: A Case
Vinay Auluck
419
..and
Potential Appraisal: Development
A Tool
in for
Non-Use of Fly ASH in Conventional Clay Brick Plants in Uttar Pradesh: Reasons and Remedies COMMUNICATION Development Management: Recent Development CASE STUDY Encyclopaedia Study
Britannica
BOOK REVIEWS
S. Ramachander: Ascending the Value Spiral: From Insight to Innovation. Reviewed by P. Bhaumik. 429 Steve W. Williams: Making Better Business Decisions: Understanding and Improving Citical Thinking and Problem Solving Skills. Reviewed by Jyotsna Bhatnagar. 430
Radha R. Sharma: 360 Degree Feedback, Competency Mapping and Assessment Centres. Reviewed by Murli Mohan. 434 Daisy Chuhan: Managing Executive Stress, An Approach to Self Development. Reviewed by Murli Mohan. 435 P. Singh and Asha Bhandarker: Winning the Corporate Olympia: The Renaissance Paradigm. Reviewed by Jyotsna Bhatnagar. 437
Raj Agarwal
All India Management
Association, New Delhi
Dr. Raj Agarwal is Senior faculty of Economic and International Business in AlMA, Centre for Management Education. A prolific writer as well as a keen researcher, he has several articles, books, seminar papers, audio-cassettes and video cassettes to his credit. His areas of specialization include Managerial Economics, Economy and Business Environment and International Business. Vinay Auluck
Learning in Management, New Delhi Prof. Vinay Auluck is a technocrat with professional experience of over 30 years in senior managerial positions in India's premier high technology institutions such as Indian Space Reseach Organizations and CMC; and as faculty in reputed management institutes like IMT Ghaziabad, Sringeri Sharada Institute of Management, Delhi. He was a research affiliate Program for Information Resource Policy, Harvard University. His research /teaching interests include Strategy and Policy, Marketing, Values and ethics and Information usage. He holds B.Tech degree from lIT Mumbai and PGDBM from 11M Ahmedabad. Dai'iY Chauhan
Institute for Integrated
Management
Development Institute, Gurgaon Daisy Chauhan, Ph. D. is Senior Research Associate with Management Development Institute (MDI), Gurgaon. She has taken part in .several research! consultancy assignments and is actively involved in the teaching and training activities at MDI. She has contributed around twenty articles in well known journals like Indian Academy of Applied Psychology, South Asian Journal of Management, Vision: The Journal of Business Perspective, Management and Change, Global Business Review, Indian Journal of Industrial Relations, Prestige Journal of Management, Indian Management, Education Times (Times of India), on varied topics like stress, leadership, motivation, career couples, personality, obsolescence, ethics etc. She has recently brought out a book on "Managing Executive Stress: An Approach to Self Development" (Excel Books, New Delhi). Another book on "Developing Leaders, Teams and Organisations" (Ed.) is in the press. Dr. Chauhan is also the Assistant Editor of Vision: The Journal of Business Perspective, which is an MDI publication. Her areas .of interest are stress and time management, motivation, team and group dynamics, leadership etc.
S. P. Chauhan
Management Development Institute, Gurgaon S.P. Chauhan, is Assistant Professor with Shri Ram Centre for Industrial Relations and Human Resources, New Delhi. He has a Masters Degree in Economics and Psychology. His Ph.D. from Panjab University, Chandigarh is on the topic "Professional Obsolescence." He has conducted various training programmes for the executives of public, private and government sector. He is actively involved in the training and research projects at SRC. He has been a Resource Person to the Government of Arunachal Pradesh for their training programme for Senior Nursing Managers, Directorate of Health Services. He has published several papers in welI known journals like Indian Journal of Industrial Relations, Vision: The Journal of Business Perspective, Management and Change, Global Business Review, Indian Journal of Training and Development, MDI Management Journal, Paradigm. His specific areas of interest in OB and HR are Developing Positive Attitude and Self Esteem, Human Obsolescence, Emotional Quotient, Managerial Effectiveness, CounselIing, Team Building, HR Practices etc. Parikshit
Dey
Indian Institute of Technonogy Roorkee Parikshit Dey, an emerging scholar in the finance area with interlinkages with instatistical tools. He has co-authored articles with Dr. 1. P. Singh, Professor at Indian Institute of Technology, Roorkee. Rienk Goodijk
University of Groningen, Netherlands Senior-consultant at GITP International and Professor of Labour Relations and Corporate Governance at the University of Groningen, the Netherlands. Prof. Rienk Goodijk, borne in 1956, is a consultant and researcher in the field of corporate governance and workers participation. His publication include: On the way to a professional works council?, 1993; Works Council and strategic decision-making, 1995; Corporate Governance and workers participation, 1998; European works councils and strategic policy making, 2000. Kishore Kumar Jain
University Tun Abdul Razak, Malaysia Dr. Jain is working as Associate Professor in the Faculty of Business Administration, University Tun Abdul Razak (UNITAR), Malaysia since January 2000. UNITAR is the first virtual university of Malaysia. He began his academic career at Christ Church College, Kanpur (India), as Lecturer in 1976. He joined St. John's College, Agra in 1977 and is presently on sabbatical for three years. Besides teaching at UNITAR, he is also involved in the executive MBA proii
gram of UNITAR in collaboration with Malaysia Airlines Academy. He is actively engaged in research and consultancy. He has organized and conducted many workshops and short courses on the topics like team building, stress management, conflict management, leadership, designing a competitive business unit, creativity and problem solving for the corporate sector. He lectures in the areas of General Management, Organization Development, Managerial Leadership, Business Policy and Strategic Management. He has presented papers for national and international conferences, and has published several papers in refereed journals of national and international repute. His research interest is in the area of e-Iearning, corporate governance, leadership, organizational change, and training & development. He has been a subject matter expert for developing web courseware for strategic management and organization development courses for his present university. Jamal Khan
University of West Indies, Barbados, West Indies Jamal Khan has been with the University of the West Indies, Barbados since 1974. He has written in social science and management journals such as International Journal of Public Sector Management, Project Management Quarterly, and International Review of Administrative Sciences. He has provided consultancy to several Caribbean regional organizations over the years. His teaching and research interests include development management, management techniques, policy analysis, project management and productivity measurement. Unnikammu Moideenkutty
Sultan Qaboos University, Oman Dr. Unnikammu Moideenkutty received his Ph. D. in Business Administration from The Fox School of Business and Management, Temple University, Philadelphia. He also has a Master's Degree in Organization Development from Bowling Green State University, Bowling Green, Ohio and a Master's Degree in Personnel Management and Industrial Relations from Tata Institute of Social Sciences, Mumbai. He is cUITl?ntlyan Assistant Professor in the Department of Management, College of Commerce and Economics, Sultan Qaboos University, Sultante of Oman. His research interests are in social exchange relationships in organizations, organizational citizenship behavior, psychological contracts, interpersonal influence in organizaitons, and human resource management practices and firm performance. Bhaskar Majumdar
GB Pant Social Science Institute, Allahabad Bhaskar Majumdar, Ph. D., is reader, G. B. Panth Social Science Institute, Allahabad. He has published a large number of research papers in journals of iii
----_O~
~
__
-Il~.__
•••
•••• ~'r_~ __ •.,_'_~'•••••-••• ,..-••
=""".""' .•••
__ ••••'_ •••••- ••••••••
'ILI' ••• __
'IlII'__
' ••••• _.
repute. His current research interests include third world industrialization, political economy of globalization, trade and industrialization, India's current economic reforms and economic theory. A. Maini
Development Institute, Gurgaon A. Maini, whose area of interest lies in supply chain management, has worked with professor B. S. Sahay of Management Development, Gurgaon. He has also co-authored articles in this area with Professor Sahay. Balakrishnan
Management
Parasuraman
School of Social Science, UMS, Sabah, Malaysia Balakrishnan Parasuraman teaches Industrial Relations in the Asia Pacific and the ASEAN regions and workers' participation at the Industrial Relations Programme, School of Social Science, Universiti Malaysia, Sabah, Kota Kinabalu, Sabah, East Malaysia. He holds an M. Sc. in Industrial Relations and HRM from the University of Stirling, UK and a Postgraduate Diploma in Education. He has published (co-authored) a book entitled Globalisation: Social Sciences Perspective (Malay Version, Dewan Bahasa dan Pustaka (DBP, 2000), Employment Issues in Industrial Organizations (2001,UMS) (co-author) and co-edited a book, Industrial Relations and Human Resource Management: Issues and Perspective (Malay Version, UMS, 2000). He has presented conference papers locally as well as overseas at Lima (Peru), Manila (the Philippines) , Bangkok (Thailand), Barcelona (Spain), Groningen (the Netherlands), Sydney (Australia), Oslo (Norway), Hielderberg (Germany), and Tokyo (Japan). He is a fellow member in various international profesional organizations. From April to August 2001, he was a Visiting Research Fellow at Faculty of Management and Organization and HRM, University of Groningen, the Netherlands under the UMESP Fellowship Programme, University Malaya, Malaysia.
Devashis Rath
Management
Development Institute, Gurgaon Devashis Rath is currently a Doctoral Scholar at Management Development Institute, Gurgaon, Haryana, India. He is a Masters in Personnel Management and Industrial Relations, and has a Bachelor degree in Law from Utkal Uni. versity, Orissa, India. He joined industry and spent around eight years in both public and private sector companies in functional areas of Industrial Relations, Human Resource Management and Training, before joining MDI to pursue his Fellowship (Ph.D). AcademicalIy, his area of interest is in organisational, behavioural, leadership and strategic issues concerning organisations. Currently
iv
------------.-,1
.••
"-iiiiij~.j___ ••J,f~•••
._,._nn_".
~D.i.~iLi~Qi",=,. =~~"~L,,=.G1~,.I"=.,,n,_"&la~ac~ ••_:zi_t: •••• ~".~., .• _~=l, .••• ~.,_,_ •• __ ~i
he is working on his thesis "A Multi-Level Study of Leadership Styles Prevalent In Indian Business Organizations." Parol Rishi
Indian Institute of Forest Management, Bhopal Dr. Paml Rishi,Ph.D,Psychology,Lecturer in Faculty of Personnel Management & OB,Indian Institute of Forest Management,BhopaI. Her current areas of interests include leadership issues,behavioural perspectives of environmental is~ sues and Occupational Stress Management. Dr. C. V. Ramanan
Sri Sringeri Sharada Institute of Mahagement, New Delhi Prof. (Dr.) C V Ramanan, Director, Sri Sringeri Sharada Institute of Management, has done his B.Tech. from Delhi College of Engineering, MBA from University Business School, Chandigarh and Ph.D. from The Netherlands. A topper throughout his academic life, he has more than 20 years of experience which include senior positions in the corporate world. For the past several years, he has been involved in Teaching, Training, Consultancy, Management Development and Personality Enrichment Programmes. He has conducted workshops in Marketing & Sales, HRD, TQM and Communication in many organisations. He is a prolific writer and in addition to articles on a variety of subjects, has also written 6 TQP (Total Quality Person) books on Personal and Professional Excellence, the theme being - The Power to Enhance Our Lives ... Dr. C.Y.Ramanan, highlights the intricacy and importance of Potential Appraisal as a powerful tool for organizational and individual effectiveness & development. B. S. Sahay
Management Development Institute, Gurgaon B. S. Sahay, Professor of Operations Management at Management Development, Gurgaon is an eminent scholar and researcher. He is the Chairman of MDI's Fellow Programme in Management as well Chairman, Centre for Suppiy Chain Management. He has published extensively with several books and numerous articles to his credit.
J. P. Singh
Indian Institute of Technology, Roorkee J. P. Singh is a Professor in the Department of Management Studies at Indian Institute of Technology, Roorkee. An eminent scholar and researcher he has worked extensively in new emerging areas such as value at risk, risk management, etc.
v
SUPPLY CHAIN PARTNER RELATIONSHIP: A STUDY ON IMPLICATIONS AND ITS IMPORTANCE
B. S. Sahay
A. Maini
In last decade business is struggling to sustain fluctuations in the global market. Globalization in twenty-first century presents great scope and access to the worldwide market for the corporates but at the same time it shoves ample challenges to respond to more aware and demanding and newly emerging king of market, the customers. This situation led organizations to . improve efficiency of the business by eliminating slackness in the every cqrner of their four-walls and look beyond to improve sluggish movement of material and information. They' have no option but to introduce flexibility and agility with their operations and proactive marketing strategy to smoothen day to day business transactions. Probably this is one of the reasons, why companies are adopting supply chain management and focusing on enhancing and maintaining consumer base to face business challenges of the new millennium. Among four key enablers, strategic partnership is the most critical empowerer. This paper outlines the understanding and need of supply chain partnership formation. It solicits conceptualisation and look into the historical development of supply chain management. The purpose of this paper is to convey salient features of partnerships and the issues that tend a firm to go for strategic partnerships and alliances to survive and thrive in a highly dynamic and uncertain market scenario. In a most primitive thinking approach it answers what supply c1win partnership is and why it is needed.
INTRODUCTION n today's fiercely competitive global business economy, heightened ex pectations of customers have forced business enterprises to sit up and focus attention on their supply chains. In order to remain competitive the industries have to supply products at reliable and reduced delivery time apart from consistent high quality and low cost. This, together with continuing advances in communications and transportation technologies (e.g., mobile communication and overnight delivery) has evolved a strong need to effectively manage better, faster and closer supply chains (Christopher,
JI
Management & Change. Volume 6. Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
L
•••••
'~
•• '
"0
._
••
"""''''''1''
<,r,', •• ,',~,,'~'"
ft,,,.
'n,"
r,',
"".
,. "'eo. ~
,,,.'
"f' ."""".
=''''1'
I
r:'
'J
,
" n ""," •••. 'm,. ""[
i 252 Supply Chain Partner Relationship
1992). Translating supply chain strategy into action is more difficult than perceived. The main reason behind why new supply chain strategies often fail is due to insufficient weightage given to soft issues in supply ch~in. This entails managing friction and resistance due to new ways of thinking and obligation of corporates to optimize the bottom line of their organizational balance sheet at different echelons in the network. These challenges cannot be effectively met by isolated change in specific organizational units, but instead depend critically on the relationships and interdependencies among different organizations. Reinforced by an increasingly competitive environment, business enterprises have to reduce inter-organizational complexity and focus on integration of business activities through not only integration of business infrastructure but also through formation of strategic partnerships and alliances.
DEFINING THE TERM: SCM During the past few years, supply chain excellence, optimization, and integration have become the focus goal of many organizations worldwide. This is because progressive firms are focusing on revenue growth instead of merely striving to meet annual cost reduction targets. Strengthening management of the supply chain is perceived by many firms as enhancing customer satisfaction and enabling profitable growth (AMR, 1997). Another reason why interest in supply chain management has increased since the 1980's is that, keeping in mind the global competitive climate, firms can no longer operate in isolation, they need to work with their channel partners in order to improve their integrative processes and accelerate the benefits available through successful implementation. Successful supply chain management hence is achieved through linking a firm's supply chain strategy to its business strategy. As the concept has gained importance as a solution to business based problems, various definitions have evolved. The -APICS Dictionary describes the theory of supply chain as: • .The processes from the initial raw materials to the ultimate cons.umption of the finished product linking across supplier-user companies; and • The functions within and outside a company that enable the value chain to make products and provide services to the customer (Cox et aL 1995).
Management
& Change,
Volume 6, Number 2 (Winter 2002)
,...--~~~~---~---~---------~----------
Sahay and Maini 253 The Supply Chain Council (1997) uses the definition: "The supply chain-a term increasingly used by logistics professionals-encompasses every effort involved in producing and delivering a final product, from the supplier's supplier to the customer's customer. Four basic processesplan, source, make, deliver-broadly define these efforts, which include managing supply and demand, sourcing raw materials and parts, manufacturing and assembly, warehousing and inventory tracking, order entry and order management, distribution across all channels, and delivery to the customer." Various authors have further defined supply chain. Ellram and Cooper (1993) view supply chain management as "an integrating philosophy to mange the total flow of a distribution channel from supplier to ultimate customer." Monczka and Morgan (1997) state that "integrated supply chain management is about going from the external customer and then managing all the processes that are needed to provide the customer with value in a horizontal way." From the various definitions given above, a summary definition on supply chain can be stated: Supply chain is a philosophy for conducting business, a strategy to gain competitive advantage through the co-ordination of all processes starting from the procurement of material from ~other Earth to providing the final product to the final consumer and efficiently managing the information systems necessary to monitor all of these activities. It links all the partners, which includes the intra-organizational members and the inter-organizational members including suppliers, manufacturers, distributors, wholesalers, retailers, third-party logistics providers and service providers into a seamless process.
LOOKING LENSES
AT SUPPLY CHAIN 'THROUGH
HISTORICAL
In order to comprehend the significance of changes taking place in supply chain, it is important to review it from a historical perspective. The underlying philosophy is that supply chains have evolved to respond to changing business trends. In the earlier years, the emphasis was on materials planning, utilizing materials requirements planning techniques, inventory logistics management with one warehouse multi-retailer distribution system, and push and pull operation techniques for production systems. In the last few years, however there has been a renewed inManagement
& Change,
Volume 6, Number 2 (Winter 2002)
,-'
....
'.,"-,
,
254 Supply Chain Partner Relationship terest in designing and implementing integrated systems, such as Enterprise Resource Planning (ERP) (Chandra and Kumar, 2000). A look back into the 1960-1975 period saw vertically-based corporations optimizing their activities with a focus on functions within the organization. Vendor relationships were a win-lose situation, with intense focus on price. Manufacturing systems were focused on material requirement planning (MRP). In the time frame from 1975 to 1990, co-operations were still vertically aligned, but most of them were involved in process mapping and analysis to evaluate their operations. There was a growing realisation by organizations of the benefit of integration of functions such as product design and manufacturing. Various quality initiatives, such as Total Quality Management (TQM) and ISO Standards for quality measurement were initiated by many organizations. Starting in 1990, co-operations all over the world had been experiencing increasing global competition. Strategic partnerships amongst organizations had been growing. Organizational structures were starting to align with processes. Manufacturing systems in organizations were being enhanced with information technology tools such as, Enterprise Resource Planning (ERP), Distribution Requirements Planning (DRP), Electronic Commerce, Product Data Management (PDM), Collaborative Engineering (Aberdeen Group, 1996). A noticeable shift has taken place in the marketplace from mass production to customized products. This has resulted in emphasis on greater organization and process flexibility and co-ordination of processes across many points. Increasingly, organizations are promoting employee empowerment and the need for rule based, real time decision support systems to attain organizational and process flexibility. LEVERAGING
THE PROMISE OF SCM INTO A REALITY
What is needed to implement a successful supply chain management program? According to a survey done by the University of Wisconsin in the fall of 1998, four key enablers were realized as critical in realizing in actualizing the abundant benefits of supply chain implementation. The following is the list of supply chain enablers: â&#x20AC;˘ Organizationallnjrastructure: It is critical to understand the specific organizational characteristics considered essential for successful supManagement
& Change, Volume 6. Number 2 (Winter 2002)
Sahay and Maini 255
â&#x20AC;˘
â&#x20AC;˘
ply chain implementation. The research identified the following list of organizational attributes: a. Having a coherent business strategy that aligns business units towards the same goal. b. Having formal process flow methodologies to enable the supply chain improvements. c. Having peop,le committed to and responsible for cross-functional processes. d. Having the process metrics identified to guide the operating units' performance towards the strategic organizational supply chain management objectives. e. Having cross-functional design team implement change. f. Having business processes, shared within the organization versus being owned by functional units. g. Having one business function driving the supply chain initiative. Technology: When technology is mentioned in context of implementing supply chain initiatives, most people immediately think of information technology. But technology goes beyond information. It is related to how products are manufactured, and handled throughout the supply chain. As a solution, it is extremely important in meeting customer needs and in increasing inventory velocity. The technology-manufacturing and material handling enabling attributes are: a. Having products (including materials, paths, components and features) designed for production flow through and inventory velocity b. Having physical production processes (including equipment design, layout, and automation) designed to facilitate supply chain management initiatives. c. Having products designed for state-of-the-art packaging, unitizing and materials' handling to facilitate flow through inventory velocity. d. Having products designed and unitized for manufacturing efficiencies. Human Resource Management: As a factor in enabling successful supply chain performance, it is noted that most companies are struggling with their difficult task of finding people who are knowledgeable in supply chain theory and practice. Secondly, having compensation and incentive programmes, for supply chain management performance Management
& Change,
Volume 6, Number 2 (Winter 2002)
--l 256 Supply Chain Partner Relationship
can be particularly difficult considering that supply chain management is inherently cross- functional by nature, both with and between companies. Human Resource Management enabling attributes are: a. Sourcing, Hiring, Selecting skilled people at all management levels. b. Finding change agents to manage supply chain implementation. c. Having compensation and incentive programmes in place for supply chain management performance. . d. Having the appropriatejob descriptions and responsibilities e .. Having in place a performance appraisal system for people working in cross-functional supply chain projects. â&#x20AC;˘ Strategic Partnerships: The last and the most critical enabler for supply chain success is developing strategic partnership with supply chain members. Many companies already have made considerable progress towards dismantling the functional silos within their organization in effect, forging internal partnerships. Now, it is time to. achieve the same kind of integration with the other channel members of the supply chain. If organizations are to achieve the full benefits of supply chain management, they must integrate and streamline the flows of products and information between supply chain partners. This entails the development of flow through transportation systems and intermediate assembly and distribution facilities to increase inventory velocity and meet differentiated customer needs. The strategic partnership enabling attributes are: a. Having expectations clearly stated, understood, agreed to up front. b. Collaborating on supply chain design, product and service strategies. c. Having top management of partnering companies interface on a regular' basis. d. Having compatible IT systems. e. Having top management communicate why strategic partnerships are important and are being pursued. . f. Agreeing on a process to incorporate business changes. g. Developing a partner selection process. h. Having lead persons responsible for building partnerships on the job for at least a year.
Management
& Change,
Volume 6, Number 2 (Winter 2002)
Sahay and Maini 257
SUPPLY CHAIN PARTNER RELATIONSHIPS:
CONCEPTS
Supply chain relationships are concerned with the selection of channel intermediaries, and then subsequently working with them, to effectively form a strategic partnership. The essence of successful partner relationships is the extent of interdependence between the partners. The purposes of entering into a strategic partnership are to achieve objectives that otherwise could not be realized and to reduce the overall risk while increasing the return on investment and at the same time aim to maximize the utilization of scarce resources. Parties in partnership relationships should understand the implications for managing such business arrangements. They both should expect to share difficulties as well as current and future benefits. Management of partnerships is essentially a matter of collaboration if the venture is to succeed. In strategic partnerships the emphasis is on co-operation and partnership between the parties, not competition and conflict; this acts as a foundation upon which it joint competitive advantage is developed. This approach stresses the development of trust, the sharing of information and the common interest between the channel members. It is often the case that the terms partnerships and alliances are used interchangeably. A look at Figure-l shows that the relationships can be either vertical or horizontal. However, vertical relationships between supplier and customer/buyer are known as partnerships and horizontal relationships, for example between two suppliers is known as an alliance. Whether the discussion concerns partnerships or alliances, the intent of the relationship is to provide differentiated intermediate or long-term benefits to both parties involved (Gattorna and Walters, 1996). Typically, organizations enter into a partnership/alliance in order to: • Achieve strategic objectives; • Develop joint strategies; • Reduced risk while increasing reward; • Improving returns on scarce resources. Partnerships between companies, whether they are from different parts of the world or different ends of the supply chain, are a fact of life in contemporary business scenario. Whatever the duration and objectives of business partnerships, being a good partner has become a key corporate' asset. It is called the corporate advantage (Gattorna and Walters, 1996). In the global economy, a well-developed ability to create and Management
& Change,
Volume 6, Number
2 (Winter 2002)
-------~~~~~-~~~-----------~~---
--------
258 Supply Chain Partner Relationship
sustain fruitful collaboration gives companies a significant leg up (Kanter, 1994).
Market
Strategy
C+
+
~
C+
+
~ HORIZONTAL
Culture
Leadership
Style
C+ C+ SUPPLIER
+--==:> + ~
SUPPLIER
Market
Strategy
VERTICAL Culture
Leadership
Style
+ SUPPLIER
+ CUSTOMER/ BUYER
Figure 1: Critical Interfaces: Horizontal vis Vertical Relationships
Management
& Change, Volume 6, Number 2 (Winter 2002)
r~""-"-~-'"~---~--------Sahay and Maini 259
Based on a research of 37 organizations and their partners from 11 countries conducted by Kanter, three fundamental conditions of business relationships were revealed. The research covered 500 interviews in order to gain qualitative data from both manufacturing and service industries and involving a range of alliances from ones established 20 years ago to ones recently formed. The three fundamental principles are: • Partnerships must yield immediate, short-term benefits for the players, but also they should extend into the future, identifying for the parties' new and unforeseen opportunities. • Successful relationships involve collaborating (creating new value together), rather than just a transactional exchange (a return for what is input to the arrangement). Partners value the skills each brings to the relationship. • The relationship cannot be "controlled" by formal systems but require an elaborate arrangement for developing interpersonal connections and internal infrastructures that enhance learning. Partnerships are not immune to cross-cultural differences as observed by Kanter. It was noticed that American companies would view partner relationships from strictly financial standpoint. They would most of the times, ignore the political, cultural, and human aspects of the partnership; whereas, Asian-based organizations were very comfortable with the 'other' factors in the partnership as a result of which they had fine-tuned the art of exploiting their partners. European partners fell somewhat in the middle of these two extremes of the continuum. Kanter suggests eight critical points necessary for inter-organizational relationships to meet, if they are to be successful: • Individual Excellence: Both partners require to have positive reasons for entering the relationship. They need to be strong and to be able to contribute something of value to the relationship • Importance: The relationship should be compatible with the strategic objectives of both partners. • Interdependence: There should be mutual need of each partner; they ideally have complementary assets and skills. • Investment: If each invests in the other, this signifies their respective stake in the relationship and commitment to the long-term well-being of the relationship. • Information: Shared information is an essential feature of the success of partnerships. Information concerns their specific, individual obManagement
& Change,
Volume 6, Number
2 (Winter 2002)
260 Supply Chain Partner Relationship
•
• •
jectives and goals as well as technical data and performance concerning changed circumstances. Integration: Partners need to develop linkages and shared ways of operating to facilitate their working together easily. Connections are formed between the organizations at various '(but critical) levels. Institutionalisation: Whereby the relationship is formalized, with clear responsibilities and decision processes. Integrity: Partners should behave towards each other in ways, which justify, and enhance, mutual trust; they should not abuse the confidences they are privy to, and should not undermine each other.
SUPPLY CHAIN PARTNER RELATIONSHIP:
THE NEED
Global competition is forcing businesses to periodically look at their supply chain plan to reduce costs and time involved in the process. This significant change is headlong leading towards a massive restructuring across industries. Traditionally, large corporations vertically integrated multiple stages of an industry chain-from raw materials to the final product delivery- leading to increased direct control over operations, but also creating unwieldy conglomerate structures in the process. During the 1990's, in contrast, a rapidly growing number of firms were reversing this process, entering into a series of alliances with other organizations as part of their strategy to lower overhead costs, obtain new technologies, increase responsiveness to customers, enter new markets and in general, enhance their flexibility. Many of these companies are downsizing to their core competencies, delivering management hierarchies and strategically outsourcing a wide range of activities (Thorelli, 1986~Powell, 1987; Snow, Miles and Cloeman, 1992; Quinn and Hilmer, 1994). One of the paradoxes of the market today is that as complex business practices are becoming essential for firms to survive and thrive, the necessary financial and managerial resources to implement these practices are becoming increasingly scarce. In the past it was more often the case that organizations were structured and managed on the basis of optimizing their own operations with little regard for the way in which they interfaced with suppliers and, indeed, customers. The business model was essentially "transactional" meaning that products and services were bought and sold on an arm'slength basis and that there was little enthusiasm for the concept of longer Management
_~_~
& Change, Volume 6, Number 2 (Winter 2002)
~
••_••
•__""'••••••• ",••••__m""d_nn"'.,"'nn_m_i_.l_i.,"",,~."_Dm
."'a=_
Sahay and Maini 261 term, mutually dependent relationships. Tradition and pride made companies want to be the best at everything to do everything themselves. The end result was often a high-cost, low quality solution for the final customer in the chain. In today's business scenario companies have to be in all-important markets simultaneously if they are going to keep competitors from establishing their positions. Globalization will not wait. Corporates need partnerships and they need them now. In other words, in today's challenging global markets, relationships that link highly focused providers of specific elements of the final offer in a cost-effective manner add value to the supply chain. The key to success in this new competitive framework, it can be argued, is the way in which this "non-linear network" of supply chain relationships is welded together in partnership to achieve mutually beneficial goals as shown in Figure-2. Hence, relationships between companies, whether they are from different parts of the world or different ends of the supply chain, are a fact of life in business today. Tier-2 Supplier
Tier-l
Manu facturer
Distribution Centre
Customers
-
Links
Supplier Customer
Customer
~ustomer Customer
Figure 2: The Networked Supply Chains
In his book, Partnerships for Profit, Jordan Lewis, 2000 introduces an effective general framework for analyzing a buyer-supplier relationship. He proposes seven advantages as to why business players should form Management
& Change,
Volume 6, Number
2 (Winter 2002)
262 Supply Chain Partner Relationship
partnerships. They are the following: • Adding Value to Products: A partnership with the appropriate firm can help add value to existing products. For example, partnerships that improve time to market, distribution times or repair times help to increase the perceived value of a particular firm. Similarly, partnerships between companies with complementary product lines can add value to both companies' products. • Improving Market Access: Partnerships that lead to better advertising or increased access to restricted market channels can be benefitial. Thereby speeding up entry into new markets. For example~ complementary consumer product manufacturers can cooperate to address the needs of major retailers, increasing sales for everyone. To maintain market stability, gaining market power. • Strengthening Operations: Partnerships between appropriate firms can help to improve operations by lowering system costs and cycle times. Facilities and resources can be used more efficiently and effectively. For example, companies with complementary seasonal products can effectively use warehouses and trucks year-round. • Adding Technological Strength: Partnerships in which technology is shared help add to the skill base of both partners. Also, the difficult transitions between old and new technologies can be facilitated by the expertise of one of the partners. For example, a supplier may need a particular enhanced information system to work with a certain customer. Partnering with a firm that already has expertise in this system makes it easier to address difficult technological issues. • Enhancing Strategic Growth: Many new markets have high entry barriers. Partnerships might enable firms to pool expertise and resources to overcome these barriers and explore new opportunities and reduce mutual costs of research and development. • Enhancing Organizational Skills: Alliances provide a tremendous opportunity for organizationalleaming. In addition to learning from one another; partners are forced to learn more about themselves and to become more flexible so that these alliances work. • Building Financial Strength: In addition to addressing these competitive issues, alliances can help to build resources for revenue. Income can be increased and administrative costs can be shared between partners, combining complementary assets or even reduced owing to the expertise of one or both of the partners. Of course, partnerships also Management
& Change, Volume 6, Number 2 (Winter 2002)
_____________________
.._-.-.-,.-,.-1..-.&-.-_-,- -.-a-_
Sahay and Maini 263
------------------------'
limit investment exposure by sharing risk. Despite the above cited advantages for entering into partnerships studies report that two thirds of all relationships experience severe problems in the first two years and reported failure rates as high as seventy percent (Das and Teng, 2000). At first glance partnerships offer a very seductive concept, as they represent an obvious simple solution to a range of strategic dilemmas, but, in reality, very often end up as disappointments. The adage that even marriages made in heaven run a high risk of failure is especially apt in the case of partnerships.
CONCLUSION A large body of literature has been cited which presents what one means when speaking about supply chain partner relationships. The exhaustive list of names of experts in the field of supply chain management adhere to the same viewpoint that the best approach to achieving supply chain improvement is through the development of more effective supply chain partner relationships. Fierce global competitiveness, heightened expectations of customers are forcing companies to move away from their comfort zones towards the uncharted waters of supply chain partnerships. Despite the endless advantages for forging partnerships as mentioned in this chapter, most relationships are dissolved or they fail. This research attempts to answer why despite possessing the infrastructure and the technical know how, relationships end up sour. Future work will provide the reader with a thorough if not highly detailed perspective of the evolutionary process of supply chain relationships from transactional to collaborative.
REFERENCES Aberden Group (1996) Advanced Planning Engine Technologies. Can Capital Generating Technology Change the Face of Manufacturing, February. AMR Research Inc., (1997) The Report on Supply Chain Management, January. Chandra c., S. Kumar (2000) "Supply Chain Management in theory and practice: A passing fad or a fundamental change?," Industrial Management and Data Systems, MCB University Press Christopher, M. L. (1992) Logistics and Supply Chain Management. London: Pitman Publishing. Das T. K. and B. S. Teng (2000) "Instability of Strategic Alliance: An Internal Management
& Change,
Volume 6, Number
2 (Winter 2002)
l 264 Supply Chain Partner Relationship Tension Perspective," Organisational Science. Ellram L. and M. Cooper (1993) "Characteristics of Supply Chain Management and the implications for purchasing and logistics strategy," International Journal of Logistics Management, Vol. 4(2). Gattorna, J. L. and D. W. Walters (1996) Managing the Supply Chain. London: Macmillan Press Ltd. Jones C, Hesterly W. S. and S. P. Borgatti (1997) "A General Theory of NetworK governance: Exchange Conditions and Social Mechanisms,"The Academy of Management Review, Vol. 22, NO.4, pp. 911-945. Mariotti J. L. (1999) "The Trust Factor in Supply Chain Management," Supply Chain Management Review, Spring, pp. 70-77. Monczka R. M. and Morgan J. (1997) "What's wrong with SCM?," Purchasing, Vol. 122, NO.1, pp.69-73. Powell, W. w., (1987) "Hybrid Organisational Arrangement: New Form or Transitional Development?," California Management Review, Vol xx (Fall), pp 6787. Quim, J. B. and Hilmer, F. G. (1994) "Strategic Outsourcing," Sloan Management Review, Vol 35, pp 43-55. Sahay, B. S., (1999) Supply Chain Management for Global Competitiveness. New Delhi: Macmillan. Sahay, B. S. (2000) Supply Chain Management in the Twenty-first Century. New Delhi: Macmillan. Sahay, B. S., Cavale, v., Rajani, R. L., Mohan R. and Gupta P. (2000) "Supply Chain Practices in Indian Industries," A KPMG and Management Development Institutes Joint Survey, In Print. Snow, C. c., Miles, R. E. and Coleman Jr., H. J. (1992) "Managing 21st Century Network Organisations," Organisation Dynamics, Vol 20 (3), pp 5-20. Survey Research by University of Wisconsin-Madison (2000) The four supply chain enablers, SCMR, March/April 2000, pp 60-68. The Supply Chain Council (1997) http//:www.supplychain.comJinfo/faq.html. Thorelli, H. B., (1986), "Networks: Between Market and Hierarchy," Strategic Management Journal, Vol. 7, pp 37-51.
Management
& Change.
Volume 6, Number 2 (Winter 2002)
WORK COUNCILS IN THE NETHERLANDS AND THEIR IMPACT ON COMPANY PERFORMANCE AND DECISIONMAKING PROCESS: A STUDY
Balakrishnan Parasuraman
Rienk Goodijk
It is apparent from existillg research ill literature that little is kllowlI about a complementary use of direct alld ill direct employee participatioll alld its effects 011 humall resource management performallce. Recently a few studies have been conducted 011 this subject matter (Drucker alld Looise, 2001; Markey, Hodgkinsoll, Kowalczyk alld Pomfret, 2001; Markey alld MOllat 1997; Markey et.al 2001; Parasuraman 2002; 2001a; 2001b). Most research pay no attention to existence of indirect employee participation (in our case, works coullcils) together with the implemelltation of HRM (direct employee participation) towards performallce of companies. In this paper, we will discuss the del'elopment of work councils in the Netherlands and its effect 011 compallY performance particularly on company decision making process. Employees as the main asset in the company will play an important role in contributing ideas which will affect the productivity and quality of products and employees' working life. Therefore, the main objective of this paper is to explore some of elements 011 Dutch Work COUTIcils alld what call the Asiall managers learn from them.
INTRODUCTION
JI
n the Dutch system of industrial relations two channels of workers' representation are active. Trade unions are usually the representatives from the side of employees with collective bargaining on wages, which are mainly set by collective agreements negotiated by trade union officers. In the dual system, workers for this purpose are represented by trade unions, whereas work councils have the task to promote the interests of employees and both the interests of the enterprise at the level of the company. Work councils are elected step by step at different levels of the enterprise; first, the plant-level, then the divisional and at the central level of the firm, the central works council. In this way management at different levels has to deal with work councils at the level they are operating. Management & Change, Volume 6, Number 2 (Winter 2002) 2002 Institute for Integrated Learning in Management. All Rights Reserved.
<9
266 Work Councils in The Netherlands and their Impact on Company
The basic principle with regard to the division of competencies is that "umbrella work councils" do not interfere on subjects that are dealt with by representative bodies at a lower level of the organization. They concentrate mainly upon issues that are concerned as far as the interests of broader parts of the company are at stake.
HISTORICAL
BACKGROUND
As the result of industrial relations from the period after the Second World War the first work "councils act (1950) breathed the sphere of co-operation. A major change of the law took place in 1979. Since then work councils consist only workers, which means that the work council in the Netherlands has evolved very strongly from being a channel for communication and co-operation between the employer and the employees into a body that represents the interests of the workforce. Not only the positioning of the works council has changed during the last decades, but also the rights of work councils have expanded. Since 1979 the dismissal of work council members has been prohibited in order to prevent their suffering any disadvantage as a result of occupying this position. In order to enable work councils to fulfil their duties the employer is obliged to provide the work council with facilities for consultation meetings, a budget and time for training and consultation of their rank and file. Although the work councils have a direct representative function vis-a-vis management to match the enterprise policy, the relationship between the employer and the work council has very often a co-operative character and work councils are informed about the strategy of the company and are provided the balance sheet figures. Beside the executive board, members of the supervisory board are often present at consultation meetings with works councils. Although the works council has the same rights as the shareholders, they do not have the right to elect members of the supervisory board. They only may nominate candidates when a vacancy occurs, which implies that only an indirect influence is exerted on the composition of the supervisory board. The supervisory-board itself, however, actually decides upon the election of individual members according to the co-optation principle.
Management
& Change, Volume 6, Number 2 (Winter 2002)
Parasuraman and Goodijk 267
THE RIGHTS OF WORKS COUNCILS In general, the rights of works councils concern at tile first place the provision of information on all, relevant matters. The works council has the right to make proposals to the employer, the right to give advice on all major strategic decisions, such as mergers and take-overs, closure or reorganization and major investments, and the right to approve with decisions on social issues. This is the most far reaching right as employers have to seek the support for plans before the qecision is taken. Although there may rise disputes on the definition of "timely", this right concerns the main activity of the works councils. Recent research shows that the influence of works councils on personnel affairs is high or at least reasonably high. After this issue organizational and general affairs are the main areas on which works councils influence the company policy (Van het Kaar and Looise, 1999). In general it is concluded that the position of the works council in the Netherlands has evolved towards a matured position of the works council-as the title of the last mentioned reference would suggest. The works council has also the right to negotiate specific working times arrangements when the employer attempts to introduce deviant flexible - working times. Another important area in which the works council has also an important say is that of health and safety. According to this law the employer should consult the works council in advance before decisions are taken or a new policy is adapted. In practice, this consultation is often conducted through a health and safety committee of the works council. In small enterprises, where there is no works council, a safety committee has to be set up with the same powers and responsibilities in regard to working conditions as a works council. It is composed of workforce representatives and experts who are connected with the enterprise (Van der Heijden and De Gier 1996). With the right of approval on issues of social policy the relationship with bargaining on wages and working conditions in general is very close as labour-related matters include payment systems, job evaluation schemes, enterprise's work rules and training programmes. The monopoly of the trade unions is, however, safeguarded by the law by the clause that the right of consent does not apply to items that have been included as a part of a collective agreement. With the decentralization the works council has however gained a more prominent position. Frame'agreements Management
& Change,
Volume 6, Number 2 (Winter 2002)
268 Work Councils in The Netherlands and their Impact on Company
are specified at the enterprise-level with the support of the works council or by the works council as such. Also, in new sectors there are collective agreements concluded by the works council. Most relevant here is the right to advise on strategic matters: takeovers, reorganizations and closure etc. If the employer does not follow the advice of the works council, the works council can appeal to the Enterprise Chamber of the Amsterdam Court. If the court rules that the employer's decision is not made in fairness, the decision has to be withdrawn. In several cases the decision to close down a plant was reversed. Recently, the court decided that the decision to relocate a firm of Philips in Terneuzen, which the employer wanted to relocate to Eastern Europe was withdrawn. The main argument was that the employer would not have followed the right procedure to consult the works council. Employers have to provide sufficient information in a timely manner, explain their decisions and they have to show that consideration was given to employee interests. In this case the works council designed an alternative plan which they felt had not been given enough consideration by the employer. Like in the field of working conditions, in specific cases of restructuring and reorganizations the role of the trade unions and the works council threaten to overlap. The employer has to consult the works council in the case of contemplating a company merger, whereas the unions have to be given opportunity to express their view. Although in practice, unions may provide useful support for works councils and the works council can offer union members an appropriate forum for expressing their views, there is sometimes competition felt between both channels of workers' representation. And, like in other fields of policy making, the works counciI is a prominent body which the employer has to warrant when important decisions are made.
THE CASE STUDY AT SHELL, THE NETHERLANDS The role of Staff Council (SC), Central Staff Council (CSC) and European Shell Forum Now we shall assess indirect employee participation with focus upon staff councils (SC) only. At Shell, there are three different layers of staff councils: local SC, central SC and Shell European Forum (see Figure-I).
Management
& Change.
Volume 6, Number 2 (Winter 2002)
..â&#x20AC;˘ n""
,,,J
,... _-~~~--~---~-~----~-------------~-----
Parasuraman
and Goodijk 269
The Local SC One of the interesting findings in Shell is that most respondents (both management and employee representatives) use the term staff council instead of workers' council which is prescribed in the National Workers' Councils Act. We asked them why they used the term staff council rather than works councils. The answer was that the works councils practice derives from pluralist ideas, which acknowledge the existence of divergent or sectional interests operating within a framework of unequal power relations between employees and employers (Hyman and Mason, 1995). Staff councils mostly have an advisory role to the management team (Markey et aI., 2001) and have a unitarist context where management and employees have common objectives towards the performance of the company. The Human Resource Manager of NAM said in our interview on local SCs that management always refers to the SC to make any changes in human resource management policies. He described why the SC must be formed in any enterprise under the Dutch Works Councils Act. According to him, the law pres~ribes that the entrepreneur maintaining an enterprise in which at least 100 persons are employed or at least 35 perspns work more than 1/3 of normal working hours, is obliged, in the interest of the sound functioning of the enterprise in all its objectives, to establish a works council for the purpose of consultation with and representation of the persons employed in the enterprise and to comply with the regulations laid down by or by virtue of this Act with regard to the council (Works Council Act, 1992). For instance, if the company wants to change its salary scale, then the company asks for approval from the Sc. If the SC says 'no', then the company cannot change its salary policy. The same goes for other issues like company mergers with another company or the selling off of a part of the company to another company. The employees have full rights to intervene on this issue. His idea, which is also supported by Otten, Director of HRM, Shell Netherlands and Romein, Chairman of the local SC in NAM, is that local SCs will concentrate on their local issues and the CSC will concentrate more on central strategies and corporate issues. Furthermore, the SC also plays an important role in labour conditions. In the Netherlands, the SC has a strong right to approve or not to approve the changes of labour conditions. If the SC says no, then the company will have difficulty, implementing any policy. If the company changes the Management
& Change. Volume 6, Number
2 (Winter 2002)
.-c--_
270 Work Councilsin The Netherlands and their Impact on Company labour policies without consulting the SC, then the SC will bring the case to the labour court.
Issues within Central SC A major feature of HR in Shell is the combination of several units. Each of the units has its own management and business. In regard to that, the units also each have their own view of HR management. Shell Chemical, for instance, can be different from Shell Refinery and Oil. This has become one of the problems for the Central sc. Each of these companies has its own HR policy. This is witnessed by Burks, Director of the Central Sc. He said that "we do not want to create too big a difference between the chemical company and the refinery company ... it is not good for the Dutch situation." The big difference here means that the Central SC tries to avoid making different policies for each company, but rather tries to make one proposal that applies to all its companies in the Netherlands. Further, he said that the HR Department at Shell headquarters and the Central SC are working very closely together to draw certain procedures on employee relation's issues through direct employee participation. Usually, the HR people will develop certain policies on HR matters together with CSC members. For example, the company (represented by HR people) proposed to implement a policy on childcare during the daytime for parents who work with Shell. This policy was discussed by a Work Group at Shell, which consists of the HR Department and two members of the CSc. The discussions between these two parties can be in the form of direct participation rather than indirect participation. However, the unique element here is that the HR Department includes the CSC as its partner to implement any policy in the company. Moreover, the final decisions on this policy will be based on the input of both parties. In other words, HRM welcomes the establishment of CSC in order to achieve the mission and vision of the company in the long run. If we tum to indirect participation within Shell, then it is a more formal procedure of consultations and discussions with the management team on certain types of issues, usually corporate issues. Burks (2001) mentions a very interesting example of a proposal by a company in Shell, and which the CSC did not agree with. The company proposed a share of options to middle managers. The esc only got to know about the proposal in February 2001 although management had Management
& Change, Volume 6, Number 2 (Winter 2002)
Parasuraman and Goodijk 271 already developed this proposal since 2000. When the proposal came to the CSC, it did not agree with certain terms and conditions. The CSC wondered why such a good proposal was not also applied to lower level management. Shell not only applied this proposal to employees in the Netherlands but also to all Shell companies in the world. If the CSC did not agree with the proposal, then it would also affect the company in its implementation in other Shell companies in the world. Therefore, both parties must evaluate the proposal very carefully in order to avoid any conflict in future. The discussion on this matter is still ongoing at Shell. In Burks' opinion, legislation plays an important role for Shell to introduce an SC or practise indirect participatIon. If there is no law on staff councils, then the company can implemept such policies without consulting with staff, even though Shell claim in their business principles that they have a responsibility towards employees to encourage their involvement in planning. (Royal Dutch! Shell Group of Companies, 1997). Therefore, the SC must be very careful when meeting a management team or the Director of the Company. The CSC must study any company proposal before agreeing with this proposal. If the CSC makes a mistake in evaluating the proposal, then this will affect all employees in the Shell company, not only in the Netherlands but worldwide. Shell European Forum At European level, the work participation concept is prescribed under the European Workers Councils (EWCs) Directive. Shell also established the Shell European Forum and its functions are almost the same as EWCs. This forum will playa role as a base for all management teams and staff councils within European countries (Shell companies) who meet together to discuss matters concerning the employees and the future development of the company in Europe. The main functions of this forum are to exchange information, hold consultations and start a dialogue on matters such as business, reorganization of company, mergers, take-over of companies (Zeegers 2001), etc. At the Shell European Forum, management and CSC discuss decisions that have already been taken. However, sometimes management and CSC face problems in implementing certain policies due to the different backgrounds of European countries, in terms of their historical backgrounds, different perspectives on workers' participation, different laws on works councils and other problems. However, in the near future, the Shell European Forum will play an important and active Management
& Change,
Volume 6, Number
2 (Winter 2002)
272 Work Councils in The Netherlands and their Impact on Company role with Shell expanding its operations in European countries. Figure-! The different layers of Staff Councils in Shell, the Netherlands
SHELL EUROPEAN FORUM (Corporate and Strategic Issues)
CENTRAL STAFF COUNCIL (Corporate and Strategic Issues)
i
LOCAL STAFF COUNCILS (Operational/Func-tional and Sometimes Strategic Aspects)
Source: Compiled by the authors WORKS COUNCILS IN NETHERLANDS: LEARN FROM THEM
WHAT
WE CAN
Though we do not suggest that what we call Dutch 'best practices' described above are the only possibility for Asian companies to develop, we take these examples for analyzing possible strategies for Asian companies. Asia is developing into a new form of participation of which the direction is rather uncertain. Although there is a widespread experience now, it is also clear that there is no common way to deal with the company strategy and structure. Therefore, these examples may be useful for those Asian companies who try to playa serious role with strategic decision-making of the international enterprise and, therefore, try to become a strategic player at corporate level.
Management
& Change.
Volume 6. Number 2 (Winter 2002)
Parasuraman and Goodijk
273
It is obvious that some of the lessons are directly related with the situation of the Dutch system of industrial relations and of corporate" governance. It should be kept in mind that in the Dutch system the enterprise is administered by a dual board: an executive and a supervisory board (O'Kelly and Veersma, 1997; en Goodijk, 2000). Also, as has been shown in the former section, the system and practice of workers participation through works councils differ from other European countries (Slomp, 1995). Therefore, it is not appropriate to adapt the lesson indiscriminately to every multinational corporation (MNC). Again, the lessons we draw are meant for the works council who strives after a position of pro-active, rather as a strategic player at the enterprise level. The case is, as suggested earlier, selected on the strategic dimension which is apparently present and the fact that the international market is a major factor affecting the choices for restructuring. The first requirement for a works council to achieve a pro-active attitude is to be involved with decision making at an early stage of decision making. This basic requirement is, however, no guarantee for an input that fits the need of works councils. The Dutch experience shows that, in order to be an effective countervailing power with regard to management, the works council has to develop its own knowledge base. Information has to be gathered and input has to be delivered based on own investigations and initiatives. Like in the cases described, experts from outside the enterprise may support to gather this information and develop criteria to counter plans of management. In order to formulate these criteria, primarily addressing social effects of decisions, at an early stage clear appointments should be made between WC and trade unions in order to prevent playing off against each other in the following stages of decision making. Next, a requirement for the works council is that a dialogue should b.e developed with management. The dialogue should be such that arguments can be developed through interaction and strategic discussions with the BofD (Heller, 1998). While the short-term policies may be easy way to see through, the long-term effects may be hard to detect and not always to foresee, especially when it concerns the strategic background of mergers and take-overs. Reorganizations that take place in such a setting have to be analyzed upon their effects for employment and working conditions and upon the coherence of the different decisions behind.
Management
& Change.
Volume 6, Number
2 (Winter 2002)
274 Work Councils in The Netherlands and their Impact on Company
The most obvious advantage of a dialogue to be held is that real involvement can be realized, but the disadvantage might be that positions are not always clear. The works council might be "used" in this way to bring the bad news and settle potential conflicts with management. However, to avoid such a role of the works council-taking into account that the decision making of management resembles mostly a garbage canclear appointments should be made with the Bofl) about a phased involvement and consultation procedure. Although the direction of the dialogue might be unclear, the phases with respect to a potential take-over or merger can be distinguished as a process variable. Internally, the works council has to divide tasks between the different members. Also, the stepwise structure of works council might serve to delegate different steps and actions of decision making. It is, for example, most suitable and logical to allocate the strategic decision making to the top level of the structure of works councils, whereas the local and/ or regional works councils might direct themselves to the operational level of decision making and the implementation and fine-tuning of decisions at the plant level. It is most evident that trade unions will have to play at this level a role of at least as a supporter of this implementation trajectory. By creating such liaisons a strong co-ordination structure can be developed in order to match the strategic decision making and the implementation of decisions at the plant-level. This poses high demands upon the co-ordination function and exchange of information. As the works council might develop more into a strategic sparring partner, the same problems that management confronts when making decisions would be experienced by works councils. When contacts are brought about and are maintained, works council develop a multiple set of relationships with different actors who interact within different networks in which decisions are made on radical restructuring of firms with often far-reaching consequences for employers and employees.
CONCLUSION In summary, the following suggestions can be given to Asian companies who want to become a more strategic player: Improvement of the co-operation between Works Councils and Unions, especially the improvement of the co-operation between Works Management
& Change,
Volume 6, Number 2 (Winter 2002)
11"1
fj
,fr
I
,
'I
I'.
'.
i
I, 1 J" Iii 1
.,1','
II
II
Parasurarnan and Goodijk 275
Councils and Trade Unions is crucial for the future position of workers' participation in corporate governance. There are opportunities to deepen the mutual relationship, to take advantage of each others' specific strengths and to use each other as a platform and sounding board. Shaping the participative company: There is an increasing interest in all kinds of forms of Direct Workers' Participation: new forms of opera~ tional meetings, quality circles, improvement teams, self-guiding team etc., management-instrument trying to involve workers-either individually or as a group- in the implementation of policy, the design of the working place and the improvement of the work processes. So direct participation has nothing to do with Workers' Participation in the strategic decision-making at corporate level, but can indeed function as an important basis for the contribution of workers-through their representatives upto corporate strategy. Direct participation and indirect/representative workers' participation at corporate level may complement each other. and indirect/representatives to the corporate strategy. Organizing frequent tripartite discussions offers the possibility to keep each other informed. Ducth experiences show that especially work councils can strengthen their position at corporate ,level. Works Councils. are more and more able and willing to participate in the decision-making: share their visions and bear responsibility. And at the same time more and more Board of Directors are willing to give the Works Council the opportunity to get involved in an early stage of the decision making, since they discovered that a pro-active role of Work Councils in generally works positive to the company: less polarisation and conflicts, more basis
REFERENCES Parasuraman, Balakrishnan (2001) "Employee Involvement Scheme Practices in The Private Sector: Case Study From Sabah, East Malaysia," Paper presented at the 4th Asian International Industrial Relations Associations (lIRA) Congress, Manila, The Philippines, November 20-21. Parasuraman, Balakrishnan (2002) "Employee Involvement Schemes Practices in The Private Sector: Case Study From Sabah, East Malaysia," MANU (Journal of Centre For The Promotion of Knowledge & Language Learning, VMS) forthcoming Parasuraman, Balakrishnan and R. Goodijk (2001a) "Workers Participation and Works Councils in Europe: Some Lessons To Malaysia," Journal of Pemikir, NO.27, pp. 209- 242 (Malay Version). Management
& Change,
Volume 6, Number 2 (Winter 2002)
--~----,"''''"' 276 Work Councils in The Netherlands and their Impact on Company Balakrishnan Parasuraman and R Goodijk (2001b) The Link between Direct and Indirect Employee Participation at the Workplace: Evidence From Royal Dutch IShell Group in the Netherlands, Research Project sponsored by UMESP, KL and University of Bocconi, Italy (July 2000 till October 2001). Cressey, P. (1997) "Transnational works councils and macro European developments," R Markey and J. Monat (eds.), Innovation and Employee Participation Through Works Councils. International Case Studies. Avebury, Aldershot. Pp. 29-48. Dolvik, J. E. (1999) An emerging Island? ETUC, Social Dialogue and the Europeanisation of the Trade Unions in the I990s. Brussels: ETUI. Drucker, M. and 1K. Looise (2001) "Organizational Change, Direct Participation, and the Dutch Works Council," Paper presented at 6th European IIRA Congress, Oslo, Norway, June 25-29. ETUI (1995) European Works Councils: Inventory of Companies Affected by Council Directive No 94/95 of 22 September 1994. Brussels: ETUI. Ferner, A and R. Hyman (1998) Changing Industrial Relations in Europe. Basil Blackwell, Oxford. Gold, M. and M. Hall (1992) Report on European-Level Information and Consultation in Multinational Companies - An Evaluation of Practice. European Foundation for the Improvement of Living and Working Conditions, Dublin, Goodijk, R. (1998) Corporate Governance en Medezeggenschap (Corporate Governance and Co-determination). Van Gorcum, Assen. Goodijk, R (2000) "Cotporate Governance and Workers Participation," a contribution to the 12th IIRA World Congress in Tokyo. GITPlTilburg. Kaar, R van het, and lC. Looise (eds.) (1999) De volwassen OR (The matured works council). Samsom, Alphen aan den Rijn. Lamers, J.J.M. (1998) Toegevoegde waarde van Europese ondernemingsraden [Added Value of European Works Councils]. AWVN, Haarlem. Markey, Rand Monat, J (eds.) (1997) Innovation and Employee Participation Through Works Councils. International Case Studies. Avebury, Aldershot. Markey, R; Hodgkinson, Kowalczyk and Pomfret (2001) "Gender, Casualisation and Employee participation in the Workplace: Comparing Australia with The EU," The paper presented at 6th European IIRA Congress, Oslo, Norway, June 25-29. Markey, R et.al (2001) Models of Employee Participation in a Changing Global Environment:Diversity and Interaction, Ashgate, Aldershot. Marginson, P. and K. Sisson (1994) "The Structure of Transnational Capital in Europe: the Emerging Euro-company and its Implications for Industrial Relations," In: R. Hyman and A. Ferner (eds.), New Frontiers in European Industrial Relations. Oxford: Basil Blackwell, Pp. 15-51. Marginson; P. et al (1998) Negotiating European Warks Councils. An Analysis of Agreements under Article 13. European Foundation for the Improvement Management
& Change,
Volume 6, Number 2 (Winter 2002)
--"l
288 Equity Sensitivity, Organizational
Justice
The multiple regression method (Aiken, & West, 1991) was used for testing the moderation hypotheses. The multiple regress-ion method for testing moderator effects involves regressing sequentially, the dependent variable on (a) the independent variable and the moderator variable, and (b) the variable created by forming cross products of the independent variable and the moderator (Cohen and Cohen, 1983). A moderator effect is indicated if the R2 obtained by regressing the dependent variable on the independent variable, moderator, and independent variable-moderator cross product is significantly above the R2 obtained by regressing the dependent variable on the independent variable and the moderator alone (Stone, 1986).
RESULTS Sample Demographics Out of the 157 employee respondents, 49.68 percent were females, 50.32 percent were males, 38 percent were graduate students, and 7.05 percent were union members. Most of them were employed full-time (93.59 percent) and 29.49 percent had supervisory responsibilities. The average tenure was 4.503 years (SD = 4.921). Almost ninety-five percent (94.9 percent) were between the ages of 20 and 49 years. The major industries represented in the sample were, healthcare (13.4 percent), banking/ finance (14.6 percent), and other (48.4 percent). The major job categories represented in the sample were, professional (34.4 percent), office/ clerical (15.3 percent), technical (12.1 percent), and management (12.1 percent). Females constituted 46.11 percent (53.89 percent males) of the supervisory sample. The average tenure of the supervisors was 6.994 years (SD = 6.983). More than eighty percent (82.1 percent) reported their level of formal education as an undergraduate degree or graduate school. Almost ninety percent (90.5 percent) were between 20 and 49 years of age. Tests of Hypotheses Hypotheses la stated that distributive justice and procedural justice will be positively related to OCB-O. This hypothesis was not supported . (r=0.02, ns and r=O.13, ns respectively). Hypothesis 1b stated that interactionl justice would be positively related to OCB-S. This hypothesis was supported (r=0.23, p<.Ol). Hypotheses 2a and 2b referred to the Management
& Change,
Volume 6, Number
2 (Winter 2002)
Moideenkutiy ']2,7
(1994) argue that sample specific cutoff points are necessary because of the unique characteristics of any particular sample, including differing levels of social desirability, varied organizational contexts, and age homogeneity or heterogeneity, that can influence response to the ESI. When a continuous variable is arbitrarily converted into a categorical variable, information is lost (Stone and Hollenbeck, 1984). In this study it is proposed to use equity sensitivity as a continuous variable that moderates the relationship between different correlates and types of OCB. Equity Sensitivity Index will therefore be used as a continuous s'cale with the score indicating the level of benevolence. Others have used ESI as a continuous scale in OCB research (Ryan, 1998). Miles et al., (1989) report a test retest reliability of .80 and a reliability (alpha) of 0.79 for this scale.
ORGANIZATIONAL
CITIZENSHIP BEHAVIOR
Organizational citizenship behaviour was measured with the target based OCB measure developed by Moideenkutty (2000). This measure consists of three scales, OCB-Organization (OCB-O), OCB-Supervisor (OCB-S), and OCB-Co-worker (OCB-C). The OCB-O and OCB-S scales were used in this study.
OCB-Organization (OCB-O) This scale consists of four items. A sample item is "defends the organization when other employees criticize it." Responses ranged from "never true" (1) to "always true" (5). The Cornbach's alpha for this scale was 0.77.
OCB Supervisor (OCB-S) This scale consisted of four items. A sample item is "volunteers for overtime work when needed"). The responses ranged from (1) "never true" to "always true" (5). The Cornbach's alpha for this scale was 0.79.
Statistical Analysis Hypotheses regarding the relationship between organizational justice variables and OCB directed toward the organization and supervisor were tested using correlations analysis. Similarly the hypotheses regarding the relationship between equity sensitivity and OCB were also tested with correlation analysis. Management
~~~"~~
& Change, Volume 6, Number 2 (Winter 2002)
,.
".~,.~ ,... u--
286 Equity Sensitivity, Organizational
Justice
Procedural Justice Procedural Justice was measured with the 7-item Fairness of Formal Procedures scale developed by Moorman (1991). This scale measures the extent to which employees perceive that fair procedures are used in the organization. Items focus on procedures designed to promote consistency, bias suppression, accuracy, correctability, representativeness, and ethicality. A sample item is "Formal procedures used in your organizations to make decisions about promotions, raises, work assignments, discipline etc. are designed to: Hear the concerns of all those affected by the decision." The responses range from 1= strongly disagree to 7 = strongly agree.
Interactional Justice Interactional Justice was measured with the 6-item scale developed by Moorman (1991). This scale measures employee perceptions of the fairness of interactions that accompany an organization's formal procedures. It foct;lses on the interpersonal behaviour of the supervisor while implementing organizational procedures. A sample item is, "When decisions about promotions, raises, work assignments, discipline etc. were made, in general: Your supervisor considered your view point." The responses range from 1= strongly disagree to 7 = strongly agree.
Equity Sensitivity Equity Sensitivity was measured with the 5-item Equity Sensitivity Index (ESI; Miles, Hatfield, Huseman, 1989). The ESI is a forced- distribution measure that identifies a respondent's preference for giving versus receiving in work situations. For each item, the respondent distributes 10 points between a benevolent response and an entitled response. The idea is that a benevolent respondent will distribute more points to the benevolent response and the entitled respondent will give more points to the entitled response. An equity sensitive respondent is expected to distribute the points equally between the two responses. An example is, "In any organization I might work for, it would be more important for me to: (a) get from the organization, (b) give to the organization." Here (b) is the benevolent response. ESI is scored by summing the points allotted to the five benevolent responses (range: a to 50). Usually, sample specific cutoff points (+/- 1/2 standard deviation from the mean for the sample) are used to divide a sample into the three ESI groups (King, Miles, & Day, 1993; Miles, Hatfield, & Huseman, 1994). King et al., (1993) and Miles et al., Management
& Change.
Volume 6, Number
2 (Winter 2002)
Moideenkutty 285
fall semesters of 1999. Participation in the survey was voluntary. Instructors were requested to give extra credit to the students for participating in the survey and many instructors agreed to do so. The survey consisted of two parts, part one (employee survey) and part two (supervisor survey). One part (part one or part two) was completed by the student and returned to the researcher. The other part was completed by the immediate supervisor of the respondent (when the student was the employee) or by subordinates (when the student was .the supervisor). When the student was a supervisor, he or she was asked to give the employee survey to two employees, one whom he or she considered to be a good organizational citizen and the other whom he or she considered to be a not so good organizational citizen. Good organizational citizens were described as "employees who went above and beyond the call of duty." Examples of good organizational citizenship were also provided. The supervisor or the employee completed their part and mailed them directly to the researcher. Addressed and stamped envelopes were provided for this purpose. The two parts of the survey had a common serial number, which was used to match the employee and the supervisor parts of the survey. Organizational justice and equity sensitivity items were included in the employee survey. Organizational citizenship behaviour was rated by supervisors. A total of 357 surveys were administered. The response rate was 43.98 percent, and 157 matched employee-supervisor surveys were returned. Unfortunately, missing values reduced the effective sample size for statistical analysis to as low as 126.
MEASURES Distributive Justice Distributive Justice was measured with the 6-item Distributive Justice Index (DJI) developed by Price and Mueller (1986). This scale measures the degree to which rewards received by employees are perceived to be related to performance inputs. Each item refers to the degree to which a respondent believes he' or she is rewarded fairly in relation to his or her education, experience and so on (e. g. "Please indicate the extent to which you feel fairly rewarded by your organization: Considering the responsibilities that you have?"). The responses range from extremely unfair (1) to extremely fair (7). . Management
& Change, Volume 6, Number 2 (Winter 2002)
284 Equity Sensitivity, Organizational
Justice
organization and supervisors and in return engage in OCB, they may consider their output/input ratios to be in balance. This may not the case for entitleds in the absence of tangible, extrinsic rewards in return for extra-role contributions. The above review of the literature suggests that the relationship between organizational justice variables and OCB directed toward different targets should be stronger for benevolents than for entitleds. Equity sensitives represent the mid point in the equity sensitivity spectrum bounded by benevolents and entitleds on either ends. The above relationship should be in between that of benevolents and entitleds for the equity sensitives. Thus, equity sensitivity is an individual difference variable that may moderate the relationship between organizational justice variables and OCB directed toward different targets. This leads to the following hypotheses: Hypothesis 2a Equity sensitivity will be positively related to OCB-O. Hypothesis 2b Equity sensitivity will be positively related to OCB-S Hypothesis 3a The relationship of procedural justice and distributive justice to OCB-O will be moderated by equity sensitivity such that, the relationship will be stronger for benevolents and weaker for entitleds. Hypothesis 3b The relationship of interactional justice to OCB-S will be moderated by equity sensitivity such that, the relationship will be stronger for benevolents and weaker for entitleds.
METHODOLOGY Sample and Data Collection The sample consisted of employed graduate and undergraduate business students from two universities in the northeastern part of United States. Data was collected from working students, because this population represents a wide range of occupations, organizations, and hierarchical levels, thus enhancing the generalizability of the findings. Surveys were administered to the subjects during class with the permission of the instructor. Data collection was done during the summer and Management
-_-iiâ&#x20AC;˘â&#x20AC;˘â&#x20AC;˘
mti
& Change.
Volume 6, Number 2 (Winter 2002)
_
l
Moideenkutty 283
greater than those of others. They prefer to receive more than they are willing to give. Later research on equity sensitivity (King, Miles and Day, 1993) led to a refinement and redefinition of the construct. Benevolents are now considered to have greater tolerance for, but not preference for, underreward (low output/input ratio). Entitleds are considered to be intolerant of underreward and more tolerant of overreward (high output/input ratio) than either equity sensitives or benevolents. Social exchange theory (Blau, 1964) and the norm of reciprocity (Gouldner, 1960) suggest that individuals experience a sense of indebtedness when they are the recipients of beneficial actions from others. From this perspective, aCB directed toward specific targets can be seen as way of repaying this debt. However, it stands to reason that this sense of indebtedness will depend on each individual's equity sensitivity. Since entitleds have a higher tolerance for overreward, they are less likely to experience a sense of indebtedness than benevolents. Thus they are less likely to engage in aCB. King and colleagues (1993) also found that entitleds have a stronger exchange ideology than benevolents. Exchange ideology (Eisenberger, Hutchison, Huntington and Sowa, 1986) refers to the belief that contributions must be made only to the extent that rewards are forthcoming from others. Miles, Hatfield, and Huseman (1994) found that benevolents focus on inputs, while entitleds focus on outcomes. autcomes preferred by entitleds are extrinsic and tangible. The most important work outcome for them is pay. Benevolents place greater importance on intrinsic outcomes. Because of their strong exchange ideology and focus on pay as an outcome, entitleds may be unwilling to engage in aCB, behaviour that is not explicitly rewarded in a tangible way by the organization, even when they receive fair treatment and support from the organization and supervisors. Benevolents, on the other hand, have a weak exchange ideology and a preference for intrinsic outcomes. They are more likely to respond to good treatment by engaging in aCB. Miles et aI., (1994) suggest that both benevolent~ and entitleds prefer balance in their output/input ratios. The difference may be only in the type of outcomes they prefer. Benevolents may have a lower preference for extrinsic tangible outcomes, but this is balanced by their greater preference for intrinsic outcomes. Similarly, entitleds may have a lower preference for intrinsic outcomes but a higher preference for tangible, extrinsic outcomes. When benevolents receive fair treatment and support from the Management
_
& Change, Volume 6, Number 2 (Winter 2002)
282 Equity Sensitivity, Organizational
Justice
organization and with their supervisor. Thus, employees who develop social exchange relationship with the organization as a whole may engage in behaviour that benefit the organization and employees who develop social exchange relationships with their supervisor may engage in behaviour that benefits the supervisor. Both Settoon, et al., (1996) and Wayne, et al., (1997) suggest that OCB is a social resource that can be exchanged in return for the receipt of social rewards from the organization and superiors because of its discretionary nature. Since distributive justice and procedural justice are characteristics of the organization as a whole, these variables are likely to have a positive relationship to OCB directed toward the organization. Hypothesis 1a: Distributive justice and procedural justice will be positively related to OCB directed toward the organization. Since interactional justice is a characteristic of the supervisor, this variable is likely to have a positive relationship to OCB directed toward the supervisor. Hypothesis 1b: Interactional justice will be positively related to OCB directed toward the supervisor.
Moderating Role of Equity Sensitivity Equity theory (Adams, 1963, 1965) suggests ~hat individuals evaluate their output/input ratio in a relationship relative to the output/input ratio in comparison to others. Individuals experience distress when this evaluation leads to perceptions of inequity. These individuals are then motivated to restore equity. The distress prediction of equity theory is based on the assumption that individuals are equally sensitive to inequity (Huseman, Hatfield and Miles, 1987). However, research has shown that there are individual differences in the extent to which distress is experienced as a result of inequity (Major and Deaux, 1982). buseman, Hatfield, and Miles (1989) proposed Equity Sensitivity as an individual difference variable to explain differential responses to perceived inequity. They propose that individuals have different preferences for equity and that these preferences can be represented along a continuum with three classes of individuals: Benevolents, Equity Sensitives, and Entitleds, Benevolents prefer their output/input ratios to be less than that of comparison others. They prefer to give more than they receive. Equity sensitives prefer their output/ input ratios to equal those of others. -They prefer to give only as much as they receive. Finally, entitleds prefer their output/input ratios to be Management
& Change,
Volume 6, Number 2 (Winter 2002)
Moideenkutty 281 and Folger, 1997). One form refers to the fairness of organizational procedures. The other form, commonly termed interactional justice (Bies and Moag, 1986), focuses on the employees' perceptions of the quality of interpersonal treatment received from supervisors during the enactment of organizational procedures. Current research in organizational justice indicates that procedural justice is linked to organizational outcomes and interactional justice is linked to supervisor outcomes (Cropanzano and Prehar, 1999; Masterson, Lewis, Goldman and Taylor, in press; Masterson, and Taylor, 1996). Organ (1990) suggested that organizational justice would be a determinant of OCB. Specifically, Organ (1988) argued that measures of job satisfaction have an affective and a cognitive component. According to Organ, the cognitive component in satisfaction measures consists primarily of perceptions of fairness (Organ, 1990) and the relationship between job satisfaction and OCB is mainly due to this cognitive component in satisfaction measures (Organ and Konovsky, 1989). Organ (1990) suggested that when both satisfaction and fairness are measured, the latter would explain more variance in OCB. Moorman (1991) found that when perceptions of fairness were controlled, job satisfaction was not related to OCB. Organ (1988) used equity theory to argue that employees will respond to perceived unfairness by lowering their inputs. Lowering task productivity can have negative consequences for employees. Employees may thus respond by lowering inputs of discretionary behaviours like OCE. When employees perceive that they are being treated fairly by the organization, they will tend to define their relationship with the organization as a social exchange (Organ, 1988; Moorman, 1991; Konovsky and Pugh, 1994). As a result, employees will reciprocate fair treatment by the organization by engaging in discretionary behaviours like OCB. Settoon, Bennett, and Liden (1996) used social exchange theory (Blau, 1964) and the norm of reciprocity (Gouldner, 1960) to argue that recipients of positive actions will experience a highly aversive sense of indebtedness, which can be reduced through reciprocation. These individuals will "seek to reciprocate in ways that maximize the likelihood that the partner to the exchange will notice this effort" (219), because the sense of indebtedness is reduced only when the donor is benefited. Settoon, et al., (1996) and Wayne, Shore, and Liden (1997) argue that employees may develop separate social exchange relationships with the Management
_~~
& Change. Volume 6, Number
-
__
2 (Winter 2002)
UA .i_iii"_'__'_'d._â&#x20AC;˘. _i._ii.-----
~i---"'._IIl_"m
280 Equity Sensitivity, Organizational
Justice
they are the recipients of beneficial'actions from others. Entitleds are therefore less likely to engage in OCB. Further, since the norm of reciprocity suggests that individuals engage in OCB due to a sense of indebtedness,equity sensitivity is likely to moderate the relationship between organizational justice variables and OCB directed toward different targets. These relationships have been tested before, Blakely, Andrews, and Moorman (2001) found a positive relationship between equity sensitivity and OCE. They also found that entitleds who perceive low organizational justice report doing significantly less OCBs than any other equity sensitivity/organizational justice condition. The present study attempts to replicate and extend this line of research. Blakely et aL used composite measures of organizational justice and OCB. This study uses separate measures for distributive justice, procedural justice, and interactional justice and for OCB directed toward the organization and the supervisor. Blakely et aL measured all the variables from a single source. This study measured justice variables and equity sensitivity from employees, while supervisors rated the OCB. The findings regarding the relationship between equity sensitivity and OCB and the moderating role of equity sensitivity as a moderator of the relationship between equity sensitivity and OCB will support the importance of considering the level of equity sensitivity while selecting employees. This may be especially important when the organization wants to maximize its "payoff' from HRM practices devised to promote OCB. This is because the findings may support the conclusion that positive discretionary actions on the part of the organization or its representatives are more likely to elicit positive responses from "benevolent" employees.
LITERATURE HYPOTHESES
REVIEW
AN
FORMULATION
OF
Organizational Justice Organizational justice is concerned with the description and explanation of the role of fairness in the workplace (Greenberg, 1990). Two main sources of organizational justice have been distinguished in the literature, distributive justice and procedural justice. (Greenberg, 1987; Greenberg, 1990), Distributive justice focuses on the content, the fairness of the ends achieved. Procedural justice focuses on the process, the means used to achieve those ends. There are two forms of procedural justice (Skarlicki, Management
& Change,
••••
Volume 6, Number
2 (Winter 2002)
c,~
_
EQUITY SENSITIVITY, ORGANIZATIONAL JUSTICE, AND ORGANIZATIONAL CITIZENSHIP BEHAVIOUR: A RELATIONAL STUDY
Unnikammu
Moideenkutty
Data from approximately 157 matched employee-supervisor dyad$ were used to test the relationship between equity sensitivity and organizational citizenship behaviour directed toward the organization and the supervisor and the moderating role of equity sensitivity in the relationship between organiza~ tional justice variables and these two forms of citizenship. Equity sensitivity was positively related to both types of organizational citizenship. However, the data did not provide support for a moderating role for equity sensitivity in the relationship between organizational justice variables and the two types of citizenship behaviour. Implications of the findings for research and practice and avenues for future research are discussed.
INTRODUCTION rgan
(1988) defined Organizational Citizenship Behavior or OCB a's discretionary behaviour that is not directly or explicitly recog([)) nized by the organization, but in the aggregate contributes to organizational effectiveness. In OCB research, an area that has received relatively less attention is the effect of individual differences on OCB. Researchers on OCB have argued that employees engage in these behaviours to reciprocate fair treatment by the organization and/or its representatives (Organ, 1988; Organ, 1990). Empirical research has shown that organizational justice variables, representing fairness in organizations (Bies and Moag, 1986, Greenberg 1990), are positively related to OCB (Moorman, 1991). Equity sensitivity (Huseman, Hatfield and Miles, 1987) is an individual difference variable that refers to lin individual's tolerance for inequity in social relationships. Individuals who are intolerant of underreward and tolerant of overreward ("entitleds") are less likely to feel indebted when Management & Change. Volume 6. Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
_________
~
__
~•.""~, .•••
,,,;,,,m._~..D_"d'•••• '.&.•••••• _md"""'•• ',.,."••.• ~".~'".-m-'m-,m
"""~, ••__m'm~=£ •.
Parasuraman and Goodijk 277 of Living and Working Conditions, Dublin. Ramsay, H. (1997) "Fool's gold? European works councils and workplace democracy," Industrial Relations Journal, Vol. 28. NO.4. Pp. 314-322. Schulten, T. (1992) Internationalismus von unten. Europaische Betriebsriite in Transnationale Konzernen [Internationalism from bottom-up. European Works Councils in Transnational Companies]. Arbeit und Gesellschaft, Marburg. Streeck, W. (1998) "The Internationalization of Industrial Relations in Europe: Prospects and Problems," Politics and Society, Vol. 26, NO.4. Pp. 429-459. Veersma U. (1994) Workers' Rights and European Multinationals: Towards European Industrial Relations," U.J. van Dijck and lP.M. Groenewegen, Changing Business Systems in Europe. An Institutional Approach. VUBPress, Brussels. Pp. 209-236. Veersma, U. and T. Tegelaers (1997) "Information Exchange at the European Level: Unilever as a.case for European Industrial Relations," R. Markey and l Monat (eds.), Innovation and Employee Participation Through Works Councils. International Case Studies. Avebury, Aldershot. Pp. 67-86. Veersma, U (1999) "Last best? Experiences of Dutch EWCs," Transfer. vol. 5, no. 3. Pp. 302-319.
Management
------------------
& Change, Volume 6, Number 2 (Winter 2002)
â&#x20AC;˘â&#x20AC;˘
ii.~i,L~Ia:_.
~
Moideenkutty 289
relationship between equity sensitivity and OCB dimensions. These hypotheses were fully supported. Equity sensitivity was positively correlated .with OCB-O and OCB-S (r = 0.174, p < .05 an9 r = 0.257, P <. 05). Since only interactional justice was positively related to OCB-S, moderation hypothesis was tested only for this variable. The results of this analysis are shown in table 2. The interaction term was not significant, indicating that equity sensitivity did not moderate the relationship between interactional justice and OCB-S. Thus the results did not support hypotheses 3a and 3b. Summary
Table-l Statistics and Correlations
Variables Means SD Procedural Procedural Justice 4.67 1.20 0.93 Distributive Justice 4.66 1.49 0.42** Interactional Justice 5.35 1.14 0.47** Equity Sensitivity 5.308 1.304 0.051 OCB-O 3.44 0.86 0.02 OCB-S 3.59 0.94 0.03
Distributive Int. Equity OCB-OOCB-S
0.90 0.44** 0.092 0.13 0.08
0.95 0.074 0.748 0.11 0.174* 0.23** 0.257*
0.77 0.44**
0.79
Note:* p. <.05** p. <.01
Reliabilities (Cronbach's Alphas) are on the diagonal Ta6Ie.2 Results of Moderated Regression Analysis for Equity Sensitivity: Independent Variable: Interactional Justice; Dependent Variable: OCB-S Independent Variables Intercept Justice Equity Sensitivity Interaction R2 Adj.R2
F N
Note:
*
p < .05
Without Interaction 7.796** 0.096* 0.142** 0.104 0.091 8.441** 148 ** P < .01 Management
B With Interaction 9.637 0.038 0.068 0.002 0.104 0.086 5.635** 148
& Change,
Volume 6, Number
0.000 -0.005
2 (Winter 2002)
---------------------------- ..â&#x20AC;˘,,-----290 Equity Sensitivity, Organizational
Justice
INTERPRETATION Theoretical Contributions and Implications Hypotheses regarding the relationship between organizational justice variables and OCB were only partially supported. The correlations of procedural justice and distributive justice to OCB-O were not significant. This is an unexpected finding especially in the case of procedural justice. This is difficult to explain since previous research has shown a positive relationship between procedural justice and OCB. The relationship between distributive justice and OCB has been less consistent. Organ (1990) has argued that it is fairness in a social exchange that influences OCB. In other words, what is important is not fairness in the short term (distributive justice), but the perception that, because procedures are fair (procedural justice), outcomes will be fair in the long term. Seen in this light, the lack of a relationship between distributive justice and OCB is not surprising. As expected, interactional justice was positively related to OCB-S. This results parallels that of Moorman (1991). In fact, Moorman (1991) found that when interactional justice was controlled, procedural justice did not affect OCB. Equity sensitivity was positively related to both OCB-O and OCB-S. These results support the findings of the Blakely et al. (2001) study. These are robust findings, because equity sensitivity and OCB were measured from different sources. Emplooyes reported equity sensitivity and supervisors rated the OCB. Thus, the results are not contaminated by common method variance. Contrary to the findings of the Blakely et al. (2001) study, this study did not find support. for a moderating role for equity sensitivity in the relationship of organizational justice variables to OCB. The sample size for this study was relatively small for testing interaction effects. Perhaps a larger sample may have more power to detect interactions. Since the findings of the Blakely et al. (2001) study maybe contaminated by common method variance, further research with larger samples is necessary before a definitive conclusion can be made about the moderating role of equity sensitivity. The significant relationship between equity sensitivity and OCB indicates that equity sensitivity is an individual difference variable with important consequences for organizational behaviour. It may be interesting to study the relationship of equity sensitivity to other variables of consequence to Management
& Change, Volume 6, Number 2 (Winter 2002)
.~ ,,'I
Moideenkutty 291
the organization that are also based social exchange and reciprocation. These variables include organizational commitment (Allen and Meyer, _1996), perceived organizational support (Eisenberger, Huntington, Hutchison and Sowa, 1986), and'leader-member exchange (Dansereau, Graen and Haga, 1975). This is an avenue for future research. CONCLUSION This study has a number of strengths that increases the internal and external validity of the results. First, the independent and dependent variables were measured from different sources. The independent variables were measured from employees and the dependent variables were measured from supervisors. This eliminates common method variance as an alternate explanation for the results. Second, the data were collected from a very diverse sample. A number of different organizations, occupations, and levels were represented in the sample. The sample consisted of union and non-union and part-time and full-time employees. This increases the generaiizability of the results of the study. A third strength of the study was that the sample consisted of actual supervisor-employee dyads. The primary limitation of the study is that it is correlational. Therefore, no causal claims can be made for the relationship between the independent and dependent variables. Another limitation of the study is that not all individuals who were given the survey responded to it. Responding to the survey can be considered as a citizenship behaviour, and it is possible that the employee sample is biased in favour of good citizens. Respondents who were supervisors were asked to give the surveys to two employees, one who was a good citizen and one who was not such a good citizen. This may have helped to balance the sample. However, it is possible that not many of the perceived poor citizens responded to their part of the survey. Though equity sensitivity did not prove to be a moderator of the correlate -OCB relationship, it was related to both types of OCB. Though further research is necessary before a definitive recommendation can be made, equity sensitivity may prove to be a factor- that could be considered in employee selection. This may be especially important when OCB is essential for organizational effectiveness.
Management
& Change,
Volume 6, Number
2 (Winter 2002)
292 Equity Sensitivity, Organizational Justice
REFERENCES Adams, J. S. (1963) "Toward and understanding of inequity," Journal of Abnormal and Social Psychology, 67, 422-436. Adams, 1. S. (1965) "Inequity in social exchange," In L. Berkowitz (Ed.), Advances in experimental social psychology (Vol. 2, pp. 267-297). New York: Academic Press. Allen, N. 1., and Meyer, 1. P. (1996) "Affective, continuance, and normative commitment to the organization: An examination of construct validity," Journal of Vocational Behavior, 49, 252-276. Bies, R. 1., & Moag, 1. S. (1986) "Interactional justice: Communication criteria of fairness," In R. J. Lewicki, B. M. Sheppard and M. H. Bazerman (Eds.), Research on negotiations in organizations (VoU, pp. 43-56). Greenwich, CT: Jai Press. Blakely, G. L., Andrews, M. C. and Moorman, R. H. (2001) "The moderating effects of equity sensitivity on the relationship between organizational justice and organizational citizenship behaviours," Paper presented at the annual meeting of Academy of Management, Washington, D.C. Blau, P.M. (1964) Exchange and power in social life. New York: John Wiley & Sons. Cropanzano, R. and Prehar, C. A. (1999) "Using social exchange theory to distinguish procedural from interactional justice," Paper presented at the annual meeting of the Society for Industrial and Organizational Psychology, Atlanta, GA.
Dansereau, F., Graen, G. and Haga, B. (1975) "A vertical dyad linkage approach to leadership in formal organizations: A longitudinal investigation of the rolemaking process," Organizational Behavior and Human Peiformance, 13, 4678. Eisenberger, R., Huntington, R., Hutchison, S. and Sowa D. (1986) "Perceived organizational support," Journal of Applied Psychology, 71, 500-507. Greenberg, J. (1987) "A taxonomy of organizational justice theories," Academy of Management Review, 12, 9-22. Greenberg, 1. (1990) "Organizational justice: Yesterday, today and tomorrow," Journal of Management, 16,399-432. Huseman, R. C., Hatfield, 1. D. and Miles, E. W. (1985) "Test for individual perceptions of job equity: Some preliminary findings," Perceptual and Motor Skills, 61,1066-1064. Huseman, R. c., Hatfield, J. D. and Miles, E. W. (1987) "A new perspective on equity theory: The equity sensitivity construct," Academy of Management Review, 12, 222-234. King, Jr., W. C. (1994) "The measurement of equity sensitivity," Journal of Occupational"and Organizational Psychology, 67, 133-142. Management
& Change,
Volume 6, Number 2 (Winter 2002) .
Moideenkutty 293 King, W c., Miles, E. W, & Day, D. D. (1993) "A test and refinement of the equity sensitivity construct," Journal of Organizational Behavior, 14,301-317. Konovsky, M. A., and Pugh, S. D. (1994) "Citizenship behaviour and social exchange," Academy of Management Journal, 37, 656-669. Major, B., & Deaux, K. (1982) "Individual differences in justice behaviour," In J. Greenberg & R. L. Cohen (Eds.), Equity and justice in social behaviour (pp.4376). New York: Academic Press. Masterson, S. S., and Taylor, M. S. (1996) "The broadening of procedural justice: Should interactional and procedural justice components be separate theories?" Paper presented at the annual meeting of Academy of Management, Cincinnati, OH. Masterson, S. S., Lewis, K., Goldman, B. M., and Taylor, M. S. (2000) "Integrating justice an social exchange: The differing effects of fair procedures and treatment on work relationships," Academy of Management Journal, 43, 738748. Miles, E. W, Hatfield, 1. D., and Huseman, R. C. (1989) "The equity sensitivity construct: Potential implications for worker performance," Journal of Management, 15, 581-588. Miles, E. W, Hatfield, J. D., and Huseman, R. C. (1994) "Equity sensitivity and outcome importance," Journal of Organizational Behavior, 15, 585-596. Moideenkutty, U. (2000) "Correlates and outcomes of organizational citizenship behaviour directed toward the organization, the supervisor, and co-workers: A social exchange perspective," Unpublished doctoral dissertation, Temple University, Philadelphia. Moorman, R. H. (1991) "Relationship between organizational justice and organizational citizenship "behaviours: Do fairness perceptions influence employee citizenship?" Journal of Applied Psychology, 76, 845-855. Organ, D. W (1988) Organizational citizenship behaviour: The good soldier syndrome. Lexington, MA: Lexington Books. Organ, D. W. and Konovsky, M. (1989) "Cognitive versus affective determinants of organizational citizenship behaviour," Journal of Applied Psychology, 74, 157-164. Organ, D. W (1990) Motivational basis of organizational citizenship behaviour. In L.L. Cummings and B. M. Staw (Eds.), Research in organizational behaviour (Vol. 12, pp. 43-72.). Greenwich, CT: Jai Press. Price, 1. L. and Mueller, C. W. (1986) Handbook of organizational measurement. Marshfield, MA: Pittman. Ryan, J. J. (1998) "Testing moral reasoning and the protest work ethic as determinants of organizational citizenship behaviour," Unpublished doctoral dissertation, Temple University, Philadelphia. Settoon, R. P., Bennett, N. and Liden, R. L. (1996) "Social exchange in organization: Perceived organizational support, leader-member exchange, and employee Management & Change. Volume 6. Number 2 (Winter 2002)
294 Equity Sensitivity, Organizational Justice reciprocity," Journal of Applied Psychology, 81,219-227. Skarlicki, D. P. and Folger R. (1997) "Retaliation in the workplace: The roles of distributive, procedural and interactional justice," Journal of Applied Psychology, 82, 434-443. Wayne, S. 1., Shore, L. M. and Liden, R. L. (1997) "Perceived organizational support and leader-member exchange: A social exchange perspective," Academy of Management Journal, 10, 82-1 II.
Management
& Change, Volume 6, Number 2 (Winter 2002)
FUTURE DIRECTIONS FOR HUMAN RESOURCES DEVELOPMENT: ALIGNING THE HR FUNCTION TO ORGANIZATIONAL GOALS
Daisy Chauhan
s. P.
Chauhan
The key to a successful organization lies in attracting, retaining and developing its human talent. Good Human Resources (HR) is a prerequisite to higher morale and productivity. The HR philosophy of an organization gets reflected in how the human resources are regarded, treated and managed as this plays a vital role in the' overall success of the company. Maintaining the motivation of the people is very important because ultimately it is they who can activate all other resources be it money, machine, material, media etc. It is through systematic and effective HRD systems that "ordinary" people can be converted into "extraordinary" performers. Organizations need to realise that investments in human resource development can yield rich dividends in the long run, unlike other investments which depreciate in value over time. Therefore organizations need to redefine their HR function and HR process in keeping with the present organizational needs.
INTRODUCTION
JI
n keeping with the changes world over, the Indian economy accepted the challenges of globalization and opened up through liberalization, governmental regulations giving way to the market forces to regulate the economy. Technological developments, ever increasing customer expectations, severe competition, both domestic and international and quality consciousness coupled with the forces of globalization have necessitated a re-orientation of the business organizations. Good HR is a prerequisite to high morale and productivity. The importance of HR for business . success has been aptly pointed out by Akio Morita (1987) when he says that your business and its future are in the hands of the people you hire. The drive for a more strategic role for human resources within an organization stems from pressures relating to demanding business environment. Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
296 Future Directions for HRD: Aligning the HR Function
advancement in technology, changes in legislation, global expansion and increasingly diverse workforce (Sunoo, 1999). According to the World Bank's Assessment of 192 countries on an average, physical capital accounts for 16 percent of total wealth, natural capital for 20 percent and human capital accounts for 64 percent. This is much against the general belief that physical capital is the most important proactive wealth. The dominance of human capital is particularly marketed in high income countries such as Germany, Japan and Switzerland where it accounts for as much as 80 percent of human capital out of total capital. In such a scenario the challenge for Indian business organizations is to perform to world class standards, gain competitive advantage, to survive, grow and prosper. This challenge can only be met by organizational transformation. An organization that is continuously changing to meet higher demands of customers and shifting market focus will be more successful in the long run. However, any change attempted at the organizational ,level in terms of technology, processes and structures cannot have the desired and lasting impact without a change in its people, change in human knowledge, skill, attitude and behaviour. This is so because organizational change cannot achieve the desired results if people are resistant to change. It is observed that the resistance of p~ople is not to change per se, but the way they are treated in the change process and the roles they are required to play in the change effort. The success of a change process can be ensured only by a committed and empowered workforce. An effective HRD system can contribute significantly towards managing change and thereby to organizational effectiveness. Prof. Allan Williams of City University Business School opines that while initiating a change process CEOs must understand the consequences of not taking people issues seriously and therefore will have to take the initiative themselves to draw HR into the change process (Survey 2000 of Leading UK and international organizations conducted by Corporate Insights Ltd.). The survey also revealed that those who are not able to adapt to the change in an organization tend to leave or rather may be asked to leave. However the positive impact of initiating change in an organization is that 1020 percent of senior managers who remain are promoted within 12 months of a major change.
Management
1
& Change.
Volume 6. Number 2 (Winter 2002)
â&#x20AC;˘
__
"':
Chauhan and Chauhan 297
WHY IS HR IMPORTANT While all other resources like technology, capital assets and even finance can be bought if one is willing to pay the right' price, the only resource that cannot be bought is motivated and committed human resources. Motivated people have to be carefully developed and nurtured. The investment an organization is willing to make on human resource development is indicative of the commitment and seriousness with which the organization views issues of HRD. Thus HRD can play an effective role m: • Optimizing the human resources • Facilitating employees to grow with the organization • Helping match individual aspirations with organizational expectations • Developing the individual's capabilities to perform his present and future roles effectively • Strengthening superior-subordinate relationships • Strengthening team spirit • Maintaining high motivation level of employees • Promoting a culture of trust, openness, mutuality and inter-dependence For individuals to contribute effectively to organizational goals, organizations need to take a right perspective and accept certain basic philosophies with regard to its employees as better results can be expected if we believe that: • Individuals have unique capabilities which need to be developed • Every individual wants opportunities to realize his/her potential • Employees are capable of practising self-regulation • Intrinsic factors can also be used for motivating people Once a clear understanding is developed on the above it becomes easier to re-align the HR processes with the organizational goals. To create a high performance work culture aimed at increasing sales turnover, profits, improving product quality, enhancing customer satisfaction, gaining competitive edge, catering to international markets, organizations need to focus their attention on certain HR processes like internal communication, team building, employee relations, problem solving, decisionmaking and work motivation. Managers and workers need to be made initiators and not just implementers of change to minimize the resistance to change. This can be achieved by involving them and eliciting their suggestions for bringing about change. The first step towards minimizing Management
& Change.
Volume 6, Number
2 (Winter 2002)
-------------------------
.IJ'.
298 Future Directions for HRD: Aligning the HR Function the resistance to change would be to create awareness about the need for change so that all concerned are clear and convinced about it and internalize it and feel committed to the change process. The next step would be to seek their cooperation and involvement. This will ensure that the interventions are institutionalized by all concerned. One factor in Indian organizations which has contributed to the gap between workers and corporate objectives has been the lack of formal communication systems. Organisational commitment and loyalty can be developed by having an open communication system, both top-down and down-up. Such a communication process can result in increased group cohesiveness and team~building. The transition from a sellers to a buyers market has given an upper hand to the customer who interact directly with those at the front line. To serve the customers better organizations may have to dismantle functional barriers to integrate all activities of the organization to focus on quality of product and service and practise empowerment so that the response time is reduced. Organisations need to create a culture of mutual trust, collaboration, genuineness and respect for each individual. With regard to problem solving and decision-making, organizations need to give up the autocratic, unilateral and prescriptive approach in favour of the participative approach which encourages innovation and creativity at all levels so that the organization can benefit from the knowledge, skills, experience and judgement of the people. The participative approach may include consultation, soliciting inputs, group consensus and delegating decision-making authority. A participative approach would certainly bring about perceptible improvement in employee morale, foster a sense of belongingness and result in improved productivity. This is amply brought out in the case of Toyota Motors which received 8,59,039 suggestions in one year, out of which 94 per cent were implemented. These suggestions came from 48,757 employees, which means that the company received 17.6 positive suggestions per employee during the year. It was estimated that in monetary terms alone, Toyota saved more than $30 million. The company on an average implemented 3,365 suggestions per day (Tregoe, 1983). REDESIGNING
THE HR STSTEMS
According to Lepak (1998), for about the past decade or so, the mantra of HR has been "be a strategic business partner." Organisations that Management
& Change,
Volume 6, Number 2 (Winter 2002)
••••••
,
Chauhan and Chauhan 299 adopt a strategic approach to developing human capital will gain competitive advantage (Corporate Executive Council, 2000). An HR department with the capabilities to align business strategy with people processes will playa critical role in their companies' success (Gratton, 1998). For aligning the HR function with the organizational goals, organizations should have a people-oriented philosophy so that the values and the HRD spirit get reflected in the personnel policies, welfare measures, teamwork, and innovative management practices of organizations. The importance of involving HR in development, planning, and implementation of competency-based strategies has been well-communicated (Beatty and Schneier, 1997). Yet a recent study of 1050 companies by the Hackett Group (1998) shows that HR professionals typically devote less than a third of their time to the most crucial strategic HR initiatives (employee development, hiring the best people, training, career management, performance management) (PR Newswire, 1998). Instead, the bulk of their time is still devoted to lower value-added, routine activities. The need of the hour is that the point of convergence of HRD department should be on the activities which are considered congruous and significant to add value to the organization's bottom line activities such as strategic planning, change management, corporate culture transition and growth and development of human capital. By refocusing the HR departments' activities, companies can further business agenda(s) by strategically aligning the areas over which HR can contribute. HR policies and practices can be the unifying force in helping an organization make strategic change. The HR philosophy of a company gets reflected in how the human resources are regarded, treated and managed which ultimately contributes to the overall success of the company. In other words good HR policies and practices are essential to meet current workforce challenges. However, most HR managers are beginning to realize that for any successful change to occur people buyin is a must. And this can happen only if employees are trusted and empowered with appropriate information to act in the best interest of the organization. Employee involvement systems, quality circles and a variety of other programmes reflect HR practices designed to encourage and harness the human value. Three key areas where this principle may be applicable are organizational effectiveness, employee satisfaction and customer satisfaction (Corporate Leadership Council, 1997; Ulrich, 1998).
Management
& Change, Volume 6, Number 2 (Winter 2002)
~
I
302 Future Directions for HRD: Aligning the HR Function
Organisations can benefit greatly through this process because it ensures a better match between the competencies possessed by individuals and those required by the organizations. Further, organizations can also concentrate on individuals likely to contribute towards organizational goals in the long run and put them on a fast track career development path.
PERSON-JOB
FIT
The right quality of people and overall resourcing are critical factors for the success of any organization. Evolving the right strategy for competitive advantage calls for developing strategic leadership, building dynamic core competencies and human capital. Whether to achieve competitive differentiation, greater efficiency and performance or better teamwork, getting the right fit between competencies required for a particular role and those possessed by individuals is essential. It is in this context that assessment of the potential of an individual becomes important.
EMPLOYEE DEVELOPMENT The age old focus on the employee as a factor of production or as the user and/or practitioner of knowledge should shift to the employee as a source of knowledge capable of exhibiting creativity and innovativeness. Such a shift would reinforce the belief that individuals possess great potential and that the competencies of individuals can be nurtured and developed. The various ways of developing these competencies are by monitoring, rewarding, mentoring, visioning and succession planning. Monitoring involves the constant supervision of tasks/activities of managers to evaluate the performance on some set parameters so that the objectives are met. Mentoring on the other hand involves developing managers to take up additional/higher responsibilities through a two-way process between the mentor and the manager where the mentor/coach gives the necessary guidance aimed at improved performance and the development of the manager. Rewarding involves giving rewards for superior performance. Visioning is when a group of people evolve a vision for the department/organization jointly so that there is clarity of purpose and greater commitment to a common purpose by all. Succession planning and succession management is the process of identifying prospective managers who could take up leadership roles and developing Management
& Chang~. Volume 6. Number 2 (Winter 2002)
Chauhan and Chauhan 303 them for those roles. Thus it is quite clear that while monitoring and rewarding are transactional processes and have a short-term perspective, mentoring, visioning and succession planning are transformational processes and have a long-term perspective. Again, while performance appraisal can be the basis for monitoring and rewarding, potential appraisal would be more useful for mentoring and succession planning. Potential appraisal is a process through which the potential of an individual is assessed for competency, skills and personality through psychological instruments, games and techniques for taking up higher/additional responsibilities. SUCCESSION
MANAGEMENT
There is no doubt that there is increased mobility of successful managers to companies offering more challenging job opportunities. The responsibility therefore rests on the management to find ways to retain their best talent,through succession planning and succession management. It is precisely because the key to an organization's effectiveness is the way it conserves, develops and uses its talent. For decades organizations have used succession planning to find their next generation of leaders. Succession planning focuses on defining successors for specific jobs. This may have worked when jobs were static and people moved through them on defined career paths. But in today's world of work, work is fluid, organizations are flatter, organ:izational structures frequently change and people make more lateral movements. Organisations therefore need to identify pools of highly talented people from which they can choose candidates for specific leadership positions. Whereas succession planning focuses on identifying an individual for a specific job, succession management focuses on creating pools of candidates with high leadership potential. While succession planning is confined to identifying the next generation of leaders, succession management goes beyond identification and ensures the planned training and development of managers to move into future leadership roles. Adopting the latter approach could help in overcoming the leadership crisis being experienced today by creating leaders for tomorrow. This has been aptly brought out by Tom Peters when he says "Leaders do not create followers, they create more leaders" (quoted in Reader's Digest, June 2002)
Management
& Change,
Volume 6, Number
2 (Winter 2002)
304 Future Directions for HRD: Aligning the HR Function
At the organizational level, the cooperation of employees is essential. The cost and quality of the product can only be controlled at the production floor, and by the conscious efforts of the operations. Many companies like SAIL, lTC, ABB and Eicher have had to initiate programmes to involve employees both at the collective and individual levels. The programmes aim at developing among employees (a) a level of trust in management, and (b) conviction that the management is making genuine efforts to improve the position of the company (Dayal et aI., 1996).
HR PRACTICES IN INDIA A study by Business Today and Hewitt Associates have identified 25 top employers in India for the year 2002. The names of these companies are given the Table below: Table The Best Employers in India (2002) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.
Infosys Technolgies Procter & Gamble Hewlet-Packard (India) SmithKline Beecham Sat yam Computers Aglent Technologies BHEL American Express (India) Colgate Pam olive (India) Gillette India Hughes Software Tata Steel Dr. Reddy's Lab.
14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25.
Sasken Comm. Oracle India Reliance Indian Oil Corpn. Compaq Computer Microsoft Corpn. India Maruti Udyog Polaris Software Johnson & Johnson LG Electronics India ST Microelectronics Tata Engineering
According to this study some of the common features of the Best Employers are as follows: • High degree of employee satisfaction, commitment and morale. • A sense of ownership and belonging-eollective relationship fostered by the organization. • Opportunities for accelerated growth and development. • Depth, breadth and consistency in application of HR practices. • Unique HR practices. Management
& Change, Volume 6, Number 2 (Winter 2002)
-------------------------------
-------
Chauhan and Chauhan
305
â&#x20AC;˘ â&#x20AC;˘ â&#x20AC;˘
Sensitivity towards a balance between work and personal life. Effectiveness of HR practices in meeting employee needs .. Alignment of HR practices with business context. Some of the practices followed by some of the top companies are detailed below: Infosys: At Infosys employees start their day taking breakfast togetherly. Dormitories are provided for those who want to sleep over. A gymnasium is built for breaks during the day. A creche for children anticipates future needs of staff whose average age is just 25 yrs. Hewlett Packard: When the American was started in us, Dave Packard worked out of his garage, where his wife served coffee and doughnuts to everyone everyday. HP still spends $5.5 million worldwide on that coffee break. BHEL: Quality Circle was initiated in 1980. In addition to quality consciousness, QC provided improvements on intra-personnel dimensions like increased adaptability to various situations, ability to get along with others, effective communication skills, increased creativity, motivation and initiative. TISCO: The Tatas believe in community development as a part of their social responsibility. for effecting change not only in the organization but also in the society where the organization operates. Management of HR is an organization philosophy which has created a healthy work culture and improved the quality of work life of employees. MUL: Maruti Udyog has evolved a work ethos which includes: Caring for each employees; Team building; Encouraging individual involvement in company's operations; and Information sharing. LG: Recognition is a way of life with LG. Performance linked bonuses and culture-building help maintain peak motivation levels at LG. TELCO: provides vertical and horizontal skill development which creates a highly motivated pool of talents. It is quite clear that the top companies have been able to maintain their position by aligning their organization strategies with the HR functions thereby leveraging the competencies of its human talent. Organizations can forge ahead in this dynamic world only if they invest in developing their people. This is so because investments made in physical resources depreciates with time but investment made in human resources always appreciates. Moreover, investing in human resources pays dividends in the form of employee commitment. Management
& Change,
Volume 6, Number
2 (Winter 2002)
!l'.
306 Future Directions for HRD: Aligning the HR Function
CONCLUSION To sum up let us accept that HRD is a continuous process. With the accomplishment of certain goals there is need to re-examine HRD needs, priorities, instruments and strategies. HRD can be considered as an ena and a means towards an end. HRD can transform the organization into a human system by developing their commitment and integrating the individual employees with the organization. Finally it cannot be denied that HRD holds the key for economic development through enabling people to become more productive and investing in human resources pays in the long run. The main challenge for organizations is therefore to create an "HRD Spirit" within the organization where the emphasis is more on approaches that are result-oriented and employee-centred, integrating the HRD strategy with the organization.
REFERENCES Beatty, R. W. and C. E. Schneier (1997) "New HR Roles to Impact Organisational Performance: From Partners to Players," Human Resource Management, 36:2937. Corporate Leadership Council (1997) "The Role of Capabilities in Achieving Competitive Advantage," Washington DC, Corporate Executive Board, Janua~y.http://www.corporateleadershipcouncil.com/mem ber/ docs/pdf. Corporate Leadership Council (1998) "The Role of ~apabilities in Achieving Competitive Advantage," Washington DC, Corporate Executive Board, January. Corporate Leadership Council (2000) "The Future Role of HR in Large Organisations, Corporate Executive Board," Washington DC, November. Dayal, 1., P. Sahgal, R. Jain, P. Gupta and A. J. Sen (1996) "Successful Applications of HRD: Case Studies of Indian Organizations," New Delhi: New Concepts. Gratton, Lynda (1998) The New Rules of HR Strategy, HR Focus (Obtained through LEXIS-NEXIS),June. Human Resources in the Canadian Consulting Industry (1999), Potential to Prosperity http://www.apegga.com/whatsnew/peggs/webl0-99/notebook.htm. Lepak, P. David (1998) "Virtual HR: Strategic Human Resource Management in the 21st Century," Human Resource ManagementReview, Fall. Morita, Akio (1987) Made in Japan. London: Harper CoIlins Publishers. P: R. Newswire (1998a) "Human Resources Professionals Focussed on Lower Value-Added Activities," According to Hackett Group Research (April 21). Management
& Change,
Volume 6, Number 2 (Winter 2002)
â&#x20AC;˘
Chauhan and Chauhan 307 Sunoo, Brenda Paik (1999), Certification Enhances HR's Credibility, Workforce, May (Obtained through LEXIS-NEXIS). Tregoe, B. (1983) "Productivity in America; Where It Went and How to Get It Back," Management Review, Feb. Ulrich, David (1998) "A New Mandate for Human Resources," Harvard Business Review. January-February (Obtained through LEXIS-NEXIS) http:// Corporateinsights .org/research_body.htm. www.ceridian.performance.com: The Price of Pace (2001).
Management & Change, Volume 6, Number 2 (Winter 2002)
BRINGING CHANGE: AN EXPERIMENT STAKEHOLDER AND FORCE FIELD ANALYSIS
WITH
Kamal Kishore Jain
In industry after industry the wealth has been created by the newcomers those who had a new idea, a new concept, a new business model, and those who could change people to accept their ideas and the business model. When it comes to making people accept your idea or change, one often finds that people's response depends on the expected utility and valuepeople expect to derive from that change. People evaluate the outcomes they face based on a number of attributes. Given the relative weight of each attribute, they arrive at an overall judgment of the value of each outcome and select the outcome of highest value to them. People choose what to do based on their perception of their own self-interest. However, it is also a well known fact that what people want and expect is often based on incomplete information. In many situations if we can make them realize the bigger picture people will often be able to see the other side of the story. Stakeholder analysis and force field analysis is useful techniques that can be used to make people move from their self-interest to larger interests. The paper narrates the author's experiment with above techniques with successive batches of MBA students.
INTRODUCTION
W
ith every wrinkle in the fabric of history, new wealth gets created and old wealth gets destroyed. It will be no different as the age of progress gives way to the age of revolution. The question is, who will create the new wealth and who will squander the old (Gary Hamel, 2000). The facts speak for themselves. In industry after industry the wealth has been created by the newcomers-those who had a new idea, a new concept, a new business model, and those who could change people to accept their ideas and the business model.
Management & Change, Volume 6, Number 2 (Winter 2002) <9 2002 Institute for Integrated Learning in Management. All Rights Reserved.
310 Bringing Change: An Experiment with Stakeholder
When it comes to making people accept your idea or change, one often finds that people's response depends on the expected utility and value people expect to derive from that change. People evaluate the outcomes they face based on a number of attributes. Given the relative weight of each attribute, they arrive at an overall judgment of the value of each outcome and select the outcome of highest value to them. People choose what to do based on their perception of their own self-interest. The importance of the relationship between beliefs, expectations, attitudes, and intentions on behaviour and persuasion has been well supported (Ajzen, 1971; Ajzen and Fishbein, 1969, 1977; Anderson and Fishbein, 1965; Fishen and Ajzen, 1974; Fishbein and Raven, 1962). However, it is also a well known fact that what people want and expect is often based on incomplete information. In many situations if we can make them realize the bigger picture people will often be able to see the other. side of the story. Stakeholder analysis and force field analysis are useful techniques that can be used to make people move from their self-interest to larger interests. This can be proved by the classroom research conducted by the author with his successive batches of MBA students. The students were asked to write on a piece of paper their agreement or disagreement on a hypothetical issue. They were asked to give their opinion on changing the grading pattern from A to F in the course to simple pass fail basis. This means that students will not be awarded grades instead, if they score something as minimum pass marks, they will be declared pass or otherwise fail. Most of them perceived the change to be in their self-interest. Almost 80 to 90 percent of students, therefore, gave their consent. However, they were asked to continue the exercise a little further. They were asked to do a stakeholder analysis and use force-field analysis to see how the change will affect various parties. In the stakeholder analysis they were asked to identify various parties likely to be affected by this change. In the force field analysis (the technique was developed by Kurt Lewin), they were asked to identify pushing and restraining forces and their relative intensity and decide to accept or reject the proposal on the basis of the overall score. The views expressed by them were compiled an~ are presented below:
Management & Change, Volume 6, Number 2 (Winter 2002)
Jain 311
STAKEHOLDER ANALYSIS Students Performance: Students will definitely have concern over their performance in the course. They want to know how well or how bad they do in the course. Students would want to know how they fare against their classmates. Having a pass-fail basis for the course will deny the students the opportunity to benchmark themselves against their classmates. They would only know students that pass or fail the course. Honour or Rank: Students especially those excellent in studies will always be looking forward for honour of being the best in class or ranked among the top 10 percent of the class. This is impossible to achieve with a pass-fail basis. Motivation: For students, being motivated is critical in finishing assignments, studying, etc. Having a pass-fail grading system will actually have positive and negative effects on students. Those who normally excel in studies will definitely become less motivated as they would only need to do the minimum to get through the course. However, those average and poor students will become more motivated to come to class and do homework knowing that they actually have a chance of passing the course by scoring the minimum marks required. Competition: In pass-fail basis, competition among students will likely be subdued because no one will ever need to compete to be the best in the class. Cooperation: In a pass-fail basis, cooperation among students will flourish as competition among them is eliminated. This will create a healthy environment to simulate the real world situation where people are cooperating in achieving the organizational objectives. Understanding of subject: Students are less likely to lea~ much and grasp a thorough understanding of the course in a pass-fail basis. So, it is not good to have a pass-fail basis if we wish to produce students with well-versed knowledge of the subject. Quality: Quality of students learning the course might deteriorate in a pass-fail basis. This is because most students will not even bother to really understand the subject and will just hope to get the minimum passing mark. Anxiety: Anxiety among students is likely to be reduced in a passfail basis. So, students will feel more comfortable learning the subject as the pressure of competing among them is taken off. Management & Change. Volume 6. Number 2 (Winter 2002)
I
314 Bringing Change: An Experiment with Stakeholder
effort to meet or communicate with lecturers are generally given extra attention as far as grading is concerned. The rest are sometimes considered not interested in the subject and just taking it for completing programme's requirement. So, in a pass-fail basis this type of favouritism is avoided and reduced. Reduce anxiety and relieve students off the pressure: A pass-fail basis would reduce anxiety among students on how they are performing in the subject and relieve them from the heavy pressure of getting good grades. This factor would help improving the students' state of well being, thus creating a healthy learning environment for students,.
RESTRAINING FACTORS Problems in Identifying Achievements A pass-fail basis will identify students taking the subject as either passed or failed students. The top performers would not be recognized. This factor is so important due to the following reasons: • It promotes healthy competition among students. •. It challenges students to work hard to be best that they could be. • Hard work pays off with the honour and award such as Dean's list for top students. • It gives hardworking students a sense of satisfaction by achieving great results. • It also increases self-esteem and confidence of the top achievers to face future challenges in the real life or working environment.
Demoralize good students A pass-fail basis will demoralize good students who love competition. They would lose motivation to excel in the subject. This factor will then be translated into real life situation in which these students will not be motivated to excel in what ever things they do and settle for average.
Focus change A pass-fail basis will change the students' focus from giving the best they have to settle for a pass result. The factor will affect them in a sense that they are now less focus in whatever they do. Without focus, it is impossible to achieve great or desired results. Management
& Change, Volume 6, Number 2 (Winter 2002)
________________
nn.= ••
lIIm __
nn •• mr_.lllli=.-li~.lmd __
•• -.
â&#x20AC;˘....~~~~~~~~-~---------------------~
Jain
---
--
315
The table below illustrates the push and the restraining forces in introducing the new system in Unitar. Each factor is given a rating, in a range of I to 5, which represents its importance and intensity. A factor of 5 is awarded to the highest intensity and importance, and I, being the least.
To maintain current system. Restraining Forces
To introduce a Pass-Fail System Push Forces
Fear that this system may bring down the examination standards at Unitar. (5) <1------
Proposed system is easy to implement.
(2)
-------<t>
This is inconsistent with most World Class Universities. (5) <1------
It is easy to grade the students; either pass, or fail. (2)
-----t>
Most students will perceive that it will be easier to pass than to fail.
Successful students could not be graded according to their level of academic excellence.
(2)
<1------
The weaker and average students will like the system as it benefits them more.
(4)
The students will tend to be complacent due to the "easy" grading system.
<1------
(2)
(3)
The passing mark, either too high or too low, will cause dissatisfaction to most of the students. <1-----(3) Good students will not like this system, as it will not make them outstanding.
<1------
(3)
Fear that this system may create inconsistency in Universities Management
& Change,
Volume 6, Number 2 (Winter 2002)
----
316 Bringing Change: An Experiment with Stakeholder and benchmarking will be difficult. <3-----(4) This system may bring the standard of education excellence down, especially, if other Universities follow suit. <3'"-----(4) Fear that the University's image may be affected and hence its future may be affected.
<3------
(5)
The system may lead to its downfall, as many students may not have faith in its academic excellence.
<3.
(5)
The business risk is too high. (4) Total score for Push Force is 8.
Total score Force is 45.
for Restraining
CONCLUSION The restraining forces are greater than the push forces, with a big difference in the rating scale. It is clear that the odds are against the proposal to introduce a "Pass-Fail" System, against the current system. The final decision by most of the students can best be expressed in the words of one of the student, "Personally, I am very much against this proposal, which I project would lower the level of academic excellence in UNITAR (University Tun Abdul Razak) today. Especially, when UNITAR's long-term business focus is to concentrate in education as one of its prime business in the future, specializing in on-line education online of excellence." The experiment has useful insight for managers/change agents in that if they analyze forces from two different perspectives-first, relative to his or her own goals, then from the point of view of those who are expected to implement change. This exercise typically reveals overlooked forces. Management
& Change, Volume 6, Number 2 (Winter 2002)
Jain 317
REFERENCES Ajzen,1. (1971) "Attitudinal vs normative messages: An investigation of the differential effects of persuasive communication on behavior," Sociometry, 34, 263-280. Ajzen, 1., AND Fishbein, M. (1977) "Attitude behavior relations: A theoretical analysis and review of empirical research," Psychological Bulletin, 84, 888918. Ajzen, 1., and Fishbein, M. (1969) "The prediction of behavioral intentions in a choice situation," Journal of Experimental Social Psychology, 5, 400-416. Anderson, L. R., and Fishbein, M. (1965) "Prediction of attitude from the number, strength, and evaluative aspect of beliefs about the attitude object," Journal of Personality and Social Psychology, 2, 437-443. Fishbein, M., & Azjen, 1. (1974) "Attitudes toward objects as predictors of single and multiple behavioral criteria," Psychological Review, 81, 59-74. Fishbein, M., & Raven, B. H. (1962) "The AB scales: An operational definition of belief and attitude," Human Relations, 15, 35-44. Gary Hamel (2000) Leading the revolution. Boston: Harvard Business School Press, 18 Kurt Lewin (1951) Field theory in social science, New York: Harper and Row. Dr. Kamal Kishore Jain is working as an Associate Professor in the Faculty of Business Administration, University Tun Abdul Razak, Malaysia.
Management
& Change, Volume 6, Number
2 (Winter 2002)
VALUE AT RISK: A CRITIQUE
Parikshit
J. P. Singh
Dey
This paper examines the efficacy of Value at Risk (VaR) as a statistical measure of risk with particular reference to portfolio management. It elaborates on the ramifications of non-coherency of this measure and suggests means to obviate the anomaly due to this by fitting a multivariate Gaussian distribution using entropy maximiwtion. It also suggests the use of Frechet bounds to augment the l't'lRfor the management of risk. Implications of the use of "square root rule" for extrapolation of VaR over long horizons are also studied.
INTRODUCTION isk measurement and management constitute, perhaps, the most evolving areas of contemporary finance theory. Ever since the revolutionary expositions of Black and Scholes and Merton (1973) that established a sound conceptual framework for derivative pricing using the arsenal of stochastic processes, exotic approaches to risk management are evolving by the day. Value at Risk (VaR) is one such apparatus that has gained immense credence in the last decade and continues to enjoy the confidence of a vast majority of finance professionals. In this paper, we critically evaluate the efficacy of the VaR as a measure of risk and as a means for its management. We also suggest means to improve its prowess as a risk management tool. After providing a brief introduction to the concept, we perform a dissection of the VaR structure highlighting the limitations of VaR emanating therefrom and provide a framework for its value enhancement. We summarize our inferences and conclusions.
R
VAR-DEFINITION,
MEANING AND SCOPE
We consider a portfolio of n securities whose market value at time t is given by P(St) where St is the n-component vector of market prices of Management & Change, Volume 6, Number 2 (Winter 2002) (Q 2002 Institute for Integrated Learning in Management. All Rights Reserved.
320 Value at Risk-A Critique the securities comprising our portfolio and assume that the probability distribution of Profit and Loss of the portfolio is given by: F[P(Sl+h)-P(S)]
(1)
Then, the YaR, at a predetermined confidence level over a holding period h is equal to the maximum loss i.e. -inj[FP(S(+h)-P(S()
(2)
subject to the constraint F[P(S(+h)-P(S(]>a
(3)
Where we implicitly assume the Profit and Loss distribution to be continuous aHd strictly monotone function. At a conceptual level, we understand YaR as the worst expected loss over a given time horizon under normal market conditions at a given confidence level i.e. with a probability exceeding a predetermined value. The above definition can be extrapolated to accommodate the time value of money by including a risk free asset with a return r over our horizon, whereupon we may define YaR as in equation (2) subject to the redefined constraint: F[P(Sl+h)-r(P(Sl+h)-P(Sl))~ O]>a (4) Which leads to the interpretation of YaR as the additional capital that needs to be introduced and invested in the risk free asset at time t to make the incremental risk free return exceed the value of the portfolio at time t + h with a probability higher than the prespecified confidence level. While the use of YaR is predominantly adopted as a measure of market or trading risk, substantial work has been done towards extending the concept with appropriate modifications to quantify other type of risks such as credit, operational and liquidity risks. LIMITATIONS
AND SHORTCOMINGS
OF VaR
Knowledge of Underlying Distribution Being a distribution based measure, the Value at Risk of a portfolio implies some knowledge about the underlying distribution of possible future Management
& Change, Volume 6, Number 2 (~inter
2002)
Singh and Dey 321 losses (which are a random variable) on the portfolio, so that VaR is a function of a random variable. Additionally, VaR is itself a random variable on the count that distributions that fit the projected portfolio losses also need be guessed or inferred from past data. Hence, the calculated VaR on the assumption that a given distribution e.g. normal, Paretian, Gumbell or others is best representative of future portfolio losses would be but an estimate of the true VaR. Intuitively we could compute the VaR of the distribution of VaRs.
Aggregation of Non Compatible Distributions As mentioned above, VaR presupposes the existence of a distribution that is representative of the uncertainty in question. While VaR may be adopted with some rationality as a measure of elemental risks, it is inherently flawed as a measure of composite risks (In the context, whether a risk is elemental or composite is again a non trivial issue) as the distributions representatIve of various component risks may be non additive and may not conform to the superposition principle. In fact, some processes may not be stochastic at all and may not possess well-defined distributions - they may exhibit chaotic behaviour with convergence to "strange attractors or limit cycles. Inclusion of non-linear derivative products in the portfolio also invalidates many of the"assumptions underlying the use of probability distributions.
Coherency VaR is often criticized as being a non-coherent measure of risk. Before the address the ramifications of this non-trivial issue and approaches that may mitigate the impact of this shortcoming, it seems appropriate to present a non-technical and conceptual introduction to "coherency" of risk measures without involving the mathematical intricacies. For the purpose, we assume that our portfolio that is created at time t needs to have a prespecified threshold value at time t + h to be acceptable to our investor. We may then define risk as the changes in the value of our portfolio between these two dates and postulate a measure of risk, r as the minimum additional cash, c that needs to be invested at time in the risk free security giving return, r such that the value of our portfolio at time t + h meets the required threshold value Vo i.e. r(P(St+hÂť = inf {clcr + P(St+h) ~ Vo (5)
Management
& Change,
Volume 6, Number
2 (Winter 2002)
322 Value at Risk-A Critique We now identify the minimum set of desirable properties of our risk measure in order that it be deemed "coherent": PI The risk measure should be stated in the same units as the value of the portfolio. P2 Addinglinvesting a certain amount x in the risk free asset at time t should reduce the value of the risk measure by the same amount i.e. r(P(S,+,,) + rx) = r(P(S,+,,)) - x (6) As a corollary, if an amount equal to the value of the risk measure is invested in the risk free asset at time t, the portfolio risk should vanish i.e. r(P(St+") + rr(P(St+")) = 0 (7) P3 The risk on a sum of several portfolios should not exceed the sum of the individual portfolio risks i.e.. r{P1(SIt+") - PiSz,+,,)} < r{P1(Slt+') + rz[Pz(Sz,+,,) (8) P4 In case of relatively large portfolios, where the time required to liquidate the portfolio becomes dependent on its size and liquidity risk becomes. significant, implications of lack of liquidity need to be built into our risk measurement structure. This is particularly so in an environment where no regulatory mechanism is in vogue to prevent taking up of like positions by a vast majority of market players. We incorporate this in our definition of risk measures by postulating r{ 1[P(St+")] } = 1r(P(St+")] 1> 0 (9) 11
P5 Finally, the magnitude of risk should be commensurate with the size of the portfolios i.e. P1(Slt+) ~ PiSZt+") p
r{P1(S\+,,)}
~ r{PiSZt+")
(10)
Properties P2, P3, P4 and P5 are respectively referred to as translation invariance, subadditivity, positive homogeneity and monotonicity in the literature on the subject. While the need for PI, P2, P4 and P5 is apparent, the necessity of P3 (Subadditivity) follows from the requirement of restricting margin reductions through opening of separate accounts for a given position. Absence of subadditivity could also create situations of hypothetical risk enhancements through mergers and vice versa, merely on the basis of the definition of the risk measure. Management
& Change, Volume 6, Number 2 (Winter 2002)
IIL
Singh and Dey 323 While VaR does conform to the properties PI, P2, P4 and P5 it is, in general, not subadditive, particularly so for portfolios with significant non-linear characteristics i.e. large proportion of options and like contingent claims. This is exemplified by the following: We consider two European digital options on a stock, S,' with the same exercise date, say T. Let the first option, A, have an initial price of PA and a payoff PA if SeT) ~ A and nothing otherwise and the second option have the initial price PB and a payoff PB if SeT) ~ B and nothing otherwise, with A > B . Further, let Pr ob.[S(T) ~ A] and Pr ob.[S(T) ~ A] = a and Pr ob.[S(T) ~ B] =: b let e:t ](a + b), max.(a, b)[. Then, the VaR at any significance levelc of a long position in A and B will be -a and -b respectively. However, the VaR at the same significance level of a combined portfolio of A and B will be [max.(PA, PB)]-(PA + PB). VaR does satisfy subadditivity (and hence becomes a coherent measure of risk) in scenarios where the underlying distributions are elliptical. In the context, we define elliptical distributions of an n component random vector X as extensions of the multivariate normal distributions Nn (m, W) i.e. the normal distribution with mean m and covariance matrix Wand a characteristic function Ye (t) = E [exp(if X) (11) The elliptical distributions are related to the standard multivariate normal distributions Nn (0, /) i.e. the distributions of the standard normal variate, Y, through an affine (degenerate, positive semidefinite) map X : Rn @ Rndefined by X @ AY + m, where A is a degenerate positive semidefinite n x n matrix. We, then, have \}I e
(t) = E[exp(i tt X)] = E{exp[il (AY + J1)ll
= exp(i l J1 )exp~ (At t J Y ] Defining W = A At we get an expression for the characteristic function and the characteristic generator of the elliptical distribution as = exp(if m) F (tt Wt) and F (rt Wt) respectively. Wand F may be determined only upto a positive constant through a knowledge of the distribution of X although m is completely determined. Conversely, however, m, vv and F completely define an elliptical distribution. Management
_
& Change, Volume 6, Number
2 (Winter
2002)
324 Value at Risk-A Critique We, now, establish that VaR does, indeed, become subadditive in the elliptical distribution environment. For the purpose, we consider two portfolios PI and P2 comprising of linear combination of securities whose respective market prices are represented by the vectors 81 and 82 which are both elliptically distributed. Then, it follows that a. PI and P2, being linear combinations of elliptically distributed variables 81 and 82 are also elliptically distributed; b. PI + P2, being a linear sum of elliptically distributed variables, PI and P2 is again elliptically distributed; c. Defining aRa as the quantile function of the distribution function Fp evaluated at, we have aRa (P) = E (PI) + S(PI) qa aRa (P2) = E (P) + s(P2) qa so that Va Ra{Pl)+ Va Ra (P2)=
E(Pl)+ E(P2)+ (a(Pl)+ a (P2)]Qa
(13)
~ E(PI + P2)+ [a(PI + P2)JQa= VaRa(PI + P2) where the penultimate step follows from the assertion (14)
SHORT HORIZON MEASURE VaR inherently, is concerned with reporting of risk over a short time horizon. Perhaps, the most common approach to extrapolating VaR over longer horizons is to make use of the "square root rule," whereby VaR over a horizon, T. VaRa(1) is approximated as aT VaRa (1). This square root formula emanates from the assumption of the underlying stochastic process being a geometric Brownian motion with a zero mean resulting in a normal distribution with lognormal returns. We examine the implications of this restriction in some detail. The VaR under the restricted scenario of a geometric Brownian motion is given by:-
VaR t = P - exp
Cut + z (J.Jt + In P )
(15)
whereP is the current portfolio value, z is the standard normal variate corresponding to our chosen confidence level, m is the mean and s the Management & Change. Volume 6, Number 2 (Winter 2002)
Singh and Dey 325
standard deviation of the distribution. The relationship between t and the VaR now becomes explicit. For high standard deviation and/or confidence level (large negative z) and small mean the exponential term in equation (15) asymptotically approaches zero due to the domination of the term and the VaR tends to the current investment in the portfolio. Conversely, when m (assumed >0) is large relative to the parameters z and s, the t term dominates in the exponential which approaches ÂĽ asymptotically so that the VaR, after being positive in the short to medium term tends to become negative indicating absence of risk in the long run. Such a scenario is, however, extremely unlikely to occur in practice as VaR is a "tail related measure" so that z would, invariably, have a significantly large negative value compared to m. Differentiation of equation (15) with respect to yields the point of
at
zO"
inflexion of the t vs. VaR curve when
.
J.l + 2-Ji = O. For
m = 20%,
s = 10% inflexion occurs after 61 days at 95 percent confidence level. However, the point at which VaR becomes negative would also depend on the current portfolio investment as well. As would be obvious from the above analysis, the so called "square root rule" does not make proper adjustment for the mean related term so that .the error due to use of this rule gets magnified with increase in m as well as t it becomes particularly prominent after the point of inflexion as the true VaR starts decreasing thereafter, whereas the OtVaR continu~s to rise perpetually. In fact, the rate of increase of the error increases exponentially with t.
MEASURES TO ENHANCE EFFICACY OF VAR A possible approach to addressing the issue of non-sub additivity of VaR could be through the transformation of the given distribution to a Gaussian distribution using probability conservation and entropy maximization. For the purpose we consider an n-component random vector, X with probability density function p(X). We define a transformation
~ : Rn ----7 Rn such that Y
= ~ (X )
Management
& Change,
is an n-component vector
Volume 6, Number
2 (Winter 2002)
326 Value at Risk-A Critique of standard normal variates corresponding to X. Then, conservation of probability decrees
>1}
k
p(x,)d x, ~
exp ( -
Y,
(16)
Integration between ÂĽ and x. and inversion yields ,
I
(17)
F (Xi)
where
=
l' P (x;)d
x; is the cumulative
probability distribu-
tion function. The dependence structure in the original vector is captured by constructing
the covariance
.Q = E(Y
matrix
yt).
Entropy
maximisation, now, provides that the best joint distribution corresponding to a given covariance matrix is the multivariate Gaussian given by
P Y ( )-
1 (n
r
(2n /2 [det
ex
)1/2
p
(1
- _
2 y
t
n
-I
y
)
(18)
The joint distribution of X is recovered from Y through the Jacobian of the original transformation i.e. (19)
where
--a Yi =
a Xj
-v~2rc P ()x j exp
(1
2J
- Y i 8 ij
(20)
2
so that
P(X)=.J
det
1(
Q
)exp [- .!-yt(n-1_ 2
I)r]ti
;=1
P(Xi)
(21)
Additionally, knowledge of the marginal distribution of the components of the price vector St+1tand consequently. of the portfolio Profit & Loss, F(P(S,+It)-P(S)](which we abbreviate as F[P(S)] enables us to establish Frechet bounds for the portfolio VaR using the principle of stochastic dominance. For the purpose we define F;, i = 1, 2, ...n as the marginal Management
& Change,
Volume 6, Number 2 (Winter 2002)
'.
\
,""-Singh and Dey 327
Profit & Loss distribution of the component of our portfolio P(S). The bounds of the distribution F[P(S)] are then given by F
L
[p (S )]
[it
= sup {max
F
i -
(n - 1 ),0 ]}
(22)
and (23) where the supremum and infimum are taken over the various possible combinations of the portfolio components that equal P(S). The VaR, then, obeys the bounds
VaR u (a ) < VaR p
(a ) < VaR L (a )
(24)
Knowledge of these bounds could supplement the information obtained from the joint distribution of equation (21). Additionally, to estimate the VaR over an extended horizon, a possible approach could be to adopt a Bayesian type analysis of different possible scenarios, working out the VaR corresponding to each one of these and, thereafter, taking an appropriate average.
CONCLUSIONS The financial markets have witnessed unprecedented growth and development in the last few decades. Access to sophisticated technology with multifold increase in analytical and computing capabilities has resulted in not only an integration of markets at the global level but also the advent of complex financial instruments with singular risk - return characteristics. While the investors are now afforded greater opportunities, management of investment has also become increasingly challenging. As a corollary to the complexity of instruments, the apparatus for their appraisal and management has al~o seen several innovations and new measures of risk with greater compatibility to address specific scenarios have stormed the world of portfolio management and insurance. Value at Risk is one such measure that has evidenced phenomenal growth and acceptance in the recent past. In this paper, we have critically examined the implications of using VaR as a measure of risk highlighting its shortcomings. SuggesManagement
& Change,
Volume 6, Number
2 (Winter 2002)
I 328 Value at Risk-A
Critique
tions have also been made to enhance its efficacy as a mechanism of portfolio management. Some incidental issues have also been addressed.
REFERENCES Black, Fischer and Scholes, Myron (1973) "The Pricing of Options and Corporate Liabilities," Journal of Political Economy. Merton, R. (1973) "Theory of Rational Option Pricing, Bell Journal of Economics and Management Science, 4, 141; Jorion, P. (1997) VaR -The New Benchmark for Controlling Market Risk Irwin . . Duffie, D. and Pan, J. (1997) "An Overview of Value at Risk," Journal of Derivatives, 4, 7; Dowd, K. (1998) Beyond VaR, The New Science of Risk Management. New York: Wiley. Schaefer, S. M. (1995) Risk Assessment & YaR Models, Documentation of the RISK'95 Workshop on "The Latest Practical Advances in Making Risk Assessment & YaR Models Work; Effective Risk Aggregation & Compliance With the Basle Proposal", Paris. I. P. Morgan and Co. RiskMetricsTM (1995) Technical Document, New York. Beder, T. S. (1996) "YaR: Seductive But Dangerous," Financial Analyst Journal, 12. Risk Magazine, YaR, Special Supplement, 68. Eber, J. M., (1997) Coherent Measures of Risk, Proceedings of the Latest Cutting Edge Developments in Value at Risk Conference, 1997; Artzner, P. et ai, Thinking Coherently, RISK, 10, 1997,68; Embrechts, P et ai, Modeling Extremal Events For Insurance & Finance, Springer, 1997~ Denneberg, D. (1994) Non Additive Measure & Integral, Kluwer, 1994; Cox & Rubinstein, Option Markets, Prentice Hall Englewood Cliffs, 1985; Hogg, R. and Klugman, S. (1984) Loss Distributions. New York: Wiley. Huber, P. (1981) Robust Statistics. New York: Wiley. Fang, K. T. et al (1987) Symmetric Multivariate & Related Distributions. Chapman & Hall, 1987; Campbell, I. et al (1997) The Econometrics of Financial Markets, Princeton Univ. Press. Rao, C. L. (1973) Linear Statistical Inference and Its Applications. New York: Wiley. Makarov, G. D. (1981) "Estimates for the distribution function for a sum of two random variables when the marginal distributions are fixed," Theory of Probability & Its Applications, 26, 803. Li, H. et al "Bounds for the distribution of a multivariate sum" in Distributions With Fixed Marginals & Related Topics, eds. Ruschendorff, L. et ai, Hayward, CA. Institute of Mathematical Statistics; Management
& Change, Volume 6, Number 2 (Winter 2002)
LEADERSHIP AND CORPORATE DOWNSIZING: THE LEGITIMACY OF EXERCISING STRATEGIC CHOICE
Devashis Rath The phenomenon of downsizing is continuing unabated. The question, which triggered this paper, was, whether downsizing is a consequence of en. vironmental shifts, as is generally believed, or is it a direct fall out of leadership decision. It conceptualizes why CEOs do not seek alternatives to downsizing and choose from them? Introducing the concept of social con. tamination as a consequence of downsizing, the paper highlights the marginalization of society as an important stakeholder of organizations. The discussion then proceeds to propose two overriding rationale for lead. ers to create a basket of options and make a strategic choice instead of outrightly taking a decision to downsize their workforce. A model for the phenomenon of downsizing is presented for better appreciation of the,criti. cality of a leader's decision in a situation oj organizational decline.
INTRODUCTION
C
orporate world is a subset of the economic system. As and when the economy of a nation is affected, its direct repercussions are felt in the corporate corridors. Thus when in 1990, the world economy underwent a recession, corporate world went into a tailspin. Suddenly corporate leaders found that their organization had built in fat over the years. However, it was Charles Handy, a professor of Managerial Psychology at the London Business School, who was the first to coin the word downsizing in mid 1970s. Handy's contention was that technological revolution which was making its initial presence felt then, would in time to come transform lives of millions through a process which Handy had then termed "down-sizing" (Appelbaum and Lavigne-Schmidt, 1999). True to Handy's prediction, "at least since mid 1980s, employment downsizing has been regarded as the pr~ferred route to improve corporate efficiency" (Morris, Cascio and Young, 1999). Many organizations use downsizing as a tool to cut costs, and/or to improve profitability, share Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
----------------~-----------------~~----
330 Leadership and Corporate Downsizing: The Legitimacy
prices and productivity (Mone, 1994). Thus jobs are rationalized and redundant employees identified. A corporate leader who can axe the greatest number of jobs and with the least emotional content throw out maximum number of people is eulogized as a tough turnaround artist. Such leaders, while becoming messiahs to shareholders, are perceived as personification of terror to employees. Even the most celebrated CEO who reigned supreme in corporate world, at least for two decades, Jack Welch, also gained the epithet of Neutron Jack after the neutron bomb, which could consume human beings leaving physical structures intact. A recent Business Week article carried the news "Neutron Jack is back ... General Electric is planning massive job cuts-on a scale not seen since CEO Welch's early days in the 1980s. Wall Street sources and those close to the company say GE will likely eliminate at least 75,000 jobs-more than 15 percent bf its workforce-during the next two years" (Moor and Prasso, 2001). In fact, as a tool in the corporate strategic toolkit, downsizing has come to be accepted as a powerful one. This has happened notwithstanding a sea of empirical findings focusing on negative Gonsequences that downsizing has unleashed not only in corporate world but also in civic society at large. The objective of this paper is not to provide any theory of downsizing or take a plunge into an ethical debate over the same. It is appreciated that such attempts would be highly unrealistic given the need to recognize and account for the wide contextual variations between downsizing events in different organizations, industries and countries. Therefore, the focus of this paper will be limited to exploring two fundamental questions. First, whether downsizing is a question of strategic choice or is it a foregone conclusion in every situation of organizational decline. Second, why should leaders seek alternatives to the decision of downsizing and make a strategic choice therefrom. However, to discuss these two fundamental questions, the starting point would necessarily have to be an introduction to the genesis of this phenomena, called downsizing and what it essentially connotes and the criticality of a leadership's decision to downsize in a situation of organizational decline. At the outset it needs to be underscored that this paper focuses on organizations in a turnaround situation and not necessarily on all type of organizations at various life stages. This is so, simply because downsizing is primarily an outcome of organizational decline.
Management
& Change.
Volume 6. Number 2 (Winter 2002)
l
I t
Rath 331 SOCIAL DARWINISM
AND DOWNSIZING
Though downsizing is an outcome of organizational ill health, the genesis of its reckless use and abuse can be traced back to the concept of Social Darwinism. When Charles Darwin published "The Origin of Species" in 1859, Herbert Spencer was already working on his own idea about the evolution and progress of society. Fascinated by the Darwinian theory of adaptation and survival of the fittest, Spencer applied the same to social thought, which came to be known as Social Darwinism, Moving away from the theory that human evolution showed the benefit of co-operation and community, Spencer and the later Social Darwinists argued that society was evolving towards increasing freedom for individuals and therefore, government intervention ought to be minimal in social and political life (Halsall, 1997). Thus with government far removed from mainstream social life, at least in capitalist societies, it was left to the discretion of a handful occupying positions of power to decide the course of action in events of economic slow down and con,sequently a downturn in organizational health. As a result survivors in an organization were not outcomes of a process of natural selection of the fittest, but who apparently appeared to fit into a set of contextual organizational rules. In conditions of decline, organizationS, which are essentially a collection of individuals striving for a common goal, suddenly become an altogether separate entity and begin to chop off parts of the very components who had once breathed life into them. In such contextual settings the privileged few in the top echelons of any organization start to decide who should continue to be a part of an organization and who should be shown the door. Decisions are based on subjective judgements as to who appears to fit into the new organizational context of work overload, cut in pay, criticality of skills and job performed, long working hours, etc. This process of mass selection and rejection in organizations has come to be known as downsizing and still goes on unabated thanks to the theory of Social Darwinism. Shaw and Barrett-Power (1997) have defined downsizing as a deliberate organizational decision to reduce workforce that is intended to improve organizational performance. Defining the key attributes of downsizing Huber and Glick (1993a, 1993b) point out that downsizing is an intentional activity, which involves but is not limited to personnel reduction, with its focus on improving efficiency of the organization and Management
& Change, Volume 6. Number 2 (Winter 2002)
332 Leadership and Corporate Downsizing: The Legitimacy
affecting work processes knowingly or unknowingly. Typically downsizing aims at reducing costs, increasing productivity and restructuring work processes. In popular usage "downsizing is frequently used as a synonym of redundancy" (Vollmann and Brazas, 1993). It is also used interchangeably with a range of other, sometimes oxymoronic terms such as "derecruiting," "de-massing," "re-engineering," to name but a few (Cameron, 1994; McCune et.al., 1988). In sum, downsizing can be viewed as a conscious and deliberate decision of one or few at top management level to reduce manpower on the payrolls of an organization with an explicit aim to improve effectiveness, efficiency, productivity and competitiveness of a firm or entity. Though organizational leaders take pride to talk about it as creative destruction, victims of downsizing view it as the most disruptive and traumatic event of their work careers. On the other hand survivors of downsizing often express (Drew, 1994; Lewin and Johnston, 2000) paradigm shifts in their work attitudes which includes low levels of organizational trust, commitment and loyalty, high levels of insecurity and intent'to leave (Iverson and Pullman, 2000) and abysmally low morale. Problems of motivation, skill retention, company image, corporate culture, etc. assail organizations undertaking downsizing exercise. Yet for factors as diverse as declining sales and profits and poor financial results, to greater responsiveness to customer needs, increased international competition, change in strategy, boost a culture of innovativeness and entrepreneurship, etc. downsizing has been a common organizational response to situations of organizational decline.
CRITICALITY
OF A LEADER'S DECISION TO DOWNSIZE
Keeping the genesis and concept of downsizing in perspective it is essential to have an understanding of the leadership process in a situaticjTIof decline by establishing the criticality of a leader's decision to downsize vis-a-vis expectations, which various stakeholders have from a leader. Drew (1994), in his results of a survey among large Canadian firms reports that mostly downsizing was an outcome of organizational reorientation accompanied by three Rs of reduction, restructuring and reorganising. Though this is corroborated by many other researches and survey, the approach to downsizing in this paper is from a fundamentally different angle, i.e. from a perspective of the criticality of a leader's decision to downsize a declining organization. A process view of leaderManagement
& Change. Volume 6. Number 2 (Winter 2002)
t
/
Rath 333
ship enjoins upon the leadership process to create organizations or alter them in some fundamental way by challenging the status quo, creating a vision,. communicating that vision widely, getting people to believe in it and then empowering them to act (Kotter, 1997). Leadership process starts with vision formulation, goes on to maximise the reach and range of that vision, aligning organizational members to that vision and, at least theoretically, ends with allowing, encouraging and facilitating others to achieve an optimum performance, both in relation to their own potential and also in relation to the needs and mission of an organization (Rowley, 1997). At the deepest level leadership process is essentially a value creating process. It is expected that it would create value not for the organization per se, but for various stakeholders of an organization, the summation of which will put an organization in a trajectory of competitiveness, stability and sustainability. However, central to the leadership process is the leader himself. Thus expectation of stakeholders boils down to a single human being, who in the considered judgement of watchdogs of an organization, Stakeholder 1m act and Influence on Leader Figure 1
Management
& Change, Volume 6, Number
2 (Winter 2002)
334 Leadership and Corporate Downsizing: The Legitimacy
i.e., the board of directors, is competent enough to take charge of the leadership process in an organization and fulfil expectations from all stakeholders. Figure-l depicts various stakeholders who look up to the leader for fulfilment of their expectations. The different sizes of the pie in figure-I are symbolic of the relative importance and influence of stakeholders on a leader. The relative thickness of the arrows is suggestive of different amount of pressure put by different stakeholders on a leader. In a situation of decline shareholders expect a leader to turnaround the organization and breath competitiveness into it in terms of increased market share, stock value, healthy financial results, etc. Organisational members on the other hand expect a leader to provide them direction, a sense of purpose and hope of an early revival so that they along with their family members co-exist and grow with the organization. Suppliers, vendors, distributors, etc. expect a leader to strengthen their long-term relationship with the organization by ensuring enough cash flow so that their debts are recovered and they keeQ, getting further orders of shipment. Customers, though not directly affected by the leader, expect an organization to bring better quality of product and services to the market at competitive prices. Likewise, the State expects a leader to bring back the organization to growth and prosperity so that along with the organization, health of the economy also improves and a nation's resources are productively used without remaining idle. Interest groups like political parties, non-governmental organizations, environmental activists, sports associations and the like expect a leader to continue to support the cause of their very existence, through corporate philanthropy, which ensures their perpetuity into posterity. Finally, society as a stakeholder expects a leader to exhibit sensitivity to social issues and take decisions that do not deteriorate social, environmental and moral standards of society. It expects a leader to pursue policies that further the cause of corporate social responsibility and positively help in building a healthier society. It is proposed that in a situation of decline while a leader is the cause and a decision to downsize is the effect, downsizing per se is the con~ sequence which produces outcomes, both for the leader as well as for stakeholders of an organization. Figure-2 proposes a cause-effect-consequence-outcome model of downsizing. In this model the relative importance, influence and pressure which various stakeholders impinge upon a leader determines the attention, response strategy and extent to which a leader fulfils such multiple expecManagement
& Change,
Volwne 6, Number 2 (Winter 2002)
Cause-Effect-Consequence-Outcome Model of Downsizing Figure 2 '-I-<
o
<l.l
Society
Social Upheaval
>oU
...c t:: U <l.l I-< ::s
~4=: <l.l t::
.....•
....
Interest groups The State
:::r:1"'d
~
'"'"
~
3
"a Ro (j
:r
'"
~
en
t::
ro
~ <l.l "'d U
•.•..• t::
o ro ...ct:: ]
0
.:sS-
e/) •..•
Suppliers/ Customers ~
Hope
Organizational members ~
Insecurity & despair
Shareholders represented by Board of Directors
Confidence & faith
~'" ~
c
~ .0, Z c:
3
cr
..•"
IV
~ a..• "
IV
o
.,
~
Lends credibility to
2.
Visibility of change efforts Pronounced cut in costs
::tI
~ ~ ~ ~ Ul
1 336 Leadership and Corporate Downsizing: The Legitimacy
tations. Thus it may be construed that since the relative pressure of organizational members is less in comparison to that of the shareholders of a firm, a leader may not hesitate to take a decision to downsize. The shareholders represented by the board of directors, by virtue of being nearest to a leader and virtually breathing down his neck command high priority attention from the latter. On the other hand, in capitalist economies, where principles of Social Darwinism operate the most, a leader's commitment to expectations of the State would be low in priority. As such a decision to downsize would not be affecting the primary expectation of the state or other interest groups directly. However, if the same situation were contrasted with that of a Socialist/Communist economy, a fast disappearing breed, then perhaps downsizing would not have had such an epidemic spread. Rather corporate leaders would have been constrained to contribute to the health of those nations, in more direct and tangible ways like generation of employment. Finally, to what extent society as a stakeholder influence a leader is a matter of doubt and debate. The question mark in figure-l is symbolic of abstractness of the idea of society as a stakeholder. Intuitively one may think that society is in fact a major stakeholder, yet it does not have power to influence business leaders, at least in third world countries. This is symbolized by the relative small weight of the arrow in figure-l and farthest positioning of society in the hierarchy of stakeholders in figure-2. Hence, it is only likely for leaders not to take into serious cognisance the social upheaval, which a downsizing decision may trigger in society. On the contrary downsizing decisions not only lend visibility to change effort of the leaders, but also quickly translate into financial figures of costs saved. This lends instant credibility to intentions of a leader, if not to anybody else, but at least to shareholders. Therefore, the proposition that downsizing is a consequence of leadership process, while a leader is its cause is, at least, theoretically tenable thus establishing the connectivity between leadership process and downsizing phenomena. This leads the discussion to a deeper level where the first fundamental question, which was raised in introductory section, calls attention. Accepting that a decision to downsize is primarily that of a leader, question arises can leaders exercise strategic choice by seeking alternatives to a decision to downsize, or is it that in a ,situation of decline downsizing is a Hobson's choice?
Manage~ent & Change, Volume 6, Number 2 (Winter 2002)
r~"'''''''''''--~Rath 337
THE ELEMENT OF STRATEGIC CHOICE IN DECISIONS OF DOWNSIZING Organisation strategies tend to be based, in considerable measure, on assumptions, premises and beliefs about an organization's environment (society and its structure, the market, the customer and the competition), its mission and the core competencies needed to accomplish that mission (Picken and Dess, 1998). This is primarily so, because strategies are about future which, till date, by no means of scientific achievement, has been accurately predicted. Drucker (1994) emphasized that the theory of business is the inter-relatedness among the various assumptions and premises.on which the business operates. Hamel and Prahalad (1994) describe at length how an organization's premises frame a firm's perspective. They claim that such a frame based on assumptions becomes a limiting factor to management's perception of a part of reality. Similarly, Smirchich and Stubbart (1985) highlight that based on assumptions and premises top mangers within an organization tend to develop a common view of the world. It is therefore, construed that a decision to downsize in a situation of decline is essentially based on flawed and half-baked assumptions about an unknown reality. This unknown reality is a revitalization of an organization and the assumption thereof is manpower reduction acts as a catalytic agent in a process of revitalization. Though there is hardly any tangible evidence to prove this hypothesis, yet it has sold like hot cakes among corporate leaders perhaps for reasons discussed in the preceding section. On the contrary Morris, Cascio and Young (1999) in their study on the financial effects of employee downsizing report, "we did not find significant, consistent evidence that employment downsizing led to improved financial performance. Performance improvements appears to depend on the reason for the downsizing .... This suggests that laying off employees to improve financial performance may not lead to intended improvement in a firm's financial performance if this is not accompanied by thoughtful restructuring of the firm's assets." Similarly, Appelbaum and Lavigne-Schmidt (1999), in their five year (1994 to 1998) analysis of positive and negative outcomes attributable to downsizing concluded that although in short run there can be many positive outcomes to a downsizing project, at the end negative outcomes outweigh the positive. For most organizations, the outcomes of organizational downsizing is not only painful but also unsuccessful (Karake, 1998). What surprises most Management
& Change, Volume 6, Number
2 (Winter 2002.)
338 Leadership and Corporate Downsizing: The Legitimacy
is this paradoxical situation in which despite such research findings downsizing continues unabated. "Announcements of layoffs reached their highest level last month in at least seven years, according to Challenger, Gray and Christmas, a job placement firm in Chicago," reports, Leonhardt (2001) of New York Times. A probable explanation to such a situation could be a perceived lack of alternatives to make a strategic choice among organizational leaders in situations demanding a downsizing exercise. This brings us to one of the most important debates in organizational theory free will versus determinism. Gopalakrishnan and Dugal (1998) observe that free will or strategic choice theorists portray managers as relatively autonomous agents who act in proactive and potentially creative ways to alter their organizational destinies. The determinists, on the other hand, believe that managers are severely constrained by prevailing environmental and structural conditions and therefore, cannot substantively alter an organisation's course. Taking these two schools of thought a step further it may be deduced that either leaders resign to a deterministic state and do not exercise strategic choice, or they assume a lack of strategic options in matters of downsizing and fall prey to environmental determinism of the downsizing phenomena. In either case, leaders do not exercise their creativity, wisdom and experience to seek alternative courses of action to a downsizing activity. There appears to be a total dependence on downsizing as one and only one tactic available within an organization's corporate strategy toolkit for facilitating a process of turning around organizations which are on a path of decline. In a situation of decline, leaders get so much carried away by the multiple challenges of external environment that more often than not they tum a blind eye to exploring internal opportunities and avenues, which could be potential sources of strategic alternatives. Michael E. Porter in an interview with Hodgetts (1999) remarks "We have tended to think that organization should follow and support strategy and that is true. The more I have thought about it, however, the more I have come to realize that the challenge of developing a strategy is greatly affected by organizational issues. In short, I used to think that the biggest challenge in developing strategy was understanding the way competitors were moving and so on .... I have come to see that in many ways an equally formidable challenge in developing a sound strategy comes from within." Leaders, therefore, must appreciate, rather pay attention to or more appropriately create alternative choices from within the organiManagement
& Change,
Volume 6, Number 2 (Winter 2002)
______
Rath 339 zation with existing resources. Strategy is all about risk reduction within the ambit of given constraints. Though corporate history is not replete with instances when leaders have created alternatives for downsizing. and made strategic choices therefrom, a few examples are certainly eye openers. Dow Chemical, Ford Motor Company and 3M turned in high losses in recent times, but shunned using layoff as a tool for reducing cost. Instead they looked for reduced pay, reduced work hours, early retirement and being lean to start with (Band and Tustin, 1995). Similarly, options of retraining, re-skilling, re-deploying in ancillary units, vendor/supplier establishments and many such other alternatives can be explored and choices made therefrom without solely operating on the basis of flawed paradigms, beaten-track assumptions and pernicious premises.
RATIONALE FOR SEEKING ALTERNATIVES The process of choice has in its womb unfathomable depths of uncertainty. Why then, should a leader tum to seek alternatives to downsizing? Life is fairly easy and predictable, at least in the short run, if one takes to the beaten track. Further, in conditions of decline, human factor appears to come at the' bottom of a leader's priority list. Hence, thoughtless sanction of downsizing is presumably natural. Again, as discussed, Social .Darwinism, at least in market driven economies of the world, puts no boundary control on a leader to seek alternatives to downsizing. Hence, the leaders do not perceive the spectre .of regulatory sanctions looming large in the horizon. To add to a leader's convenience there is hardly any social sanction either. The dictum of "the business of business is business" gives blanket cover to leaders to justify a decision to downsize. Finally, Geletkanyez and Hambrick (1997) drawing from March and Simon (1958) and Cyert and March (1963), observe that apart from the inherent complexity of the decision-making process-monitoring of external contingencies, interpreting their significance to the firm, formulating viable strategic alternatives and finally selecting an appropriate course of action ... tax the cognitive limitations of strategic decision makers. All said and done, there appears to be two fundamental rationales for leaders to seek alternatives to downsizing. First, it is proposed that a leader is not a leader if he cannot find alternatives to downsizing and decides on downsizing as a matter of Hobson's choice. It is a separate issue, if having found alternatives, he Management
~~~~~_~~~
__
~
& Change.
Volume 6. Number
2 (Winter 2002)
m_&,_._~.,.~a,m=, __ ~,,~~_~,.~._--,..â&#x20AC;˘m-_-----
340 Leadership and Corporate Downsizing: The Legitimacy
opts for downsizing as a strategic choice of last resort. It is also proposed that a leader, to meet the ends of strategic imperative, if not for altruism, must exhibit social sensitivity and fulfil expectations of the marginalized stakeholder that society is. Coming back to the first proposition, it may be argued that any manager given the power and position of the CEO, can exercise the option of downsizing with equal ease. So if a leader also resorts to that easy a solution, where then lies the dividing line between a leader and a manager? One of the key differentiating factors that distinguishes leaders is to develop multiple strategies and make a sub-optimal choice which in their considered opinion would achieve seemingly unattainable goals in face of unfathomable odds. By building strategic alternatives leaders provide hope to organizational members in a situation of decline. Employees come to feel that all is not lost and there are still ways and means to come out of the current state of affairs. Through strategic alternatives leaders communicate positive feelings and emotions and thereby inspire organizational members to rebuild the organization again. Leaders bring alive in concrete details the basic management process and strike a fit to the context in which people are the most important part. By exercising choice options leaders reduce ambiguity and the amount of time employees spend worrying about "what is going to happen to me?" (Gurin, 1998). In a situation of turnaround, leaders focus on people, while managers focus on processes. It is people who can create and execute change. Processes are mere enablers. Leaders are not required to activate an enabler, they are required to stir the imagination and emotion of people. Positive actions like seeking alternative course of action activates positive feelings and emotions while destructive acts of outright downsizing can lead to negative psychological and behavioural survivor reactions at work. Interestingly enough, Shaw and Barret-Power (1997, p.109), recognizing the relationship between strategy, implementation and survivor's reactions define downsizing more broadly as "a constellation of stressor events centering around pressures toward workforce reductions which place demands upon the organization, work groups and individual employees and require a process of coping and adaptation." Similarly, Cameron (1994, p.197) compares the exclusive use of a workforce reduction strategy to "throwing a grenade into a crowded room." Organizations do not require leaders to do that. Hence, it is reiterated that leaders to lead an organization in decline must first establish their credibility as leaders to Management
& Change,
Volume 6, Number 2 (Winter 2002)
Rath 341
II I'
organizational members by seeking alternatives to downsizing and exercising strategic choice therefrom. To discuss the second proposition pertaining to fulfilling expectations of society, we must begin with the big question mark in figure-I. Is society really a marginalized stakeholder? Intuitively the answer is both yes and no. Society is marginalized since it is but a mute spectator to abuses which human beings subject it to. Though society does give out danger signals from time to time by such mechanisms like deteriorating social order, increasing crime rate, decadence of moral standard, ever rising stress level, etc., hardly anyone pays any attention to such feelers. We are so much engrossed in the business of making money that majority members of a society tum a blind eye and a deaf ear to expectations which society has from them. On the other hand it is also argued that society is not at all a marginalized stakeholder today, because a number of interest groups in the form of activists and non-governmental organizations are working from multiple perspectives towards restoring, harmony in society. Further, Ross (1997) quotes James E. Austin's study "The Other Leadership Arena" to report that 81 percent of all the managers and executives surveyed byAustin in 1996 "are significantly involved in the non-profit sector, extending their leadership beyond the factory floor and the office door to the larger social problems confronting their communities." However, when it comes to social sensitivity, which a leader exhibits in his capacity as a leader of an organization in decline, there is nothing much to write about. The phenomenon of downsizing not only affects organizations per se, but also significantly adds to problems of society. It drives people on to streets with hardly a fraction of them being really able to re-settle themselves. All over the world laws abound to protect wealth of the rich, while hardly there is any law, worth its salt that protects the poor from his hunger. As a result greater mass of the redundant pool of employees, with hunger in their stomach, hands free and an idle mind tum to make both ends meet at the expense of creating social chaos, disharmony and hate. ?,o put it in a nutshell, the larger than life consequences of downsizing are nothing but social contamination. But such contamination gets camouflaged in the hob knob of corporate activities towards value creation. So the question, which arises here is-are not these leaders who sanction downsizing as the only tactical course of action for facilitating corporate revival responsible for such social contamination? Anita Roddick (2001), in an interview to Across the Board, vehemently Management
& Change,
Volume 6, Number
2 (Winter 2002)
- ----~~---------------------~~-~"'"""""'I
342 Leadership and Corporate Downsizing: The Legitimacy
advocates that businesses should be audited socially and environmentally, as stringently as they are audited financially, before they are allowed to get onto a stock market. She goes on to remark that "I do not think the movement (social responsibility) has made a hoot within the big corporations, except for words they have corralled all the words of social responsibility for their advertisements." Here is where exemplary leadership would position itself to address issues related to society. This, leaders would do, not out of altruism, but as a strategic imperative to keep the show on as members of civic society. It is a strategic imperative because days are fast fading when the major risk to business was only from the market. However, "in current liberal market thinking the capital market is used, via correct pricing, to distribute or mediate the risks between some shareholders, employees, stakeholders and pension claimants. This approach ignores the 'externalities,' the issues of risk facing those uninvolved in these markets" (Berry, 2000, p.5). Society is one of those externalities, which a leader can hardly afford to ignore. Beck's (1992) conceptualization of a risk society purports that modernism or science technology and its uses has created additional hazards to society along with the age old natural hazards of storm, tempest, earthquake and other pestilence. To this is added the hazard of social effects of downsizing, which perpetuates into posterity and transcends national boundaries. Beck (1992) contends "the axial principle of industrial society is the production and distribution of goods, while that of the risk society is the distribution of bads. Further, the industrial society is structured through social classes, while the risk society is individualized." To remain only as a profit making member of civic society is a challenge, which most leaders would love to avoid but would not care to realise till the calamity has struck. In mid-May 2000, 3M, one of the largest companies of the world declared that it would voluntarily stop making Scotchgard, a 40 year old product with $300 million in sales, after its inhouse testing reported that the compound did not decompose in the environment (Arndt, et.al., 2000). The threat of the risk madesociety compell 3M to take such a momentous decision after playing truant with societal concerns for long 40 years. Exercising social sensitivity as a matter of strategic imperative is gaining acceptance for, as Roddick (2001) puts it, "changes are going to be forced on the companies by this group of vigilant consumers the activists, the social dissenters, the fair traders ... all of these people who collectively, through the Internet, have an enormously Management
& Change,
Volume 6, Number
2 (Winter 2002)
I I
~
Rath 343 powerful voice." Therefore, to satisfy, demands of strategic imperative, leaders must rethink their made-to-order decision of downsizing in light of society's expectations from them and proact to make society a significant stakeholder of organizations. SCOPE FOR FUTURE RESEARCH The theoretical framework deliberated above is a virgin territory. Not much work has been done or empirical studies conducted focusing on criticality of a leader's decision to downsize. Hence implications for future research appear to be promising. It would be interesting to explore why employees keep blaming environment rather than the leader for a decision to downsize when they respond to questionnaire surveys on downsizing. This they do, in spite of the well-known fact that few CEOs rack their brains for alternatives while they keep sanctioning downsizing without bating an eyelid. Is it that employees have been brain washed with talks on economic upheaval and environmental threat or is it that the questionnaire did not contain any such item? Or is it that employees in their heart of hearts keep blaming their CEO but do not express it for perceived want of social desirability? It would be also an interesting proposition to explore if the downsized mass of employees as well as the survivors consider their CEO as leader material or merely respond to his position power. A survey of CEOs who have taken major downsizing decisions could reveal other critical variables, which could have made it well neigh impossible for them to seek alternatives and make a strategic choice. Another research implication of this paper could be a survey research to find out organizations, big and small, that have not downsized, but have taken recourse'to various other alternatives. What triggered their CEOs to exercise strategic choice instead of relying on the well-tested tactics of downsizing? It would also be fascinating to find out the relationship between leadership skills and the desire to search for alternatives and make strategic choice in matters pertaining to downsizing. Finally, the causality between the social sensitivity quotient of leaders and the decision to downsize can be investigated. The model presented in figure 2 and discussed at length throughout this paper can serve as a reference point to researches seeking answers to questions raised above and their research findings can be used to reveal the testability of the model.
Management
& Change,
Volume 6, Number
2 (Winter 2002)
--------.----".--'1
1
344 Leadership and Corporate Downsizing: The Legitimacy
CONCLUSION Downsizing has gone down well as a tactical measure to address the imperatives, which leaders face in situations of downturn. However, there appears to be sufficient intuitive legitimacy to create a portfolio of alternative choice paradigms to address the issue of restructuring an organization, particularly in relation to matters concerning overstaffing. Only such a search for a basket of alternative action plans will create a platform for leaders to exercise strategic choice. Needless to say, at least apparently, downsizing is a path of least resistance when compared to implementing change initiatives with the entire pool of existing employees. Further, downsizing sends enough feelers to survivors to willing change their style of functioning and mental attitudes or face the ultimatum of a farewell from the organization, thus making task of the leaders to implement change initiatives apparently easy. However, therein lies the challenge for a leader to establish his credibility as a leader. To think creatively and strategize optimistically is what a leader is paid for. Recourse to the beaten track reflects poorly on the justification of a leader to continue as a leader. That apart, downsizing as a tactical measure, as opposed to, a strategic choice option, holds the leader responsible for social contamination. Society expects business leaders to contribute to its health rather than contaminating it. As material needs of people are getting increasingly fulfilled, there is a proportionate .increase in the intensity of public debate on issues concerning quality of society. This has resulted in triggering judicial activism, consumerism, environmentalism and an increasing awareness and sensitivity of public towards societal issues and concerns. As leader of an important member of civic society organizations it is in the fitness of things and for pure strategic reasons that organizational leaders give due respect to society as an equally important stakeholder.
REFERENCE Adrian, Thornhill and Mark, N. K. Saunders (1998) "The meanings, consequences and implications of the management of downsizing and redundancy: A review," Personnel Review, 27(4), 271-295. Appelbaum, Steven H. and Lavigne-Schmidt, Suzanne (1999) "Downsizing: measuring the cost of failure," Journal of Management Development, 18(5),436463.
Management
& Change. Volume 6, Number 2 (Winter 2002)
!I
i
I !
r"".'."
.'';II''-'l''l!!!!,_"m'g,mP'''F",
•• '''t',.''IIEP'M''
'1"====""'="'"00'1'""'-
"fI''''
""
"jJ
5'
'1
"'.
'0
__
1M
I' "
I
_______
Rath 345 Arndt, Michael, Zellner, Wendy and Coy, Peter (2000) "Too much corporate power," Business Week, Sep. II, 57. Band, David C. & Tustin, Charles M. (1995) "Strategic downsizing," Management Decision, 33(8), 36-45. Beck, U (1992) The risk society: Towards a new modernity. Newbury Park, CA; Beverly Hills, CA; London: Sage Publications. Cited in Berry (2000). Berry, Anthony 1. (2000) "Leadership in a new millennium: The challenge of the risk society," The Leadership & Organisation Development Journal, 21(1), 5-12. Cameron, K.S. (1994) "Strategies for successful organizational downsizing," Human Resource Management, 33 (2), 189-211. Cyert, Richard, M. & March, James G. (1963) A behavioural theory of the firm. New York: Prentice-Hall. Cited in Geletkanycz & Hambrick (1997). Drew, Stephen A.W (1994) "Downsizing to improve strategic position," Management Decision, Feb, 32(1), 4-11. Drucker, Peter (1994) "The theory of business," Harvard Business Review, SepOct, 95-104. Geletkanycz, Marta A. and Hambrick, Donald C. (1997) The external ties of top executives: Implications for strategic choice and performance," Administrative Science Quarterly, 42(4), 654. Gopalakrishnan, Shanti and Dugal, Mohinder (1998) "Strategic choice versus environmental determinism: A debate revisited," International Journal of Organisational Analysis, 6(2), 146. Gurin, Leni (1998) "Bouncing back from downsizing," Journal of Quality and Participation, Sep/Oct, 21(5), 24. Halsall, Paul (1997) "Herbert Spencer: Social Darwinism 1857," Internet Modern History Sourcebook, www.fordham.edulhalsall/modlspencer-darwin.html.accessed on 07-02- 200 1. Hamel, Gary and Prahalad, c.K. (1994) Competing for the future. Boston: Harvard Business School Press. Hodgetts, Richard M. (1999) "A conversation with Michael E. Porter: A significant extension" toward operational improvements and positioning," Organisational Dynamics 28(1), 24-32. Huber, G.P. and Glick WH. (1993a) "FIT: equisenility and organizational effectiveness: a test," Academy Of Management Journal, 36(6), 196-250. Cited in Appelbaum & Lavigne-Schmidt (1999). Huber, G.P. & Glick, WH. (1993b) Organisational Change and Redesign. Oxford University. Cited in Appelbaum & Lavigne-Schmidt (1999). Iverson, Roderick D. & Pullman, Jacqueline A. (2000) "Determinants of voluntary turnover and layoffs in an environment of repeated downsizing following a merger: an event history analysis," Journal of Management, 26(5), 9771003. Management
~~
~,••
& Change,
""_'M=•. "~",.=,.,.~&~_=oL._'m~,,'~••
• __
._=
Volume 6, Number
2 (Winter 2002)
.__~..&~_""'a.""'m••••."",'.""'<W"'••••••••",nn_.""••.••.••• " ,.,m••.nn..,., .•••••
m_nn
_
-------~-~--------- ..\ 346 Leadership and Corporate Downsizing: The Legitimacy Karake, Zeina A. (1998) "An examination of the impact of organizational downsizing and discrimination activities on corporate social responsibility as measured by a company's reputation index," Management Decision, 36(3), 206-216. Kotter, John P. (1997) "Leading change: A conversation with John P. Kotter," Strategy & Leadership, Jan/Feb, 14-23. Leonhardt, David (2001) "The wave of layoffs: Is it bound to get bigger?" New York Times, Jan 30. Lewin, Jeffrey E. and Johnston, Wesley l (2000) "The impact of organizational downsizing and restructuring on organizational competitiveness," Competitiveness Review, 10(1),45-55. March, James G. and Simon, Herbert A. (1958) Organisations. New York: Wiley. Cited in Geletkanycz & Hambrick (1997). McCune, IT., Beatty, RW. and Montagno, RY. (1988) "Downsizing: practices in manufacturing firms," Human Resource Management, 27 (2), 145-61. Mone, M. (1994) "Relationships between self-concepts, aspirations, emotional responses and intent to leave a downsizing organization," Human Resource Management, 33(2), 261-279. Moore, Pamela L. and Prasso, Sheridan (2001) "Jack the job-killer strikes again," Business Week, 02/1212001, Issue 3719. Morris, James R, Cascio, Wayne F. and Young, Clifford E. (1999) "Downsizing after all these years; questions and answers about who did it, how many did it and who benefited from it," Organisational Dynamics, Winter, 78-87. Pickem, Joseph C. and Dess, Gregory G.(1998) "Right strategy Wrong problem," Organisational Dynamics, Summer, 27(1), 35-50. Roddick, Anita (2001) Interview. Across the Board, Jan, 37(1), 15. Ross, Judith A (1997) "Community Service," Harvard Business Review, JulJAug, 75(4),14. Rowley, Jennifer (1997) "Academic leaders: Made or born? Industrial and Commercial Training," 29(3), 78-84. Shaw, lB. and Barret-Power, E. (1997) "A conceptual framework for assessing organizations, work group and individual effectiveness during and after downsizing," Human Relations, 50(2) 109-127. Cited in Appelbaum & LavigneSchmidt (1999). Smirchich, Linda and Stubbart, Charles (1985) "Strategic management in an enacted world," Academy of Management Review, 10(4), 724-736. Vollmann, T. & Brazas, M. (1993) "Downsizing," European Management Journal, 11(1) 18-29. Cited in Adrian & Mark (1998).
Management
& Change.
Volume 6. Number 2 (Winter 2002)
IMPLEMENTATION OF WTO AGREEMENTS: MAJOR ISSUES AND PROBLEMS FOR DEVELOPING COUNTRIES
Raj Agrawal
Implementation of WTO agreements is very crucial for the effective functioning of any country. It would perhaps be useful to take stock and reflect on some worrying issues. There are serious problems in the implementation of the WTO agreements, especiallyfrom the perspective of India. Uruguay and Doha round agreements which have not served all the membership well. Ever since the conclusion of the Uruguay Round, India continues to experience great difficulties in capitalizing fully on the benefits they expected to derive from their participation in the multilateral trading system. The main issue in implementation from the angle of India is related to the question of whether the WTO agreements are development friendly. The introductory paragraphs of the Marrakesh Agreement of 1994 establishing the WTO recognized that" there is need for positive efforts designed to ensure that developing countries, and especially the least developed among them, secure a share in the growth in international trade commensurate with the need of their economic development". It is well known that the WTO-led trading system has failed to deliver the promised expansion in market access for exports from developing and least developed countries. Developing countries have been pressured to liberalize trade, investment and financial flows. But that liberalizing zeal has been found wanting when it comes to opening up of developed country markets. The great expectations of WTO from expanded market access have remained ephemeral and elusive, even as onerous obligations have been imposed on us. Indeed.. wide -ranging imbalances in various Uruguay Round of agreements have come to light during their implementation in the last six years. Now, in order to ensure that the developing countries get a fair share of the growth in international trade, the moot question to be answered is, whether the agreements are fair and conducive to the development of developing countries. Also there is the question of whether the developing countries have the necessary capacity and resources to implement the agreements within the time limits prescribed. An allied question relates to the implementation by the developed countries, particularly in respect of the provisions, which have an impact, either positive or negative, on the developing countries. This paper is an attempt to examine the various WTO agreements vis-a-vis Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
348 Implementation
ofWTO Agreements: Major Issues
problems of implementation associated with them as well as possible remedies, especiallyfrom the point of view of India. A number of lacunae exist in the WTO Agreements and also in the dispute settlement mechanism of the WTO. This makes the implementation process not only diffICultbut also (sometimes) unfavourable to India and the least developed countries.
INTRODUCTION he WTO was established on 1st January, 1995 as successor to the GATT. The implementation problems of WTO agreements are partly linked with the organizational structure and partly to the specific features of the agreements. The main difference between the WTO and GATT is as follows: • The GATT was a set of agreements and not an organization. The role of the GATT was in the area of the export and import of goods, in particular the reduction of tariff and elimination of non-tariff barriers. Agriculture was under a very soft discipline in the GATT and textile was under a special regime in derogation of the normal GATT rules. • The WTO, on the other hand, is a full-fledged organization with a permanent secretariat and well-defined structure. Besides, the trade in goods, its area of operation extend to the intellectual property rights and services. It contains enhanced disciplines in the areas of agriculture and textiles. • The dispute settlement mechanism of the GATT was relatively weak to deal with the effective implementation of the decisions. • The dispute settlement mechanism of the WTO is much more efficient and comprehensive than the GATT. It has better mechanisms for the enforcement of rights and obligations and also by ensuring acceptance of the decisions. The dispute settlement process has several problems for India.
T
WTO Agreements Elaborate Agreements have been made on 12 subjects in the area of trade in goods, viz. • Agriculture • Textiles and Clothing • Trade Related Investment Measures (TRIMS) • Sanitary and Phyto-sanitary Measures (SPS) • Technical Barriers to Trade (TBT) Management
& Change,
Volume 6, Number 2 (Winter 2002)
Agrawal 349
• • • • • • •
Anti-dumping Customs Valuation Pre-shipment inspection Rules of Origin Import Licensing Subsidies and Countervailing Measures Safeguards. Besides Trade in goods, WTO also covers agreements in specific areas, VIZ., • The General Agreement on Trade in Services (GATS) • The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) • The Trade Policy Review Mechanism (TPRM) • Agreement on the Dispute Settlement Undertaking. The implementation of WTO agreements require immediate action in the following four broad areas: • Formulation of legislation and procedures • Establishment of institutions • Elimination of some trade measures within specified time limit • Notifications to the WTO The burden of implementation for developing countries is rather heavy, although, India has already initiated several moves by formulating new legislation's and procedures. To honour to specified time limits, India also eliminates several quantitative restrictions in trade. Establishment of institutions needs financial and human resources. For instance, the implementation of the patent part of the TRIPS requires the setting up of the patent office, which should be able to handle product patents and the process patents. The SPS agreement requires setting up of quality setting institutions. The implementation of the agreements on Anti-dumping, Subsidies and safeguards require formulation of legislation and formation of the authorities to conduct investigations. All these require finance, infrastructure, technology and trained manpower. Some of it are obligatory and have to be done within prescribed periods. Many of the developing countries have found the task of implementation very onerous. The WTO has completed almost seven years of its existence. Ministerial Conference, the top policy making body of the WTO, met four times; First in Singapore (1996), the second in Geneva (1998), third in Management
& Change,
Volume 6. Number
2 (Winter 2002)
--~~~~~-~._-_.".,.,._.
"l
I
350 Implementation
ofWTO Agreements: Major Issues
Seattle (1999), and the last in Doha (2001). In contrast to the earlier GATT days, the developing countries are fully involved in the activities of the WTO, and are also trying hard to comply with the provisions of the rule-based multilateral trading system. The developing countries have identified a large number of problems on implementation and they have tabled spedfic proposals for solutions. Some of these are relating to the improvements in the agreements, as some agreements have several deficiencies, imbalances and inequities. Besides, they have also pointed out their problems in implementing several provisions of the agreements. The process of identification of the problems of implementation and working out suggestions for solutions has to be a continuing process. It can be best done by the developing countries based on their own experience of implementation. Also they have to be vigilant about the implementation of the agreements by major developed countries which are their main markets. The process can be facilitated if the developing countries exchange information on this subject among themselves and devise solutions together. The developing countries should also be actively involved in various WTO negotiations and meetings and actively participate in the evolution and interpretation of agreements and practices. They have to ensure that the evolving interpretations and practices are not against their interests. The following sections examine some major lacunae and possible rem. edies of the WTO Agreements, in particular those, which are important from the point of view of India.
AGREEMENT ON AGRICULTURE The farmers in the developed countries, with the massive support of governments through domestic and export subsidies and high tariffs, clearly have unfair advantage over the farmers in the developing countries. The bulk of the domestic support and export subsidy in the developed countries will continue to be applicable even beyond 2000.The farmers of the developed countries have already got tremendous advantages over those in the developing countries in terms of higher financial resources, access to technology, benefit of modem infrastructure and several other facilities. Over and above, they also get heavy protection of governments. This is patently unfair in international trade. It stands to reason that the devel. Management
& Change, Volume 6, Number 2 (Winter 2002)
'"''
,~.,
..
~,
".
--------------------
Agrawal 351
oped countries should totally eliminate their domestic support and export subsidy on agriculture within a short time and also have reasonable ceilings on their tariffs in this sector. In spite of the AoA, agriculture still remains to be the most protected sector and is mortgaged to domestic political agenda in many countries. Loopholes in the agreement allow countries to replace quantitative restrictions with tariff peaks and continue with their subsidy programmes by packaging it in a GATT compatible manner. Besides unrealistically stringent Sanitary and Phyto- Sanitary (SPS) measures adopted by industrial countries, tariffs on agricultural products generally remain substantially higher. Developed countries have also managed to wriggle out of subsidy reduction commitments by cleverly manipulating different "Boxes." OECD-countries combined spending on account of support to agriculture stood at $ 327 billion during 2000 one needs to look. Look like "Special and Differential Treatment" in reverse gear, which is benefiting the industrial countries, instead of developing countries and LDCs. The AoA seeks primarily to remove distortions existing in agriculture trade by reducing barriers affecting market access and disciplining market-distorting subsidies. AoA has also made references to non-trade concerns (NTCs) that would have to be taken on-board while the Agreement is being implemented by the WTO Member countries. These NTCs include food security and the protection to the environment, among others. The preamble to the AoA provides some indications as to what can be treated as the NTCs. It states that "commitments under the reform programme should be made in an equitable way among all Members, having regard to non-trade concerns, including food security and the need to protect environment, having regard to the agreement that special and differential treatment for developing countries is an integral element of the negotiations, and taking into account the possible negatives effects of the reform programme on least -developed and net food importing countries." The NTCs also find a mention in Article 20 of the AoA, wherein the need to continue the reform process that the Article initiates has been emphasized. The food production of developing countries for domestic consumption should be excluded from the disciplines of import control and domestic support. This should be done either through clarifications of Articles 3 and 4 of the agreement, or if need be, by putting additional provisions in the agreement. Management
& Change,
Volume 6, Number
2 (Winter 2002)
352 Implementation
ofWTO Agreements: Major Issues
The agreement should not stand in the way of support to small farmers and household farmers in developing countries. In many developing countries the large number of small farmers normally do not engage in agriculture as a commercial venture. For them it is a way of life coming from generations. Also they do not have any other source of income. They will face a bleak prospect if they are called upon to face international competition. However, notwithstanding these references to the NTCs, existing provisions in AoA do not provide clear guidelines with which to address these concerns. Among the dimensions that the preamble statement considers as being part of the NTCs, only the. food security issue has found a mention that too in a very perfunctory manner. The only support for measures aimed at ensuring food security appear in the form of an exemption from the calculation of Aggregate Measure of Support (AMS); the expenditure which is made on public stockholding of foodgrains. Expenditure made for accumulation and holding of stocks of products would, however, be exempt from AMS only if these activities form an integral part of a food security programme identified by national legislation.
AGREEMENT ON TEXTILES AND CLOTHING The Uruguay Round negotiations culminated with an Agreement on Textiles and Clothing (ATC) which guarantees the inclusion of textiles in the WTO framework, the trade of which was hitherto guided by the Multifibre Arrangement (MFA). As per the ATC, trade in textiles and clothing will be fully integrated into the multilateral trading system in four stages, the last being at the end of the year 2004. However, the progress achieved in the first two stage of integration, i.e., on 1 January, 1995, and 1 January, 1998 is negligible. This is an important area where proper implementation of the existing provisions is of crucial relevance to a large number of developing countries. The general perception is that the developed countries have done everything they can to reduce tariffs and that we cannot extract more from them on this score. This is wrong and in areas like textiles, plastic, leather and footwear, tariffs on many textile items will be in excess of 25percent-30 percent in the USA and the EU. Moreover, the developed countries have resorted to anti-dumping processes and safeguard measures. Management
& Change, Volume 6, Number 2 (Winter 2002)
I
~
Agrawal 353 The agreement also suffers from certain basic deficiencies. For example, it does not have a provision for positive structural adjustment efforts by government in the developed countries. They should also prepare positive structural adjustment programmes and notify it to the WTO, where timely implementation of these programmes should be kept under review. This will smoothen the process of final integration of this sector into the normal trade rules.
THE TRIPS AGREEMENT Negotiations on the TRIPs Agreement were an important highlight of the Uruguay Round negotiations. Although many of the theorists have also been against this agreement as it confers limited monopoly rights to the intellectual property holders, which goes against the basic premise of multilateral trade liberalisation. TRIPs cover seven forms of intellectual property: Copyrights, trademarks, industrial designs, patents, trade secrets, geographical indications and integrated circuits. Out of these seven, patents remains to be the most controversial. The agreement on TRIPs is basically unbalanced as it primarily focuses on the protection of the rights of the owners of the IPR without paying much attention to the interests of the consumers. More so, developing countries find that they have very limited time to put the needed institutions in place to help their countries benefit from this agreement. Some of the articles in the TRIPs agreement not only lack clarity but also stand against the interest of the developing countries. Members are allowed to exclude plants and animals from patentability, but there is no general prohibition of patenting these materials. There should be a clarification that naturally occurring plant animals, the parts of plants and animals including the gene sequence, and essentially biological processes for the production of plants, animals and their parts must not be granted patents. There have been instances in the recent past when the firms in developed countries have obtained patents for the use of naturally occurring plants in some developing countries with some slight modifications. There should be a decision that patent must not be granted to a subject matter which was available to the public by means of use, written description or in any other manner in any country, prior to the date of filling of the application for patents. Management
& Change,
Volume 6, Number
2 (Winter 2002)
354 Implementation
ofWTO Agreements: Major Issues
Similarly, when the subject matter of patent is derived from the plant material of a country, the consent of country must be obtained before granting patents. Also patents, inconsistent with Article 15 of the Convention on Bio- Diversity (CBD) must not be granted. If the subject matter of patent is derived from the bio-resources of a country,it should be obligatory on the part of the patent holder to share the economic benefits with the country of origin and also with the indigenous communities that have nurtured the bio-resources for a long time. There should be a decision that the country must impose such a condition on the patent holder who must implement it faithfully. Another apprehension of developing countries is that the TRIPs agreement in its present form might tempt intellectual property rights (IPRs) holders to charge exorbitant prices for transfer of dissemination of technologies held through such IPRs. Furthermore, the provision of patent for 20 years creates effective monopoly of the patent holder, and thus prevents access to essential technologies for development. The longer patent protection period needs to be reduced to a reasonable period. In pharmaceutical sector certain drugs are essential as well as life saving and any restriction on their production should be removed so as to make them available in sufficient quantity at reasonable prices. India and developing countries should be firmly against such technological protectionism and subordination of technology and knowledge to predatory interests. There is a need for relaxation in the exclusive rights of the patent holders in respect of these drugs. There should be assurance that nothing in the TRIPS agreement could prevent members from adopting measures to protect public health. Broadest flexibility has to be provided for the use of compulsory licenses and parallel imports. The provision of compulsory licensing in the TRIPs agreement (Art.31) is very cumbersome and it makes the compulsory licensing almost impracticable. It should be made simpler. However, at Doha, the health consideration prevailed over the trade related intellectual property rights (TRIPS). That means the ministerial declaration accepts the rights of WTO members to frame health policies that ensure access to affordable medicines. The governments will be able to invoke the so-called "compulsory licensing" rules that allow them to ask other drug manufacturers to produce patented drugs in cases of national emergency.
Management
& Change, Volume 6, Number 2 (Winter 2002)
Agrawal 355 The beneficiary of compulsory licensing could be the Indian pharmaceutical industry, since it makes generics (unbranded formulations) that are vastly less expensive than patented drugs produced in developed markets. Indian drugs manufacturers stand to gain if more governments grant compulsory licenses because only India, Brazil and China have the ability to produce cheap generics.
The Agreement on Trade Related Investment Measures (TRIMs) SpecijlcaUy Prohibits • •
The application of domestic content requirements Limitation on import of inputs; Both of these restrictions will have adverse impact on the developing countries.
The domestic content requirement is useful and often necessary for reasons such as: • •
Encouraging domestic economic activities by using local inputs Prevention of wastage of foreign exchange in the import of raw materials • Encouraging indigenisation of production; etc. The restriction on "putting limitation to the import of inputs" inhibits a developing country to have balancing of foreign exchange. The developing countries who often face foreign exchange crunch, require flexibility in this regard. The developing countries should be exempted from the disciplines on: • The application of domestic content requirement • Not limiting the imports of inputs. There is a need of an enabling provision in Article 2 or 4 of the TRIMs agreement to this effect. In light of rgw recent Basmati dispute, we have to strongly push for extension of protection under geographical indications for Basmati Rice and other such exclusive products.
GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) The GATS provides an international as well as a multilaterally accepted legal framework for the promotion of liberalization of trade in services. Trade in services has been defined under the GATS in terms of four modes of delivery, viz: Management & Change, Volume 6, Number 2 (Winter 2002)
356 Implementation
• • • •
ofWTO Agreements: Major Issues
Cross border supply (e.g., international telephony) Consumption abroad (e.g., tourism) Commercial presence and (e.g., opening of a consultancy firm on foreign soil) Movement of natural persons (MNP) (e.g. persons working on foreign soil on a contract and time bound basis)
Basic Principles of GATS •
Most favoured nation treatment: No discrimination amongst other members of the agreement in terms of treatment accorded to their service suppliers: • National treatment: Foreign services and service suppliers to be treated no less favourably than nationals; • Progressive liberalization: The process of liberalization is irreversible because of binding commitments on the negotiated levels of market access; and • Transparency: All policies related to barriers to market access and discriminatory restrictions by the Members are to be notified. The GATS is based on a "positive list" approach, i.e. no sector is covered unless it is specifically mentioned in the Agreement, services sector has been classified into 12 categories, which are further subdivided into 160 subgroups. Under the agreement each member has undertaken specific commitments in terms of market access (Article XVI) and national treatment (Article XVII). These are"presented in the schedules of specific commitments on six service sector groups viz., business, communication, construction and related engineering, financial service, health and social service and tourism and travel related service (see table-I).
a. b. c. d. e. f. g.
Table-} Classification of Services Business (including professional and computer service) Communication Construction and Engineering Distribution Education Environmental Finance
Management
& Change,
Volume 6, Number 2 (Winter 2002)
Agrawal h. i j. k 1
357
Health Tourism and Travel Recreational Transport Other services not included elsewhere
The major groups where broad agreements have been arrived at are: telecommunications and financial services, with a special emphasis on banking and insurance. Although trade in services was never part of the GATT, but were brought into the WTO framework during the Uruguay Round. The major problem in the agreement on services is the imbalances in benefits accrued to the developed and developing countries due to varying stages of their development. The agreement also suffers from unequal treatment given to capital and labour in terms of market access. From the point of view of developing countries, the clauses regarding the movement of natural persons (MNP) need due consideration. Whereas the movement of capital has been specifically included in the GATS obligations,' the same treatment has not been given to the movement of labour. It is important to note that only Indian unskilled labour but not skilled and professionals would be able to take advantage of the ongoing liberalization in the area of professional services unless some breakthrough is reached in the area of movement of natural persons. Movement of natural persons, especially both professionals and nonprofessionals, is of importance to India as it enjoys distinct advantage in this area covering a whole range of serviees from hotel, health, engineering, accountancy, construction and other professional services. Barriers on MNP There are a number of restrictions, which prevent the movement of natural persons in the form of visa regulations and selective discriminations against developing countries. As is known under GATS, the countries are listed in terms of a listundertaken market access commitments. The specific commitments undertaken by the developed countries have offered little in terms of facilitating national treatment or making administrative arrangements in the area of MNP. The following are the major drawbacks of the present commitments on MNP. Management
& Change, Volume 6, Number
2 (Winter 2002)
358 Implementation
ofWTO Agreements: Major Issues
a) It is restricted to business and intra-corporate transferees. b) It is linked to commercial presence in the host country which is a costly affairs c) Onerous conditionalities impused on the commitments by the developed countries d) Commitments are not made where supply is abundant in developing countries (e.g., health, software etc.) e) Stringent visa regulations, quotas etc.
MNP: Issues of Concern Irrespective of GATS, in recent years a number of countries have introduced barriers on movement of labour. â&#x20AC;˘ In 1999, UAB introduced a freeze on engaging unskilled manpower from India and Pakistan. â&#x20AC;˘ In the United States, H1-B visa (especially workers) is given to professional workers coming in. India has been seeking larger H1-B visas for facilitating sending software engineers etc. The U~A has put visa ceilings for software professionals from India through H1-B Visa programme and allowed only 95,000 persons in 1998. Wage parity, deduction of withholding tax and double taxation of social security (applied to the US and EU) were the key non-tariff barriers (NTBs) used by the developed countries to protect domestic workers against foreign workers. Wage parity means an Indian working in the US should receive the same salary as would be paid to an American national in that job. This affects the Indian competitiveness to deliver the assignment at a much cheaper cost. The other problem, which India faces in the context of MNP, is the economic needs test (ENT) applied by the developed countries as a barrier. Developed countries provide access to outside labour only if they do not have sufficient number of personnel for that field and the job is essential for the country. It means they do not allow free competition in domestic labour market. India argues for the total elimination of ENT from the horizontal commitment of developed countries.
Official Position of India in the area of MNP India has put forward a number of suggestions on the WTO platform for improving the MNP mode of trade in services. The important suggestions are: Management
& Change.
Volume 6. Number 2 (Winter 2002)
D Agrawal
• • • • • •
359
Each country should publish and make freely available procedures applicable for movement of personnel and the various entry procedures. Equal treatment to all foreign nationals. Standardization/harmonization of qualifications and experience with the help of agreements. There should be no restrictions on temporary movement of professionals. Salary and wage comparison with residents and/or citizens should not be used as trade restrictive measures. Requirements of local competency or local certification (e.g., medical boards) cannot be used as non-tariff barrier.
DISPUTE
SETTLEMENT
MECHANISM
The mechanism for dispute settlement is essential for proper functioning of any multilateral organization. The Dispute Settlement Undertaking (DSU) of the WTO forms Annex 2 to the WTO Agreement. It is one , of the corner stones of the WTO as the process is meant to ensure the rights and obligations of its members. The WTO as compared to GATT has improved the enforcement rights and obligations by fixing time frames for various stages in the dispute settlement process and by bringing in automaticity in the decision making process. However, DSU suffers from some major deficiencies from the point of view of developing countries, and also states measures for rectification. The dispute settlement process under the WTO is time consulting and costly. For example, intemationallaw firms charge anything between $250 to $1,000 per hour as fees for trade disputes arising at the WTO. Many of developing countries can neither afford such costs of litigation nor they have enough expertise to handle these cases on their own. Furthermore, the final relief can take as much as 28 months. Developing countries' trade prospects often suffer during this period. Thus, there should be a provision for legal assistance to developing and least developing countries. Once the legal settlement is reached on any matters at the WTO, even if the erring country removes the measures promptly, the affected country get relief only from the time when these measures are removed. Further, there is no provision for compensation for the illegal measures of the past, which created the dispute. Hence, there should have provisions Management
& Change.
Volume 6. Number
2 (Winter 2002)
,
.,
a 360 Implementation
ofWTO Agreements: Major Issues
for adequate compensation to developing country (complainant) for all these factors.
CONCLUSION It is well-known that the WTO-Ied trading system has failed to deliver the promised expansion in market access for exports from developing and least developed countries. Developing world has been pressured to liberalize trade, investment and financial flows. But liberalizing zeal has been found wanting when it comes to opening up of developed country markets. The great expectations from expanded market access have remained ephemeral and elusive, even as onerous obligations have been imposed on us. Indeed, wide-ranging imbalances in various Uruguay Round Agreements have come to light during their implementation in the last six years. Tardy implementation of the agreement on agriculture by developed countries, limited liberalization in Mode-4 of service supply and disappointedly slow pace of textile- quota elimination-all these pose serious challenges for us. Besides unrealistically stringent Sanitary and Phyto- Sanitary (SPS) measures adopted by industrial countries, tariffs on agricultural products generally remain substantially higher. Developed countries have also managed to wriggle (Jut of subsidy reduction commitments by cleverly manipulating different "Boxes," In such a protectionist backdrop, it is hardly surprising that during 1990-98, trade within advanced economies accounted for more than 62 percent of the increase in total world trade. On the extreme, the number of least developed 'countries rose from 24 to 49 in last 30 years, and their share in global exports declined from over 3 percent in 1954 to 0.4 percent in 1999. Similarly in the case of services, no significant progress has been achieved so far on liberalization in Mode-4 of service supply. India should strongly demand enhanced access for skilled and professional people in service sectors of our interest. India must suggest removal and relaxation of existing limitations on the movement of natural persons. Among others, there is a need for scrapping social security contributions for temporary movement of professionals, establishment of multilateral norms on economic needs test and mutual recognition agreements, as well as more Management
& Change,
I
Volume 6, Number 2 (Winter 2002)
,I,', I
Agrawal 361 transparent visa administration. Also, provisions of the TRIPS agreement are sought to restrain the supply life-saving drugs at affordable prices. Developing countries are firmly against such technological protectionism and subordination of technology and knowledge to predatory interests. India should ensure that nothing in the TRIPS agreement could prevent members from adopting measures to protect public health. Broadest flexibility has to be. provided for the use of compulsory licenses and parallel imports. In light of recent Basmati dispute, India has to strongly push for extension of protection under geographical indications for Basmati Rice and other such exclusive products. Further, the scope for non-actionable subsidies should be widened to include subsidies provided by developing countries for promoting their economic and industrial development. In spite of all the rhetoric about the need for development and implementation agenda to be heart of WTO-negotiations, only marginal progress has so far been achieved on resolving the outstanding-related proposals submitted by the developing countries only two have been addressed so far. India should be committed only to the strengthening of a rule-based, non-discriminatory multilateral trading system and WTO. However, developing countries should be allowed necessary time and space to successfully complete the adjustment process in accordance with their developmental aspirations and at a pace in line with internal reforms. This alone will build and sustain confidence in the WTO, and make it more credible and acceptable to the developing world. As agreed at Doha, we should expect the multilateral agreements on investment and competition as well as the multilateral agreement on environments in the near future. We should, right now, start thinking in terms of formulating our ideas of drafts of such agreements. It should also be mentioned that at Doha round, the WTO has set up working groups on new issues such as on debt and technology transfer. Therefore, it is more or less certain that in future these issues will also come under negotiations. The Government of India and the Indian industry/ businesses have their plates full and need to work carefully hand-in hand, in responding to these issues.
REFERENCES Business India (1999) 4-17 July, New Delhi. Management
& Change,
Volume 6, Number
2 (Winter 2002)
362 Implementation
ofWTO Agreements: Major Issues
Gereffi, Gary (1995) , Global Production Systems and Third World Development'. In Barabara Stalling (Ed), Global Change, Regional Response: The New International context of Development. Newyork, Cambridge: University Press Government of India (2000) Economic Survey. New Delhi: Ministry of Finance. Reserve Bank of India (RBI) (1999) Annual Report. World Bank (1996), India: Country Economic Memorandum. South Asia Region. Washington, D.C.; Prospects and Developing Countries. Washington, D.C. World Trade Organization (1995), International Trade: Trends and Statistics. Geneva: WTO ___ (1996) Annual Report, Vols. II and I. Geneva: WTO _____ (1999) Annual Report, Vols. II and I. Geneva; WTO ___ (1996) Annual Report, Vols. II and I. Geneva: WTO ___ (1996) Annual Report, Vols. II and I. Geneva: WTO _____ (1999) Annual Report, Vols. II and I. Geneva; WTO ___ (1996) Annual Report, Vols. II and I. Geneva: WTO _____ (1999) Annual Report, Vols. II and I. Geneva; WTO Yeats, Alexander (1998) , Just How Big Is Global Production: WPS 871, World Bank, Washington ,D.C. World Bank (2000), entering the 21ST Century World Development Report 1999/ 2(XX) ibid, 1998. "Agricultural Policy Refonn and the least developed and Net Importing Countri~s." Washington, D.C. ibid, 1999. "A proposal for Comprehensive Development Framework." ibid, 1999. World Development Indicators Washington, D.C. Draft. Zurn, Michael.l998. "The Rise of International Environmental Politics: A Review of Current Research," World Politics 50: 617-49
BIBLIOGRAPHY An Introduction to the GATS, WTO Secretariat Trade in Services Division, October 1999. Analysis and Publications, WTO Document. Approaches to Liberalizing Services, Sherry M.Stephenson, Development Research Group of the World Bank (DECRG). Assessing the General Agreement on Trade in Services, Bernard Hockman. Brief Outline of Mandated Services Negotiations Brief Outline of Mandated Services Negotiations. Business Guide to the World Trading System, International Trade Centre & Commonwealth Secretariat, Geneva 1999. Communication from India, Proposed Liberalization of Movement of Professionals under General Agreement on Trade in Services (GATS)
Management
& Change, Volume 6, Number 2 (Winter 2002)
Agrawal 363
\
"Developing Countries and the GATS 2000 Round," Journal of World Trade, Pierre Sauve, 2000. Economic Effects of Service Liberalization, Background Note by the Secretariat, WTO, S/CIW126, 7 October, 1997. Exporting Labour Services and market Access Commitments under GATS in the World Trade Organizatlon, An analysis from the Perspective of Developing Countries, Neela Mukherjee. GATS - Fact and Fiction, WTO Document. Global Economic Prospects and the Developing Countries, Embargoed Unit 1 PM, EST, October 31, 2001. Impediments to trade in services, Measurement and Policy implications. Christopher Findlay and Tony Warren; London & New York. India & the WTO, A monthly newsletter of the Ministry of Commerce and Industry, May 2000. National Seminar on WTO and its Impact on Consultancy and Construction Industry, Keynote Address, B.K.Zutshi, Consulting Engineering Association of India, 2 January 2002. Report (2001) of the Special Session of the Council for Trade in Services to the General Council, WTO, S/CSS/8, 11 October 2001. Report (2001) of the Special Session of the Council for Trade in Services to the General Council, WTO, S/eSS/8, 11 October 2001. Report of the Meeting Held on 1 December 2000 on the treatment of Autonomous Liberalization, Note by the Secretariat, WTO, S/CSSIM16, 22 January 2001. Report of the Working Party on GATS Rules to the council for trade services, WTO, SIWPGR/6, 4 October 2001. Services in the International Economy, Robert M.Stem, The University of Michigan Press. Services Sectoral Classification List, Note by the Secretariat, WTO, MTN, GNSI W1l20. The Developmental Impact of Trade Liberalization under GATS, Informal Note by the Secretariat, Job NO.2748/Res.l, 7 June 1999. The General Agreement on Trade in Services (GATS) : Objectives. coverage and disciplines, WTO Documents. The prospects of International Trade in Services, Dietrich Barth. The WTOlWorld Bank Conference on Developing Countries in a Millennium Round WTO Secretariat, Centre William Rappard, Geneva, 20 ..21 September 1999, Developing Countries in the New Round of GATS Negotiations: From a defensive to a pro-Active Role, Aaditya Mattoo "Treatment of. Autonomous Liberalization in the WTO New Service Round, To give Credit is to Get More," Byung-il Chol, October 2000 United Nations Conference on trade and development, Policy issues in internaManagement
& Change,
Volume 6, Number
2 (Winter
2002)
-
-~----------------------------- ....
~
364 Implementation ofWTO Agreements: Major Issues tional trade and commodities study series NO.8, Christopher Findlay, New York and Geneva, 200l. Uruguay Round : The General Agreement on Trade in Services, International Trade Forum 311996. World Trade Organization; A Training Package, Module 6, Services: GATS, 15 December 1998. WTO services talks press ahead, Members adopt negotiating guidelines at Special session, 28-30 March, WTO News: 2001 Press Release. WTO Staff working papers, WTO Documents.
I
Management
& Change,
Volume 6, Number 2 (Winter 2002)
NEED FOR ATTITUDINAL ASSESSMENT IN MANAGING PROTECTED AREAS: A STUDY
Parul Rishi
In the developing countries, looking at the socio-economic and cultural traditions, the newer approaches to protected area management, addressing the needs of nearby communities by emphasising local participation and by combining conservation with development, are more pertinent. Resources in protected areas and environmental issues are governed by a web of interests, conflicts and trade-off between different sets of local people, government departments and local planners (Shrivastava, 1997). That is why, the attitudinal assessment of people about park and park resources have become a very pertinent research need. This article integrates the conceptual framework of behavioural analysis of PA management with a focus on attitudinal assessment, its nature, relevance and procedure within the above context .The basic objective is to know the attitudes of different stakeholders towards PA resources and management. Such assessment especially focuses on the study of conservation attitudes, hardships' ranking and value-attitudes'- behaviour inter-relationship. Stakeholders' analysis can also be conducted on attitudinal dimensions, especially from tourists, forest department staff and significant others using point scale method. Suggestions are made for the successful, people oriented conservation projects, to address the attitudinal and perceptual considerations of stakeholders and establish equitable partnerships the long-term survival and development of resource and the users.
INTRODUCTION ince last five decades, protected areas' network has expanded rap idly, particularly in developing countries. Throughout the world, there ~ is a strong determination to preserve the natural heritage. This determination is expressed in the form of financial contributions to conservation organisations and political pressure on governments to establish additional protected areas or to enforce ban on trade in endangered species. Although some early protected areas were established by the colonial gov-
Management & Change, Volume 6, Number 2 (Winter 200:2) <9 2002 Institute for Integrated Learning in Management. All Rights Reserved.
1 366 Need for Attitudinal Assessment in Managing Protected Area
ernments, independent national governments also continued to maintain and extend the .protected area network.
PROTECTED AREAS IN DEVELOPING COUNTRIES Protected areas have long been recognised as playing a crucial role in conserving bio-diversity. But milny of these areas are at serious risk because of the hardships they impose on members of local community, (Wells and Brandon, 1992). The establishment of protected areas in de. vel oping countries has placed the heavy burden on local communities, which has proven to be a gross disincentive to effective conservation (Wells, 1992). Any attempts geared towards wild life conservation have to run up against the harsh reality of rapidly increasing human population living below the poverty line in most of the cases. In situations where wildlife conservation is at odds with the livelihood of local communities, the former is always at the loosing end owing to the fact that when it comes to setting priorities, members of local cqmmunities complain that their interests and values are often pushed aside, and exclusive preference is being given to wildlife protection (Nepal and Weber, 1995). Traditional approaches to park/management have generally been unsympathetic to the constraints facing local people, relying more on guarding, patrolling and penalising people. However, in the developing countries, looking at the socio-economic and cultural traditions, the newer approaches to protected area management, addressing the needs of nearby communities by emphasising local participation and by combining conservation with development, are more pertinent.
PEOPLE-PARK
CONFLICT
Most protected areas were originally established with little or no regard for local people. Park management basically emphasised a policing role aimed at excluding people-sometimes characterised as "fences and fines" approach. Machlis and Tichnell (1985) have argued that this preservationist approach ... Requires an essentially militaristic defence strategy and will almost always heighten conflict." In a sample of 100 parks from 49 countries, they identified various specific threats to national parks (Machlis and Tinchnell; 1985; Me Neely, 1989). The main issue of these conflicts is local people's customary right to use park resources, which Management
& Change. Volume 6, Number 2 (Winter 2002)
Rishi 367 has raised basic questions about their survival. These conflicts have led to severe damage to park resources and jeopardised the accomplishment of park objectives and management (Neumann, 1989). People in and around protected areas exert tremendous biotic pressure for grass, fuel wood and small timber in particular. Since these are prime necessities of people and livestock and in the absence of acceptable alternative, people, especially the poor are compelled to adopt illegal ways for obtaining them. Besides, there are other issues also like, problem of trust, difficulties of communication, stakeholders' number, power differences, degree of risk and uncertainty etc. which needs attention. Imposing protected areas on rural communities may had number of negative consequences like disruption of local cultures and economics (Callimanopulos, 1982), increased depredations on crops and livestock by wild animals (Mishra, 1984) and the displacement of people from their traditional lands, leading to social and cultural disruption, enforced poverty and symptoms of hopelessness and distress (Calhoun, 1972), Lusigi, 1984). These adverse effects have generated resentment and hostility that has led to vandalism, such as the setting of fires, damage/destruction of park property, and is extreme cases man handling with park staff too (Hough, 1988). As the populations expand, the increasing demand for land and resources will cause these conflicts to escalate. As such conflicts are dysfunctional for both, the people and parks, so it is very essential to examine, how much these conflicts can be managed and how protected area-people relationships can be improved. PARTICIPATORY
MANAGEMENT
CONCERNS
IN PA
Government departments conduct developmental planning in protected areas, by staff who is educated and urbanised and hence live in a different culture. In this way incorporating participatory concerns in PA management is a crucial question; Even if planners recognise that they have different perspectives than those of local people, they tend to consult with rural elites living close to roads rather than discovering the real needs of poor, uneducated and powerless people in remote areas (Chambers, 1983). Although planners claim that two way information flow exists, in reality, the information flow is top down. Planners also claim that rural populations are not able to diagnose their problems or needs and they are completely incapable of devising strategies for their own development. Management
& Change.
Volume 6, Number
2 (Winter
2002)
368 Need for Attitudinal Assessment in Managing Protected Area
Where locals participate in planning, they are the traditional elites having political knowledge and power to influence outcomes in their direction resulting in the capturing of major benefits by local elites. Involving people in real sense of the term i.e. not just getting people to agree with what conservation organisations want to do, implies that planners should be prepared on the following: • Give up some degree of control to empower them • Have patience for this complex and time consuming task • Investments in training, supportive research and evaluation • Staff skilled in catalyzing the social organization of local people • Acquainting people with further planning of PA management at an early stage to elicit their ideas and suggestions • Encouraging and assisting in institutionalizing participation • Monitoring progress and respond to needed changes in approach Ideally, protected areas should be managed with substantial active input from local participation and should generate sufficient economic benefits to guarantee local support for conservation~ But in reality, planners have the objective of improving people park relationships and reducing resulting conflicts rather than genuine participation and economic development. A more in-depth self-analysis through planners and others is required to state what we really mean by participation and how we can effectively practice it for the genuine benefit of park and people.
PLURALISM IN PROTECTED AREA MANAGEMENT The above analysis justifies that forest management is no more dominated by a single technical authority, rather moving in the direction where values and objectives appear to be "Plural, conditional, incomparable, and incommensurate" (Daniels and Walker, 1997). In the current context, the concept of pluralism (Clement, 1997) has become especially relevant to .understand the dynamics of protected areas management and rural development. Pluralism, in the present context, is based on the assumption that there is no single technical solution to any protected area management problems. There are multiple values and objectives which are not solely the result of ignorance and are of specific interests. This concept has emerged as a result of international recognition of the role of all the major stakeholders in protected area management which are getting reinforced by Management
& Change, Volume 6, Number 2 (Winter 2002)
,-
._--<_._--------------------------~-_._-------
Rishi 369
NGOs in particular and other groups in general. Identification of the principal stakeholders in the protected areas allows creating a mental map of the range of interests involved in management situation. Mt. Diablo Park also faced the end of a long tradition of livestock grazing based on the assertion of a policy of managing for "natural processes," The controversy associated with the removal of grazing delayed implementation of the park general plan for almost five years. Much of the Stakeholders, largely suburban homeowners, regarded grazing as fuel management and vegetation manipulation efforts or as a replacement for the ecological role played by prehistoric elk and antelope grazing in Eco system dynamics (Fried and Huntsinger 1998). The most compelling reason to retain grazing was the perception that the practice reduces the likelihood of wild fires spreading from the park by reducing the build up of dried grass and suppressing the flammable shrubs. However, the park staff perceived grazing as an exploitative local use. For them, local concerns are generally marked with self-interest with limited consideration or ignorance of larger resource value (Fried and Huntsinger 1998). Besides the local people and park staff, scientists ÂŁllso neglected the activities of indigenous people, which have influenced the American landscape over millennia (Blackburn and Anderson 1993). The fundamental argument used to remove grazing was the interpretation of managing for naturalness and ecological integrity (Burth 1988). Researchers argued that ecological and legislative mandates for removing grazing do not fully explain the park staffs stance (Fried and Hl,mtsinger 1998). The above ideologies and perceptions of differing nature suggest the need for pluralistic collaboration among all the stakeholders only then, the Mt. Diablo state parks can cope with diverse constituencies over the long run. In the light of above background, Keoladeo National Park (KNP) of India was also studied from the perspectives of different stake holders which included policy makers, planners and administrators in government, especially forest department, as well as tourists and subsistence user groups. It is' surrounded on three sides by rural landscape with an approximate population of 15,651 people and 2350 households (Government of India census 1991). The sprouting of management problems can be traced somewhere in 1977 when the villagers living around the park, demanded the boundary wall around the park to prevent wild animals from raiding their crops, which was constructed in 1981 with large gates, to allow the livestock go inside for grazing. In 1982, it was declared as National Park Management
& Change,
Volume 6, Number 2 (Winter 2002)
370 Need for Attitudinal Assessment in Managing Protected Area
and grazing was banned. Government justified that "your animals should not disturb the park and birds, as our animals should not raid the crops." This "you and your cattle" we and our. park issue resulted in alienation of people from park and its management and it was the beginning of the emergence of "pluralism" in KNP. Looking at the conflicting situations persisting in most of the protected areas/National Parks, there is a need to focus the research studies on behavioural dimensions of park management. This article integrates the conceptual framework of behavioural analysis of PA management with a focus on attitudinal assessment, its nature, relevance and procedure within the above context. BEHAVIOURAL
ANALYSIS
OF PARK MANAGEMENT
The relevance of behavioural issues in protected area management has been further increased to learn the process of change involving protected area, local people and the interface between the two (Figure-I). The behavioural component mentioned above includes cognitive Interface, i.e., understanding the role of people and PA staff, respecting their ideas and indigenous knowledge; affective Interface i.e., developing positive feelings, attitudes and concerns about local people and winning their trust through compassionate communication and Conative Interface i.e., empowering people through joint decision and action regarding conservation, management and development. To achieve such multilevel interface between protected area management and local people, attitudinal studies have got a very special significance. PA CONSERVATION AND MANAGEMENT: A TTITUDINAL STUDIES
RELEVANCE
OF
Resources in protected areas and environmental issues are governed by a web of interests, conflicts and trade-offs between different sets of local people, government departments and local planners (Shrivastava, 1997), which are mentioned as under: • Divergent interests completing over the same resource. • Religious favour overpowering conservation. • Restriction on use of roads passing through PA. • The Problem of 'Gochar' (common grazing land) Management
& Change, Volume 6, Number 2 (Winter 2002)
Rishi
371
Figure 1: Behavioural Model of PA management
.B ehaviouraLCom
ponents
A F
C
F E C
N
o A T
T
I
I
V
V
E
E
Protected Area Manal:ement
Local People ]
I
\
\
M ore Collaborative P A Management & Peaceful co-existence Source: Adapted from Parul(2000)
• • • • •
NTFP collection. Agriculture Vs forestry interest. Damage by wild life Tourists' expectations. Local press and wildlife To execute the attitudinal assessment, some conceptual details of attitudi~al assessment need special focus. Attitudinal Framework: The understanding of attitudes is one of the central concern in social life. It is a relatively permanent enduring state of readiness of mind, which predisposes an individual to react in a characteristic way to any event, situation or person with which it is related. Krech, Crutchfield and Management
& Change.
Volume 6, Number
2 (Winter 2002)
372 Need for Attitudinal Assessment in Managing Protected Area,
Ballachey (1962) indicate that social actions of the individual reflect his attitudes, which are the enduring systems of positive or negative evaluations, emotional feelings and action tendencies with respect to social objects.
WHY ATTITUDINAL ASSESSMENT? The way PA staff treats local people or local people behave with PA staff, is determined by their beliefs and feelings about each other, and their dispositions to respond to them. All the social actions of people or PA staff are directed by their attitudes. By assessing their attitudes, it is possible to do something about the prediction and control of their behaviour which may be ultimately useful for resolving PA-people conflicts and ensuring peaceful co existence for conservation, management and development. If PAstaff knows the attitudes of people towards park, its resources, conservation and the administration, they will be better able to find out the strategies to promote pro- protected area behaviour in a more meaningful way. I
ATTITUDINAL MEASUREMENT The task of measuring attitudes is not a simple one. Henerson et. al (1987) statl":Sthat the concept of attitude, like many other abstract concepts, is a cr~ation a construct. As such,. it is a tool that serves the human need to see order and constancy in what people say, think and do, so that given certain behaviours, predictions can be made about future behaviours. An attitude can not be measured the way heart beat can be measured .... we can only infer that a person has attitudes by his/her words, actions or statements (Henerson, et. al, 1987). Behaviour is a result of many complex factors-feelings, past experiences, assessment of expectations of others, anticipation of consequences and so on. The patterns of behaviour are also not very consistent.But still, person's statements about his own attitude, are the best indicators of the attitude, particularly when there is no reason to hide anything. Keeping in view the precautions given in box 1, various rating scales, questionnaires and interview schedules can be designed to measure the Management
& Change,
Volume 6, Number 2 (Winter 2002)
I
I
Rishi 373
attitudes and related constructs. Besides, narrative technique is also important in the understanding of environmental attitudes (Shanahan and Me Comas, 1999; Shanahan, Pel string and Me Comas, 1999). The significance of researchers' observations too, however, can not be undermined. Box-1 Precautions for Attitudes Measurement When we measure attitudes we must rely on inference, since it is impossible to measure attitudes directly. â&#x20AC;˘ Behaviours, beliefs and feelings will not always match, even when we correctly assume that they reflect a single attitude; so to focus on only one manifestation of an attitude may tend to distort the picture of situation and mislead us. We have no guarantee that the attitude, we want to assess will be reliable long enough for a one time measurement. A fluctuating attitude can not be revealed by the information gathered on one occasion. Source: Henerson, et. aI, 1987 :1
ATTITUDINAL STUDIES: A RESEARCH REVIEW The importance of attitudinal studies has been'recently increased owing to the incorporation of human factor in the conservation and management of park and park resources. However, their number in the Indian context is somewhat limited. Nepal and Weber (1995) presents the findings of a field survey on the interface between local people and wild life in the Royal Chitwan National Park, to explore the potential for co-existence of wildlife and local people. Based on three distinct areas defined by their distance to the Park, the complexities and dynamics of local people's perceptions, attitudes and motivation towards wildlife conservation were analysed. The findings indicate that although local people disliked the restrictions imposed by the park authority, curtailing the use of park resources, they take a positive attitude to wildlife conservation. Their active involvement in protection and conservation could be secured if due consideration is given to addressing their needs in the overall planning and management of the park. Shih-Jang Hsu and Robert Roth (1996), in their study, assessed the environmental knowledge and attitudes held by community leaders. A 55-item instrument was administered through postal survey method to 250 Management
& Change,
Volume 6, Number
2 (Winter 2002)
374 Need for Attitudinal Assessment in Managing Protected Area
randomly selected co~unity leaders. Significant differences were found in knowledge scores by age, education level, income level and ethnicity and in attitude scores by age, educational level, occupation and ethnicity, The results indicate that education level is the best predictor of environmental knowledge and attitudes. The study may have the implications for protected areas too. By increasing the knowledge about protected area and conservation education in community leaders, one can expect more positive attitudes among local community people toward park and park resources. Pimbert and Gujja (1997) indicated that effective management of two wetland areas ~f international importance for conservation Keoladeo National Park in India and Ucchali wetland complex in Pakistan, has been hampered by local opposition to existing wetland management policies and the threat of worsening conflict between villagers and conservation authorities. Participatory Rural Appraisal (PRA) reveal that strict restrictions on the use of PA resources by local communities, such as the banning of grazing in Keoladeo, were ecologically unsound as well as a threat to local livelihood. The greatest challenge for policy makers is for PRAs to be conducted with local communities before Protected areas are formally established. Such measures would encourage joint management, reduce potential conflicts and promote ecologically sound practice. Manning Valliere and Minteer (1998), in their study, measured environmental values and ethics and explored their relationships to attitudes toward national forest management. The principal research methods were literature review and a survey of Vermont residents concerning management of Green Mountain' National Forest. Descriptive findings suggest that respondents favour nonmaterial values of national forests, subscribe to a . diversity of environmental ethics, including anthropometric and biocentric, and support emerging concepts of ecosystem management. Environmental values and ethics explain approximately 60 percent of the variation in attitudes toward national forest management. Paml Rishi (1998) elaborated that human activities can have substantial impact on the physical environment. With the expanding human population, resource management and environmental conservation have become the critical problems. Attitudes and knowledge playa very important role . in pro-environmental behaviour. Within this assumption, the present study brought together the cognitive, conative and affective components of environmental attitudes. It was conducted on 148 college students to Management
& Change,
Volume 6, Number 2 (Winter 2002)
.â&#x20AC;˘ Rishi 375
assess their affect, verbal commitment, actual commitment and knowledge of environmental issues. To assess these indices, data was collected in small groups using a 43-item questionnaire titled "Ecological attitude survey" specially designed for the purpose. The results indicated that college students of Bhopal are. affectively concerned and intellectually aware of environmental problems and are ready to commit environmentally responsible behaviour, but their actual commitment of pro-environmental activities is woefully low. Results were discussed in terms of attribution styles and attitude behaviour inconsistency studies. Finally, implications for promoting pro-environmental behaviour were suggested. Enters and Anderson (1999) stated that it is essential to look at community based management with a critical eye. Completely communitycentred approaches to Biodiversity conservation may be just as unsatisfactory as completely government-eontrol approaches. The best solutions for the future are likely to be found in partnerships and dynamic interactions among'different stakeholders. Parul Rishi (1999) conducted the behavioural analysis of local people and other stakeholders in Keoladeo National Park. The conservation attitudes and perceptions of local villagers, tourists and local city dwellers were assessed using the conservation attitude scale. The behavioural analysis of situation revealed that there is a persisting conflicting situation in KNP as far as people KNP interface is concerned, with special reference to grazing and fodder. However, ecological importance of the national park is well recognised and unquestioned by all the stakeholders. Local villagers as well as city dwellers of Bharatpur have strong affinity with KNP, that is why, its management can not remain untouched by their influence. More so, there is also a need for integrated research in close co-ordination with forest department, only then a balanced analysis of situation from all the ecological, socio-economic and behavioural perspectives can be made addressing the far reaching objective of peaceful co-existence. Looking at the above review, it is well evident that attitudinal assessment of people about park and park resources has become a very pertinent research need. The basic objective of this component is to know the attitudes of different stakeholders towards PA resources and management. Such assessment especially focuses on the study of conservation attitudes, hardships' ranking and value-attitudes' behaviour inter-relationship; Stakeholders' analysis can also be conducted on attitudinal dimenManagement
& Change,
Volume 6. Number
2 (Winter 2002)
I
I
I
!
I
I
I
,:,
376 Need for Attitudinal Assessment in Managing Protected Area
sions, especially from tourists, forest department. staff and significant others using point scale method. Such attitudinal assessment helps to understand and preict the behaviour of various stakeholders in PA, to develop positive feelings, attitudes and concerns about local people to win their trust and confidence and to identify the spheres requiring attitude change and to recommend the possible strategies for promoting the attitude change among different stakeholders regarding PA. .SUMMING
UP AND WAYS AHEAD
The above conceptual review integrates various aspects related to protected areas like their relevance, in developing countries, people - park conflicts, protected areas and lo<;al development, Participatory management concerns in PA, pluralism, behavioural analysis, and conceptual framework of attitudinal studies with a special focus in the context of protected areas. Successful, people oriented conservation projects must address the attitudinal an(} perceptual considerations of stakeholders and establish equitable partnerships so that all stakeholders have equal opportunities to control and manage resources and for receiving their benefits. It e.:;:;entiallymeans site-specific package of measures developed with the objective of promoting sustainable development. It integrates the concerns of local communities into the management of protected areas for the longterm survival of resource and the users. REFERENCES Adorno, T. w., Frenkel- Brunsurk, Else, Lavinson, D. J., and Sanford, R.N. (1950) The authoritarian personality. New York: Harper. Badola, R. (1999) "People and Protected Areas in India," Unasylva 199, Vo1.50. pp 12-14. Brandon, K. & Wells, M. (1992) "Planning for people and parks: Design dilemmas," World Development 20 (4), 557-70. Calhoun, J.B. (1972) "Plight of the elk and Kaiadilt is seen as a chilling possible end for Man," Smithsonian, 3 (8). Pp. 26-33. Illustr. Callmanopulos, D. (1982) "The tourist trap: Who's getting caught?" Cultural Survival Quarterly, 6(3). Pp. 3-35. Illustr. Chambers, R. (1983) Rural Development Putting the Last First. London: Longman.
Management
& Change, Volume 6, Number 2 (Winter Z002)
___________________________
•••• nirnii••
---!i..
Rishi 377 Croft. T.A. (1981) "Lake Malawi National Park: A case study, Conservation planning," Parks 6(3), pp. 7-11, illustr. Ewans, M. Singh, T. D. 1. A. Hancock J. A. (1989) Bharatpur-Bird Paradise. New Delhi: ~ustre Press Pvt. Ltd .. Henerson, 1\1. E., Morris, L. L., Jayalor C, Gibbon F. (1987) How to measure Attitudes. California: Sage Publication, Inc. Hough, J. L. (1988) "Obstacles to effective management of conflicts between national parks and surrounding human communities in developing countries," Environmental Conservation. 15, 129-136. James, Shanahan, Lisa, Pelstring, Katherine, McComas (1999) "Using Narratives to Think About Environmental Attitude and Behaviour: An Exploratory Study," Society & Natural Resources, 12, 405-419. John. L. Hough. (1988) "Obstacles to Effective Management of Conflicts Between National Parks and Surrounding Human Communities in Developing Countries," Environmental conservation, Vol. 15. NO.2. Krech, D., Crutchfield RS., Ballachey E.L. (1986) Individual in Socie~y. Singapore: McGraw Hill Book Company, Inc. Lusigi. W,J. (1984) "Future directions for the Agrotropical Realm," pp 37-146 in McNeely & Miller, q.v. Machlis, G.E. and Tichnell, D.L (1985) The State of the World's Parks. Colorado and London: Westview Press, Boulder. Machlis, G.E. and Tichnell, D.L. (1985) The State of the Worlds Parks. Colorado and London: Westview Press, Boulder. Manning, R, Valli tre, W., Minteer, B. (1999) "Values, Ethics, and Attitudes toward National Forest Management: An Empirical Study," Society.& Natural Resources, 12,421-436. McNeely, 1. A. (1989) "Protected Areas and Human Ecology: How National Parks can contribute to Sustaining Societies of the Twenty First Century," In: Conservation ill the Twenty First Century. Western, D. and Pearl, M.C. (eds.). Oxford University Press, New York, pp 150-157. Michael P. Wells, (1996) "The Social Role of protected areas in the new South Africa," Environmental Conservation 23 (4). Mishra H.R. (1984) "A delicate balance. Tigers, rhinoceros, tourists and park management Vs the needs of the local people in Royal Chitwan National Park," pp, 197-205 in McNeely & Miller, q.V. Nepal, S. K. Weber, K E. (1995) "Aspects for coexistence: Wildlife and Local People," Ambio, Vol. 24 (No.4) pp. 238-245. Nepal, S.K and Weber, KE. (1995) "Aspects for Coexistence: Wildlife and Local People," Ambio, Vol. 24 NO.4, pp 238-245. Neumann, R.P. and Machlis, G.E. (1989) "Land use and threats to park in the neotropics," Ambio, 16, 13-18. Parul, R (1999) The war of differing perception at KNP. Unpublished manuscript. rv!anagement
& Change,
Volume 6, Number
2 (Winter
2002)
378 Need for Attitudinal Assessment in Managing Protected Area Paml, R. (2000) JFM after a decade: A behavioural analysis of foresters and local people. Unpublished Project Report. IIFM, Bhopal. Pimbert, M.P. & Gujja, B. (1997) "Village Voices Challenging Wetland Management Policies," Nature & Resources Vol. 33, NO.1, pp 34-42. Rishi, Paml (1998) "A Study of Environmental Attitudes and Knowledge and their Role in Pro-Environmental Behaviour," Indian Journal of Social Research Vol.. 39 (3-4), 177-186. Rishi, Paml (1999) "Behavioural Analysis of protected area management: A study of Keoladeo National Park," Unpublished Research Report, IIFM, Bhopal. Shahahan, J., and K, McComes (1999) Nature Stories. Cresskill, NJ: Hampton Press. Shih-Jang HSU and Robert E. Roth, (1996) "An assessment of Environmental Knowledge and Attitudes Held by Community Leaders in the Hualien Area of Taiwan," The Journal of Environmental Education, Vol. 28, No.l, 24-31. Shrivastava, A. (1997) "People's Participation: A vital Component in Management of GIR Protected Area," Indian Forester, June 1997, pp 503511. New York, 246p. T.Enters and J.Anderson (1999) "Rethinking the decentralisation and devolution of Biodiversity conservation," Unasylva V. 50 (No.4). Wells, M. (1992) "Biodiversity conservation, affluence and poverty: mis-matched costs and benefits and efforts to remedy them," Ambio 21 (3), 237-43. Wells, M. (1992) "Biodiversity, conservation, affluence and poverty: mismatched costs and benefits and efforts to remedy them," Ambio 21, 237-243. Wells, M., and Brandon, K. (1992) People and Parks. Washington: The World Bank.
Management
& Change, Volume 6, Number 2 (Winter 2002)
I I
POTENTIAL
APPRAISAL
: A TOOL FOR DEVELOPMENT
c. V. Ramanan The article highlights the intricacy and importance of Potential Appraisal as a powerful tool for organizational and individual development and effectiveness. An implementation plan has been designed as a practical guide to the corporate world. This short article further illustrates the difference between and improvement upon the traditions personal appraisal tool.
INTRODUCTION
. ]F-
otential appraisal is a process of determining an employee's. strengths and weaknesses with a view to using this as a predictor of his/her future performance. The process of assessing the managerial potential of employees deals with the question of whether or not they have the ability to handle positions in the future which involve more responsibility than they have had now. As long as individuals are viewed as being able to handle increased or different responsibilities, they would be considered to have potential. Managers cannot rely exclusively on past performance since a person's ability to adequately handle one level of responsibility does not mean that he or she can perform well in a position with a higher or different responsibility. DISTINCTION BETWEEN PERFORMANCE POTENTIAL APPRAISAL
APPRAISAL
AND
The fundamental difference between reviewing performance and assessing potential is in the criteria used. What? vs How? In reviewing performance, the criteria used is what the employee has already produced, what the results have been. In assessing future capabilities, the focus Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
380 Potential Appraisal: A Tool for Development needs to be more on how the employee achieved the goals i.e., the process skills used and what skills he or she currently possesses that could be indicators of his/her ability to assume different or more advanced responsibilities. â&#x20AC;˘ Potential Appraisal is crucial, critical, complex and complicated. â&#x20AC;˘ It is a powerful tool of employee development. â&#x20AC;˘ Potential Appraisal is even more intricate than Performance Appraisal.
TYPES OF EMPLOYEES It is important to understand the categories of employees for the sake of carrying out the potential appraisal. Let us discuss the types of employee in order to detail the process of potential appraisal. i. Passengers II
Problem Children
iii. Work Horses
iv. Stars
Promoted without ability U~ble to perform at higher levels Have ability but do not perform (Attitudinal Problem) Bask in the glory of their potential Perform very well in routine tasks but have limited potential Promotability is difficult Creates Frustration , High potential backed by high performance Idei.l people to have Difficult to Retain
(a) It is important for Managers to differentiate between the Current Performance and Promotability (Potential Performance) of Subordi- . nates. (b) Many fail to make this distinction; they assume the person with the skills and ability to perform well in one job will automatically perfonn well in a different, more responsible position. (c) So, people are promoted a,nd they cannot perform adequately ...
Management
& Change, Volume 6, Number 2 (Winter,2002)
Ramanan 381
TIMING AND FREQUENCY Because of the nature of the Potential Assessment Activity, its timing and frequency is left to the Manager's direction e.g.: • When an employee has been on the job for one year. • When an employee reaches a milestone-say every three years. • In preparation for major organisaticmal shifts like expansion and Reorganization.
RECOMMENDATIONS A potential Assessment should take place at least over a 6 month period, with a Manager-Employee meeting at both the beginning and end of the process. Begin • The Manager and Employee should meet to identify Process, Technical and Administrative Skills required for the Employee's future responsibilities. • The Manager explains why these skills are necessary. • Explores with the Employee how these skills might be learnt and utilized on the current job. • Nominates employees for Skill and Knowledge based Training Programmes. • These could be in-house, outside or on-the-job training. Observe • Observe the employee for 3 to 6 months to assess the extent to which he/she possesses and demonstrates the acquired skills. • Note specific behavioural examples of these skills and be prepared to discuss them at the concluding assessment meeting. • The employee should also be prepared to discuss behavioural examples that demonstrate ability and need. Review and Implementation • At the asseSSment meeting, the Manager and the Employee should jointly review thdr observations, • Identify employee's skill ~tnmgths ~nd developmental need. Management
& Change, Volume 6, Number
2 (Winter 2002)
382 Potential Appraisal: A Tool for Development
•
• • •
Manager should provide a written "summary statement" (say, one paragraph in length), providing the employee with where he or she stands regarding potential. The pair should then formulate a development plan that the employee can pursue to help realize potential... If Potential Appraisal is not done in a planned manner, you may promote an undeserving employee. As a consequence he/she does not succeed. It.is not easy to demote them! Thus, in a bid to develop a Territory Manager out of a Super Salesperson, and not doing it properly, you may lose both!
SUCCESS FACTORS If Potential Appraisal is done in a systematic way it would contribute to having well designed: • Career Plans: The preferred growth path of an individual in an organisation e.g: Specialisation in HRD: Aspire for avenues in HR Planning, Training and Development, Industrial Relations, Audit, etc. A professional organization would make sincere efforts to match the individual's career aspirations. • Succession Planning: The process where every individual manager is expected to develop a subordinate who would take over from him/ her over a period of time. Many Managers feel insecure about this process and avoid this developmental activity. Unless they develop their people they themselves become stagnant. • These are possible only if a good potential appraisal system exists and is firmly in place.
CONCLUSION If implemented well, performance and potential appraisal could take the organization on a fast developmental track and high productivity through people ...
THE POTENTIAL APPRAISAL FORM A potential appraisal form has been designed for implementation in the corporate world. Management
IL
& Change. Volume 6. Number 2 (Winter 2002)
Ramanan A Sample Potential Appraisal Form ... (To be filled by the Appraiser and the Reviewing
383
Officer)
In assessing the potential of the appraisee please tick-mark the appropriate box and mention the significant contributions, he/she has made during the current year. 1. Highly result oriented and handles the assigned tasks independently 2. Professional knowledge and skills far exceed the current job 3. Understands the complexities of next level job 4. Contributes significantly to decision making in the Department / Division 5. Takes initiatives and welcomes additional responsibilities 6. Highly respected by peers and subordinates for team building and leadership. qualities 7. Stability in the company Very High High Not Certain 8. Has the ability to represent the company and deal with external environment, clients, agencies 9. Please indicate if growth potential exists in: (Tick mark the appropriate box) Own Discipline General Management Others (Please Specify) 10. OVERALL ASSESSMENT: (Please cross mark the appropriate box) High Potential Low Potential Higher Potential Low Potential 11. Please indicate if the appraisee is ready for promotion (Tick mark appropriate box)
NOW
ONE YEAR LATER
FEW YEARS LATER
Date: Signature Name Designation
Management
& Change,
Volume 6, Number
2 (Winter
2"002)
NON-USE OF FLY ASH IN CONVENTIONAL CLAY BRICK PLANTS IN UTTAR PRADESH: REASONS AND REMEDIES
Bhaskar Majumder
This Paper considers the actual and possible use of fly ash generated by any thermal power plant or any major coal-using plant. The empirical study for this purpose centers on the NTPC, Dadri, in the district of Ghaziabad, and the IFFCO, Phulpur, in the district of Allahabad, both in Uttar Pradesh, India. Based on information provided by Fly Ash Mission, Delhi, and the Notification of the MOE&F, Gal, dated the Sept 14, 1999, we consider in this Paper the actual and possible utilization of fly ash in conventional clay brick plants. A total of ten such brick plants are selected from within 50-km. radius of each of the ash generating plants as mentioned. The Paper focuses on the reasons for non-use of fly ash in the conventional clay brick plants. The recommendations for the possible use of fly ash in manufacturing clay bricks follow the cost-benefit implications of using fly ash in clay bricks.
)
INTRODUCTION
IIJ)
uring pre-independence period, the problems related to accumu '. lation of industrial wastes in India did not become acute because of industrialization that occurred at a slow pace (Sankar, 1998, p. 3). The concern for waste management through reuse and recycling came with respect to accelerating industrialization during post-independence period. A waste is often considered as a material to be discarded, which has no immediate value to the consumer who is abandoning it (Cointreau, 1982, p. 4). Generation of industrial wastes is seen as a side effect of production and consumption in the economy-this side effect (or externality) is a form of social cost that is not borne by the agent who is its source. In the industrially less developed countries, generally the responsibility of tackling industrial wastes lies with the municipalities. This is unlike in the industrially developed countries where industrial refuse is not treated .
Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute mr Integrated Learning in Management. All Rights Reserved.
386 Non-Use of Fly ASH in Conventional Clay Brick
as part of municipal refuse (Cointreau, 1982, p. 7). While the first approach may lead to resource removal, the second one leads to resource recovery. It is often assumed that the public administration will manage wastes by its removal (Mesoli, 1980). There came also the question on utilization of wastes like other non-waste resources utilized for productive purposes. In a less industrialized economy, a government can not shut down the plant if the firm does not comply with the environmental standards. Rather, the firm may threaten to shut down the plant if it does not obtain a lenient license. The power of the firm controlling the plant is likely to be effective because the economic benefits of the plant are concentrated at a local level, while the benefits of government actions, or the environmental benefits, are spread across a large geographic area (Digkstra, 1999, p. 93-94). The government can rely on guiding the plant through suggestions for adoption of appropriate technologies. This approach stresses on resource recovery (Bever, 1976; Heidenstem, 1977). Generally, the governments in the industrially less developed countries see industrial wastes as materials to get rid of. Hence, wastes are often managed by its disposal and dumping. Consequently, the industries can bypass the problems that grow out of disposal and dumping of wastes. The wastes can be reused and recycled if these are seen as inputs. The problem can be seen specifically from two .sides. One is the technological side of reducing the wastes by selection of substitute products, or producing the same product with material-saving technologies. The other is reuse of the wastes. We concentrate in this paper on reuse of wastes. The reuse has to lead to value-addition when it is transformed into some exchange-based products (Cornelissen, 1999, p. 24). The type of wastes that we are going to analyse for its reuse is generated at the level of a plant. We take the case of fly ash that is generated by a Thermal Power Plant or any major coal using plant. The empirical study for this purpose centers on the NTPC, Dadri, and IFFCO, Phulpur, in Uttar Pradesh, India. For NTPC, Dadri, electricity is the main product, while for IFFCO, Phulpur, electricity is an input that is generated in its captive power plant. In both the cases, fly ash is generated as a byproduct, and is considered as a waste. This paper examines both the possibilities and problems in using fly ash. For this purpose, we take the case of clay-using brick plants. The reason why we concentrate on brick plants is that, of product-specific total utilization of fly ash in producing Management
& Change,
Volume 6, Number 2 (Winter 2002)
,
Majumder
387
value-added goods in India, 70.2 per cent account for production of fly ash bricks (Table-I).
(Product-specific
Table-l Utilization of Fly Ash in India Utilization as a Percentage of Total Utilization of Fly Ash) Percentage
Areas of Use
70.2 23.0 6.41 0.57
Fly Ash Bricks Portland Pozzolana Cement Asbestos Products Others* Note: Source:
Utilization of Fly Ash
*Include Underground Fills, Hydraulic Structures, Ash Ponds and Dykes, Agiculture and Soil Amendment. GO!, DST, TIFAC, n.d., Techno-Market Survey, High Value Added Products and Applications of Fly Ash, p. 180.
The other reason why we select brick plants as actual and potential users of fly ash follows the Notification dated Sept.14, 1999, of the Ministry of Environment & Forests, Government of India. The Notification says that 'no person shall within a radius of fifty kilometers from coal or lignite based thermal power plants, manufacture clay bricks or tiles or blocks for use in construction activities without mixing at least 25 per cent of ash (fly ash, bottom ash or pond ash) with soil on weight to weight basis' (GOI, MOE and F, 1999). The recommendations for using fly ash follow the empirical study of selected conventional clay brick plants. These brick plants are selected from within 50-km radius of NTPC, Dadri, and IFFCO, Phulpur. The purpose of this analysis is to explore how the reuse of fly ash can convert a liability (disposable) into an asset (to be preserved). The rest of the paper has five sections. In Section I, we present the problems of fly ash accumulated by NTPC, Dadri, in the District of Ghaziabad, and by IFFCO, Phulpur, in the District of Allahabad, both the Districts are in Uttar Pradesh. In Section II, we examine the problems associated with non-use of fly ash in conventional clay bricks. This Section has three parts. In Part-I, we select the brick plants within the radius of 50-km. from NTPC, Dadri, while in Part-II, we do the same for IFFCO, Phulpur. In Part-III, we document the reasons for non-use of fly Management
& Change.
Volume 6, Number
2 (Winter 2002\
388 Non-Use of Fly ASH in Conventional Clay Brick ash in manufacturing clay bricks. Section III deals with the cost-benefit implications of using fly ash in conventional clay brick plants. This Section covers two parts, in Part-I, the implications of use of fly ash in clay bricks are studied with reference to the brick plants in the district Ghaziabad. In Part-II, the same is done for the district Allahabad. Finally, in Section IV we offer the recommendations.
FLY ASH: PROBLEMS Fly ash is "the finely divided residue resulting from the combustion of ground or powered coal which is transported from the firebox through the boiler by flue gases." Pulverized fuel combustion is in operation for the last half a century. Most of the large boilers in industrial plants use this technique. Fly ash possesses pozzolanic properties similar to naturally occurring pozzolanic materials, primarily of volcanic or sedimentary origin. There are two types of ash found in a coal-using plant. Generally, this ash is associated with power plants, though other plants using c,}al as energy also generate ash. The types of ash, thus, generated are bottom ash and fly ash (NTPC, 19991 Oct., p. 31). Bottom ash is found at the bottom of Boiler furnace following burning of coal for generation of energy. This ash has higher carbon content and lower fineness. Fly (dry) ash is very fine, found in powder form. The size of one particle of this ash varies from about one micron to 300 micr('ns. This ash is collected from different fields of Electro-Static Precipitators (ESP) in dry form. The fly ash is colleCted in hoppers and disposed off (GOI, DST, TIFAC, 1995, August, p. 23-24). This ash is characterized by relatively lower carbon content and higher fineness. The ash in dry form has pozzolanic properties, which helps it to react with free lime to be fit for being a useful construction material. There are about 70 thermal power plants in India. A 1000 MW thermal power plant generates about one million tonne of fly ash per annum for generation of electricity. Only 3.0 per cent of fly ash is utilized in India at present for productive purposes (GOI, TIFAC, Techno-Economic Survey, n.d., Several Issues). Because of industrialization, good quality coal reserves are depleting fast in India. The better quality coal, which is with lower ash content, is being used in steel, railway, and other metallurgical industries. Initially, coal with a maximum ash content of 35.0 per cent was graded. It means, any sample with higher percentage of ash was not Management
& Change, Volume 6, Number 2 (Winter 2002)
Majumder 389 graded as coal. With reducing quality of mined coal and depleting coal reserves, the average ash content of coal in thermal power plants is around 50.0 per cent now (GOI, TIFAC, Techno-Economic Survey, n.d., Several Issues).
NTPC, Dadri: Ash Accumulation Since the beginning of commercial production in August 1992 up to March 2001, only 21.8 per cent of fly ash generated by the thermal unit of NTPC, Dadri has been utilized. During 1993-2001, the NTPC, Dadri experienced increasing quantity of ash utilized. Utilization of ash as percentage of generation of ash, however, oscillated over a wide range. The major products where NTPC, Dadri supplies fly ash are cement and asbestos. More than 78.0 per cent of the accumulated ash generated, thus, is dumped in ash mound (Table-2). Table 2 NTPC, Dadri: Coal Use, Ash Content, Generation and Utilization of Ash, 1992- 2001 Year
Coal Use (in Lakh MT)
Generation of Fly Ash (in Lakh MT)
Ash Content in Coal (in%)
Ash Utilization as % of Generation
1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001
2.57 14.40 22.69 18.76 39.85 41.56 44.37 48.74 43.06
1.03 5.69 10.84 7.22 15.32 15.17 15.62 17.44 14.82
40.0 39.50 39.15 38.48 38.45 36.50 35.20 35.78 34.41
100.0 42.68 . 69.64 12.73 9.79 7.58 12.93 13.91 30.32
57.32 30.36 87.27 90.21 92.42 87.07 86.09 69.68
Total
281.0
103.15
36.71
21.8
78.20
.Aug.1992 March1993
Ash Dumping as % of Ash Generation
Source: NTPC, Dadri, 2001.
The distance of the dumping site (ash mound) from the ash generating point is four-km. For c,myring ash from the boiler to the ash mound, Management ~, Change, Volume 6, Number 2 (Winter 2002)
390 Non-Use of Fly ASH in Conventional Clay Brick fixed cost incurred by the NTPC, Dadri was Rs. 137 crore. The recurring cost (ash handling cost per MT) is Rs. 30. Quantity of ash dumping per day is 3556 MT for the Dadri unit for which average handling/dumping cost per day comes to be a little more than Rs. one lakh (Ash Utilization Cell, NTPC, Dadri, 2001).
IFFCO, Phulpur: Ash Accumulation IFFCO, Phulpur, started commercial production in March 1981 with a production capacity of 900 tonnes per day (TPD) ammonia and 1500 TPD urea. The main inputs of the plant are naphtha, fuel oil, coal, water, and electricity. Electricity is mainly generated in the power plant captivated (Table-3). Table-3 IFFCO, Phulpur: Coal Use and Ash Content, Generation and Utilization of Fly Ash Year
Coal Use (in Lakh MT)
Generation of Fly Ash (in Lakh MT)
Ash Content in Coal (%)
1998 1999
3.85 3.40 4.05
1.70 1.50 1.79
44.15 44.12 43.95
2CXXJ Note: Source:
Ash Utilization of Dumping Fly Ash (as as % of % of Generation Generation Ash of Ash
67.6 93.3 159.0*
32.4 6.7 Nil
*IFFCO, Phulpur, installed dry ash collection system in April 2000, and hence, utilization of fly ash exceeded generation. IFFCO, Phulpur, Allahabad.
Based on coal consumption at the rate of 1,000 MT/Day, IFFCO, Phulpur generates 400 MT ash per day at the minimum. During the last 20 years (1981-2000), the accumulated ash came to be (400 MT x 330 working days in a year x 20 years) 26,40,000 MT. For the calendar year 2000, the ash generation rate came to be 540 MT per day on average. The disposal rate is 2.5 times the rate of generation, that is, 1500 MT per day. Based on 330 working days in a year, the plant disposes of 4,95,000 MT fly ash in a year. The plant thus needs less than six years to dispose
Management
& Change,
Volume 6, Number 2 (Winter 2002)
Majumder 391
of all accumulated ash. However, during these six years, the plant generates (600 MT x 330 working days x 6 years) 11,88,000 MT fly ash. Thus, additionally, the plant needs, at the present rate of disposal, 2.4 years to utilize the ash generated (Technical Division, IFFCO, Phulpur, May, 2001). Thus, on a span of less than ten years from year 2000, IFFCO, Phulpur, can utilize all fly ash generated. This complies with the Notification of the MOE&F, Government of India, 1999, for all ash generating plants. Since April 2000, IFFCO, Phulpur, has shifted from wet ash disposal in the former ash pond in the adjoining area to supply of dry ash through pneumatic conveyor system. To be specific, coal-based boiler generates bottom ash (20.0 per cent) and fly ash (remaining 80.0 per cent). Fly ash goes to new dry system, collected in hopper and supplied directly to tankers. Bottom ash goes to wet ash system. The fixed cost for dry ash disposal (on setting pipelines etc.) is aroundRs. 2.5 crores. The recurring cost is around Rs. 0.15 per tonne of ash. The land area that still remains covered at the end of 2001 with ash collected and filled during the earlier period, when there was no ash disposal, is around five acres outside the plant area (Tachnical Division, IFFCO, Phulpur). The dry ash is supplied to cement plants free of cost. Ash Content in Coal Used in NTPC, Dadri, and IFFCO, Phlllplir IFFCO, Phulpur, uses coal that has an ash content at 40.0 per cent at the minimum. On average, it varies between 44.0 and 48.0 per cent. The plant uses grade ElF non-coking coal. The plant till date has no technique/technology to reduce the rate of generation of fly ash. Nor does it have any plan to change the source of coal for reduced ash content. Its R&D unit does not have any plan to go for clean (washed) coal to reduce ash content (Technical Division, IFFCO, Phu1pur). For NTPC, Dadri, the ash content in coal was 40.0 per cent that came down to around 35.0 per cent after 1998, with the source of coal remaining unchanged. NTPC, Dadri, reported using clean (washed) coal since 1998 for reduction in ash content (Ash Utilization Cell, NTPC, Dadri). The problems of high ash content of coal, accompanied by non-utilization of ash generated, are multiplied by the spread of fly ash. The spread carries with it the physical characteristics of fly ash. The problems associated with spread of fly ash are shown in Box-I.
Management
& Change,
Volume 6, Number 2 (Winter 2002)
392 Non-Use of Fly ASH in Conventional Clay Brick Box-}
Problems of Spread of Fly Ash Fly ash is extremely difficult to tackle in a dry state because of its extreme fineness. Fly ash is readily air-borne 'and hence pollutes air. Fly ash mixed with water causes soil and water pollution by leaching. Inhalation of fly ash causes silicosis, fibrosis of lungs, bronchitis, pneumonitis etc. By being air-borne, fly ash corrodes structural surfaces of residential buildings of the people settled near the ash generating plants. Ultimate settlement of fly ash on cultivable land in the adjoining area degrades soil fertility. .~:
Source: GO!, DST, TIFAC, 1995, Techno-Market Survey on Fly Ash Bricks, August, p. 2.
Based on the problems mentioned above, we undertook an empirical study on actual and possible utilization of fly ash generated by NTPC, Dadri, and IFFCO, Phulpur. We concentrated on brick plants for reasons mentioned in the introduction of this paper. CONVENTIONAL
CLAY BRICK
PLANTS:
NON-USE
OF FLY
ASH Clay Brick Plants within SO-km. radius of NTPC, Dadri We covered ten conventional clay brick plants within a radius of 50-km. from NTPC, Dadri. The selection follows the Notification, Sept. 1999, of the Ministry of Environment & Forests, Government of India. We found no record of the number of conventional clay brick plants within a radius of 50-km. from NTPC, Dadri. It is, thus, not possible to say the exact basis of the sample drawn. We selected a total of ten clay brick plants within the required radius on the assumption that it would represent the problems and possibilities of utilization of fly ash. Incidentally, all the selected brick plants are located in the undivided district of Ghaziabad, UP. Excepting one brick plant that was set up in 1988, all the plants studied were established in the 1990s. The capacity of the plants varies in terms of production of bricks per year. The cost of production per 1,000 pieces of bricks varies from Rs. 800 to Rs. 1,000. Market price per unit of Management
I
& Change,
Volume 6, Number 2 (Winter 2002)
.------------.,...-------------------
---~-
Majumder
393
conventional clay bricks is much higher than the cost of production unit (Table-4).
per
Conventional
Table-4 Clay Brick Plants around NTPC, Dadri: Selected Indicators
Plant (Year of Establishment)
Jagpal Brick Factory (1996) Indian Brick Industries (1992) Janta Brick Field (1990) Raj Brick Factory (1999) Surya Brick Factory (1996) Rajesh Brick Plant (1990) R.K. Brick Factory (1988) Jeet Brick Factory (1998) Singh Brick Factory (1995) Beer Brick Factory (1996)
Distance from NTPC Dadri
Production per Year (number of pieces)
Cost of Production per 1,000 pieces
Market Price per 1,000 pieces
15
47,00,000
800
1,100
24
1,00,00,000
1,000
1,300
18
52,00,000
900
1,000
14
32,00,000
950
1,200
15
1,08,00,000
900
1,000
30
85,00,000
925
1,250
32
1,50,00,000
1,000
1,200
28
17,00,000
1,000
1,300
]2
65,000
925
1,300
30
45,CXx)
1,000
1,200
Source: Field Visit, 2001. Most of these brick plant owners use lease-in land for digging purposes. The whole of the total land leased-in is agricultural. As high as 83.0 per cent of this land leased-in is used for soil cutting purposes, the rest of the land leased-in are for residential and chimney area. For production of clay bricks, soil digging varies between three and four feet for the plants. The operational period of brick production per year is generally six months or less. In view of the brick plant owners, the brick market Management
& Change,
Volume 6. Number
2 (Winter 20(2)
396 Non-Use of Fly ASH in Conventional Clay Brick
plant owners varies from Rs. 200 to above Rs. 1,100 per truck/tractor (one truck carrying 16 MT of fly ash), depending on the distance. Inspite of the probable technological and marketing problems regarding use of fly ash in conventional clay bricks, the brick plant owners expressed their positive attitude towards using fly ash in clay bricks. The positive and negative reasons for non-use of fly ash in producing conventional clay bricks, covering all the clay brick plants within specified radius of the selected ash generating plants, are shown in Box 2. I I
!
Box-2
I
Positive Reasons •
Land for conventional clay. brick plants is abundant (purchase or lease-in) in the study areas.
•
The price/rent per unit of land (purchase or lease-in) is affordable for the brick plant owners.
•
The brick plant owners lease-in land on easy terms and conditions (like extendable tenure of contract, no upper limit on digging topsoil fixed by Government etc.
•
Landowners with large agricultural land like to lease-out land at low rent.
•
The technique of production of conventional clay bricks is known.
•
Skilled labour is easily available for conventional clay brick plants at a low wage.
•
The clay brick plant owners can conceal the benefits they derive via avoidance of taxes when the actual volume of output per period is difficult to assess.
•
There are no problems of marketing conventional clay bricks, at existing costs and prices.
•
The organizational and administrative formalities (registration etc.) to set up a conventional clay brick plant are easy.
• •
Reliability of conventional clay bricks in the market is high . The clay bricks ensure stable benefits for conventional owners.
clay brick plant
Negative Reasons Conventional clay brick plant owners do not know the technology of mixing fly ash in clay bricks. There is no compulsion imposed by the government on use of fly ash in clay bricks. The transportation cost of fly ash from the ash generating plant is high relative to cost of land leased-in. Management
& Change. Volume 6, Number 2 (Winter 2002)
,I I
Majumder 397 The private consumers believe that the strength of fly ash mixed clay bricks is less relative to clay bricks. The labourers already employed in conventional clay brick plants are not trained for manufacturing fly ash mixed clay bricks. The conventional clay brick plant owners do not know the raw materials and infrastructure requirements for manufacturing fly ash mixed clay bricks. The conventional brick plant owners do not know the 'technology supplying agency' for manufacturing fly ash mixed clay bricks. The conventional clay brick plant owners do not know the market demand for fly ash mixed clay bricks. The consumers are not aware about fly ash mixed clay bricks. The conventional clay brick plant owners do not know the method of receiving fly ash from the ash generating plants. Subsidy is yet to be provided to those plants, which want to mix fly ash in clay to produce bricks. . The government is not using fly ash mixed bricks in public sector. Thus, reliability of fly ash bricks remains questionable to private final consumers. auree: Arranged from responses of the owners/managers/workers tional clay brick plants in the study areas.
COST-BENEFIT CLAY BRICKS
IMPLICATIONS
of conven-
OF USING FLY ASH IN
Clay Brick Plants within SO-km. radius of NTPC, Dadri We did not find any record of the number of conventional clay brick plants within the radius of 50-km. from NTPC, Dadri. Since all the conventional clay brick plants within this radius that we studied come within the administrative jurisdiction of undivided district Ghaziabad, hence for costbenefit implications, we rely on the district level data. For the district, the number of conventional clay brick plants at the time of survey stood at 360 (of which we selected 10 within the 50-km. radius of NTPC, Dadri). As we calculate from information collected from conventional clay brick plants, the surplus per 1,000 such bricks (revenue---cost) came to be on average Rs. 245.0. In total cost of production of such bricks, soil cost comes to be only 6.86 per cent. Soil cost per 1,000 pieces of bricks jumps to 11.34 percent if fly ash replaces soil by 25.0 percent. The cost of production of clay bricks mixed with fly ash (25.0 percent on weight-toweight basis) per 1,000 pieces of bricks, thus, becomes 104.47 percent of total cost of production if fly ash is not mixed with clay. The absolute Management
& Change,
Volume 6, Number
2 (Winter 2002)
398 Non-Use of Fly ASH in Conventional Clay Brick
cost difference between fly ash mixed clay bricks and conventional clay bricks per 1,000 pieces of bricks, thus, stands at Rs. 42.09. The positive cost-differential may be explained by transportation cost of fly ash (Table6). Table-6 Conventional Clay Bricks and Fly Ash Mixed Clay Bricks: Costs and Benefits for Clay Brick Plants around NTPC, Dadri Indicators
Observations Part-A Average brick size (in cubic inch) Average weight of a brick (in kg.) Average digging depth of soil (in f1.) Average land price per acre (in Rs.) Average distance from NTPC, Dadri (in km.) Average transportation cost of fly ash from NTPC, Dadri (in Rs. per 16 MT)* Average cost of production per 1,000 bricks (in Rs.)** Average market price per 1,000 bricks (in Rs.)** Part-B Quantity of soil in one acre land (in cubic f1.) Quantity of soil in one acre land (in MT) l-..rumberof bricks that can be manufactured with one acre land (in number) Quantity of fly ash if 25 per cent of clay is replaced by fly ash (in MT) Transportation cost of fly ash from NTPC, Dadri as specified by the ratio 75:25 between clay and fly ash (in Rs.) Cost of production of conventional clay bricks per 1,000 (in Rs.) (a) Soil Cost (in Rs.) (b) Other Costs (in Rs.) Soil cost if fly ash replaces clay by 25.0 per cent (in Rs.) Cost of production (fly ash mixed with clay) per 1,000 bricks (in Rs.) Cost-differential (fly ash mixed with clay-conventional clay bricks) per 1,000 bricks (in Rs.) Note:
9x4.45x2.8 2.6 3.2 1,41,000 23.8 1433 940 1185
139366.4 5679.5 21,84,426 1419.8 1,27,168 940 64.54 875.46 106.63 982.09 42.09
Part-A Provides primary data, collected from Field Visit, 2001. Part-B Show cost-benefit projections with and without fly ush mixed with clay in manufacturing bricks.
Management
& Change, Volume 6. Number 2 (Winter 2(02)
Majumder * **
399
Based on respondents' information at the time of survey. No taxes have been added in cost of production.
Source: Field Visit, 2001.
Soil cutting area (sq. metre) in any year for all the conventional clay brick plants in the district of Ghaziabad is 360.0 acres, of which agricultural land constitutes 100.0 per cent. If soil cutting implies destruction of topsoil, then the total value of land that is destroyed comes to be more than Rs. sixteen crore for the whole district covering all clay brick plants (on the basis of average land price existing in 2001). Given the quantum of soil cutting per year, we calculate the quantity of fly ash that can replace 30.0 per cent (maximum) clay. Thus, we calculate maximum agricultural land that can be saved by using fly ash (maximum 30.0 percent) as replacement of clay (weight-to-weight basis). The volume of soil that can be saved per year in the district Ghaziabad equals the percentage of fly ash mixed with clay (Table-7). Table-7 Use of Fly Ash and Land Saving in the District of Ghaziabad,
UP
Indicators
Observations
Part-A Agricultural land (As % of total land acquired by the brick plants) 100.0 Avcrage production per year (number of pieces per plant) 70,10,000 Average land price per acre (Rs.) 1,41,000 Soil cutting area per plant per year (in acre) 3.21 Soil Cutting in volume per plant per year (in MT) 18,226 Average transportation cost for brick plants (in Rs. per 16 MT) 1433 Part-B Conventional brick plants in the District Ghaziabad in 2001 (in number) Soil cutting area per year (in acre) Agricultural land destroyed by soil cutting per year (in acre) Total land value of destroyed land (in Rs.) Soil cutting in volume per year (in MT) Fly ash in volume that can be used per year (in MT)* Agricultural land that can be saved per year by using fly ash (in acre)* Management
& Change,
Volume 6, Number
360 1155.6 1155.6 16,29,39,600 2,10,61,965.6 63,18,589.7 364.6 2 (Winter 2002)
L
400 Non-Use of Fly ASH in Conventional Clay Brick Fly ash in volume required per year (in MT)** Agricultural land that can be saved per year by using fly ash (in acre)**
*
52,65,491.0
288.9
Calculations based on use of fly ash replacing clay by 30.0 per cent. Calculations based on use of fly ash replacing clay by 25 per cent. For the district of undivided Ghaziabad, projections regarding use of fly ash and potential saving of agricultural land have been based on studies of ten brick plants selected within 50-km. radius of NTPC, Dadri, following the Notification of the MOE&F, GOI, Sept. 1999. Field Visit, 2001.
**
Source:
Fly ash in volume that can be used per year, if 25.0 per cent of clay is replaced by fly ash in conventional clay brick plants, given the number of these plants and the average volume of clay used in the district of Ghaziabad, is half of all the ash accumulated by NTPC, Dadri, during 1992-2001. The possible use of fly ash per annum in the existing clay brick plants in the District Ghaziabad is several times the fly ash generated by NTPC, Dadri per annUm.
Clay Brick Plants within SO-km. radius of IFF CO, Phulpur As we calculate, in total cost of production of clay bricks, soil cost comes to be only 3.24 per cent. Soil cost per 1,000 pieces of bricks jumps to 6.58 per cent if fly ash replaces soil by 25.0 per cent. The cost of productionof clay bricks mixed with fly ash (25.0 per cent) per 1,000 bricks, thus, becomes 103.33 per 1:entof cost of production if fly ash is not mixed with clay. The absolute cost difference between fly ash mixed clay bricks and conventional clay bricks per 1,000 bricks thus stands at Rs. 27.45. This positive cost-differential may be explained by transportation cost of fly ash (Table-8). Table-S Conventional Clay Brick Plants and Fly Ash Mixed Clay Brick Plants: Cost. Benefit Implications for plants around IFFCO, Phulpur Observations
Indicators
Part.A Average brick size (in cubic inch) Average weight of a brick (in kg.) Average digging depth of soil (in ft.)
9.2x4.3x3.0 2.8
Management
~~-
& Change,
Volume 6, Number 2 (Winter 2002)
_
4.7
Majumder 401 Average land price per acre (in Rs.) Average distance from IFFCO, Phulpur (in km.) Average transportation cost of fly ash from IFFCO, Phulpur (in Rs. per 16 MT)* Average cost of production per 1,000 bricks (in Rs.)** Average market price per 1,000 bricks (in Rs.)**
J
89,000 24.1 780 823 925
Part.B Quantity of soil in one acre land (in cubic ft.) 2,30,825.6 Quantity of soil in one acre land (in MT) 9,326.287 Number of bricks that can be manufactured with one acre land (in number) 33,30,816 Quantity of fly ash if 25 per cent of clay is replaced by fly ash (in MT) 2,331.572 Transportation cost of fly ash from NTPC, Dadri as specified by the ratio 75:25 between clay and fly ash (in Rs.) 1,13,664 Cost of production of conventional clay bricks per 1,000 (in Rs.) 823 (a) Soil cost 26.72 (b) Other costs (labour, coal, water, sand etc.) 796.28 Soil cost if fly ash replaces clay by 25.0 per cent (in Rs.) 54.17 Cost of Production (fly ash mixed with clay) per 1,000 bricks (in Rs.) 850.45 Cost-differential (fly ash mixed clay bricks-eonventional clay bricks) per 1,000 bricks (in Rs.) 2i45
Source:
*Based on report of the respondents at the time of survey. ** No taxes have been added in cost of production. Field Visit, 2001.
For the District Allahabad, the total number of conventional clay brick plants at the time of survey was 356 (of which we selected ten within the 50-km. radius of IFFCO, Phulpur). We do not have exact number of conventional clay brick plants within this specified radius. Thus, we relied on district level data to arrive at some projections. Soil cutting area (in sq. metre) in a year on average is 356.0 acres in the district for all the clay brick plants, of which agricultural land constitutes 73.48 per cent. On the assumption that soil cutting destroys topsoil, the total land value that is destroyed comes to be nearly Rs. three crore for the whole district covering all clay brick plants (on the basis of average land price existing in 2001). Given the quantum of soil cutting per year, we calcuManagement
& Change,
Volume 6, Number 2 (Winter 2002)
402 Non-Use of Fly ASH in Conventional Clay Brick
late the quantity of fly ash that can replace clay, depending on clay replaced by 25.0 per cent or 30.0 per cent etc. Thus, we calculate maximum agricultural land that can be saved by using fly ash as percentage replacement of clay (Table-9). Table-9 Use of Fly Ash and Land Saving in the District of Allahabad,
UP
Indicators
Observations
Part-A 73.5 Agricultural land As % of total land acquired by the brick plants) 29,70,000 Average production per year (number of pieces per plant) 89,000 Average land price per acre (Rs.) 0.89 Soil cutting area per plant per year (in acre) 8316 Soil Cutting in volume per plant per year (in MT) 780 Average transportation cost for brick plants (in Rs. per 16 MT) Part-B Conventional brick plants in the District Ghaziabad in 2001 356 (in number) 316.84 Soil cutting area per year (in acre) 232.87 Agricultural land destroyed by soil cutting per year (in acre) 2,81,98,760 Total value of destroyed land (in Rs.) 26,34,841 Soil cutting in volume per year (in MT) 7,90,452.3 Fly ash in volume that can be used per year (in MT)* Agricultural land that can be saved per year by using 69.8 fly ash (in acre)* 6,58,710.2 Fly ash in volume required per year (in MT)** Agricultural land that can be saved per year by 58.2 using fly ash (in acre)**
Note:
Source:
Management
*Calculations based on use of fly ash replacing clay by 30.0 per cent. **Calculations based on use of fly ash replacing clay by 25.0 per cent. For the district Allahabad, projections regarding use of fly ash and potential saving of agricultural land have been based on studies of 10 brick plants selected within 50-km. radius of IFFCO, Phulpur, as required by the Notification of the MOE&F, GOI, Sept. 1999. Field Visit, 2001.
& Change,
Volume 6, Number 2 (Winter 2002)
Majumder 403
There are differences in terms of social costs and benefits when conventional clay bricks and fly ash-mixed clay bricks are compared. While production of conventional clay bricks increasingly exhaust agricultural land, production of fly ash mixed clay bricks saves agricultural land (by both area and volume). Be it conventional clay bricks or be it fly ashmixed clay bricks, it reuses the apparent wastes (fly ash) generated by major coal-based plants. The problem comes regarding the cost and price of fly ash-mixed clay bricks vis-a-vis conventional clay bricks. Both cost of production per unit and market price per unit are higher in case of fly ash-mixed clay bricks. While net surplus (Revenue-co~t) is positive for both types of bricks, it is much higher for clay bricks per plant based on annual production level. Since plant size is much higher (by capacity production) for clay bricks, hence clay brick plants record on average higher net benefits. RECOMMENDATIONS Saving topsoil by utilization of fly ash in conventional clay bricks' requires a number of measures. Since the Government of India has already notified the mandatory utilization of fly ash by clay users within 50-km. radius of ash generating plants, hence we offer our suggestions for the Government. • The Government will have to circulate its notification including amendments, if any, regarding utilization of fly ash among micro-level public bodies and public administration • Soil testing for the brick plants for its possible mixing with fly ash generated by the coal-based plants within 50-km radius is to be done free of cost by the MOE&F, GO! • Raising price of land per unit (in case of commercial purposes) through raising registration cost (stamp duty etc.) to discourage conventional clay brick plant owners to acquire topsoil at ease for purposes of manufacturing only clay bricks within 50-km. radius of ash generating plants • Raising rate of tax per unit of only conventional clay bricks, so that it has a discouraging effect on producing only clay bricks • Reducing rate of tax per unit or total tax exemption on fly ash mixed clay bricks, so that it has an encouraging effect on fly ash mixed clay bricks Management
& Change,
Volume 6, Number
2 (Winter 2002)
.404 Non-Use of Fly ASH in Conventional Clay Brick
•
Documenting quality of fly ash mixed clay bricks and its dissemination by Government/appropriate authority • Eco-stamp on fly ash mixed clay bricks, e.g, fixing a logo on such bricks • Maintaining a record of the number of conventional clay brick plants within the radius of 50-km. from major ash generating plants by the MOE and F, GO! • The Government has to be a major buyer of fly ash-mixed clay bricks, • The price per unit of fly ash-mixed clay bricks should be fixed by the Government and publicized through media. • Ensuring cost-free supply of technology and training for manpower in brick plants for use of fly ash. There are alternative possibilities of use of fly ash. There also exist the possibilities of export of fly ash, and import of low ash-content coal. In this paper, we have concentrated only on the question of use of fly ash in brick plants based on selection of brick plants around NTPC, Dadri, and IFFCO, Phulpur. The related questions are beyond the scope of this paper. ACKNOWLEDGEMENT This paper is an offshoot of a project under the India environmental capacity bui~ding technical assistance project aided by the World Bank. The author acknowledges the services of M.G.Gupta, G.N.Gha, A. Dwivedi, and S. Jaiswal who collected all the. information from the field for preparing the report. The author is grateful to Prof. Kirit Parikh for his valuable comments and suggestions for refinement of the findings. The author alone is, however, responsible for any remaining errors. Abbreviations
DSt GO! MOE&F NTPC TIFAC
Management
used Department of Science and Technology Government of India Ministry of Environment and Forests National Thermal Power Corporation Technology Information, Forecasting and Assessment Council
& Change,
Volume 6, Number 2 (Winter 2002)
Majumder 405
REFERENCES Bever, M. B. (1976) "The Recycling of Metals: Ferrous Metals and Non-Ferrous Metals," Conservation and Recycling, VoLl, No.I. Cointreau, S. 1. (1982) "Environmental Management of Urban Solid Wastes in Developing Countries," Urban Development Department, World Bank, Washington D.C., US. Cornellisen, DR. IR. Hans (1999) "Use of Coal Ashes: Experience in the Netherlands," in Indo-European Workshop on Handling and Utilization of Coal Combustion By-Products from Indian Power Stations, Guru Gobind Singh Super Thermal Plant, Ropar (Punjab), India., Digkstra, Bouwe R. (1999) "The Political Economy of Environment Policy," Edward Elger; UK. GO!, DST, TIFAC (1995) Techno-Market Survey on Fly Ash Bricks, Aug. GO!, DST, TIFAC, N.D., Techno-Market Survey on Fly Ash Prefabrication, Technology and Market. GO!, TIFAC, n.d. Techno-Market Survey, High Value Added Products and Applications of Fly Ash. GO!, MOE&F, 1999, The Gazette of India: Extraordinary, Part II Sec. 3 (ii), Notification. Heidenstern, O. Von (1977) "Swedish Experience in Separation at Source of Solid Wastes"', Institute of Solid Waste Management, London. Mesoli, M.V. (1980) "Garbage in the Cities: Refuse, Reform and the Environment, 1880-1980," Texas A&M Press, Texas. NTPC (1999) NTPC Guide for Users of Coal Ash, Ash Utilization Division, Oct. Sankar, U., 1998, "Laws and Institurtions relating to Environment Protection in India," MSE Occasional Paper NO.2, Chennai, India.
Management
& Change,
Volume 6, Number
2 (Winter 2002)
DEVELOPMENT MANAGEMENT: RECENT DEVELOPMENT
REFLECTIONS
ON
Jamal Khan While development management has achieved widespread recognition in many countries, one feels that not enough thought has been given in this area to address organizational needs. In this article, an attempt has been made to identify and define the basic problems, bring a strategic focus and reflect on ways and for further development of thought in this area.
.
INTRODUCTION
JE
y now, development management has achieved widespread recognition and institutionalization in Asia, Africa, Latin America and in the global organizations of the North Atlantic. One has this disquieting feeling that conventional public management does not offer an adequate response to some of the organizational needs of development, growth and transformation. Esman and Montgomery (1969) state and Gant (1979) and Bryant and White (1982) corroborate that the pressing task is how to combine skills which now exist in developing countries and bring them to bear more effectively in action programmes which will help accelerate productive growth, expand social well-being and improve public services, and that this is the essence of development management. The increasing trend toward development management does not deny or sidetrack the many valuable contributions of the discipline of public management. Nor does it ignore the enormous and enlarging needs for competence in management capability and organizational performance that are inherent in development. The basic assumption behind the tum to development is that something more than what exists is needed (United Nations, 1975; Barzelay, 1992; Hughes, 1998). At the most general level, it is useful to think of development management as a problem-oriented, task.
Management & Change, Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. AU Rights Reserved.
L
408 Development Management: Reflections on Recent Development
oriented and field-determined subject. It is one line of response to a very basic matter the way in which development goals can be set and pursued with the greatest possible certainty and effectiveness. The objective of development. management is the formulation, achievement and sustenance of development goals. The essence of the idea of development management lies in problem-defining. It is important to make a distinction between public management and development management, although the two generically serve the same broad purpose. First, public management is generally concerned with getting things done and making things work better. Efficiency, rationality, optimization and control are its motifs. System performance and improvement is an ongoing objective. Decision-making is an important element. But the focus is on implementing decisions, and is customarily assumed that the important underlying goals are given. Development management claims an important share in policy-making and in the choice of ends, say, important programmatic goals or purposes. Second, public management is concerned with problem-solving. Development management includes an emphatic concern with problem-defining. Third, development management is concerned with the design and building of systems. It does not exclude a concern with get. ting things done or making thing work better. But it embraces a more fundamental concern with trying to determine what kinds of things are likely to work, as well as how to make them work. Finally, contrary to what one may assume, development management does not limit its concerns to government or the public sector. Yet, development management shad(;s into and overlaps with more conventional management at numerous points, essentially because the real work defies self-containing compartments. Development management, viewed in this way, is not an alternative to public management; it is a field within the broader discipline of public sector management. PROBLEM
DEFINITION
The question arising at this point is how development management can be a practical, manageable, actionable and doable set of premises and activities. At root, development management entails both structure and process. Its true focus is on a particular kind of action, and not on a particular set of institutions/organizations or a particular kind of skill and Management
& Change, Volume 6, Number 2 (Winter 2002)
r
,----.'.
---------------~----~---
-
--
Khan 409
technology. The foc~s is expressed more in a programme than anything else. The programme of development management stems from the twin functions of problem-defining-as distinguished from problem-solving and system-building or system development as contrasted with system maintenance. Together, these concerns provide the basis for a programme with three prime elements. The first is the development and use of specific approaches/techniques for analyzing the task environments of development and the potential than can be imputed to those task environments. Second, it is the design, operation and analysis of strategies and structure for development policy-making and decision-making under conditions of indeterminacy, complexity, interdependence and fuzziness. Third, the tools for implementing, controlling and coordinating development decisions have to be identified, applied and honed. The distinction between problem-defining and problem-solving needs elaboration. Nothing binds problem-solving action more than the qualities or the problem-defining effort that logically procedes it. There are no greater difficulties in development efforts than getting good definitions of the problems on which strategies and actions are based. Admittedly, development management does not dwell on all public problems. Its focus, rather, is rather on those that involve the development, choice and establishment of new systems of action. Its prime concerns are change, renewal and innovation. In practice, the line between system development and system maintenance often blurs, although conceptually the basic distinction between new forms/modes of action and the improvement of that which is established is recognizable. An abiding concern with problems seems to be a distinguishing attribute of contemprary times (Hirschman, 1967). The difference between academics/researchers and practitioners/ executives continues to be stereotyped and exaggerated and facile assertions are made that the reluctance of academics to tackle real-world problems or muddles makes it difficult, perhaps even impossible, to make effective and productive use of social scientists in growth efforts and development initiatives. Such views also reflect an approach to conceptualizing problems that are often untenable. The academics are "too theoretical" and the practitioners are "too pragmatic." Yet, it is not only possible but also desirable to constructively link the academics and the practitioners in the defining of problems, including the subtle, complex, interrelated, multivariate and interdependent problems of development. When it comes to problem-solving, the practitioners are usually far more persuaManagement
& Change.
Volume 6. Number
2 (Winter 2002)
-'-Ii I
410 Development Management: Reflections on Recent Development
sive than the academics. But in defining problems, there are often real opportunities for collaboration across the field. These opportunities derive from the inherent qualities of the things called "problems." Problems come into existence when situations or types of situations are perceived, judged to be inadequate or undesirable and regarded as susceptible to change for the better. It should not be forgotten that one individual's problem may be another individual's opportunity nor should one ignore that solving/resolving one kind of problem often brings in its wake another kind of problem. Also noteworthy is that in attempting to shape and implement strategies, problem analysis and problem resolutiong are typically stressed at the expense of problem definition. Problem-solving action must logically proceed from an initial set of given assumptions that constitute a definition of the problem. With some exceptions here and there, the quality of efforts at solutions is nearly always limited by the quality of the initial definitions. When good definitions are not produced, development efforts may be nullified and problems may be defined in such a way that they prove to be starkly inadequate in comparision with actual results. For example, problems defined in technical and economic terms fail to incorporate serious attention and commitment to the organizational requisites of a development strategy. Similarly, problem definitions that result in the application of the North Atlantic management techniques and standard operating procedures as the instruments of reform, without careful assessment of their relevance and likely organization/management consequences, can also be wasteful and misleading. Problem-solving that does not proceed from careful problemdefining can be fraught with indeterminacy. Knowledge and know-how gathered from a particular discipline or an approach/technique with a certain orientation may not be an adequate form of intervention. The biases of one discipline may even disable one to identify the key factors of a situation one wants to perceive as a development problem/task. Further, the problem-solving skills of management specialists do not necessarily produce valid definitions of the problems/tasks to be solved through management/operationa:I techniques. Given this, the crux of concern in development management is most likely with problem-defining. Problem-defining for development is always a somewhat elusive exercise for three reasons. First, it entails the imposition of value judgements about what should be. In practice, such judgements can frequently be made in a relatively rational, systematic fashion. The values applied to Management
& Change,
Volume 6, Number 2 (Winter 2002)
n~--~~------~Khan 411
many situations are the relatively obvious instruments of some well-established higher goals. But this is not always true. In any case, values cannot be proved or objectified. Hence, the selection of the values often involves a measure of confusion, disagreement and muddle. Secondly, one can posit that all encounters with reality are, more or less, symbolically mediated. In looking at a situation, what one sees depends on the perspective through which one looks at the filters through which one selectively sorts out, simplifies and interprets reality in order to comprehened and relate to it. One element of the definition of any problem consists of a specification of the pertinent characteristics of a situation. To the extent that the problems of concern are not somple and familiar ones, those who would define problems must face a prior problem that of getting a relevant and reliable grip on reality. There is no fully satisfactory solution to this prior task. Yet, there is always an opportunity to minimize the chances of error that lie in ignoring it. . Thirdly, there is the matter of preduction. A full-fledged statement of a problem includes assumptions about the feasibility and consequences of an intervention. Public management, for instance, as a discipline largely consists of analyses, prescriptions and techniques for intervening in situations to make them better, i.e. reduce irrationality or inconsistency, to increase efficiency, and establish responsibility, accountability and transparency. The efficiency with which these techniques work depends on how well one has defined the problem to which they are applied. When these familiar tools are used on familiar problems, the techniques often work quite well. In the case of development management, however, the novely and complexity of the situation tends to be great and the ability to predict the effect of an intervention may be correspondingly small. Development management tends to be a high-risk venture, involving nonlinear strategies of action and a continuing tendency towards indeterminacy in the relationship between intended action and its consequences. Development management seldom involves a transitive style and a linear movement of effort from observation, analysis and definition to diagnosis, action and outcome. The problems of development are distinguished by several qualities-novelty, indeterminacy, complexity, interrelatedness and interdependence. The strategy of defining such problems boils down to a reiterative and cyclical process of redefinition. This process has implications for the way in which the management of solutionseeking effort is arranged. Perhaps, the most significant implication is that Management
& Change, Volume 6, Number
2 (Winter 2002)
n i
412 Development Management: Reflections on Recent Development
the managerial resource needs are greater in volume and quality than for the tasks of public management. This situation is telling as well as unfortunate in that management resources are frequently scarce in development settings and the development assistance agencies may not realize that their own models are likely to understate the need for those management resources. In undertaking development management, when it comes to managing, the less one has, the more one needs. Put another way, the needs are vast and growing, but the resources and capacities to meet the needs are scarce and sparse. The second implication, equally significant, is that in actual efforts at defining and analyzing problems, the analytical distinction between goals and methods/processes tends to break down. Once chosen, a goal sets limits on the range of relevant methods. In some cases, a goal choice may even specify a method of action. However, the process of analysis also involves decisions about methods/processes which are also decisions about goals, because goals are the outcomes of actions. In defini~g problems, in any event, it is usually rewarding to begin with a conscious distinction between goals and methods.
STRATEGIC FOCUS Even if each problem/task of development management tends to be somewhat unique in some ways, some generalization about problems of development management may be offered. This is important to efforts at shaping strategies and approaches. In general, strategies for defining development management problems/tasks must deal with (a) the means of describing initial state conditions, that is, identifying the salient features of the task environment which is to be regarded as a problem; (b) the means of dealing with value concerns, that is, achieving sensible and relevant criteria in terms of which one effectively judges and attacks the situation as a problem; and (c) the means of building a cache of strategic premises, that is, what interventions may serve given purposes, the ways in which they are likely to work and the types of conditions under which they are likely to work. If the strategic needs of development management are to be met (Hope, 1984; Jones, 1992), certain kinds of knowledge must be mobilized and put to use. One part of it consists of categories of problems that are typical concerns of development management, viz., the management of development and the development of management. Another consists of Management
& Cha!1ge, Volume 6, Number 2 (Winter 2002)
r-~-------------------Khan 413
types of methods of problem-defining and problem-analysis. A third identifies innovative action strategies and assesses the way in which they work under various conditions. To illustrate, the types of problems that are typically formulated and attacked can be arranged typologically. One approach is to delineate development problem situation according to the types of goals that may apply. Goals that point to the inadequacies of situations by positing preferred alternatives may be open-ended or closed, narrow or broad, more or less intermediate, creative or redistributive, and so forth. In problem-solving efforts, goals can be regarded as variables rather than as giv'ens. To the extent it is possible to identify and assess a range of possible goal 'choices, the quality of problem-defining can be enhanced. Likewise, different methods of intervening in problem situations, that is, different ways of pursuing desired goals are distinguishable. Hirschman (1967) offers some insights into the likely outcomes of different kinds of interventions, e.g., an awareness of a range of possible solutions enlarges the scope of problem-defining analysis and it offers a way to avoid the common tendency to define a problem in terms of a single perspective. Problem-solving approaches can be distinguished along such lines as the extent to which they are technology-centred, the extent to which they are bound by space and time, the extent to which they involve authoritative versus volitional action patterns, and the type of organizational requisites they require, such as hierarchical, polyarchical, routinizable, high skill/low skill, and functional/project variants. Besides goal choices and intervention strategies, a related type of problem-defining approach entails knowledge of types of task environments. Task environment points to the setting where the problem is. One kind of knowledge about task environments concerns the means by which task environments can be perceived or described in an appropriate analytical mode to identify the factors in the situation that must be taken into account in treating a situation as a problem. In task environment analysis, one asks how task environment characteristics bear on the definition of problems. What is possible in one task environment may not be possible in another. Salient characteristics of a task environment have a great deal to do with determining what consistutes a "good" problem. In rural development management, for instance, one may identify some types of situations in which voluntary development efforts do not work (Hunter, 1970). It would be unproductive to define a problem of rural development as one that can be attacked through voluntary local efforts where the task Management
& Change, Volume 6, Number 2 (Winter 2002)
.,
.
I ,
414 Development Management: Reflections on Recent Development
environment is not compatible with such an approach. To the extent that one can better ferret out what is and what is not likely to work under given types of circumstances, one can better define problems and determine more feasible development goals. In this way, one can help to curtail the customary tendency to define problems to fit general preconceptions about solutions. Again, for example, by knowing more about the conditions under which cooperatives are likely or not likely to work, one can choose them where they appear to fit, instead of accepting the hackneyed assumption of cooperatives being a universal solution to an almost unlim. ited set of rural development problems. The cooperative-building efforts in developing countries of the past illustrate the way in which, in the absence of more distinctive knowledge of task environment, many problems tend to be defined and extended in terms of familiar solutions, rather than getting addressed more discerningly. Another strategic need of development management, sometimes sidetracked by real-life muddle, concerns the problem-defining mechanisms of the real world in terms of what they are and the way in which they work. This involves identifying and understanding the commonplace instruments of problem definition and problem analysis. Included are planning agencies, the public sector organizations with special mandate for budgetary and financial management, management services and materials control, various regular operating agencies, research and analyzing of organizations and the other entities involved in the myriad tasks of defining and analyzing problems. In the world of development, these organizations also embrace various bilateral and multilat~ral assistance agencies, which can have a direct impact on the definition of problems as .the basis for development initiatives in individual countries. What these organizations are and the way in which they really operate as opposed to how they are expected to function is important to an understanding of the way in which problems are defined and of the way in which they can be better defined (Rainey, 1990; Massey, 1993). Thus, the actual dynamics of the budget and planning processes are among the true keys to comprehension of the ways in which problems are operationally defined. Then there is the additional, but useful, question of whether effective, enlarging and innovative problem-defining capabilities can be institutionalized to serve development objectives. If not, development management has a grave problem at hand and the identification of its programme is not likely to a fruitful use of time. Certainly, the development of an efManagement
& Change. Volume 6, Number 2 (Winter 2002)
r Khan 415
fective and expanding problem-defining capacity in any country is not likely to be a piece' of take. This type of capability, as development experience suggests, seems to accrete and grow indirectly, sometimes tangentially and even unexpectedly, out of the synergistic efforts of varied initiatives. Yet, to some extent, it can be it must be strategized and carried out. CONCLUSION Developlment management as a field must always be driven by pragmatic concerns. One way to show and sustain this concern is to include in the programme for development management a conscientious attention to the observable, identifiable, practical and field-level constraints encountered in development problem-defining efforts. Tentatively, some of these obstacles would include defining problems of a a priori knowledge of apparent solutions, confusing system development with system improvement, ignoring nonlinear progress and redundancy, failing to keep choices open, manipulating technical premises to achieve falsely plausible action strategies, and suboptimizing solution-seeking efforts. If development management is to be useful, practical and operational, it must also be academic, scholarly and research-oriented. Its findings are contributions to management/analytical capacity to define problems in a better way and to act on the definitions and conceptualizations. These findings can only be attained by harnessing academic analytical talent to practical questions and concerns. Much of the talent can be drawn from social/behavioural sciences, but the efforts must not be captured or monopolized by any particular discipline, as has been the practice before and now. One task that can be usefully performed in academic/researsh settings to help build the knowledge infrastructure of development management is the monitoring and analysis of relevant growth, development, management and transformatione xperience elsewhere in the globe, so that developers and catalysts need not in the future reinvent the wheel so often as they have done in the past. Such monitoring implies exchange, collaboration, cooperation and sharing which, in tum, imply a pressing need for international flows of information and interaction between the academics/researchers and practitioners/executives. Another ongoing need that has both academic and practitioner aspects is to observe and analyze actual task environments with a view to providing better knowledge for Management
& Change,
Volume 6, Number
2 (Winter 2002)
416 DeveJopmentManagement:
Reflections on Recent DeveJopment
problem-defining efforts in complex and relatively indeterminate developmental circumstances. Academic contributions to development management- are essential and the contributions need to be recognized and put to good use. The leading academic contribution is the pooling, sharing and diffusion of analysis, findings, planning, design and control to the service of development management initiatives and to help with their application. One basic way to provide this service is by training, equipping and energizing practitio .. ners. Another involves actual participation in the process through consultation, outreach, fieldwork and people interchange. In the last analysis, development management embodies certain kinds of priority activity and focus. It enchances certain qualities that help infuse the systems of action by which human e~istence is improved. Development management has a strategic focus, among other defining characteristics, that is, a strategic orientation depending on the capacity of define and analyze problems. This capacity and skill must be enhanced and honed by coupling and dovetailing analysis and action. If and when development is targeted, development management as a strategic orientation towards development and growth action becomes a high-priority concern. When the strategic and creative focus is kept in mind, it enables policy-makers and organizational personnel to achieve, sustain and humanize development.
REFERENCES Barzelay, Michael (1992) Breaking Through Bureaucracy: A New Vision for Managing in Government. Berkely: University of California Press. Bryant, Coralie and Louise G. White (1982) Managing Development in the Third World. Boulder: Westview Press. Esman, Milton J. and John D. Montgomery (1969) "Systems Approach to Technical Cooperation: The Role of Development Administration," Public Administration Review, Vol. 29. Gant, George "Po (1979) Development Administration: Concepts, Goal, Methods. Madison: University of Wisconsin Press. Hirschman, A. o. (1969) Development Projects Observed. Washington DC: Brookings Institution. Hope, Kempe R. (1984) The Dynamics of Deve"lopment and Development Administration. Westport: Greenwood Press. Hughes, Owen (1998) Public Management and Administration. London: Macmillan Press. Hunter, Greg (1970) The Administration of Rural Development. London: Oxford Management
& Change, Volume 6. Number 2 (Winter 2002)
Khan 417 University Press. Jones, Edwin (1992) Development Administration: Jamaican Adaptations. Kingston, Jamaica: Caricom Publishers. Massey, Andrew (1993) Managing the Public Sector. Aldershot: Edward Elgar. Rainey, Hal G. (1990) Understanding and Managing Public Organizations. San Francisco: Jossey-Bass. United Nations (1975) Development Administration: Current Approaches and Trends in Public Administration/of National Development. New York: United Nations.
Management
& Change,
Volume 6, Number 2 (Winter 2002)
ENCYCLOP JEDIA BRITANNICA 2002: A CASE STUDY
Vinay Auluck
n 2001 while announcing the launch of the new 2002 edition of the 32-vol ume revised printed version of Encyclopredia Britannica (EB), the chairman of the board was in contemplative mood about the future of the company. He was very aware of the special status of the Britannica brand: a legacy, carefully developed over a period of 234 years. It symbolizes authenticity, accuracy, and the most up-to-date source of information in the world of learning. The contributors to the product have included Nobel Laureates, academicians, and leading thinkers; add to this the value of such high quality content going through a careful process of editing, indexing, and periodic updating. During the late 1980s and 1990s, initiatives were taken to digitize the content for a product in electronic format as part of product development efforts. It was felt that Encyclopredia Britannica had all the ingredients of a good business - a great core benefit offered, great brand value, and the ability to move quickly into the digital space. The Chairman was upbeat about technology since, even after 30 years, Moore's Law that "every eighteen month's processing power doubles while costs hold constant" was still valid. As a result, a stream of faster, cheaper, and smaller devices were continuing to storm into the market. This, along with new protocols of digitization, have enabled text, images, and sound to be integrated into one a single application, enabling a powerful multimedia range of communication channels for information distribution. Moore's Law explains how computers, telecommunications services, and data storage systems defy the laws of gravity and commerce, becoming faster, cheaper, and better at increasing velocity. However, the quick spread of these technologies, with increasing greater reach to more and more customers, is explained by Metcalfe's Law, which postulates that "the utility/usefulness of a network equals the square of the number of users." The more people use your software, your network, or your book, the more valuable it becomes, and it increases its ability to attract new users. In 1994 the Internet reached an optimum inflexion point, and in 1996 EB had content that could easily be tailor-made for the Internet. It was believed that both Moore's Law and Metcalfe's Law would be driving the world made of atoms to
TI
Management & Change. Volume 6, Number 2 (Winter 2002) @ 2002 Institute for Integrated Learning in Management. All Rights Reserved.
r 420 Encyclopaedia Britannica 2002 the one made up of bits. But Ronald Coase propounded the really disruptive threat due to the laws of transaction costs. This stated that "firms are created because additional costs of organizing and maintaining them is cheaper than the transaction costs involved which individuals conduct with each other in market." Firms wiII expand precisely to point where costs of organization of extra transaction within a firm become equal to costs of carrying out the same transaction by means of an exchange in the open market. In the late 1990s, the technology horizons indicated WAP/mobile Internet and electronic access of content. In the recent past, the revenue had not been enough to generate enough cash flow through the sustained sale of print products. With more and more new-generation children being educated in the Internet environment, EB simply could not ignore this new medium. This meant extra investment. Over the last couple of years it was felt that EB had been successful in. developing a popular website containing the entire 32-volume/44-miIIion word content. However, the rules of doing business in the dotcom era were changing very quickly. The challenge was to take steps that ensured that EB woulid be able to reach new customers anywhere in the world, cheaper and faster, overcoming the barriers of time and cost. Some of the main issues were: What view should be taken with regard to printed products? What business model should be followed for the Internet product? In what way should a new valuechain be developed ?"'What should be done to keep the EB brand moving in the right direction? In these reflective moments, it is important to note the entire 240-year history of EB.
ORIGIN The Encyclopa:dia Britannica was founded in Edinburgh in 1768. According to one chronicler or Britannica history, Colin Macfarquhar, a scholarly and industrious printer and bookseller, and Andrew Bell, a talented engraver, started the project of creating the first edition. Their choice for editor was William Smellie. It would be arranged alphabetically, "compiled upon a new plan in which the different Sciences and Arts are digested into distinct Treatises or Systems", and its chief virtue was to be, in the editor's word, "utility". The 1st edition of the Britannica was published one section at a time, in fascicles, over a three-year period, beginning in 1768. The three-volume set was completed in l77l and was quickly sold out. Encouraged by the success of the 1st edition, the publishers issued the 2nd edition in 10 volumes (1777-84). The 3rd edition, completed in l797 and the first to include articles by outside contributors, comprised 18 volumes; the fourth,
Management
& Change, Volume 6, Number 2 (Winter 2002)
---_._--~~--------------------~
Auluck 421 completed in 1809, boasted of 20 volumes. Encyclopredia Britannica first came to the United States in the form of a pirated edition printed in Philadelphia in 1790 by Thomas Dobson. Owners of that set included George Washington, Thomas Jefferson, and Alexander Hamilton. Contributions from the leading scholars of the day began with a set of six volumes published in 1815-24 as a supplement to the 4th, 5th, and 6th editions. Contributors included Sir Walter Scott, Thomas Malthus, David Ricardo, James Mill, and Thomas Young, whose pioneering efforts to penetrate the mystery of the Egyptian hieroglyphics on the Rosetta Stone first saw light of day under the , Britannica imprint. The 9th edition, published in 1875-89, is often remembered as the "Scholars' edition". It embodied as no other publication of the day, the transformation of scholarship wrought by scientific discovery and new critical methods. In its pages Thomas Henry Huxley propounded Darwin's theory of evolution and W. Robertson Smith, editor of the encyclopaedia, applied the "higher criticism" to biblical literature. The poet A.c. Swinburne wrote on John Keats, Prince Pyotr Kropotkin on anarchism, and James G. Frazer contributed articles on totem ism and taboo.
TWENTIETH '.
CENTURY
The 11th edition (1910-11) was produced in cooperation withCambridge University, and though by then ownership of the Britannica had passed to two Americans, Horace Hooper and Walter Jackson, the strength and confidence of much of its writing marked the high point of Edwardian optimism and perhaps of the British empire itself. The addition of three and later six supplementary volumes resulted in the 12th (1921-22) and 13th (1926) editions. Contributors to those editions included Sigmund Freud, Albert Einstein, Marie Curie, Leon Trotsky, Harry Houdini, H.L. Mencken, and W.E.B. Du Bois. The article "Mass Production" was signed by Henry Ford but is believed to have been written by his personal publicist. By the time the thoroughly revised 14th edition appeared in 1929, the principal operations of the company had moved to the United States. Other important changes took place. Whereas previously the editorial staff would be disbanded after the completion of a new edition, the company now maintained a permanent editorial department whose job was to keep pace with the rapid growth of knowledge. The encyclopaedia began to undergo continuous revision when the company's headquarters moved to Chicago in the mid-1930s and, starting in 1936, a new printing was published each year, incorporating the latest changes and updates. The year 1938 was the second time the Britannica Book of the Year appeared (one had been published in 1913). The yearbook contin-
Management
& Change,
Volume 6. Number
2 (Winter 2002)
422 Encyclopaedia Britannica 2002 ues to be. published. In 1943, William Benton, a founder of the advertising agency Benton and Bowles and later a U.S. senator, became chairman of the board and publisher. Under his leadership the company expanded by purchasing Compton's Encyclopedia, the dictionary publisher G. & C. Merriam (later Merriam-Webster, Inc.), and other properties. Britannica also extended its publishing activities abroad during this period. Benton led the company until his death, in 1973. The publishing landmarks of his era were Great Books of the Western World, a 54-volume collection published in 1952 (a 2nd, revised edition, in 60 volumes, was issued in 1990); and the innovative 15th edition of the Britannica, in 30 volumes, in 1974. A major revision was published in 1985, bringing the size of the set to 32 volumes. Britannica was an early leader in electronic publishing and new media. In 1981, under an agreement with Mead Data Central, the first digital version of the Encyclopcedia Britannica was created for the Lexis-Nexis service. Britannica also created the first multimedia CD-ROM encyclopaedia, Compton's Multimedia Encyclopedia, in 1989. By the 1990s Encyclopcedia Britannica, Inc., had produced or was at work on encyclopaedias and other educational materials in Japan, Korea, Chin21,Taiwan, Italy, France, Spain, Latin America, Turkey, Hungary, Poland, and elsewhere. The company built one of the most aggressive and successful direct sales force. By targeting middle-income families and focusing on their aspirations for their children, the company was successful in developing a market for home libraries. There were proposals to create a digital version in the form of a CD.ROM in the early 1990s but there was a counter argument that it might jeopardize the high margin market for the printed versions of EB. Microsoft created its own encyclopaedia around this time and branded it as Encarta. Britannica had more that 40 mi1lion words and it was a challenge to create an interactive version within the capacity limit of a CD-ROM. Meanwhile, with an extremely low marginal manufacturing cost of around $1.5 per copy, the CD-ROM as a freebie made good economic sense. The marginal cost of a print encyclopaedia, in contrast, was upward of $250 for production and over $400 as a sales person's commission. CD-ROM encyclopaedias meanwhile were retailing for $50 to $70. But they were mostly given away to promote the sale of computers and periphera~s, and made an excellent gift with perceived value of $70 but marginal production cost of$1.5. This affected the sales of the 32-volume print encyclopaedia business. Britannica was selling for $1,500 to $2,200 per set (depending on the various binding options). Months passed. Sales continued to plummet. In response, EB put together a text-only CD-ROM version of Britannica. However, the sales force Management
& Change, Volume 6. Number 2 (Winter 2002)
r
Auluck 423 did not react to this positively, as the CO-ROM versions of Britannica could not possibly generate the $500 to $600 sales commission of the printed product. Britannica decided to offer the CD-ROM as a free bonus for buyers of the multivolume set. Anyone who wanted to buy the CD-ROM alone would have to pay $1,000. This did not work and sales continue to dwindle. In 1994, with the advent of the Internet, Encyclopaedia Britannica became the first encyclopaedia to put its 32-volume database, containing over 45 million words, online. Its web site - www.eb.com -primarily catered to educational institutions, with monthly subscriptions of $5, or annual subscriptions of $50. This aimed at merging the remarkable legacy of Encyclopredia Britannica with all the power and possibility of technology. . At present, Jacob Safra is chairman of the board and Han Yeshua is its chief executive officer. Yeshua has more than 20 years of experience in educational software and publishing. Before joining Britannica, he was deputy general director of the Tel Aviv-based Centre for Educational Technology (CET), Israel's largest educational technology firm. He also served as chief executive officer of the Centre for Educational Technology Holdings, a CET subsidiary. Before that he held several senior positions with CET, including marketing manager, head of medical division, and developer of educational learning materials. Yeshua is the author of several textbooks and holds a Bachelor's degree with honours in medical science from Hebrew University. In the knowledge-based information econorny, the consumer not only needs content but also a context. In particular, students need to know how to authenticate, filter, and synthesize the enormous volume of inforrnation flowing over them. As youngsters conduct research on the web, they need help in distinguishing the credible from the inauthentic, and Britannica was expected to lend this helping hand. Britannica's India operations were set up in 1998 with the objective of marketing Britannica products in the South Asia region, and also to initiate efforts to develop content that catered to the needs of Indian students. The Indian subsidiary has been an integral part of the worldwide editorial effort. In October 1999 Encyclopredia Britannica announced a decision to convert Britannica.com into a free service. Such was the response to the free services that within hours of opening of the site, with more than 10 million visitors on the first day, the site's serverS to collapse. The web site had to add additional servers to cater to the traffic. Less than 18 months after it launched its first free service, EB announced that it would not provide information free of charge. It was realized that the immense popularity of its service had not been translated into monetary benefits. It was realized that the company should focus on its traditional strengths of referencing, education, and learning. While content was the strength of this 234year-old brand, it had to be delivered only through a product or service; though Management & Change, Volume 6, Number 2 (Winter 2002)
.,"1
424 Encyclopaedia
Britannica 2002
the ne~ mediums like CD-ROMs, DVDs, and the Internet do offer new possibilities, they certainly did not mark the end of print products. In December 2001, the new, updated 2002-printed version was announced after a gap of four years. According to the company, "To many people the printed set of books is still the symbol of knowledge and authority. Despite the benefits of electronic publishing, books happen to be a remarkably efficient platform for the storage and retrieval of information. More than that, books are a fresh and vital part of our civilization. To hold the Encyclopedia on a shelf or browse through open volume are pleasures no other medium can. provide." The challenge lies in analyzing and implementing growth options and sustaining the growth.
QUESTIONS
2 3
FOR REFLECTION
What is the nature/component of information? How does one add value to information? In what way did the electronic media transform the value chain, business model, and critical factors of success for EB? List the advantages /disadvantages of electronic versus print product competition?
QUESTION
FOR CLASS DISCUSSION
What should the company do, and why, to ensure that it continues to remain number one in the encyclopaedia market profitably? Annexure-I Competition for Encyclopredia Britannica Three well-known and highly regarded publishers dominate the general encyclopaedia market and control the lion's share of the overall market. These are: World Book Inc. Grolier Inc. Encyclop::edia Britannica, Inc. These three together probably account for more than 95 per cent of the print encyclopaedia market. Thus the main competitors are World Book and Grolier. In the high school and public library markets, EB competes with World Book Encyclopaedia, Americana, New Book of Knowledge, and Compton's Encyclopedia. In the academic library market, since Collier's Encyclopedia and Academic American are no longer printed, EB's only competition is Grolier's Encyclopedia Americana. In the consumer market, EB's main competitor is the World Book. Management
& Change, Volume 6, Number 2 (Winter 2002)
T".'.
"T'l
-"i
Annexure-II
Product Comparison Chart:-l
Name
Number of Number Words Volumes Millions
~
Britannica
32
44
64,932
32,393
24,139
% of Illustrations Full In Colour 33%
Ill>
Americana
30
31
45,000
26,800
23,000
20%
World Book
22
10
17,000
14,120
28,000
80%
Compton's
26
9
37,000
11,000
22,500
70%
9,243
10,576
27,850
90%
~
of Number In Entries
of
Number Pages
of
Number of Illustrations
0>
'"
0>
a "g n ::r 0>
~'" ~
c a " .0Z c
a ...• "
0-
N
~
'"
c> ...• N
o o
~
.
New Book of Knowledge
21
6.8
> Eo
=n::r:••• ~
Annexure-3 Product Comparison Chart-2
.3::
Product
'" '"= "3
Number of Entries
OQ
"g
Britannica Online
Ro (j ::T
Illustrations
Maps
Videos
Sounds
Web Links
72,000
Encyclopedia Americana Online
10,000
45,000
NA
NA
NA
130,00 0
"..,
~
I
1,134
NA
NA
155,00 0
NA
N
="
tr:I
=
NA
Gralier Multimedia Online
38,000
6,850
830
NA
150
55,000
NA
New Book of Knowledge Online
9,000
2,500
629
NA
NA
7,000
NA
World
21,000
8,700
730
77
733
15,000
128 panoramas;
Book
Online
I
;
I
I
I
I
I
a.
NA
0 "Cl
~
20,000 in journal
tv
tv 0 0
3,300
+
a"
~ ~ ..,
.a:.
n
'"=
3
Update Schedule
'<
~ ~
c 3 " 9"z c
Other Multimedia
I::a-i
B.. S.
Quarterly; journal weekly; links monthly
I:l:l
:!. S'
==
;:;0
~
N 0 0 N
News weekly, links monthly Quarterly; news weekly; links monthly Monthly I
I' e
Auluck 427 Annexure-4 On Line Encyclopaedias Grolier is a dominant player in the on-line encyclopaedia market with three online reference tools-the Encyclopedia Americana, for in-depth research; the Grolier . Multimedia Encyclopedia, for quick reference; and the New Book of Knowledge, for student reference. These databases also include the Wall Street Journal Almanac and the Encyclopedia Americana Journal, an auxiliary database of current events written by their own editors with web links and background articles. World Book online is the distant second. World Book was criticized in the recent ALA evaluation for its less-than-spectacular searching features and advised libraries owning the CD-ROM to stick with the discs. Subscription to Encarta online is free and is offered only to Encarta CD/DVD owners.
REFERENCES Britannica India - www.britannicaindia.com Britannica.com :http://corporate.britannica.com.au!our_story /vision/b 30m.asIJ http://www. pdma.org/bookstore/books/unleash_review.html "Rule Britannica !Site Encyclopedia Site is a winner." "Ton Tapscott," Computer WOrld Nov29 ,1999 http://www.computerworld.com/cwilstory/O.1199.NAV 47- 74_ST037694,00.html http://www.computerworld.com/cwilstory/O.1199.NAV 47_ST029207 ,00.html It All on the Web putting the 'e' in encyclopedia By: Jerry Useem Issue: November 1999: http://www.business2.com/articles/mag/print/O. 1643,5646,FF.html http.://www.computerworld.com/cwi/story/ 0, 1199,NAV47.:.NLTAM_ST058603,00.html(March 14, 2001) chicagotribune.com/business/chi-O 10517britannica.story?coll=chi-business-hed
-
18k chicagotribune.com/business/columnists/chi-O 112130352dec 13.column - 29k "Did Microsoft Kill Britannica.com?" By Chet Dembeck, E-Commerce Times http://www.ecommercetimes.com/perl/story /1514.html
Management & Change. Volume 6, Number 2 (Winter 2002)
BOOK REVIEWS
S. Ramachander, Ascending the Value Spiral: From Insight to Innovation, New Delhi: Response Books (A division of Sage Publications), 2002, pp. 286, Rs. 250/- paperback. The best breakthroughs evoke a delightful sense of inevitability. You see them and say, "Aha .... of course." The surprise is that in retrospect, it shouldn't have been that much of a surprisy. In business the standard for creative enterprise is more demanding. Being innovative is not enough; and as the author states that innovation within an organization must also create and capture value. Breakthrough changes are seen as convergence of two basic forces-one due to powerful technological thrust and the other an informed and insightful' understanding of a new opportunity. The theme of the book is spun around the second topic, which the author mentions as "strategic marketing insight." The book concerns itself with the theme of how to continuously improve customer value and thus proposes a framework of 4D-cycle model of Discover, Design, Develop and Deliver. It goes on to suggest the ways of finding new value/learning and creatively adapting new ways not only for new business and products but also for repositioning of existing business or using new technologies. 4D-cycle is positioned as a conceptual base and in many stages it would either overlap or merge. This book would be good reading for the managers who get myopic to an extent that they start believing that their industry is unique and nothing can be adapted from other companies or unrelated industries. The tools, models and frameworks suggested in the book have been proposed and read many times over either in books and journals but, Mr. Ramachander has done a good job to put the above in a sequential perspective. For customers today either in developing or in developed economies, their expectation from a product no longer is based on its reliability; durability or troubles free working. Instead they are looking for uniqueness or at least a relevant competitive distinction in the product or services offered. Hence, no company can be content with their existing market or successfuf brand. They need to work continuously on new Management & Change, Volume 6. Number 2 (Winter 2002) @ 2002 Institute Tor Integrated Learning in Management. All Rights Reserved.
430 Book Reviews ideas to generate products that are aligned with. the consumer needs. The concept, 7which would help the companies on above, is market .. ing insight, which is a unique, perspective and deep appreciation of th(~ dynamic relationship between the product and the customer. Creation is a divergent and inclusive process. Customers often do not know what they really want and there are people like Akio Morita who steps off the beaten track to offer insightful product concepts. Consumer insights, creating mental models namely the behavioral and the structural and drawing parallels from other industries are some of the tools suggested to stimulate the managers and prevent them from falling into the product trap or think in the familiar manner from the product fo,mulation and its attributes. Branding is yet another tool to add strategic and competitive value for one's product. Brands are not built by the marketers but by the consumer's mind. Branding does not confer invincibility to one's business but helps to sustain and protect it. Besides adding perceived value to the customer such as reduction of risk, time c.ost of verification, it can also potentially deliver competitive uniqueness thus retaining customers. The author besides describing techniques and models as practiced by him to enhance value in product or service, he backs it up with relev.ant examples of products and companies. The book explains key ideas without getting bogged down in abstract concepts and assists the reader with questions which may help to understand/clarify doubts if any.
P. Bhaumik President, Institute for Integrated Learning in Management, Institutional Area, Lodhi Road, New Delhi-ll0003.
Lodhi
Steve W. Williams, Making Better Business Decisions: Understanding and Improving Critical Thinking and Problem Solving Skills. New Delhi: Response Books (A division of Sage India Publiclltions India Pvt. Ltd.), 2002. iv+ 167pp.Rs. 250. paper In an era where diverse issues of allergies and decision making (Streuferth and Satish, 2002), relationship between skin conductance responses and decision making (Atsunobo, 2002), and where work and psychology are drawing attention to decision making in government and rvrllrag<:n:ten,t ,& Change.
Volume 6. Number 2 (Winter
2002)
Book Reviews 431 industry.(Drenth , 2002), the book underreview presents a comprehensive view of the process of decision making in business. The book by Williams unfolds with Chapter I, which offers a succinct introduction initiating the reader to the decision making difficulty in daily life, right from selecting clothes, to making political choices to deciding places of vacation. It offers elementary information about the decision making process, putting the reader at ease. Simons', ' Bounded Rationality' and the process and steps of decision making are further elaborated. The introduction ends with a table which illustrates the effective use of rational problem solving skills. The author emhasises the trap which individuals fall into when making decisions, and instead of 'satisficing'. the options available, individuals often stop at the first possible solution. The book under review is further divided into three parts. P!lrt I, chapter 2, lays emphasis on the intemal process of decision making, from a biological, emotional and psychological angle. The map of a brain i!i provided (pp.26.) !lnd the author explains how chemiclll information is passed by the neurotransmitters and these chemicals trigger emotional reactions. The author, states how the rational mind is taken over by the strong emotional impulses and if these are not controlled by the fron~ tal lobes of the brain, then we would not be able to control the emotional responses and will be unable to make a rational and thou~htful response. Chapter 3, titled, 'Why we don't decide as we should' focuses on the 'hedonic' versus the 'rational' human nature. By forcing to look at increased number of options whih~ making decisions we are forcing the rational nature to be dominant and are resisting the influence of the impulses. The author advises, the readers, of the probability, of our decisions, being influenced by our emotions, in that case, it is necessary that we take our Wants more seriously and 'attempt to address these intuitive concerns to minimize the chances of satisfying our immediate needs while forging our future interests'.(ppAO.). Chapter 4, addresses the judgmental bias influencing decisions which lead to many decisional errors. The chapter starts with the selective perception and the famous picture of the Russian old lady with the young lady (Krech et al 1982) is depicted separately to drive the point home. The author deals with the primacy, recericy, halo, presentation, framing, commitment and categorization effects. He suggests ways of avoiding .
Management & Change. Volume 6, Number 2 (Winter 2002)
"'
432 Book Reviews
these biases, which are very well illustrated in a tabular format. Chapter 5, focuses on risk perception and the decision making process. The author, suggests the multidimensional perceptual characteristic of risk. How risky or safe we feel is determined by the amount of uncertainty present, expectations of gains and losses, amount of personal involvement and how we frame the decision. The author states that wherever possible we attempt to modify risk by attacking the problem from a multidimensional perspective (pp.87). Further understanding the gains or losses from such decisions, the tradeoffs that have to be made, clarify the outcomes of basing our decisions. Part II, unveils with chapter 6, which deals with, 'Thinking critically-How we know what we know.'. As the title suggests this chapter deals with the critical thinking process which is two pronged ac .. cording to the author. We are required to be both imaginative and disciplined, be open to new ideas .and be skeptical to the minute de .. tails to hone this process. The premises on which this chapter rests are considering alternative explanations, testing facts, ways and means to enhance critical thinking. Part III, which starts with chapter 7, looks at understanding and improving creativity. The novelty of this chapter is that it equates creativity to the process of humour. The unexpected understanding, the 'ahha' experience in creativity and humour are similar, which is well illus .. trated by a small anecdote. (pg.l24). The author, explains the major overlap between. resources, techniques and motivation which is resultant in high creativity. Creative problem solving follows the five step mode, which the author explains in detail. The chapter ends with the guidelines to enhance creativity which is well illustrated by a table. The books draws to a close with chapter 8 which emphasizes, Ways to improve our decisions. This chapter in effect summarizes the book. The book is written in a lucid style and all the sections dovetail one another in perfect harmony. Written in an easy style, dotted with anecdotes and stories makes this tome, enjoyable. Tables at the end of each chapter serve as a ready reckoner for the key points that the author makes. It would appeal to students of psychology at the undergradu .. ate level. Since a lot of research studies have been incorporated, it would be a helpful supplement for researchers in this field, specially, for the literature review process, though they will have to look at other source too. Management
& Change. Volume 6. Number 2 (Winter
2002)
Book Reviews
433
The book is elementary and it would be a useful supplement in the creativity modules. The exercises and examples, like for instance the old lady and the young lady for perceptual selectivity and the nine dot exercise are a little overused now. The reviewer suggests that the author in subsequent editions can use some new and unique exercises, which are usually not found in psychology books or trainer volumes on creativity. Though titled, 'Making better Business Decisions', there were purely psychological perspectives which were present, and very few business decisions were dealt with. Besides this lacunae, cognitive dissonance theory could also be mentioned in the decision making process. The reviewer suggests, the use of leT in de~ision making and computer aided simulations could be added. Also the intertwining with cognitive psychology may be a helpful dimension which would further enrich this volume on creativity, thus making it more contemporary. Well! at a time where, 'Not only do we see frequent negligence of psychological insights in decision making, an equally or even more disturbing phenomenon is the abuse of social and behavioural scientific research findings'.(Drenth , 2002). At this time, the book under review is a comprehensive and a rich contribution to the field of creativity and decision making. References Atsunobu, S., (2002) "Relationship between skin conductance responses and decision making in the gambling task." The University of Tokyo, Japan. Paper presented at the XXV Conference of Applied Psychology, Singapore. 2002. Drenth, P., (2002) "Contribution of W & Psychology to policy making: added value?" vrije Uni~ersiteit Amsterdam, Netherlands. Paper presented at the XXV Conference of Applied Psychology, Singapore. 2002. Krech, D., Crutchfield, R.S. Livson, N., Wilson, w.A., Jr., & Parducci, A.(l982). Elements of Psychology (4th edition). New York :Knopf. Streufert, S. and Satish, U., (2002) "Allergies and decision making competence." SUNY Upstate Medical University, USA. Paper presented at the XXV Conference of Applied Psychology, Singapore. 2002.
Jyotsna Bhatnagar Assistant Professor, Institute for Integrated Learning in Management, Lodhi 'Institutional Area, Lodhi Road, New Delhi-110003.
Management
& Change, Volume 6, Number 2 (Winter
2002)
434 Book Reviews
Radha R. Sharma, 360 Degree Feedback, Competency Mapping and Assessment Centres, First Edition, Tata McGraw-Hill Publishing Company Limited, 2002. 239 pp. Price not mentioned, hard. In today's context of globalization and global competition which has become a reality in our country, the managements of the corporates are coming under tremendous pressure to maintain the competitive edge for the survival/growth of their corporates. Of all the resources at the disposal of an organization it is its human resource which can manipulate the other resources, viz, machines, money etc. to achieve the desired goal/objective. One of the key traits that describe the quality of the human resource is its competency. Thus competency becomes one of the crucial parameters that gives the competitive edge to an organization. In the above context the book deals with one of the most contemporary and relevant issues that managements of progressive companies are concerned /working with. The book is well c.omposed and is easy to understand. It is organized into two parts. Part I deals with 360 Degree Feedback. It can be classified into three basic sections, the first dealing with the status, evolution, the need, preparedness of the organi~ation, pitfillls etc with regard to 360 Degree Feedback; the second: creat~ ing a model for analysis ;and the third: the sharing of experiences of some corporates , viz, Motorola and Seagram. Part II pertains to Assessment Centre and Competency Profiling. This can be essentially classified into three sections, viz, the first: Ii general review of the subject matter in terms of its beginning, growth, design, integrating Assesmment/ Development Centre with 360 Degree Feedback etc.; the second: Potential Apprilisal through Assessment Centre; and the third: the sharing of the experiences of the corporates such as, Wipro,SB,GHCL,JK etc. As such the book deals with the subject at a broad level. It does not go into the finer details on how to design and develop the 360 Degree Feedback/Assessment Centre which pertain to the technical/core aspects. One of the good aspects of the book is thilt it gives a reasonably good picture to the reader on the status/development of 360 Degree Feedback! Assessment Centre in the corporates functioning in India be it IndianlMNC and how more and more corporates are moving towards these HR initiatives as a means to survival and growth. The: other aspect that emerges is that in many companies that are practicing 360 Degree Feedback it is used more as a tool for development of the: Management
& Change.
Volume 6, Number 2 (Winter
----------
2002)
--.-..Ii.1
Book Reviews 435
individuals rather than for their performance appraisal. In this way the Feedback system has become a facilitator rather than a threat to the employees. The other interesting issue is the general trend in the sequential development of the three basic HR initiatives: 360 Degree Feedback, followed by Development Centre and subsequently by Assessment Centre. Of course there are companies that are working on one or two of the above initiatives in the order that is convenient to them in terms of suiting their organization culture. The book deals with Development Centre in a passing context. Probably dealing in this area in a greater detail would have made the book more complete since the three initiatives are in a way inter-linked. Since one of the core issue; for 360 Degree Feedback to be used for Performance Appraisal/for application in Assessment Centre/Development Centre; is Competency Profiling, a greater coverage on this would have made the book more resourceful. On the whole the book is good and the efforts of the author in compiling the various material from different organizations/consultants is commendable. It serves as a useful reading for professionals in academics as well as in corporate. Murli Mohan Professor, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-ll0003. Daisy Chuhan: Managing Executive Stress, An approach to Self Development. First Edition. New Delhi: Excel Books, 2002. 195 pp. Rs. 250 hard. In the present day the intense competition in the market is making organizations work harder as well as efficiently and effectively on a continuous basis . This means organizations have to revisit their product designs, processes, procedures and so on to bring in continuous upgradations (TQM approach) or go in for quantum jumps (Business Process Reengineering)or paradigm shifts. All these mean that the people in the organizations have to meet these challenges head on. For this they have to be well equipped with the skills in demand today/multiskilled. To look it the other way today's skills are getting outdated faster Management & Change, Volume 6, Number 2 (Winter 2002)
436 Book Reviews
and faster so much so individual's have to cope with continuous changes in skills/acquisition of new skills to ensure their employability in organizations. These lead to two basic sources of stress. One emanating from the demands on the individual from the organization and the other arising from the limitations of the individual in teJms of the capability. Managing Executive Stress, which is incidentally the title of the book, is a current topic world over and has become the central focus and concern of both individuals and organizations. The book is well written, concise and easy to grasp. Especially for those who are new to the subject it gives a good view of the various dimensions connected with it (stress). ' The book is arranged into three sections. Section I has two chapters which talk about the various sources of stress, namely, economic/ technological/IT/socio-cultural changes etc. and executive effectiveness in the context of managerial role, skill requirements, organization structure and climate and so on. Section II focuses on understanding executive stress. It has four chapters dwelling on the concept of stress, causes of stress, consequences of stress and the proposed model developed by Mohan & Chouhan for coping with stress. Section III deals on managing executive stress. It has two chapters under it. These cover the basic approaches to managing stress, viz, changing orientation, i.e. taking charge of oneself and one's' life and the other by changing behaviour in terms of building better inter-personal relations, how to conquer worry etc. The author has provided information on the findings of numerous research studies conducted by international and indian researchers in the area of stress. Besides it provides tips to build self-confidence, positive thinking etc. Further if some one is interested in assessing oneself on various dimensions such as stress personality, emotional intelligence quotient (EQ), interpersonal relations, locus of control and time management, it has their respective instruments and their scoring keys and interpretation. The proposed model (by Mohan & Chouhan) which is based on the study of 174 managers in government, public and private sectors in India appears very apt in life . To quote from the book " the present Model suggests that an individual can, to a great extent, influence/control the external environment through personality attributes like internal locus of control, high need for achievement and positive attitude and thereby Management
& Change, Volume 6, Number 2 (Winter
2002)
Book Reviews 437 counteract the negative impact of stress". In the final analysis it is clear that both organizations (those enlightened) and individuals are more and more concerned about stress (the negative one) and its impact on the organization's/ individual's performance. In this regard organizations should take the responsibility for providing the environment conducive for the effective functioning of its managers. However, the ultimate onus lies with the individual with regard _ to self development and career progression. In this context the proposed model in the book makes a good fit. The book makes an interesting reading and the author has made good efforts to pack fair amount of theory and basic practical guides in addition to providi~g instruments for measuring certain personality dimensions of an individual in it. As such the book should interest anyone who wants to read on the basic issues related to the topic. Murli Mohan Professor, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-ll0003.
P. Singh and Asha Bhandarker, Winning the Corporate Olympia: The Renaissance Paradigm. New Delhi, Vikas Publishing Pvt. Limited. 2002. xxiii + 232 pp. Rs. 295. paper. THe famous exhortation by Swami Vivekanand, in Katha Upanishad, "Utthisthata, jagrata, prapya varah-nibodhatta," which when translated in English, reads, "Arise, Awake and stop not till the goals are achieved." The book under review, is a passionate reflection of this and is an 'exhortation to the Indian Corporate for revival and renaissance. The key theme behind the book is the deconstruction of prevailing ethos which the authors term it as "creative destruction." Written in a simple and crisp style, the book, has been deeply influenced by psychology and spiritual thought, and innovatively combines the leadership; transformation and change domains of organizational behaviour. The book unveils with the section on Blueprint, which through a story telling style, informs the reader about the architecture of the book. The spirit behind the book is a reawakening through deconstruction of the present and the past, like the surge of an ever onward soldier who believes in renewal of strategy and tactic of warfare all the time. Management
& Change, Volume 6, Number 2 (Winter
2002)
438 Book Reviews The authors lead you through the lanes and by-lanes of this book, through Chapter 1 which is titled, 'The Topography of the 21st Century'. Through this chapter the authors set the environmental context in which the book is framed, comparing and contrasting 20th and the 21 st century challenges around seven dimensions. They succinctly describe the emergence of an intelligent society and the customer reach turning from domestic to global, of emerging business models, organizational architecture and operational challenges. The people imperatives amongst these challenges, are those which deal with alienation of the soul from the person and a need to reconnect at a spiritual plane for survival and renewal. The imperative of ethical and transparent corporate governance is further discussed . The chapter ends with Emerging leadership requirements from transactional to renaissance, which set the need for a leadership style which is a complete resurrection of the traditional transactional style of leadership. The next section is Chapter 2 , which is titled 'Valley of Indian Organizations', and is divided into two sub parts. Part One deals with the Individual and Group level disposition of Indian corporate. This chapter crafts out a model (pg.61) which is plaguing the Indian corporate ethos, where level one is the behavior predisposition leading to an individual level outcome, while level three deals with the organizational level outcome. To illustrate this model further, in a leader -centric style, essentially the firm and its managers would be influenced by the personality of the owner manager, which may lead to an individual level outcome of ov.erdependence or even being given responsibility without authority or may lead to even rebellion, which may then lead to a permutation and combination of organizational outcomes at the third level, like a dispassionate, soul-less organization with operational survival as the immediate focus. The other mindsets that the authors address are: : Hierarchical orientation; Thought focus; Power focus; Clan orienta-, tion; Low competitive spirit, Inward looking and Procrastination. Ho-, listically how these mental sets sap away the competitive spirit of Indian organizations is dealt thoroughly by the authors. The authors are intensely critical of the Indian organizations, not sparing any rod on the truant Indian organizations. The book then steps into Part II of chapter two, which examin'es prevailing organizational mindsets and their impact on global competi .. tive spirit. They focus on five prevailing organizational mental sets. The Management
& Change, Volume 6, Number 2 (Winter
2002)
Book Reviews 439 first is visioning and the problems in Indian organizations which may be envisioning but they may not be translating them into BHAG-Big Hairy Audacious Goals, which translate into long term vision'(Collins and Porras,1996) and the inability of the Indian Managers to 'translate words to pictures with a vivid description of what it will be like to achieve your goal.'(Collins and Porras, op cit),is further elucidated. Next, the authors focus on strategizing, which discusses the lack of structural interventions, which distribute the responsibility of implementation of strategy among a core group of professionals in Indian organizations. Architecting is the next topic, which deals with the 'functional myopia'(Ramnarayan and Bhatnagar, 1993),which is afflicting the Indian organizations, making them into product/functional silos. Processizing is the next critical thought which addresses the 'customerization' (Fisher, Schoenfeldt and Shaw, 1997) approach, of addressing both external and internal customer delight. and Indian realities deal with a.D. interventions of TQM, BPR etc, which fail to be successful, due to the isolated approach and 'systemic failures 'in Indian organizations. This section ends with acculturizing, and the types of cultures dominant in Indian organizations. The chapter concludes with the summary of Indian organization realities. - The third chapter, titled, 'Routes to Peaks for building corporate renaissance' aims at managing the valley conditions which the authors have addressed earlier. There are nine routes which talk of winning vision, creating new business models, soul of a start-up-heart of a collusus, customer at the centre etc. A framework which is not new and is similar to Peters and Waterman's excellence approach of simultaneously loose tight structure, and close to the customer dimensions. 'Ethical governance and Creative destruction though are, still fresh in approach.(pg.91 ).After every route, the authors provide a checklist of an action agenda, which may serve as a diagnostic tool to assess the current situation in organizations. Sometimes the ideas in this chapter seem like old wine in new bottle, ( refer to pg.97),where environment'll scanning and organizational learning, issues are addressed as developing antenna/binocular vision. The unit of analysis till now has been the organizations, Chapter four, at last! talks about Renaissance Leadership, and the unit of analysis now shifts to individual. Though the authors have consistently talked of creative destruction of the past, yet in this chapter Managefllent
& Change, Volume 6, Number 2 (Winter
2002)
440 Book Reviews
they look to the past and analyze leadership styles of historical and corporate leaders. Ten characteristics of the renaissance leaders are discussed and after every characteristics the authors have provided a checklist. Based on content analysis of autobiographies of great leaders" the authors have arrived at this exhaustive list. Well! We close a full circle in leadership theory here, when we go back to where we started, i.e. the trait theory of leadership which the authors describe as characteristics of great leaders. The renaissance leader, then is who has a winning self which is high and an evolving self which is also high. The 'lotussing self, is a new dimension, though similar to the ideology of Shri Shri Ravi Shankarji. Chapter five, titled, 'Grooming Renaissance Leader', is divided into three sub parts. Part I deals with the 'socialization of the renaissance leaders'. The focus is on leaders like Gandhi, Birla, Welch, Iococca, JRD Tata, Ambani etc. The authors discuss six features of grooming, which are architecting a vision of life; constructing identity; belief and value building; emotional empowerment; inculcating a desire to succeed; role modeling.(pg.202). Mother as a significant authority figure, who moulds the personality of the child has been very sensitively handled and the ideas of emotional empowerment; perseverance in the face of failures and inspirational figure from which the leader derives support are discussed. Self awareness and in eSsence become a Pygmalion to self is what the authors want to delve into in this chapter. Part 2, focuses on the 'Role of various institutions in building renaissance leaders' and examines the relative role played by familial, educational and corporate world in grooming this leadership style. The sample, that the authors look at, are 140 executives of public and private sector. Critical goals and values like, respect for elders, power and position, comfortable life, empowerment; empathy, actualizing self etc. appear in a tabular format. This chapter and the book draws to a close with the third subpart, which is the 'modes of grooming'. Coaching, mentoring, enlightenment and self lotussing are the foci. Like the Olympian, who questions his own records and breaks it, his benchmark is the stretch that he attains with every performance and the translucence of looking within and connecting with the being constantly, becoming a Buddha again is what this chapter closes with. The book under review, in its analysis of the contextual factors and deconstruction theory is fresh in perspective. The authors move to a Management
& Change. Volume 6, Number 2 (Winter
2002)
II
Book Reviews 441 deeper paradigm of self awareness, of touching the god within, unleashing the unlimited power of an empowered self, to evolve into a renaissance leader. This book starts well and throbs with expectation and excitement at the outset, but ends a little disappointingly, with the reader, wanting to know more about the renaissance leader. The focus of the book is intense, when it comes to the contextual factors and the authors have devoted the first three chapters of the book to this. Renaissance leader which is the newness of the book gets a diluted focus, i.e., of the last two chapters. The reviewer suggests that the renaissance leader paradigm could go a little deeper into spiritual thought making it truly enriching. A' powerful book, written with immense research and consulting input and peppered with hindi proverbs and small personal anecdotes makes reading this book a powerful experience. If the focus is more on the practical aspects of empowering the Buddhas! leaders in the organisations, by looking at contemporary Buddhas from the corporate world, then the book would be pure gold. A rich contribution to the domain of leadership and change, this tome of knowledge lives up to its name as it truly believes in the Olympic slogan; 'Citius, Altius, Fortius', which when translated in English, means, 'Faster, Higher, Stronger', to win the corporate olympiad with a renewed lotussing self. Jyotsna Bhatnagar Assistant Professor, Institute for Integrated Learning in Management, Lodhi Institutional Area, Lodhi Road, New Delhi-ll0003. References Fisher, e.D., L.F. Schoenfeldt and J.B. Shaw. (1997) . Human Resource Management, 3rd Edition, Boston :Houghton Miffin and Company Collins, J.e. and Jerry I. Porras (1996) "Building your company's vision," Harvard Business Review,on change, HBS Press. Ramnarayan S. and Jyotsna Bhatnagar, (1993) "How do Indian organizations meet learning challenges?," Vikalpa, voI.18, no.I.
Management
& Change, Volume 6, Number 2 (Winter
2002)
Guidelines for Contributors Management & Change invites original. research-based papers. articles. communications and management cases on tOPICSof current concern in all areas of management. A general guideline for contributors is listed below' , I.
.1.
Manuscripts should normally be of up to 10,000 words (20 to 40 A-4 size pages. typed double space). Manuscripts should be submitted in duplicate with the cover page bearing only the title of the paper and authors' names. designations, official addresses. e-mail and phone/fax numbers. Ahstracts. Submit an abstract of about 150 words . Tahles and Figures. Their location in the text should be indicated as follows:
I 4.
5
6. 7 8.
'I. i Ii
I I. 12 10. 14.
15. i 6.
i7
18.
Table-l
about here
I
Endnotes. All notes should be indicated by serial numbers in the text and literature cited should be detailed under Notes at the end of the paper bearing corresponding numbers. before the references. References. Place the references at the end of the manuscript following ihe endnotes. The list should mention only those sources actually cited in the text or notes. Author's name should be the same as in the original source. For example: Verma. A .. T. Kochan and R D. Lansbury (ed.) (1995) Growing Asia' Changing Trends in EII/plo\'ln('nl and Induslrilll Rellllions. London: Routledge. Rangnekar. Sharu (19%) In !II(' \\iorid or Corporale Manllgers. New Delhi: Vikas. Shelh, N. R. (1997) "Somc Reflcctinns on Management and Change." Management & Clwllge. III): )-12. Gupta. Amitabh (1991) "An Empirical Study of Weak Level EffiCiency in India." M.Phil. Dissertation, L'niversity of Delhi. Delhi. For morc than one publication by the same author. list them in chronological order. with the older item Ilrst. For more than one publication in one year by ,he same author. usc small (lower case) letters to distinguish them (e.g., 198Ca, 1980b). Follow British spellings throughout (programme. not program). Universal 'z' in "ize" "ization" words. Usc of numerals: One to twelve in words, thirteen and above in figures. unless the reference is to percentages (5 percent). distance 15 km), or age (10 years old). Use 1900s and 19th ~entury. No stops after abbreviations (UK. MBA). Use stops after Initials (K S. Singh). Usc double quotes throughout. The use of single quotes to be restricted for use within double quotes, e.g .. "In the words of SzelL the 'economic question' is today ..." Quotations 111 excess of 45 words should be separated from the text with a line space above and below and indented on the left. Quotes should be cited accurately from the original source, should not be edited, and should give the page numbers of the original publication. Italicization and usc of diacriticals is left to the contributors, but must be consistent. When not using diatricals, English spelling should be followed. Capitalization should be kcpt to the minimum and should be consistent. An author will receive 10 offprints und a complimentary coPy of the issue in which his/ her paper appears. Book reviews must provide the following details. and in this order: Name of author/title of book reviewed/place of publication/publisher/year of publication/number of pages, in Roman and Arabic figures to include preliminary pages/and price, with binding specifications such as paperback or hardback. For example: Udai Pareek, Training Inslrumellts filr Human Resources Development. New Delhi: TataMcgraw Hill. 1997. xi+625 pp. RS.595 hardback. if papers arc accepted for publication. contributors are requested to scnd floppy disks containing the full tcxt of the paper' inciudiag notes, references, tables, charts and maps. Mtlnll.w:rililS IVhich do no! con{imn 10 Ihese gil/de lines IVil/nol iJe CillISideredtilrlJl(iJlicalioll. Manscripts not considered for publication will not be sent back. Those submitting papers should also certify that the paper has not been publishcd or submitted for publication elsewhere. . Manuscripts and all editorial correspondence should be addressed to: Administrative Coordinator. Management & Change, Institute for Integrated Learning in Management. 3. Lodhi Institutional Area. Lodhi Road. New Delhi-II 0 om, India. Phones: 91-11-24631033, 24647821. Fax: 91-11-24647796 E-Mail: YUSIlj@iilm.ecill
._~""""'--~--------'"",",=--------~._----..â&#x20AC;¢... sl.y __ o