Management & Change by IILM Institute for Higher Education

B.Bhattacharyya

Regional Trade Liberalization in South Asia: SAPTA TO SAFTA.

S.A. Mufeed and F.A. Gurkoo

Enhancing Educational Institutions Effectiveness Through HRD Climate: An Empirical Study.

Avinash Kumar Srivastav

Organizational Climate in Public Sector: An Empirical Study.

Ashish Pandey Rajen K. Gupta and Biswajit Roy

Organizational Learning and Special Contribution of 'Affectivity': Case Study of an Indian R&D Organization.

Santanu Ray Uddipto Roy

Risk and Risk Mitigation in Indian Infrastructure Sector: A Case of the Golden Quadrilateral (Panagarh-Palsit Stretch of NH2).

Srinivas Shirur

Why Do Companies Issue Bonus Shares? An Empirical Study.

Raduan Che Rose Arfan Salleh and Naresh Kumar

Learning Culture and Performance Outcomes: Evidence from Malaysian Organizations.

Jyotsna Bhatnagar

Strategic HR Role Analysis of Managers of Mid Size Manufacturing Sector: Effect on Firm Performance.

R.K. Uppal and Rimpi

Globalization and Banking Industry: Opportunities and Challenges.

ParagDubey

Cross Culturul Management and Inclusive Growth: Lessons from Japnese Experience. BOOK REVIEWS The Journal of the)!LM lnstitute for Higher Education

Management & Change The Journal

of the IILM

Institute

for Higher

Education

Editor Dr. K.M. Mital Professor

of Strategic

Chaiperson,

General

IILM Institute

Management Management

for Higher

and Area

Education

krishna.mital@iiIrn.edu

EDITORIAL ADVISORY BOARD Agrawal, L. Mohan Professor, Indian Institute of Management, Lucknow. Ahmed,Abad Ex-Pro-Vice Chancellor, University of Delhi, Delhi. BaIachandran, V. Bala Distinguished Professor, lK. Kellogg Graduate School of Baxi, Chetan Bhattacharyya,

Management, Northwestern University, Evanston, Illinois. Dean, Research, Management Development Institute, Gurgaon. Distinguished Professor and Director, IILM Institute for Higher Education, New Delhi and Former Dean, Indian Institute of Foreign Trade, New Delhi. Professor, Management Centre, University of Bradford, UK. Dean Emeritus, IILM, New Delhi. Professor, Robert Morris College, Pittsburgh, USA. Professor, Stem School of Business, New York University, USA. Professor, Dept. of Management Studies, Indian Institute of Technology, New Delhi. Professor, Shri Ram Centre for Industrial Relations, New Delhi. Ex-Professor, Dept. of Financial Studies, University of Delhi, Delhi. Professor, Faculty of Management Studies, University of Delhi, Delhi. Director, IILM Institute for Higher Education, Gurgaon & Former Director, Delhi School of Economics, Delhi. Former Director-Research, National Productivity Council, New Delhi. Ex-Chairman, Indian Council of Social Science Resarch. Professor and Dean, Asian Institute of Technology, Bangkok, Thailand. Ex-Professor, Delhi School of Economics, University of Delhi, Delhi. Ex-Director, Indian Institute of Management, Ahmedabad. Director, Jaipuria Institute of Management, Noida. Professor, University of Osnabrock, Germany. Vice-Chancellor, u.P. Technical University, Luchnow and Former Director, lIT Roorkee.

Butler, Richard Chatterjee, N.R. Corre, Joseph Ghosh,Avijit Jain, P.K. Joshi, J. Rama Khan,M.Y. Mamkoottam, K. Mukherji, Badal Nair, N.K. Panchmukhi, V.R. Pandey, I.M. Pandit, V.N. Sheth, N.R. Singh, J.D. SzelI, Gyorgy Vrat, Prem Manuscript

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Contributions are invited in diverse areas of management from interested authors. In each issue of the journal it is normally planned to include research papers, case studies, original conceptual papers, short communications and book reviews. For contributors guidelines, authors may refer to the inside back cover. Enquiries should be elctronically made to the Editor, Management & Change, IILM Institute for Higher Education at e-mail ID (krishna.mital@iilm.edu).

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for Higher Edcuation, New Delhi disclaim any responsibility of fact or opinion made by the contributors in any of its issues.

@ 2006 IILM Institute for Higher Edcuation.

and

, I

Management & Change VOLUME 10

NUMBER 2

2006

ARTICLES Regional Trade Liberalization in South Asia: Sapta to Safta.

B. Bhattacharyya

Enhancing Educational Institutions Effectiveness Through HRD Climate: An Empirical Assessment.

S.A. Mufeed F.A. Gurkoo

Organizational Climate in Public Sector: An Empirical Study.

Avinash Kumar Srivastav

Organizational Learning and Special Contribution of 'Affectivity': Case Study of an Indian R&D Organization.

Ashish Pandey Rajen K. Gupta Biswajit Roy

Risk and Risk Mitigation in Indian Infrastructure Sector: A Case of the Golden Quadrilateral (Panagarh-Palsit Stretch of NH2).

Santanu Ray Uddipto Roy

101

Why Do Companies Issue Bonus Shares? An Empirical Study.

Srinivas

117

Learning Culture and Performance Outcomes: Evidence from Malaysian Organizations.

Raduan Che Rose Arfah Salleh Naresh Kumar

131

Strategic HR Role Analysis of Managers of Mid Size Manufacturing Sector: Effect on Firm Performance.

Jyotsna

IS3

Shirur

Bhatnagar

PERSPECTIVES Globalization and Banking ~ndustry: Opportunities and Challenges

R.K. Uppal Rimpi Kaur

183

Parag Dubey

217

SHORT COMMUNICATIONS Cross Cultural Management and Inclusive Growth: Lessons from Japanese Experience. BOOK REVIEWS V. Srinivasan, New Age Management Philosophy from Ancient Indian Wisdom; and S. Bagchi, The High Performance Entrepreneur,reviewed by B. Bhattacharyya. Dewakar Goel, Living a Stressful Life with Joy; and Charles W.L. Hill and Gareth R. Jones, Strategic Management: An Integrated Approach, reviewed by K.M. Mital. Arthur A Thompson Jr, A J Strickland Ill, Jon E Gamble and Arun K Jain, Crafting and Executing Strategy: The Quest for Competitive Advantage- Concepts and Cases (Fourteenth Edition), reviewed by Sapna Popli. M Y Khan, Indian Financial System, reviewed by Gireesh C. Tripathi. Andrew Inkpen and Kannan Ramaswamy, Global Strategy: Creating and Sustaining Advantage Across Borders, reviewed by Rajesh K. PilIania. Vithal Kamat, Idli, Orchid and Will Power; reviewed by Srinivas Shirur.

. Contribu.tors'. Dr. B. Bhattacharyya

Distinguished Professor and Director, llLM Institute for Higher Education and Former Dean, Indian Institute of Foreign Trade, New Delhi. E-mail: b.bhattacharyya@iilm.edu

Dr. S.A. Mufeed

Reader, Department of Management Studies, University of Kashmir, Srinigar, E-mail: mufeedku@yahoo.com

KA.Gurkoo

Senior Faculty, Department of Management University of Kashmir, Srinagar.

Dr. Avinash Kumar Srivastav

Associate Dean (Research), ICFAI Business School, 64 KrishnaAvenue, 13th Cross, 6th Main, 3rd Phase, Jp Nagar, Bangalore 560 078. E-mail: aksrivastava@ibsindia.org

Ashish Pandey

Research Scholar, Management Development Institute, (www.mdi.ac.in). Mehrauli Road, Gurgaon 122001; also engaged as Research Leader at Pragati Leadership Institute, Pune.

Dr. Rajen K. Gupta

Professor, Management Development Institute, (www.mdi.ac.in).MehrauliRoad. Gurgaon 122001.

Dr. Biswajit Roy

Faculty, Management Development Institute, (www.mdi.ac.in). Mehrauli Road, Gurgaon 122001.

Prof. Santanu Ray

Director, ICFAI Business School, Plot J 3, Block GP, Sector Y, Salt Lake City, Kolkata 700 091. E-mail: santanuray@ibsindia.org

Dr. Uddipto Roy

Faculty Member, ICFAI Business School, Plot J-3, BlockGP, Sector Y, Salt Lake City, Kolkata 700 091. E-mail: uddipto Joy@rediffmail.com

Dr. Srinivas Shirur

Assistant Professor, IILM Graduate School of Management (lGSM), 16, Knowledge Park, Greater Noida 201306. E-mail: srinivas.shirur@iilm.edu

Dr. Raduan Che Rose

Associate Professor and Deputy Dean, Graduate School of Management, Universiti Putra Malaysia, Serdang Selangor, Malaysia.

Dr. Arfah Salleh

Associate Professor, Graduate School of Management, Universiti Putra Malaysia, Serdang Selangor, Malaysia.

Dr. Naresh Kumar

Researcher, Graduate School of Management, Universiti Putra Malaysia, Serdang Selangor, Malaysia.

Dr. Jyotsna Bhatnagar

Faculty, Management Development Institute, (www.mdi.ac.in). Mehrauli Road, Gurgaon 122 001. Email: jyotsnab@mdi.ac.in

Dr. R.K. Uppal

Principal Investigator in UGC Sponsored MRP and Head, Dept. of Economics, DAY College, Malout (Punjab). Mobile: 91-98729-61700, 01637-261188 (R) E-mail: rkuppal_ mlt@yahoo.com

Rimpi Kaur

Project Fellow and Research Scholar, Punjabi University, Patiala. Mobile: 91-98729-05155.

Dr. Parag Dubey

Faculty, Marketing Area, Indian Institute afForest Management, P.O. Box 357, Nehru Nagar, Bhopal 462 003. E-mail: parag@iifm.ac.in

Studies,

From the Editor's Desk

COMMUNICATION, TRADITIONAL ETHICS AND LEADERSHIP Communication is a process by which a leader or a manager transfers and receives information in managing business. In fact, communication is the nervous system of an organization. Communication processes within an organization are vital for achieving organizational goals. They are the processes that link different areas of the organization together, they are relevant for all levels, and they affect all individuals working in any capacity. The effectiveness of the communications system - the way in which it is managed - has a significant impact on the ultimate effectiveness of an organization. Information is power which is conducive for problem solving, decision making, change management, and building trust and relationship. In an organization typically a message from the leader may be a directive to complete a pending job on priority; it may be an advice to change a procedure; it may be an approval or disapproval of the proposal submitted; it may be new business policy to be in force, or a feedback about the company performance from the top. Communication refers to the process of interaction that keeps occurring among individuals, in organizations vertically up and down, horizontally within and across the society at large. Thus, there is a definitely a field of mass communication, electronic devices for communication, communication as a process within organizations for enhancing organizational effectiveness, and a vast field of skills in interpersonal communications. In organization individuals deal with superiors, equals and subordinates at regular intervals through verbal and written communication, involving horizontal and vertical communication. Horizontal communication is as important as vertical communication. The word communication is derived from the Latin word 'communis' that means' common' which means that if a person well communicates, he can develop 'common' ground of understanding. Communication is an exchange of facts, ideas, opinions or emotions by two or more persons. In any organization, it is a two-way traffic, upward and downwards (vertical), inwards and outwards (horizontal), oral and written, and formal and informal. v

A communication channel may be oral or written, formal or informal, and one-to-one or one-to-many. A supervisor's casual conversation with one of his subordinates may use an oral, informal, one-to-one channel; a letter from the CEO mailed to all employees' homes may be written, formal, and one-to-many channel. As there are no set rules in managing business or change, leader and executive management have to be in constant touch with employees, and guidelines and instructions issued accordingly based on changing situation and context. Communication role in managing change is crucial as change can be brought about with the cooperation of all concerned only. It is precisely a leader's competency that drives change and accordingly effective communication system should be in place to communicate leader's viewpoints and guidelines into the matter. It is largely a leader who enhances the organization's ability to be flexible, improves adaptability to the market forces, and enhances scalability and responsiveness to customer needs. Attentive listening (samyak shravan) is the true art of communication. Samyak shravan means no thinking inside, no thought process but only focused listening. In Upanisads there is a reference that if whole body is listening, then one can understand 'mahavakyas'. Lord Mahavira extolled the virtues of shravan. He taught his disciples to be shravakas and shravikas those who become perfect in the art of right listening. Recognizing the significance of communication, Thomas Mann (Vijayaraghavan, Right Speech, The Economic Times, 2006), the 20th novelist from Germany observed: 'Speech is civilization itself. The word,. even the most contradicting word preserves contact, it is the silence which isolates.' A noted philosopher, Jimi Hendrix, said: 'Knowledge speaks, but wisdom listens.' 'Silence is golden' is a well-known saying which is regarded as a valuable advice world over. Whereas silence is golden but it does not mean one should not speak where it is necessary. Another noted thinker, R.E.Moody similarly said: 'The greatest motivational act one person can do for another is to listen.' A leader should try to inculcate communication related skills such as mradubhashita (ability to speak sweet language), marmsparshita (ability to touch heart) andpoorvabhashita (ability to talk with initiative). Indian culture emphasizes that ability to speak sweet language (madhuryam) cost nothing and one who speaks well endears him to all. Ramayna portrays vi

Rama not only as a mradubhashi (who talks sweetly) but also as a poorvabhashi (who talks proactively and timely, taking the initiative to commence a conversation). An individual should also be murmsparshi (who uses language that touches heart). (Vijayaraghavan, The Economic Times, 2006). The great Indian saint, Valmiki, suggested that one's facial expressions and body language should match with the spoken words (Na mukhe netreryorvapi lalate bhroshtha; aneysvapi ca gatresu dosh samviditah kvachil). (Kishkindha Kand, 3-30). Valmiki had also very appropriately advised what to speak, when to speak, how much to speak; and at what tone, pitch and modulation to speak (Avistaram sandigdham vi/am bitmadrutam; urahstham kanthgaru vakyam vartake madhyame svare). (Kishkindha Kand, 3-31). Tulasi Das, a great poet and symbol of Hinduism, in Ayoyodhyakand on the other hand noted that as per Lord Rama's advice one should speak in a manner that suits place, time and moment (Desh kal avsar anusari bole vachan vinit vichari). Valmiki had highlighted significance of communication through the character ofHanuman. In Ramayan, Hanuman is known for keeping his communication to the point i.e. neither less nor more but necessary and sufficient; nor made with delay or in hurry; made from heart without artificiality; and always made in soft tone and pitch appropriate for other's benefit as far as possible (Sanskar kam sambhamdrutam vilambitam uccharyati kalyani vaacham hradyaharinam). One should thus speak in soft or finn words depending on the situation. An individual should bear loving and delightful looks on face and speak without ego. (Kale hitam milam bruyad visamvadi pes lam. Poorvabhibhashi sumukhah sushilah karuna mrduh). (Sukra Niti, 3-12). &

Though it may be possible to train oneself to speak rightly for a particular occasion, an approach to proper speaking and behaviour marked by consistency, and which can stand the test of time, can be obtained through real training and development. It was this training, through constant discipline and effort, which enabled Gandhiji to declare that he never had any occasion to regret anything which he said or wrote (Vijayaraghavan, Right Speech, The Economic Times, 2006).

Mahatma Gandhi on February 6, 1945 wrote. 'Those who have the greatest measure of self-control or are most absorbed in work speak the least. Speech and action go ill together. Look at nature. She is continuously

I [

~ ~

!_._.--~~~-

in action, never rests for a single moment, yet is mute' Gandhiji on March 19, 1945 wrote, 'Every moment of my life I realize that silence is the best speech. If speak you must, you should speak as little as possible. Avoid using two words if one suffices.' On May 21, 1945, Gandhiji added, 'A needless word is also violation of truth. That is why the practice of truth becomes easier by observing silence.' Sweet communication is emphasized in The Bible as well. The Bible likens pleasant words to a honeycomb, sweet to the soul (Proverbs 16,24). The clue to evolving this stable, enduring, endearing and consistent approach is contained in The Bible (Mathew: 12, 34). (Vijayaraghavan, The Economic Times, 2006). Harsh words which bring glory to no one should always be avoided. Meaningless and loose talk which does not serve any purpose either should be avoided (Nash lam kirtyet kanchit pralapam na ca karyet) (Sukra Niti, 3-65). Renowned scholar and philosopher from South India Tiruvalluvar (Kural, 95) had said over 2000 years ago: Humility and pleasant speech go to make one's ornaments, all others do not matter.' There is another famous quote from South India which says 'One is not beautified by ornaments, garlands, glittering embellishments, bath, scented applications, flowers or eye-catchingjewellery. Only that speech, which bears refinement, uplifts and is charming. All other ornaments constantly perish. The ornament of good speech is actually the real ornament.' A good speaker (Gita: 17.15) well-versed in the art of communication always makes a 'speech which causes no vexation and which is true, as also agreeable and beneficial and guided by regular study of the scriptures and perfected through continuous efforts'. (Anudvegakaram vakyam satyam priyahitam ca yat; svadhyayabhyasanam caiva vangmayam tapa ucyate). It is thus what all is said about Lord Krishna is that all that He speaks, sees and hears is sweet. He is the Lord of sweetness and sweetness itself too. (Vachanam madhuram, nayanam maduram; sravanam madhuram, madhuradhipathe akhilam madhuram). Nothing more effectively involves people, sustains credibility or generates enthusiasm than face to face communication between leader and employees. Top business leaders usually meet employees at least once a year in open forum to discuss business matters. More than any other action, it makes the communication explicit and relationship between business leaders and workmen stronger. viii

____ .

._.~

••••••••

._m".••.."i".."Ii

.•

, i

I ! !

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Communication facilitates execution of basic management functions, namely, planning, organizing, directing (leading) and control. There can be no effective management ifthere is no effective means of communication. Most critical ingredient for the success of the communications programme is attitude of the top brass as without their support no communication system can deliver effective results. Communication and change are two very vital ingredients of a dynamic work culture for which the leadership has to play an effective role. According to Mr. Sam Pitroda, Chairman, Knowledge Commission, 'as knowledge grows business leaders have to recognize that their role has char.ged from command and control at the top to coordination and communication with the bottom' . Communication is central to the management of any organization or a government department and the main media of communication is language. It is the continuous interaction between company management and employees that drives the organizationon growth path. Verbal communication in everyone's life keeps occurring daily, on all the days, and 365-days in a year. Non-verbal communication in the form of body language anyway keeps occurring all the time. A relatively new approach to assessing the communications climate in organizations is. the communication audit. Through a variety of procedures, including questionnaires and interviews, the audit provides a comprehensive picture of the organization's communication system, including the sources and causes of communication failures. Communications audit, in addition to identifYing areas where formal communication techniques may be needed, can also identifY areas where management needs to concentrate on providing a more effective communications climate. Much of the success in life thus depends on communication skills. Communication skills are also needed while drafting reports, manuals and everyday official and personal letters. Individuals are often judged on the basis of how effectively they communicate. One may be as bright as Albert Einstein, but if one's communication is weak, he is weak (RajendraPrakash, IIT Roorkee, 2003). For improving communication skills improvement in proficiency in language of communication is equally important. As long as people or society will exist, significance of effective communication shall always persist. IILM Institute for Higher Education ix

K.M.Mital

E1exLb.ilitÂĽ..lrLMa nagement THE INDIAN ARMY, FLEXIBILITY AND MANAGEMENT The army follows the 'directive style of command' which gives leaders at lower levels the ability to take independent decisions depending on the field situation. Military management and leadership emphasize the idea of dispersed and not hierarchical leadership. The key is to pre-empt the enemy. According to General J.J. Singh, the Chief of the Army Staff, in an interview to The Economic Times (September 16, 2005), "Such a command structure induces flexibility. Decision-making has to be quick and rather than giving exhaustive instructions, brief guidelines need to be given. The execution on ground should be left to the subordinates." In the battlefield, speed and boldness are more important than perfection. Indecisiveness can be a fatal flaw. An average decision taken on time can carry the day while a brilliant decision that came later can result in defeat. In a scenario where adversaries can be conventional, transnational or even nuclear, flexibility is critical. Flexibility and individual empowerment are important and bureaucracy does not work in the battlefield. According to the Chief of the Army Staff, "The achievement of surprise in any plan is probably the single most battle winning factor and this cannot be achieved through rigid bureaucratic controls." While according to the Army Chief, there is degree of form, method and system which needs to be inculcated in soldiers during their training to ingrain discipline, to teach basic drills and ensure their unquestioned execution, it is no less important for the army to be flexible, ingenious and unpredictable in its approach. He observed, "Battles are not always won based on sheer numbers or strength, they are won because of the ability to reinvent and improvise under pressure, under stress and under â&#x20AC;˘ fire." According to the Army Chief, 'The difference between a corporate bad decision and a military man's bad decision is that in the latter case, lives and the nation's pride are at stake." - Editor Source:

Baishya, D., The Interview with the Chief ofthe Indian Army, Corporate Dossier, The Economic Times, New Delhi, Septem ber 16, 2005. x

REGIONAL TRADE LIBERALIZATION IN SOUTH ASIA: SAPTA TO SAFTA B. Bhattacharyya The paper provides a comprehensive account of intra-trade in South Asia, which traditionally has existed more at an informal level among the countries of the region such as between India & Pakistan and Bangladesh & India. Intra-trade in early periods prior to SAARC has been merely 6-8 per cent of the aggregate trade as against 22 per cent within ASEAN Free Trade Area and 65 per cent within the European Union. It analyzes reasons of low intra-trade such as protectionist policies of the earlier regimes prior to that existing during the preliberalization era of eighties. It analyzes the impact of SAARC Preferential Trading Arrangement (SAPTA) enacted on April 11, 1993 during the Seventh SAARC Summit in Dhaka and the South Asian Free Trade A rea (SAFTA) agreed at Islamabad SAARC Summit on January 6, 2004 that became operationalised with effectfrom January 1,2006. The paper concludes that the ultimate success of SAFTA is not only dependent on the legal framework as negotiated in the SAFTA document but also on the political and economic stability and growth in the member states as well as relationships among them, particularly between the two dominant nations - India and Pakistan - which alone account for more than 80 per cent of Group ~ GDP. Key words:

Non-tariffbarriers, SAPTA, ASEAN

SAARC, WTO, SAFTA,

INTRODUCTION The history of trade liberalization in South Asia is relatively new and the record is also relatively modest. The intra-regional trade comprising both exports are of the SAARC group of countries has for a long time accounted for about four per cent oftotal trade. The sub-region has, however, a history of informal trade which is fairly substantial between India and Pakistan as well as between Bangladesh and India. However, even accounting for such informal trade, the share of intra-group trade is unlikely to be higher 22 per cent within Management & Change, Volume 10, Number 2 (2006) ilJ 2006 IILM Institute for Higher Education. All Rights Reserved.

----~-------------~---_._'_ ..... "' ."".,--..,-

2 B. Bhatlacharyya

ASEAN Free Trade Area and 65 per cent within the European Union. One important reason behind this has been the development strategy followed by India by for the most dominant economy in South Asia. India has embarked on the industrialization process through the import substitution route which necessitated strong market access barriers to provide protection to the newly set-up domestic manufacturing sector. To some extent, a more or less similar strategy was also followed in other countries in South Asia, such as Bangladesh and Pakistan. However, from the mid nineteen eighties, policy environment started moving towards liberalization in most countries in South Asia. As a consequence, by 2005 the trade regimes in South Asia have become much more open compared to what were in place a decade ago. Another important fact behind the slow process of regional economic integration in South Asia, trade liberalization being only one dimension, has been the state of political relationships among the principal nation states in the sub-region. The trade flows between Indian and Pakistan have been the most affected by the political unease between the two biggest economies in South Asia. The political factor also figures in India-Bangladesh bilateral trade in the form of a consistently large trade surplus in favour of India, which has become a politically sensitive issue for Bangladesh.

The standard economic explanation in terms of complimentarity ofthe -" sub-regional economies is also partially valid as a determinant of relatively small intra-regional trade flows. The major economies in South Asia have a trade structure which is essentially competitive, as they tend to concentrate on select products, such as textiles and garments, leather and leather products, plantation products, such as tea. FRAMEWORK

AGREEMENT

OF SAPTA

The first major step towards sub-regional trade liberalization was the Framework Agreement on SAARC Preferential Trading Arrangement (SAPTA), signed on April 11, 1993 during the seventh SAARC Summit in Dhaka and entered into force December 7, 1995. SAPTA was based on the following basic principles: (a) Overall reciprocity and mutuality of advantages so as to benefit \ equitably all contracting states, taking into account their respective Management & Change, Volume 10 Number 2 (2006)

B.Bhattacharyya 3 level of economic and industrial development, the pattern of their external trade, and trade and tariff policies and systems; (b) Negotiation of tariff reform step by step, improved and extended in successive stages though periodic reviews; (c) Recognition of the special needs of least developed contracting states and agreement on concrete preferential measures in their favour; (d) Inclusion of all products, manufactures and commodities in their raw, semi-pressed and processed forms. There had been four rounds of trade negotiations so far, though only the three rounds of tariff negotiations have been made operational. Tariff Negotiations under SAPTA The consolidated results of the three rounds in terms of product coverage and depth of tariff cuts are summarized in Tables 1 and 2. Several features emerge from the consideration of these data which help in explaining the outcome in terms of actual trade flows. First, the progress in terms of product coverage by numbers over the three rounds had been uneven. The first round expectedly was very modest in terms of product coverage which improved in the second round. The third round, however, saw a decline in real terms - though the total number of products covered rose from 1,868 to 3,456, those which were extended to all in fact declined from 1,109 to 876. Overall, the proportion of items where concessions have been granted only to LDCs in the total is as high as 62 per cent. Given the very low export capability ofLDC member states, such lopsided distribution of concessions reflects more a political statement than a strong commitment to sub-regional trade liberalization. Second, the product-by-product method is basically faulty, especially because it allows camouflaging the true extent of concessions. For example, in the first SAPTA Round, out of the 106 products offered for concessions by India, only 23 were actually imported by India from the group members in 1993 -94. Bangladesh offered preferential access for 12 items of which only six were imported from India in 1992-93. The corresponding numbers for Pakistan were 35 and 11. Pakistan is a special case as it does not even extend MFN (most favoured nation) status to India, though both are members of WTO. Sri Lanka offered concessions on 31 items but imported only 17.

I' I

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Management & Change, Volume 10 Number 2 (2006)

I ~

, ;s::

Table I Product Coverage Under the Three Roundes of SAPTA

,j;;o,.

etl

(1)

a P:o

First round

::r

Country

(JQ .(1)

~ ~

For LDCs

For all

Second round Total

For LDCs

For all

f'>

Total

For LDCs

For all

Total

Grand Total

Bangladesh

215

226

143

338

481

719

Bhutan

101

124

182

r:r

India

106

514

390

904

1874

1917

2927

Maldives

368

390

---

166

233

1387

189

436

Pakistan

131

227

358

271

295

688

-Sri Lanka

208

100

126

226

759

1109

1868

2580

876

3456

5550

(1)

Z c: 3

..â&#x20AC;¢ (1)

N o o

Nepal

Total Source:

SAARC Secretariat

-=S-

Third round

~ ~ '< ~

I ,

B. Bhattacharyya 5 Third, the depth of tariff cut for non-LDCs was mostly restricted to 10 per cent, throughout the rounds. It must be observed that during the entire period, due to autonomous trade liberalization in most of the SAPTA countries, the average level of tariffs was coming down and, therefore, the constant lOpeI' cent reduction in real terms meant a lower level of tariff concessions. For India, the depth of tariff cut offered was highest in the first round, ranging from 10 to 90 per cent for all, which declined to 10 to 40 per highest in the first round, which declined to 10 to 40 per cent in the Second Round which further fell to 10 to 20 per cent in Round Three. India has, however, extended non-reciprocal tariff concessions to Bangladesh on a large number of items over this period, the last one being a duty free status for 40 items in August 2002. In addition, Bhutan and Nepal enjoy duty free entry in India for indigenous goods. Fourth, the issue of non-tariff barriers (NTBs) was not properly addressed. This was a major deficiency, given the extensive use of import licensing in several member states. The NTBs were released only for imports from the LDC member states. SAPTA Second Round schedules of both Indian and Pakistan listed out the NTBs applicable to products under concessions. Out of the 904 items offered by India, 195 were subject to NTBs, the position in the case of Pakistan being worse (Gupta 2002). India has since removed all quantitative restrictions (QRs) under Article XVII:B of GATT.

Sita: Symbol of What is All Good in Indian Woman Sita is typical of India - the idealized Sita. Sita is the name in India for everything that is good, pure and holy; everything thatin women we call womanly. Through all the suffering she experiences, there is not one harsh word against Rama. She takes it as her own duty and performs her own part in it. Think of the terrible injustice of her being exiled to the forest. But Sita knows no bitterness. That is again the Indian ideal. Said Gautam Buddha: "When a man hurts, and you turn back to hurt him, that would not cure the first injury; it would create in the world one more wickedness". Sita was a true Indian by nature; she never returned injury. - Swami Vivekananda Management & Change, Volume 10 Number 2 (2006)

Table 2 Depth of Tariff Concessions

~ ~ ~ El

a c g

•.... o

For LDC's

Bhutan India

For all

For LDC's

For all

=-~

For LDC's

10,13 and 14

10,15

50,100

10,25,30, 50 and 90

25,50

10,15,25 and 40

10,18 and 20

10,20

5,10

7.5

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Maldives

Nepal

10,15

Pakistan

Overall

10,15

10,20

10,15 and

10,30 and

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Bangladesh

Scr"

Third round

Second round

First round

Country

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(Per Cent)

!:Xl

l<P

[

in the Three SAPTA Rounds

60 Source : SAARC Secretariat

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B. Bhattacharyya 7 Impact of SAPTA A look at the trade flows reveals that SAPTA has so far made little progress in promoting intra-regional exports. Compared against other regional trading arrangements, SAPTA's record looks disappointing as the data in Table 3 reveals. Table 3 Share of Intra-Group Exports in Total Group Exports

Region

1995-1999

2000

2004

AFT'A (ASEAN)

24.8

24.5

22.2

CER

10.7

9.3

65.1

66.9

60.7

NAFTA

53.2

58.8

55.9

Source: ADB, Asian Development Outlook (2002)

In addition to the overall low share of intra-group trade, a major problem is the high level of concentration on bilateral trade flows of a few countries, such as between India and Bangladesh, Nepal-India and India-Sri Lanka. Reasons behind Poor Performance of SAPTA There are several reasons why, despite three Rounds of tariff preferences as well as bilateral trade agreements involving tariff preferences between India and Nepal, India-Bhutan, India-Bangladesh and India-Sri Lanka, the share of trade within the SAARC countries continues to be small. First, the positive list approach in SAPTA did not cover the items with high trade potentia!. Second, tariff reduction by itself cannot promote trade in a developing country framework, because of the extremely low response in the supply function. Third, information flows on prospective suppliers are scanty and unreliable. Fourth, existing trade relationships between exporters and importers are too strong to be changed due to a marginal change in tariff rates. Even after SAPTA III, the task of eliminating remaining tariff barriers imports more than 5,100 items at HS six-digit code level, while it Management & Change, Volume 10 Number 2 (2006)

8 B. Bhattacharyya has given concessions on only 459 items to all. It may be remembered that in terms of numbers, India has given preferential treatment to the maximum number of products. Hence, the ratio of covered to uncovered products will possibly be similar or worse in other member states. On an aggregate basis, there will be about 35,000 tarifflines of which only 5,500 have been covered. Thus, there is a long way to go. Data in Tables 4 and 5 clearly reveal that the current level of both tariff and non-tariff barriers in the SAARC countries are still substantially high, especially in the major countries like India and Pakistan.

Literary Glants

SACHCHIDANANDA HIRANANDA VATSYAYANA 'AGEYA' Sachchidananda Hirananda Vatsyayana 'Agyeya' (1911-1987) was born at Kasiya village in Gorakhpur, and was popularly known by his pen-name 'Agyeya' meaning which is beyond comprehension. He was a pioneer of modern trends in Hindi literature not only in the realm of poetry and fiction but also in criticism and journalism. He was one of the most prominent exponents of the 'nayi kavita' (new poetry) in Hindi. While studying for his MA degree he also participated in freedom movement and underwent imprisonment several times. He took up teaching profession for some time but while at the same time emerging as a great poet and author. He also distinguished himself as an artist, sculptor and archeologist. He wrote numerous books including 'Chinta', 'Ityalum', 'Trishanku', 'Savara Aheri', and 'Nadi ke Dveep'. Apart from a large number of his own books, more than hundred books on his works as commentary have been written by others. He edited several journals including 'Sainik', 'Vishaal Sharat' and 'Prateek'. Agyeya received numerous honours such as the 'Sahitya Akademi Award', 'Jnanpith Award' and the 'International Wreath Award for Poetry'.

-Editor

Management & Change, Volume ION umber 2 (2006)

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Table 4 Average Tariff Rates in SAARC Countries (Per cent, unweighted)

~ &'J

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Country

1991

1992

1993

1994

1995

1996

1997

1998

1999

Bangladesh

88.6

71.0

50.0

42.0

27.4

24.6

23.8

22.2

India

79.2

53.0

47.8

41.0

38.7

35.0

30.0

32.2

Nepal

16.1

11.0

16.3

17.7

Pakistan

66.0

61.1

56.0

51.1

50.7

41.7

46.5

Sri Lanka

26.9

25.0

24.2

26.0

20.0

Source : Hoekman, et al. (eds.), Development, Trade and the WTO, appendix tables.

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10 B. Bhattacharyya

Inter-se

Competition

within SAPTA

The fear that local industry can get adversely affected beyond the normal adjustment due to trade liberalization after SAPTA becomes SAFTA does not appear to be justified. An exercise has been carried out to determine the similarity in the export structure of the SAPTA countries. Data on two digit HS Code Level of each member states were collected. The Spearman Rank Correlation Coefficient was estimated for each pair of trading partners. The results are given in Table 6 It is found that the correlation coefficient is high only in the case of Bangladesh-Sri Lanka. It is moderate in the case of Bangladesh-Nepal, Pakistan-India, and India-Sri Lanka. The coefficients reveal to what extent the countries are competing with each other. The almost uniformly low values of the coefficients indicate intra-SAPTA competition to be not too significant. Table 5 Coverage Ratio of NTBs in SAPTA 1984-1987

1988-1990

1991-1993

Bangladesh

88.6

71.0

50.0

India

79.2

53.0

47.8

Nepal

16.1

Pakistan

66.0

61.1

56.0

Sri Lanka

26.9

25.0

24.2

Country

Source : Hockman, et al. (eds). Development, appendix tables. Note:

Trade and the WTO,

Above figures estimated as per cent of products within a category affected by NTB applied to a tariff line.

Roots are the branches down in the earth. Branches are roots in the air. The roots below the earth claim no rewards for making the branches fruitful.

- Rabindranath Tagore

\ Management & Change, Volume 10 Number 2 (2006)

, \

B. Bhattacharyya II Table 6 Intra-SAARC Host country

Rank Correlation

Analysis

Rank Correspondence

Year

Bhutan India Maldives Nepal Pakistan Sri Lanka

-0.072 0.573 0.334 0.657 0.471 0.951

1995/94 1998/98 1997/97 1998/98 1998/98 1998/99

India Maldives Nepal Pakistan Sri Lanka

0.106 -0.356 -0.186 -0.068 -0.050

1994/96 1994/95 1994/98 1994/95 1994/99

India Maldives Nepal Sri Lanka

0.672 0.095 0.096 0.423

1998/98 1997/97 1998/98 1999/99

India Maldives Nepal Sri Lanka

0.607 0.244 0.605 0.423

1999/98 1999/97 1999/98 1999/99

Maldives Nepal

0.201 -0.018

1997/97 1998/98

Partner Country

Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bhutan Bhutan Bhutan Bhutan Bhutan Bhutan Pakistan Pakistan Pakistan Pakistan Pakistan Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka India , India India Source:

B. Bhattacharyya, Authors' calculations. Management & Change, Volume 10 Number 2 (2006)

12 B. Bhattacharyya

Box 1

Why SAPTA Gains Are Modest A Business Perspective Why SAPTA is not moving forward at the expected rate? India offered tariff concession on 2927 products of which 2450 products were in favour of LDCs. India offered tariff cuts varying between 25-100 per cent for the LDCs members. However, other six members are not willing to reciprocate for misconceived fear of being swamped by imported goods from India. Pakistan has still not granted MFN status to India. Though SAPTA has liberalized more than 5000 items but the list hardly includes any item which were most traded bilaterally among members. Secondly, there has been no across the board reduction of tariff and the process has been too selective. In fact, tariff concessions were introduced on items that represented no more than 1 per cent of the total trade of the seven countries. Due to impact of globalization, consumer taste in the region is also in favour of the goods from outside the region. The only way to address this problem is to improve the quality of products for our own consumer and make them competitive against imported goods. The lack of proper rail and road link among member countries increases the cost of transportation, affects delivery schedule and restricts mutually advantageous business enterprise to develop. For example, Bangladesh imports cotton from Pakistan via Karachi which is transshipped through Colombo or Singapore, if a freight train is allowed from Lahore to travel across India, it would reach Dhaka in four days time at a quarter of existing freight. Similarly, Pakistan can save huge transportation cost by trading through India directly instead of taking third country route via Dubai. We need to address the issue of non-tariff barriers also. Nepal bans import of machine made woolen yarn, Sri Lanka bans import oftea and spices, Bangladesh has a list of banned and restricted products ..We also have a number of non-tariff measures which needs to be dismantled quickly to make SAPTA a success. We also have varied documents and different customs procedures. It is imperative to achieve greater standardization and harmonization of documents such as Letter of Credit and complex customs procedures as has been done by the European Union. o

(

Source: FlED Bulletin, December 2005.

! Management & Change, Volume 10 Number 2 (2006)

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B. Bhattacharyya AGREEMENT

FRAMWORK

OF SAFTA

The Legal Framework The realization that the process oftrade liberalization needs to be faster led to the negotiation of South Asian Free Trade Area (SAFTA) in the Islamabad Summit on January 6, 2004. It has been ratified by all the member states, except Sri Lanka. Pakistan has made a conditional ratification in February 2006. It has become legally effective with effect from January I, 2006. It has been made operational from July 2006. The legal complexities of Pakistan's offer are still unresolved. The objectives of SAFTA Agreement (Article 3) are to promote and enhance mutual trade and economic cooperation among Contracting States by, inter-alia: (a) eliminating barriers to trade in and facilitating the cross-border movement of goods between the territories of the Contracting States; (b) promoting conditions offair competition in the free trade area, and ensuring equitable benefits to all Contracting States, taking into account their respective levels and pattern of economic development; (c) creating effective mechanism for the implementation and application ofthis Agreement, for its joint administration and for the resolution of disputes; and (d) establishing a framework for further regional cooperation expand and enhance the mutual benefits of this Agreement. Trade Liberalisation

through Tariff Reduction

The programme of implementation is on two tracks, for the LDC member states (Bangladesh, Bhutan, Maldives and Nepal) and other member states (India, Pakistan and Sri Lanka). The Non LDC members will reduce their existing tariff rates to 20 per cent within two years from the date of the Agreement coming into force. However, if actual tariff rates are below 20 per cent, on a margin of performance basis, there shall be an annual reduction of 10 per cent on actual tariff rates for each of the two years. The tariff reduction commitment by the LDC member states comprises Management & Change, Volume 10 Number 2 (2006)

]4 B. Bhattacharyya reduction to 30 per cent within two years. In case of tariff rates below 30 per cent, annual reduction commitment is at the rate of 5 per cent for two years. This is the first phase of tariff reduction. In the second phase, the non-LDC members will bring down the rates to 0-5 per cent level in the next five years, except for Sri Lanka for whom the period will be six years. The reductions are ideally to be made in equal annual installments, but atleast not less than 15 per cent annually. The corresponding obligations for the LDC members comprise an implementation period of eight years and an annual reduction level of not less than 10 per cent. India and Pakistan would complete implementation by 2012, Sri Lanka by 2013 and Bangladesh, Bhutan, Maldives and Nepal by 2015. Thus" SAFTA will become fully operational with effect from January 1, 2016.

Sensitive Lists However, keeping in view the sensitivities of certain sectors ofthe domestic industry and their need for continued protection, each member-state is allowed to maintain a sensitive list which will include products not to be subjected to the tariff cuts. The number of products in the sensitive lists shall be subject to a maximum ceiling mutually negotiated, "with flexibility to LDC member-states to seek derogation in respect of the products of their export interest. The lists will be reviewed atleast once every four years with a view to reducing the coverage of products." Summary statement of sensitive lists of member countries are given in Table 7.

The most important thing about the 21st century is the degree of interdependence among peoples throughout the world, and our interdependence with the ecosystem of the earth. - Bill Clinton

Management & Change, Volume 10 Number 2 (2006)

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Table 7 Sensitive List of Member Countries

S. No.

Name of the Contracting States

Bangladesh

Bhutan

India

No. of Tariff Lines for LDCs

?l> ()

Rer Cent of Total Lines

1254

24.0

157

3.0

763

884

16.9

Maldives

671

12.8

Nepal

1335

25.5

Pakistan

1183

22.6

Sri Lanka

1065

20.3

0Cl

'a" a'"

Consolidated List

1249

'"::l

No. of Tariff for Non-LDCs

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Do not go about throwing mud at others; for all the faults you suffer from, you are the sole and only cause. - Swami Vivekananda

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16 B.Bhattacharyya Keeping in view Bangladesh's specific export structure and market access requirements, India has offered Bangladesh market access for 8 million pieces of garments, 3 million pieces of using fabrics from India, an additional three mil!ion pieces of garments with the condition of using fabrics of either Indian or Bangladesh origin and a further two million pieces without any condition. Rules of Origin Rules of origin are designed to ensure that preferential market access remains restricted to the member-states. However, ROOs can be fine-tuned to help the industrialization process of members who are relatively underdeveloped. The SAFTA ROO rules have been drawn keeping this factor in view. ROOs generally follow one from the following multiple criteria: o o o

Change of tariff heading Value added/ domestic content rule Specific process rule

SAFTA has used all the three criteria. The SAFTAAgreement provides: (a) For giving preferential access to the Member Countries under the SAFTA, the goods shall have undergone substantial manufacturing process in the exporting countries. The substantial manufacturing process is defined in terms of twin criteria of Change of Tariff Heading (CTH) at four-digit Harmonized Coding System (HS) and domestic value content of 40 per cent (30 per cent for LDCs). (b) Apart from the general rules to provide for Product-Specific Rules (PSR) for 191 tariff lines to accommodate the interest of the LDCs given their limited base for natural resources and undiversified industrial structure, the Products Specific Rules have been provided clearly on technical grounds i.e. where both inputs and outputs are at the same four-digit HS level. A summary of the major conditions admissible under the SAFTA is shown in Table 8. Kites rise high against the wind - not with it. - Sir Winston Churchill Management & Change, Volume 10 Number 2 (2006)

B.Bhattacharyya Table 8 Specific Conditions Country / Region

Under SAFTA - ROO SAFTA

Single country ROO DVA (per cent of FOB) India, Pakistan

40 per cent

Sri Lanka

35 per cent

LDCs

30 per cent

CTH

4-digit

Cumulative ROO Minimum aggragate content

50 per cent

Input from exporting country

20 per cent

Non- Tariff Barriers Sometimes more than tariffs, non-tariff and para-tariff barriers can impede trade flows. The SAFTA Agreement provisions on NTBs are in Article 7.4 and 7.5. The Contracting States shall notifY the SAARC Secretariat all non-tariff and para-tariff measures to their trade on an annual basis. The notified measures shall be reviewed by the Committee of Experts, established under Article 10, in its regular meetings to examine their compatibility with relevant WTO provisions. The Committee of Experts shall recommend the elimination or implementation of the measure in the least trade restrictive manner in order to facilitate intra-SAARC trade. Contracting Parties shall eliminate all quantitative restrictions, except otherwise permitted under GATT 1994, in respect of products included in the Trade Liberalization Programme. Other

Promotional

Measures

Removal of tariffs and the NTBs at the border can definitely eliminate a major impediment to cross-border trade flows. However, that by itself will be insufficient to affect a major expansion in intra-regional trade within SAFTA, because of major infrastructural and institutional weaknesses. Recognizing this, SAFTA provides some additional provisions in Article 8. Management & Change, Volume 10 Number 2 (2006)

j 18 B. Bhattacharyya

Additional

Measures

Contracting States agree to consider, in addition to the measures set out in Article 7, the adoption of trade facilitation and other measures to support and complement the SAFTA for mutual benefit. These may include, among others: (a) harmonization of standards, reciprocal recognition of tests and accreditation of testing laboratories of Contracting States and certification of products;

(b) simplification of harmonization of customs clearance procedure; (c) harmonization of national customs classification based on HS coding system; (d) customs cooperation to resolve dispute at customs entry points; (e) simplification and harmonization of import licensing and registration procedures; (f) simplification of banking procedures for import financing; (g) transit facilities for efficient intra-SAARC trade, especially for the landlocked Contracting States; (h) removal of barriers to intra-SAARC investments; (i) macroeconomic consultations;

rules for fair competition and the promotion of venture capital;

(k) development of communication systems and transport infrastructure; (I) making exceptions to their foreign exchange restrictions, if any, relating to payments for products under the SAFTA scheme, as well as repatriation of such payments without prejudice to their rights under Article XVIII of the General Agreement on Tariffs and Trade (GATT) and the relevant provisions of Articles of Treaty of the International Monetary Fund (IMF); and (m) simplification of procedures for business visas. Safeguards One concern of the trade and industry with respect to any PTAJRTA is that under the liberalized regime, there can be an upsurge in imports which can cause injury to domestic producers. Provisions to address such an eventuality exists also in the WTO regime. This is a genuine concern and Management & Change, Volume 10 Number 2 (2006)

B.Bhattacharyya 19 SAFTA Agreement also provides a mechanism to address this issue. SAFTA Agreement is in fact less rigid than WTO regime. The WTO Agreement on safeguards provides that the duty suspension should not exceed four years (extendable to eight years) for the developed countries and ten years for the developing countries. SAFTA provides that in no case will such suspension be for duration of more than three years. In contrast to WTO Agreement, SAFTA has a special dispensation for the LDCs. "Notwithstanding any of the provisions of this Article, safeguard measures under this article, shall not be applied against a product originating in a Least Developed Contracting State as long as its share of imports of the product concerned in the importing Contracting State does not exceed 5 per cent, provided Least Developed Contracting States with less than 5 per cent import share collectively account for not more than 15 per cent of total imports of the product concerned." Dispute Settlement All trade agreements provide for a mechanism to settle any dispute which may arise among the member-states with regard to the subject matter of the Agreement. Most RTAs now draw upon the WTO dispute settlement. SAFTA Agreement is no exception. (Please see Fig.l for dispute settlement process in the SAFTA). The main principles and the modalities are described below: Dispute Settlement

Process

•

When a disputed issue is identified by a member country (C), it will be raised with the concerned member (D) by initiating a bilateral consultation process.

•

C may request D for consultation in writing and in parallel should notify the Committee of Experts (COE) through the SAARC Secretariat.

•

Upon receiving such a request, D shall reply within 15 days and shall enter into consultations within a period of not more than 30 days.

•

If D does not respond or the consultation fails to settle the dispute within 30 days (or by 60 days upon mutual consent), C may request the COE to settle the dispute. Management & Change, Volume 10 Number 2 (2006)

20 B. Bhattacharyya o

COE shaii investigate and make recommendations on the matter within 60 days from the date of referral.

COE may also request a member from the panel of specialist (to be established within one year of SAFTA) to peer review the matter and submit its recommendation within 30 days.

Any concerned member may appeal the recommendations of the COE to the SAFTA Ministerial Council (SMC). SMC shall review the matter within 60 days. SMC may uphold, modify or reverse the recommendations of the COE.

The members to which the COE/SMC provide its advice, shall notify the COE/SMC within 30 days of its intentions regarding implementation of the recommendations.

If the member fails to implement the recommendations within 90 days, COE may authorize other members to withdraw concessions having trade effects equivalent to those of the measure in dispute.

CONCLUDING

REMARKS

Ultimate success ofSAFTA, however, depends on not only on legal framework as negotiated in the SAFTA document but also on the political and economic stability and growth in the member states. South Asia has traditionalIy been recognized as home of the largest member of world's poor. However, recent data reveal considerable improvements on poverty reduction, which may be partially attributed to the policy reforms adopted in most countries in South Asia during the last two decades. In context of the SAFTA, what is important to realize is that a liberalized policy environment is an essential precondition of increased cross-border trade. When the trade is allowed to grow, it works as a driver to economic growth which in tum leads to more trade, setting a virtuous cycle. Initial macro-economic conditions in member countries were quite favourable at the time of launching of the SAFTA which should help the SAFTA to achieve its avowed objectives, ifthere is political will. The biggest challenge to the SAFTA is in fact, on the political front. One important feature of the SAARC is predominant presence ofIndia in the group. Taking GDP at market prices as the criterion, India accounts for 76 per cent of the total SAARC. Pakistan is the second biggest economy, Management & Change, Volume 10 Number 2 (2006)

B.Bhattacharyya

accounting for 12 per cent of the total group economy. It is obvious that the bilateral trade between India and Pakistan holds the key to the real expansion in SAFTA trade. However, India-Pakistan trade so far has been a victim of the political relations between the two countries. Though India extends MFN (mostfavoured nation status) to Pakistan, Pakistan trades with India on the basis of a 'positive list' which includes only 773 items. India has so far not taken the issue to a dispute settlement stage within the WTO framework, possibly hoping that the issue would get automatically settled when the SAFTA gets operationalized. Pakistan has refused to extend MFN treatment to India under SAFTA, which it was supposed to do with effect from July 1,2006. In its notification to the SAARC Secretariat, Pakistan has offered preferential access to all the SAPTA members, except India, with a sensitive list of 1183 items. Trade with India will continue on the basis of the positive list. From purely economic point of view, it is fairly obvious that if the two biggest economies of the group, accounting for more than 80 per cent ofthe group's GDP, do not liberalize bilateral trade, the prospects oftrade expansion under the SAPTA is fairly bleak. A recent study has attempted a quantification of the peace dividend that could accrue to India and Pakistan, ifpolitical relations get normalized. Considered in the context of the SAFTA, potential impact on the trade may come from two major sources, peace dividend through normalization of political relations and membership of a regional economic grouping, viz. SAARC/SAFTA. Lack of agreement between India and Pakistan on the issue of latter extending SAFTA benefits to India during the recently held 14th SAARC Summit in New Delhi in April (2007) underscores the need for concerted efforts for better mutual understanding ..

Renunciation of the fruits of action is the centre around which the Gita is woven. It is the central sun around which devotion, knowledge and the rest revolve like planets. - M.K.Gandhi Management & Change, Volume 10 Number 2 (2006)

'.'4

•

i 22 B. Bhattacharyya

Fig 1 Flow Chart of Disputes Settlement Process of SAFTA

Reply ByD (15)

Bilateral Consultation (30)

Ignored ByD

Report ToCOE Peer review by third party (30) Decision by COE (30) + (30)

Fail to Settle

Adoption by D(30)

! Implement Recommendations (90)

Note

! Withdrawal of Concession by others

Numbers within brackets indicate the maximum number of days permissible under the Agreement.

Management & Change, Volume 10 Number 2 (2006)

___________________________________

.'I11I•

.,'n••• __

B.Bhattacharyya

REFERENCES ADB (2006) "RTAs: Are They the Last Word on Asian Economic Development? ,. Institute e-newsline, May 2. Asian Development Bank (2002) "Asian Development Outlook III", Pre.f erential Trade Agreements in Asia and in Pacific Overview. ASSOCHAM (2005) "South Asian Free Trade Area: India Investment Opportunities ", New Delhi.

s Trade

and

Bandara and Yu (200 I) "How Desirable is the South Asian Free Trade Area?" A Quantitative Economic Assessment. SJFI Working Paper No. 16. BaroneceIIi, E. (2005) On the Political Determinants of Trade: Conflict and Regional Integration in the Case of Pakistan-India Trade. In "Proceedings 2005 SISP Meeting, Calgary, September 22". Bhattacharyya, B (2005) "Security Dimensions of International Indian Perspective". World Trade Institute.

Trade:

Clarete, Edmons and Wallack, "Asian Regionalism and its Effects on Trade in the J 980s and 1990s ". Asian Development Bank, ERD Working Paper No. 30. Devarajan and Nabi (2006) "Economic Growth in South Asia: Promising, Un-equalizing, Sustainable?" Washington DC: World Bank. FICCI (2005) "Business Beyond Borders: A Study on India-Pakistan Economic Relations", May. FICCI (2006) "Conference on SAFTA: Opportunities and Challenges ", Background Papers. March, New Delhi. Govt. of India, "Economic Survey 2005-06", New Delhi.

Management & Change, Volume I 0 Number 2 (2006)

24 B. Bhattacharyya Ministry of Commerce, "Annual Report 2004-05", Govt. of India. Panagariya, A. (2003) "South Asia: Does Preferential Trade Liberalization Make Sense?" World Economy, 26 (9). PHDCCI (2005) "Seminar on 13th SAARC Summit: The Road Ahead". December 10, New Delhi. Pigato, et al. (1997) "South Asia S Integration into the WorldEconomy". Washington DC: World Bank. Pitagala, N. and Bayson (2001) "Has Unilateral Liberalization Encouraged Regional Trade in South Asia?" (Mimeo) Washington DC: World Bank. Pitagala, N. (2005) "What Does Regional Trade in South Asia Reveal about Future Trade Integration?" World Bank Policy Research Working Paper 3497, February. SAARC Website for SAFTA documents. Saqib and Taneja (2005) "NTBs and India S Exports: The Case of ASEAN and Sri Lanka". ICRIER, July. World Bank (2004) "Trade Policies in South Asia: An Overview". WashingtonDC.

You are what you think. You are what you go for. You are what you do. - Bob Richards

Management & Change, Volume 10 Number 2 (2006)

â&#x20AC;˘...-----------------------------------~-

ENHANCING EDUCATIONAL INSTITUTIONS EFFECTIVENESS THROUGH HRD CLIMATE: AN EMPIRICAL ASSESSMENT S.A.Mufeed

F.A.Gurkoo

Higher education institutions are basically HRD agencies (human resource development) set up for developing human resources in a country. Time has come to realize the significance of developing human resources engaged in education sector and make adequate investment in developing staff engaged in teaching - learning delivery system. With fast developing technologies, changing environment and growing world, members of educational institutions need to constantly update their knowledge, sharpen skills and improve their methods. Unfortunately, most educational institutions neglect development of their faculty and staff. Research studies show that it is development of human resources that contributes for organizational success irrespective of their size, nature of ownership and control. In a changed environment with globalization at its full swing, universities and other higher educational institutions need to reassess their human resource policies and evolve programmes for redefining their human resource development priorities. that deal with recruitment, employee induction and placement, appraisals and assessments, training and development, reward mechanisms, retention policies, motivation, empowerment and job rotation for developing enabling climate. Subject of HRD climate in university level higher education sector has not been much researched till date. In this paper, it is attempted to study whole gamut of HRD climate in universities and other equivalent higher level academic institutions by eliciting employee perceptions on HRD, climate for which the University of Kashmir, Srinagar is selected as the main focal point of study. Key words: HRD climate, HRD mechanism, HRD, Globalization. Management & Change, Volume 10, Number 2 (2006) ~ 2006 IILM Institute for Higher Education. All Rights Reserved.

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••••

'1.1I.1'••••

26 S.A.Mufeed and RA.Gurkoo

INTRODUCTION HRD is important at all level, be it, economic, social, cultural, societal, politicalor organizational level. All organizations whether government departments, public, private, or academic institutions - are equally concerned with HRD, which is very critical for survival and growth of today's organizations. All HRD drivers such as openness, trust, role clarity, financial health, higher human resource utilization, and HRD interventions can increase productivity, improve quality, ensure cost effectiveness, enhance creativity and sharpen competitive edge. In spite of tremendous technological developments 'human element' continues to be most important driver for raising production and productivity. Recent research studies show that rapid technological development in globalization era cannot substitute for the role of human resources which is the 'core resource' and all other resources are subservient to it as it is main driver for all others. Thus, HR is critical for organization's health and well being. According to Huselid, Jackson and Schuler (1997) "effective HR management does translate into higher productivity and market value". According to Saber, Dowling and Liesch (1998), Human resource management plays a key role in success of joint ventures at global level. Similar results were found by Huselid (1995), McDuffie (1995) and Huselid and Becker (1997). Leading MNCs such as ABB, GE, IBM, Motorola, etc. have introduced numerous HR interventions and achieve organizational excellence (Bandarker, 2003). Human resources thus need to be constantly developed in keeping with the changing environmental needs by updating their knowledge, skills and abilities (KSAs). HRD is a continuous and cyclical process where human resources are continuously developed to meet the present and future challenges through proper update of KSAs. HRD in broader sense aims in improving competency i.e. knowledge, skills and abilities. HRD in the organizational context may be viewed as a process by which employees of an organization are encouraged to (i) acquire capabilities (knowledge, attitudes, skills, perspectives and values) needed to perform their varied roles and functions (ii) improve their capabilities as individuals to harness their full potential both for their own and organizational development and (iii) develop an organizational culture where superior-subordinate relationships, teamwork and collaboration among different sub-units are strong and contribute to the organizational Management & Change, Volume 10 Number 2 (2006)

S.A.Mufeed and F.A.Gurkoo 27

health, dynamism and pride of employees (Rao, 1991). HRD in nut shell is a continuous process for developing competencies, dynamism, motivation and effectiveness in a systematic and organized way (Mufeed, 2005 & Pakkeerappa,2005).

REVIEW OF RELATED LITERATURE HRD benefits can be best reaped when it is adopted as a company-wide philosophy in an integrated manner by the organization which is conducive both for employee growth and organization development to be referred as HRD climate. Research shows that HRD climate affects the performance of an organization. Priyadarshini and Venkatapathy (2005) vide their study found that the HRD practices in banks have a strong influence on their performance and that top performing banks have a higher degree of innovative HRD practices in their organizations. HRD climate affects the performance of individuals and organizations following higher satisfaction level achieved by its members on job related issues (Ahuja, 2002). Mufeed (2006) found positive relationship between HRD climate and job satisfaction and attitude towards work and role efficacy, which again shows that HRD climate, has a definite impact on these factors. Mishra Dhar, et al. (1999) conducted a study and found that HRD climate contributes to overall organizational development, increased employee commitment, added satisfaction level with their job in particular and organization in general, which is in agreement with results found by Kline and Boyd (1991), Sinha and Singh (1995) and Kahn and Robertson (1992). According to Biswas, et al. (2006) some factors have affected managerial practices in India in the recent past. Among the most noticeable changes, there has been the transition of hum an resource management (HRM) practices and policies in Indian organizati<;ms.These practices were primarily influenced by the prevailing business environment. Changes on HR scene have thus influence managerial practices in organizations. In past, Dayal, et al. (1996) carried out a study on HRD climate in Indian Oil Corporation (JOC) a leading public sector enterprise (PSE) in petroleum sector and ~ound that HRD climate is conducive for learning. Jain, Singhal, and Singh (1997) also conducted a similar study on two PSEs to assess whether their developmental climate was conducive for employee development. Both the PSEs were found to have satisfactory level ofHRD climate. Management & Change, Volume 10 Number 2 (2006)

28 S.A.Mufeed and F.A.Gurkoo Krishna and Rao (1997) carried out a comprehensive empirical study in BHEL, Hyderabad and found that HRD climate in the organization encOl.Uaged middle and senior managers to experiment with new methods and try out creative ideas. Panchanatham (1998) vide his study found that marketing personnel in a particular group with a strong HRD support had comparatively less hurdles in their creative pursuits than where there was no such backing. The study should establish a strong HRD climate that can enable marketing personnel to face global challenges more successfully under varied market situations. Patel (1999) vide his study ofHRD climate found remarkable dissimilarity in performances of two branches although they belonged to the same bank management. The study also found HRD climate comparatively better in high performing branches. Mangaraj (1999) vide her study ofRourkela steel plant found that improved HRD climate in terms of openness, participation and team spirit leads to higher organizational performance. Sister Alphonsa (2000) vide her empirical study of a private hospital in Hyderabad found that HRD climate tended to improve employees performance. Mufeed (2006) vide his empirical study on HRD practices in hospitals found the perception ofHRD climate at a desirable level and found that there existed a highly significant positive correlation between HRD practices and HRD climate. It was found that the better the perception of the employees regarding how adequately HRD practices were being performed in the organization, the more development they were likely to perceive in the organization climate. This showed that HRD practices and HRD climate were mutually interdependent. Mishra and Bhardwaj (2002) vide their empirical study on HRD climate found that private sector managers perceived favourable and satisfactory HRD climate. However, in many studies respondents perceived HRD climate at low level. Rao and Abraham (1986) studied HRD climate in 41 different organizations and found it only average. Anandram (1987) in their study organizations in Pune found thatHRD climate was at less than average level. Krishna and Rao (1997) found that HRD climate in BHEL, Hyderabad provided opportunity to employee development to minimum extent only thus leaving substantial scope for their development. Rohmetra (1998) in her study found a poor HRD climate in the bank. Patel (1999) in his comparative'study of HRD climate in a district central co-operative bank found mean score of Management & Change, Volume 10 Number 2 (2006)

S.A.Mufeed and F.A.Gurkoo 29 major items of the HRD climate below average. Shakeel (1999) in his research study on HRD in Universities assessed HRD climate in two chosen universities on a lower side. To explore HRD scenario in the Sultanate of Oman, Budhwar, Al- Yahmadi and Debrah (2002) studied HRD in state owned enterprises and concluded that HRD interventions did not made any significant impact. Agarwala (2002) in her study indicated that HRD practices were being inadequately performed in select public sector enterprises but found that HRD climate was perceived as 'significantly more motivational' in private enterprises. In organizational settings that are typical in universities in India, significance ofHRD is seen as a key to meet challenges from transnational trade in higher education. According to Sharma (2000) "human resource development is one of the major objectives of a University by the very nature of its constitution, set up and organization". To maintain high quality of the human resource output of the university system, its own human resources must be developed and enriched on a continuous basis. However, "educational institutions are so busy in the task of educating others that they often tend to forget their own education" (Rao, 1999). Parents, industry, students, government and the society at large expect that university staff have necessary competencies, dynamism and motivation (Pakkeerappa, 2005). What transpires from the response of higher educational institutions especially the universities to the HRD movement in India since mid seventies is that these seats of higher learning have in general exhibited a very cold and almost a negative attitude towards this cause. There can be several causes to it. "University administration finds it difficult to absorb new knowledge and ideas" (Shakeel, 1999). The reason is that "Indian universities are the victims of the government sector syndrome" (Rao and Das, 2001). Moreover the university structure and the operating systems are not often compatible with innovations which are occurring at a rapid pace in an environment. According to Shakeel (1999) "the university structures, the rules and regulations, the decision making bodies and the processes are basically the same which existed during the British period. That is why universities are not able to keep pace with the development needs of society and they are not in a position to fulfill the hopes and expectations attributed to them". In educational institutions "the development, hitherto, has been focused mainly on infrastructure, technologies and finance Management & Change, Volume 10 Number 2 (2006)

•••

30 S.A.Mufeed and F.A.Gurkoo without giving thought to the development of its staff-human resources (Pakkeerappa, 2005). The present times need radical departures from the traditional form of higher education if we have to survive the competition from foreign universities (Ambrose, 2005)". Thechallenges from transnational trade in higher education can be met by choosing 'staff development' as the thrust area for the universities. An enabling climate conducive for development of human resource has to be nurtured in universities. In this connection, direction of HR practices in vogue needs to be changed and made more development oriented. According to Agarwala (2002) and Priyadarshini and Venkatapathy (2005) a significant goal ofHR practices is to foster a climate in which employees feel encouraged to improve individual and organizational performance. Hence, HRD climate is influenced in the manner HR practices are implemented. There is a clear link between HR practices and HRD climate. HRD practices contribute to organizational effectiveness through HRD climate and HRD outcomes. One can create an appropriate HRD climate only through efficient HRD practices and processes. HRD practices inflmmce employee attitudes, skills, knowledge and the organizational climate. According to Kalburgi (1984), Murthy and Gregory (1989), Parthasarathy (1988), Chandrasekar (1993), and Coelho (1993), a combination of various factors such as openness, team spirit, trust, autonomy, cooperation, integrity, recognition, participation, fair compensation, counseling, problem solving, valuing assets, and respect for the individual influence the HRD climate of an organization. According to Bhardwaj and Mishra (2002) remarked that the su.. premacy of human resource and the need for their development make out a strong case for the evaluation ofHRD climate as directly or indirectly this climate affects the organization and the employees." Research on HRD climate has been quite intensively carried out in India. A review of these studies shows that most of the research studies carried out in the past have limited their endeavour to the study of one of the elements or mechanisms of the HRD. Separate studies have been conducted for various mechanisms of HRD such as performance appraisal, training and development, organizational development, etc. Research efforts have been by and large sporadic and only some comprehensive research efforts have been made. Very few studies have been undertaken based on comprehensive set up elements ofHRD climate. Besides, most of Management & Change, Volume 10 Number 2 (2006)

~~~~

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.••••,,__

S.A.Mufeed and F.A.Gurkoo 31 the studies have sought perceptions of managerial cadre employees and only very few based on perceptions of non-managerial employees. The subject ofHRD climate in university level higher education system has not been adequately researched till date. A need was thus felt for undertaking a major research initiative which could come out with a comprehensive study of the existing status of the HRD climate in universities and university level higher educational institutions of eminence based on perceptions of all cat~ egories of employees on different elements ofHRD climate. Accordingly, the present study has been made to determine the status ofHRD climate in the universities and university level higher educational institutions covering teachers, officers and the ministerial staff and focusing on all the elements of the HRD climate. In this paper, an attempt has been made to fill this gap by undertaking a study of University of Kashmir has a particular university sample chosen. UNIVERSITY

t II

r I

OF KASHMIR

AT A GLANCE

The University of Kashmir takes its origin from the erstwhile University of Jammu and Kashmir which was established in the state in 1948. It was later on bifurcated into two separate universities; one pertaining to their Kashmir division; and the other to the Jammu division. The University of Kashmir came into existence with effect from September 5, 1969. Many teaching and research centers were established in seventies. The university grew rapidly and a large number of post-graduate departments were opened during mid eighties. In 2003 the University was accredited by NAAC and placed as an "A" grade University of the country with 87 per cent score. Total human resource employed with the University across different cadres is about 1700 including about 350 faculty members. The personnel policy of the University of Kashmir is defined under various provisions of the Kashmir and Jammu Universities Act, 1969 and various statutes adopted from time to time. Though the University has not drawn its well-documented personnel policy, it however, does have certain policies covering recruitment, promotion and other aspects including service conditions of its employees. The personnel policy is a mix ofUGC guidelines, state civil service rules, and a few provisions made by the university to govern some service aspects of its employees.

Management & Change, Volume 10 Number 2 (2006)

MM'

32 S.A.Mufeed and F.A.Gurkoo OBJECTIVES

OF THE PRESENT

STUDY

Within the broad domain of research areas identified, following study objectives were delineated for the present study; (i) to asses the existing status of human resource development climate in the University of Kashmir, Srinagar; (ii) to know the existing status of human resource development practices in the University of Kashmir , Srinagar; (iii) to measure the satisfaction level of teaching and non-teaching staff towards existing human resource development practices; and (iv) to draw conclusions and to provide result oriented guidelines and suggestions for improvement of human resource development practices.

Hypothesis In consonance with the above objectives, following hypotheses were formulated: (i) HRD climate at the university is not conducive for employee development at a satisfactory level. (ii) University employees in general are not satisfied with the existing human resource development practices in the university. (iii) Employees in various cadres do not hold radically different views with regard to the status of HRD practices. RESEARCH

APPROACH

AND DESIGN

The study is based on information collected through questionnaire survey and information available in published documents. Primary data was collected through administering questionnaires and conducting interviews. Secondary data was obtained from personnel policy documents, annual reports, university calendars, published materials, etc. The questionnaire as devised by the Xavier Labour Relations Institute, Jamshedpur was picked upon and ..modified on the basis of somewhat similar studies and divided into three main sections. The "firstsection included 38 statements for assessing HRD climate at the university. The section sought to analyze prevailing HRD practices and the third section was devoted to document biographical details Management & Change, Volume 10 Number 2 (2006)

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•• _••,••• ",_ ••_ ••• ,••• " _

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S.A.Mufeed and F.A.Gurkoo 33 of the respondents. In the first instance a pilot sample study was conducted to analyze satisfaction level ofteaching and non-teaching staff. This was followed by more detailed investigations on sample staff of 211 from the University employees covering both academic and non-academic categories. Employees were divided into three main cadres, namely, managerial, non-managerial cadres and teaching staff. Managerial staff included officers pertaining to top, middle and lower management levels. Top management included functionaries like Cancellor, the Pro-Chancellor, Vice-Chancellor, Financial Advisor, Registrar, Controller of Examination, Librarian, Joint Registrar, Additional Controller of Examinations, Dean Academics, Dean Colleges, Chief Proctor, Dean Students Welfare and other officials. Middle management officers included Deputy Registrars, Deputy Controllers of Exam ina tions, Deputy Librarians, Deputy Chief Proctor, Director Physical education and other officers of equivalent level. Lower management level officers included Assistant Registrars, Assistant Controllers of Examinations, Assistant Librarians, Assistant Engineers, and other officers of equivalent level. Non-managerial employees included ministerial staff such as section officers, assistants, accountants, etc. Academic staff covered teachers at all levels including professors, readers and lecturers. In this study an attempt has been made to analyze HRD climate by shortlisting 23 variables divided into three categories; (i) General climate (ii) OCTAPACE culture and (iii) HRD mechanisms. Summary of identified variables is given below (Fig.!). DATA ANALYSIS AND INTERPRETATION

If a drop of water falls in the lake there is no identity. But if it falls on a leaf of lotus it shines like a pearl. So choose the best place where you can shine. -Anonymous

Management & Change, Volume 10 Number 2 (2006)

34 S.A.Mufeed and F.A.Gurkoo

Fig. I Schematic View for Selection ofHRD Variables ,

General Climate TMB SSR LMC PP PAID SD

Top Management Beliefin HRD Superior Subordinate Relationships Line Managements Commitment to HRD HRD oriented Personnel Policies Positive Attitude Towards Development Self Development.

HRD Mechanisms PAM 1R CAR JR WEL RD QWL GRM EP

Performance Appraisal Management Training and development Career planning Job Rotation Welfare Reward Quality of Work Life Grievances Mechanism Employee Participation

OCTAPACE Culture OPEN CONFR IT AUTH PROAC AUTO COLL EXP

Openness Confrontation Trust Authenticity Pro-activity Autonomy Collaboration Experimentation

Management & Change, Volume 10 Number 2 (2006)

•......

...

(

•

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•.

Table 1 Employess Perceptions

~ ~ l:O ~ :3", a ~ (j

::r l:O ::l

:3",

towards HRD Climate in the Sample Study University

Authorities of this University go out of the way to make sure that the employees enjoy their work.

(N=211)

2.29

1.21

32.2

The authorities at this University believe that human resources are an extremely important resource who should be treated more humanely.

2.91

1.27

47.7

Subordinate development is viewed as an important officers responsibility at this University.

2.49

1.15

37.2

The personnel policies in this University facilitate employee's development.

2.57

1.25

39.2

Authorities in this University are willing to invest a considerable part of their time and other resources towards employees development.

2.27

1.12

31.7

Senior Officers at this University take active interest in their juniors and help them learn their job.

2.48

Employees lacking competence in performing their jobs are helped to acquire competence rather than being left unattended.

2.49

1.09

37.0

Officers in this University believe that employee behaviour can be changed and they can be developed at any stage of their life.

2.73

1.15

43.2

1.i

6 7 8

o o

...~

Standard Deviation (6)

•

Percentage to the Mean Scores

cr" ", ...•

c£

Statements

.'"

Stat. No.

(JQ

••

Mean Scores

1J'J

1.16

37.0

> a:= if == Q.

r= o

Employees in this University are helpful to each other.

3.14

1.04

53.5

~ :3 ",

Employees in this University are very informal and do not hesitate to discuss personal problems with their supervisors.

3.07

1.17

51.7

Psychological climate in this University is very conducive for employee development by acquiring new knowledge and skills.

2.93

III

;:l

a (") ;:l"

1.17

Authorities in this University make efforts to identifY and utilize employees potentia!.

2.58

1.15

39.5

Z :3 0-

2.95

1.17

48.7

tv ,--, tv

Employees in this University do not have any fixed mental impressions about each other. Promotions in this University are governed by the suitability criteria alone without any favouritism.

2.85

1.28

46.2

1.89**

1.06

22.2

",..,

o o

University has built-in mechanism to reward employees good work and contributions.

Supervisors appreciate employees good work.

2.15

1.07

28.7

Performance appraisal reports in this University are based on objective assessment without any subjectivity.

2.66

1.25

41.5

Employees are encouraged to experiment with new methods and explore creative ideas.

2.36

1.13

34.0

When any employee makes a mistake his supervisors treat it with understanding and help him to learn from such mistakes rather than punish or discourage him.

2.68

1.14

42.0

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2.95

C :3

.•...___ .

48.2

In this University seniors guide their juniors and prepare them for future responsibilities and roles they are likely to take up.

___

1.24

~ c

48.7

(JQ

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Weakness of employees is communicated to them in a non-threatening way at this University.

2.71

1.16

42.7

When behaviour feedback is given to employees they take it seriously and use it for development.

2.82

1.06

45.5

Employees at this University take pains to understand supervisors or colleagues perceptions about their strengths and weaknesses.

2.58

1.07

39.5

Employees sponsored for training take it seriously and try to make it best use.

3.49

1.07

62.2

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Employees following training are encouraged to apply ideas learnt.

2.43

1.21

35.7

gj ~

Sponsorship for training is need based.

2.52

1.16

38.0

The University welfare activities enable employees to hardness their mental energy for work purposes.

2.37

1.08

34.2

Job rotation at this University facilitates employee development.

2.85

1.12

46.2

.'"

Employees trust each other at this University.

2.98

1.06

49.5

C 3

Employees at this University are not afraid to interact with their superiors to share their feelings.

2.88

1.25

47.0

=(;'

Employees at this University are not afraid to express or share their feelings with their subordinates.

31.8

1.13

54.5

Employees are encouraged to take initiative and undertake activities on their own without formal instructions from supervisors/immedi ate officers.

2.26

31.5

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1.06

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Delegation of authority to develop handling higher responsibilities is quite common at this University.

2.32 (48.7)

1.10

In the event of delegation of authority, juniors use it as an opportunity for development.

2.95 (48.7)

1.10

48.7

~ ;"

Team spirit is of high order at this University.

2.84

1.12

46.0

11>

:3,"

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[JO

•

Ql)

~ ~

In the event of problems cropping up employee discuss them mutually to resolve them rather than indulge in any blame game.

2.53 (38.2)

1.04

38.2

> b

o Z

Seniors often discuss career growth opportunities of juniors with them at this University.

2.45 (36.2)

1.14

36.2

~ o

Our University's future plans are made known to the staff to help them develop their juniors and prepare them for future.

2.40 (35.0)

1.18

35.0

2.65

0.656

41.44

11>

~ cr

...

11>

,.--. tv

o o

Total

Note:

.....•

33.0

(46.0)

,11>

___

~ ~

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* Highest mean score ** lowest mean score The rating for every question has been done on a scale from 5 to 1, where (5) represents almost always true; (4) as mostly true; (3) as sometimes true; (2) as rarely true; and (1) as not at all true.

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S.A.Mufeed and F.A.Gurkoo 39

Table I summarizes an over all view ofthe HRD climate at the University. The mean scores for each item varied between 1 to 5 wherein the value of 1 indicates extremely very poor HRD climate and 5 indicates a very high HRD climate. Mean score of 3 indicates an average HRD climate while a value 2 indicates a poor HRD climate and a value of 4 represents a good HRD climate. It is to be seen that extreme values of I and 5 non-existent and for most statements values ranged between 2 and 4. Table 1 shows that the mean scores range between 1.89 and 3.49 where the highest mean score relates to 'training' in statement 24. This is followed by the environment of 'openness' towards subordinates and 'collaboration' being at statement 31 and 9, respectively. The level of' openness' , however, towards their superiors is not perceived to the same degree as in score value of statement 30. The score values on the'whole for both these parameters indicate an average value. The lowest score marked for statement 16 relating to the reward mechanism indicates that good and bad performances go hand in hand and that the system in vogue does not make difference between good and bad performers. The other two parameters with lower scores indicate the work of good performers often go unnoticed as evident statement 2 and 17. Employees often at under instructions and they miss opportunities to be innovative and proactive. Highest score values for training inputs signifies employees' priority for knowledge acquisition and development. Except for three highest scores, all other scores fall below the average score of 3 though the score values for delegation of authority (autonomy), trust, psychological climate and authenticity are tilted more towards 'average' score as reflected vide mean scores for the statements, 2,11,12,14,29 and 34. It is to be seen that SD is measured at plus 1 range. Testing the Hypothesis Ho. 'Human resource development climate at the University of Kashmir is not conducive for employee development at a satisfactory level. An integrated view of mean and percentage scores for the University of Kashmir shows that 35 out of 38 statements scores are below average level with scores of only six statements tilted towards higher than the average level indicating that employees do not perceive HRD climate at the University at a satisfactory level. It reveals that HRD practices at the University for their development are perceived as satisfactory by employees. Accordingly, the hypothesis that the 'HRD climate at the University of

I~_-

Management & Change, Volume 10 Number 2 (2006)

--.-----------------III----

'I-II'LIII'IJI' __

40 S.A.Mufeed and F.A.Gurkoo Kashmir is not conducive for employee development at a satisfactory level' is accepted.

QUALITY ASSESSMENT STATISTICS FOR HRD CLIMATE In this study it has been attempted to analyze satisfaction level of teaching and non-teaching staff towards prevailing HRD practices (Table 2). Accordingly, a model was developed to determine the quality of the HRD climate by measuring employees satisfaction level in terms of their perceptions and responses. Table 2 includes data on quality ofHRD practices and satisfaction level of employees on these practices. Table 2 Overall Employess Perceptions on Quality of

HRDClimate No.

Per Cent

Excellent

2.8

Good

29.9

Poor

144+

68.2

Total

211

100,,0

Perception

+ denotes highest scores Table 3 Satisfaction Level on HRD Practices According to

Employee Cadre Staff Cadres

Climate quality (Per Cent) Satisfactory

Poor

Managers

48.60

51.40

Non-Managers

18.00

82.00+

Faculty

32.20

67.80

Total

31.75

68.25

+ denotes highest scores Management & Change, Volume 10 Number 2 (2006)

____ ~~

IIlI.

.,.""'ii1""',"i__

,Table 4 Employee's Pereceptions on HRD Climate According to Employee Cadre Managers (N=37)

Perception

Teachers (N=124)

Non-Managers (N=50)

No.

Per Cent

No.

Per Cent

No.

Per Cent

Excellent

2.7

2.0

3.2

Good

45.9

16.0

29.0

[

Poor

51.4+

82.0+

67.8+

Total 37 + denotes highest scores

100.0

124

100.0

(")

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~ ~

asn>

Example is not the main thing in influencing others, it is the only thing.

a0n> ..•

'N o o

=[ Cl)

- Albert Schweitzer

~ ~

C')

••• ....

42 S.A.Mufeed and F.A.Gurkoo

Table 2 Cadrewise Employees' Perceptions ofHRD Climate

I~- ------

I~Managers

--~

---I

IDNon~M-;;~agers 1-

~F~~itLu

Percentage scores marked+ indicate that a large population perceives HRD practices as 'poor' (Table 2). Only 2.8 per cent of the respondents view the HRD climate /practices as 'excellent' and 28.9 per cent respondents view them as 'good'. However, 68.2 per cent respondents perceive HRD practices as 'poor'. Thus, on the whole status ofHRD practices is 'poor'. Satisfaction level with regard to prevalent HRD practices is given in Table 3. Level of dissatisfaction is highest among non-managerial cadre (82 per cent) followed by the teaching staff (67.8 per cent). Even among officers only 48.60 per cent perceive HRD practices as satisfactory. Table 4 maps out employees' perception on the quality of HRD practices as per employees' cadre. Among officers only 48.6 per cent consider the quality of HRD practices as 'good and above' while 51.4 per cent view them poorly. Non-teaching employees perceive HRD practices on the whole 'poor' considering that 82 per cent view them 'very poor', 67.8 per cent teachers perceive them 'poor' and only 4 respondents view them 'excellent' (Tale 4). Employees perception according to hierarchy given in Table 5. Mean scores range between 1.34 and 4.17 (Table 5). Highest mean score of 4 and mean score of 75 in statement 31 and lowest score of 2 and 1.71 in statement 16 and 23. 'Openness" is more perceived by seniors as subordinates are hardly free to express their views before superiors at a good level as the mean score for variable 30 concerning such fearless expressions before superiors records only 3.43 which though is good at the scale level but is fairly low on comparison with the value of 4 for variable 31 which Management & Change, Volume 10 Number 2 (2006)

S.A.Mufeed and F.A.Gurkoo 43

concerns with such 'openness' before subordinates. Top management belief in the HR has received good scores (above averages of3) across all the three management levels but the teaching and non-managerial staff differ who perceive related factor in statement 2 below average score of3. While top management feels the good level of3.57 to invest in developing human resources, rest of the employees do not agree with it as recorded by them in statement 5 with ministerial staff recording the third lowest score of 1.68 for it. While senior and middle level officers perceive the process of mentoring and developing juniors by seniors at a high score of 4 (17+3.83/2), junior staff significantly differ on it by registering a score below average level of 3. Even the top management registers its average score below 2.86 only. All levels of management, teaching and non-managerial staff perceived top management belief in statement 1; reward mechanism in 16; performance appraisal management in 18; experimentation environment in 19; feedback process and the attitude of self development in 23; opportunity of trying out learning in training and development in 25; practice of delegation and autonomy in 33; attitude of confronting problems openly without accusing each other in 36; career opportunities. in 37; and openness under personal policy in 38; etc. were all below the average score of 3. Even top management perceive its commitment to the HRD below average level. Teaching communities differ in their perception of HRD climate on almost all factors excepting training where their perception for statement in 24 are almost of same level at plus 3. The score values for non-managerial staff make it amply clear that some values of OCTAPACE culture in it are of re.asonable standard as it has perceived some of these values i.e. collaboration at statement 9, openness at statement 10, and trust at statement 29, 30 and 31, well above the average score of 3. Table 6 summarizes employees perception according to their cadres divided as managerial, non-managerial and teaching staff on prevailing HRD practices and the total HRD climate for all 38 statements .. A cursory look of Table 6 shows that the mean scores range between 1.34 and 3.70. Highest mean score is recorded by the managerial staff for development oriented good superior-subordinate relationships at 3.7 score with score percentage of67.50 in statement 12. However, non-managerial staff who work under these officers perceive this relationship conducive for Management & Change, Volume 10 Number 2 (2006)

44 S.A.Mufeed and F.A.Gurkoo employee development through superior's guidance and coaching poorly by registering a score value of 2.7 exactly one per cent short as compared to their officers and view it conducive for development only to the extent of 42.5 per cent. Teachers of the university also register a score value of2.82 (45.5 per cent). Besides the data also reveals that the University does not 'provide ample opportunities to the employees to try what they may have learnt during training' is agreed upon by one and all as is evident from score values in statement 25. Similar perception is observed in statement 16 concerning reward mechanisms which have been perceived very poorly by all the three cadres. Employees in all cadres are concemed about their development through training is evident from values recorded in statement 24.1n the entirety all the cadres have rated the HRD climate in their case below satisfactory level though score value for officers at 2.85 is higher than teaching and non-managerial staff who have viewed it 'very poorly'. .

Testing the objectives ANaYA (Analysis of Variance) of38 HRD climate statements concerning various HRD practices have been made in consonance with the objective laid down for the purpose with a view 'to JTlakea comparative study of the employee perceptions across various cadres on the existing status of human resource development Practices in the University'. This was done by testing the hypotheses laid down using 'one way' ANaYA.

Testing the Hypothesis

Ho Employees across various cadres do not significantly differ from one another in their perception on the status of HRD practices.

A view of the values of significance in the Table 6 shows that the significance in 21 cases is 0.000 i.e below 0.01 and 0.05. As the differenoe is significant at both 0.05 per cent and 0.01 per cent levels of significance the null hypothesis (Ho) to the effect that 'employee perceptions across various cadres do not significantly differ from one another on the existing status of human resource development practices is accordingly rejected at 5 per cent level of significance'. However, in case of values marked (*) significance is more than 0.05. Hence, the hypothesis (Ho) on these statements is accepted at 5 per cent level of significance. On the whole it is inferred that the University employees in different cadres significantly dif-

Management & Change, Volume 10 Number 2 (2006)

S.A.Mufeed and F.A.Gurkoo 45

fer from one another in their perceptions on the existing status of most of HRD practices in the University. Table 7 summarizes the level of perception of employees of the sample universities for 23 variables of HRD climate under three elements viz: General climate, OCTAPACE culture and HRD mechanisms. The mean scores range between 2.02 and 2.99. The data shows that employees of the University have not perceived any variable at the 'average' level 00. The lowest mean score is perceived by employees for 'reward mechanism'. Mean scores of the employees for the variables of self development, trust, authenticity and collaboration are highly skewed to the average level at plus 2.9 score. The scores on rest of the factors/variables are very poor needing significant improvement. In nutshell, the respondents have perceived all variables below the satisfactory level yet HRD climate is highly skewed to the satisfactory level for four (4) variables

DADABHAI NAOROJI Dadabhai Naoroji (b. 1825) was a great Indian leader often hailed as the 'Father of the Indian Politics and Economics', who was involved with Indian National Congress during its formative years. He presided over annual sessions of the Indian.National Congress thrice in 1886, 1893 and 1906. He was the first Indian Professor at the Elphinstone Institute, Mumbai; first Indian to become a member of the British House of the Commons; first Indian as Member of the Royal Commission; and perhaps first among leading Indians to demand self-rule for India. Dadabhai Naoroji established the East India Association in London on December 1, 1886 to propagate nationalist views on multifarious problems facing India. He served as Dewan of Baroda (presently Vadodra) and elected to the Municipal Corporation, Mumbai and the Mumbai Legislative Council. He started 'Voice of India', a newspaper, highlighting country's problems and building a case for India's freedom. He authored a book entitled 'Poverty and British Rule in India' that brought intellectual awakening countrywide towards India's freedom in a veiled fashion. He was among the initial top leadership of the Indian National Congress who had demanded end to the British rule in India. -Editor Source: Tata Tea Ltd., Voice of Freedom (Dadabhai Naoroji), Bhavan's Journal, 44(18), April 30, 1998, p.33. Management & Change, Volume 10 Number 2 (2006)

~ g ~'" (1)

?P (J ::r

Stat. No.

~ ~

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

C 3 (1)

Z c 3 <:T

~ N

N o o

,2)

rJ1

--~-~_._

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Table 5 Perceptions of Employees on HRD Climate According to the Hierarchy

..•. _.,

-~~~..

MS 2.86 3.57 3.29 3.43 3.57 3.29 3.00 2.71 3.57 3.00 3.43 2.86 2.86 2.57 3.00 2.00 2.71 2.86 2.57

LM N=24

MM N=06

TM N=07

(6) 0.69 0.79 0.49 0.79 1.27 1.38 0.82 1.11 0.79 0.58 0.79 1.21 1.07 1.13 1.00 0.82 0.76 1.35 0.53

MS 2.17 4.00 3.67 2.83 2.33 3.50 4.00 3.33 3.00 3.83 4.00 4.17+ 3.50 3.33 2.83 2.67 3.33 2.67 2.50

(6) 1.33 0.89 1.21 1.83 1.21 1.05 1.10 1.37 1.10 0.98 1.10 1.17 1.64 0.52 1.60 0.52 1.03 1.63 1.38

MS 2.62 3.50 3.04 2.67 2.17 3.00 2.83 2.96 3.12 3.08 3.67 3.83 2.79 3.04 2.83 2.08 2.29 2.75 2.25

(6) 1.35 1.25 1.23 1.13 1.34 1.32 0.96 1.27 1.42 1.32 1.20 1.01 1.28 1.08 1.34 1.32 1.08 1.26 1.22

P N=27

NM N=50

MS 2.12 2.74 1.92 2.20 1.68 2.02 2.26 2.64 3.24 3.38 2.60 2.70 2.18 2.72 2.80 1.34x 1.50 2.12 1.82

(6) 1.35 1.32 0.97 1.47 0.84 1.13 1.03 1.24 1.02 1.24 1.09 1.30 1.30 1.21 1.37 0.69 0.91 1.06 1.12

2.52 2.89 3.00 3.07 2.67 2.78 2.59 2.96 3.26 3.11 3.04 2.81 2.96 3.33 3.52 2.11 2.41 2.89 2.56

...--..-..

(6) 1.01 1.12 1.00 1.14 1.24 1.09 1.12 0.98 1.13 1.12 1.19 1.11 0.90 1.11 i.12 1.12 1.12 1.40 0.97

R N=30 SD

MS 2.13 2.80 2.27 2.43 2.43 2.50 2.50 2.57 2.83 2.87 2.93 2.90 2.57 2.93 2.87 2.00 2.17 2.93 2.63

(6) 1.07 1.35 1.11 1.19 1.14 1.07 1.22 1.17 1.15 1.11 1.41 1.21 1.04 1.28 1.38 1.14 0.99 1.17 1.16

~ ..

L N=67

(6)

2.24 2.72 2.43 2.55 2.37 2.34 2.31 2.66 3.12 2.85 2.72 2.79 2.55 2.96 2.60 2.01 2.31 2.81 2.57

.•.

1.21 1.24 1.10 1.09 0.95 1.01 1.00 1.08 0.81 1.13 1.22 0.95 1.00 1.17 1.16 1.05 1.02 1.23 1.06

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20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

2.57 2.86 2.71 1.71 3.00 2.00 2.86 2.86 J.29 3.43 3.43 4.00 3.29 2.86 3.29 2.57 2.86 2.29 2.86

1.21 2.62 1.17 2.14 1.14 2.74 0.79 3.33 1.02 1.07 3.50 1.38 2.71 1.30 2.50 1.22 2.63 1.11 0.49 2.67 0.52 2.88 1.08 3.08 1.12 2.63 1.11 0.52 2.71 0.95 2.76 1.17 2.44 0.76 2.33 0.97 1.00 2.83 1.24 3.26 0.75 3.38 1.21 3.68 1.06 2.04 1.16 2.00 1.20 2.52 1.22 0.58 2.17 0.98 1.26 2.37 1.17 1.76 1.08 2.96 1.02 0.69 3.00 1.26 2.46 1.14 2.12 1.19 2.37 0.97 0.90 3.00 1.38 2.67 1.21 2.46 1.22 2.46 0.97 3.15 0.82 3.32 1.04 2.93 0.52 3.00 1.35 1.04 0.79 3.33 1.27 2.83 3.08 1.38 3.10 1.37 3.00 1.36 0.75 0.84 1.07 3.04 1.34 1.00 3.50 3.33 1.17 3.52 0.98 2.04 1.04 2.20 1.29 2.30 0.76 2.83 0.95 1.03 2.38 1.10 2.02 1.27 2.30 0.91 0.90 2.67 0.55 3.00 1.18 2.82 1.26 2.70 0.49 2.50 0.87 2.63 0.97 0.98 2.33 1.03 3.37 1.28 3.24 0.94 1.15 1.21 2.67 1.03 2.75 1.19 2.64 1.06 2.56 2.29 1.12 2.20 1.20 2.59 1.72 1.05 1.11 2.83 1.26 1.63 2.21 1.10 2.08 2.63 1.08 1.21 2.67 + Highest mean score x lowest mean score Stat No. : Statement number in the questionnaire (See Table 1 for TM : Top management; MM : Middle management LM Lower management; NM : Non-managerial staff P : Professors; R: Readers; L: Lecturers; MS Mean score; SO: Standard deviation

2.77 2.67 2.70 2.33 3.47 2.83 2.57 2.33 3.03 2.83 2.77 2.77 2.43 2.33 3.10 2.50 2.20 2.67 2.67

1.17 1.06 1.24 1.21 0.97 1.23 1.30 1.12 1.33 1.02 1.17 1.14 1.10 1.15 1.16 1.14 0.96 1.35 1.35

3.00 2.84 2.75 2.69 3.60 2.75 2.85 2.45 3.06 2.72 2.58 2.99 2.12 2.45 3.07 2.67 2.46 2.54 2.42

1.06 1.11 0.94 0.96 1.02 1.16 0.97 0.99 1.09 1.00 1.09 1.02 0.86 1.02 1.09 1.15 0.94 0.97 1.05

> =~

3: ~ r>:l

description)

:l Q.

;l;>-

(:j

= "'l

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3::

Table 6 Cadrewise Employees Perceptions on HRD Climate

~ ~

~ ~ ~

s (1l

l..,

cr' (1l

N o o

Stat. No.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

Mean Score

2.59 3.59 3.19 2.84 2.46 3.14 3.05 2.97 3.19 3.19 3.68 3.70 2.92 3.00 2.86 2.16 2.54 2.76

1.24 1.12 1.13 1.21 1.39 1.27 1.03 1.24 1.27 1.17 1.11 1.13 1.30 1.03 1.29 1.14 1.07 1.30

(6)

____''___ -

Per cent to the Mean Score

2.12 2.74 1.92 2.20 1.68 2.02 2.26 2.64 324 338 2.60 2.70 2.18 2.72 2.80 1.34x 1.50 2.12

39.75 64.75 54.75 46.00 36.50 53.50 51.25 49.25 54.75 54.75 67.00 67.50 48.00 50.00 46.50 29.00 38.50 44.00

Mean Score

•

(6) 1.35 1.32 0.97 1.47 0.84 1.13 1.03 1.24 1.02 1.24 1.09 1.30 1.30 1.21 1.37 0.69 0.91 1.06 .

~ ~

Manager (N=124)

Manager (N=50)

Manager (N=37)

Per cent to the Mean Mean Score Score

2.27 2.77 2.52 2.64 2.45 2.48 2.42 2.70 3.08 2.91 2.84 2.82 2.65 3.03 2.86 2.03 2.30 2.85

1.14 1.24 1.11 1.14 1.06 1.05 1.08 1.08 0.98 1.12 1.2fl 1.04 1.00 1.19 1.25 1.08 1.03 1.25

28.00 43.50 23.00 30.00 17.00 25.50 31.50 41.00 56.00 51.50 40.00 42.50 29.50 43.00 45.00 08.50 12.50 28.00

(6)

Per cent F to the Value Mean Score 31.75 44.25 38.00 41.00 36.25 37.00 35.50 42.50 52.00 47.75 46.00 45.50 41.25 50.75 . 46.50 25.75 32.50 46.25

1.684 6.887 14.771 3.272 9.777 10.740 6.690 1.017 .472 3.146 9.476 10.347 4.985 1.309 .046 9.896 14.495 6.640

= [ ~ :I

P Value

~ ~ ~

.188* .001** .000 .040 .000 .000 .002*** .363* .625* .045** .000 .000 .008*** .272* .955* .000 .000 .002**

_•..

•

•••••

3::: pO ::l

a '"a

Ro (')

::r pO ::l

~ ~

'"o Z ::

ar:r '"'" IV

t:J

o o

19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 Total

•

2.35 2.73 2.86 2.81 2.46 3.22 2.05

2.57 2.62 2.65 3.14 3.11 3.49 2.41 2.51 2.97 3.05 2.76 2.38 2.41 2.85

1.14 1.12 1.27 0.91 0.93 1.11 1.03 1.12 1.11 1.::5 1.16 1.26 1.10 1.09 1.04 1.01 1.25 1.14 1.21 1.21 0.39

* +

33.75 4325 46.50 45.25 36.50 55.50 26.20 3920 40.50 41.25 53.50 52.75 62.25 35.75 37.75 49.25 51.25 44.00 34.50 35.25 4625

1.82 2.14 2.50 3.08 2.76 3.68

2.00 1.76 2.12 2.46 3.32 3.10 3.52 2.20 2.02 2.82 3.24 2.64 2.20 2.08 2.46

P value> 0.05 Highest mean score

•••

20.50 28.50 37.50 27.00 44.00 67.00 25.00 19.00 28.00 36.50 58.00 52.50 63.00 30.00 25.50 45.50 56.00 41.00 30.00 27.00

1.12 1.14 1.22 1.12 1.17 1.24 1.20 1.08 1.19 0.97 1.04 1.37 1.07 1.29 1.27 1.26 0.94 1.06 1.20 1.26 0.56

36.50

** x

•

••.•

2.72 2.81 2.40 3.07 2.79 2.72 2.94 2.23 2.39 3.00 2.62 2.42 2.58 2.52

1.06 1.08 1.09 1.06 1.06 0.98 1.19 1.07 1.01 1.09 1.01 1.17 1.12 0.95 1.03 1.07 1.10 1.00 1.08 1.13

39.50 47.25 43.75 42.75 38.75 62.25 43.00 45.25 35.00 51.75 44.75 43.00 48.50 36.75 34.75 50.00 40.50 35.50 39.50 38.00

2.67

0.27

41.75

2.58 2.89 2.75 2.71 2.55 3.49

P value < 0.05 lowest mean score

***

•

8.717 .000 8.258 .000 1.231 .294* 2221 .111* 1.000 .370* 2.016 .136* 9.156 .000 16.711 .000 2.429 .091* 6.363 .002*** 5.127 .007*** 2.479 .086* 6.618 .002*** .462 .631* 2.706 .069* .480 .620* 6.554 .002*** 1.865 .158* 2.114 .123* 2.544 .081*

P value < 0.01

""'''''-------

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=;~

:rl

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o \C "'"

-•

~----~--------"-'

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50 S.A.Mufeed and EA.Gurkoo

Managerial perceptions indicate the perceptions of the 'top management', 'middle management' and those of the 'lower management' of the sample university. Non-managerial perceptions indicate the perceptions ofthe nongazetted ministerial staff. Faculty perceptions indicate those of teaching staff of the University.

Table 7 Employees' Perceptions ofHRD Climate Elements Per cent to the Mean Score

Mean Score

SD (6)

Top management's beliefin HRD

2.51

0.26

37.75

Superior subordinate relationship

2.54

0.26

38.50

Line management Commitment to HRD

2.64

0.21

41.00

HRD oriented personnel policies

2.52

0.23

38.00

Positive attitude towards development

2.57

0.27

39.25

Self Development

2.95

0.29

48.75

Openness

2.79

0.27

44.75

Confrontation

2.53

1.04

38.25 49.50

HRD Dimensions/Elements I General Climate

ILfKJ'APACE Culture

Trust

2.98

1.06

Authenticity

2.95

1.17

48.75

Pro-activity

2.51

0.29

37.75

Autonomy

2.63

0,31

40.75

CoJlaboration

2.99+

0.15

49.75

Experimentation

2,36

1.13

34.00

ill URnMecl1JlJ1hms. Performance appraisal management system

2.58

0.21

39.50

Training

2.81

0.47

.39.50

Career planning and development

2.45

1.14

36.25

Job rotation Employee Participation

2.85

1.12 0,33

46.25

2.68 2,33

Quality of work life mechanism

42.00

0.04

33.25

Grievances mechanism

2.68

1.14

42.00

Reward mechanism

2.02 x

0.13

25.50

Welfare mechanism

2,37

1.08

34.25

+ Highest mean Score

x Lowest mean Score

Management & Change, Volume 10 Number 2 (2006)

__._.. _ ,.~__~~~

._a__ i_da:_.;=_,,_,lJI--,.&-

••-

••••

S.A.Mufeed and F.A.Gurkoo 51

Analysis of Correlation

Matrix

A view of the Correlation Matrix in Table 8 indicates that highest level of positive correlation exists at 0.600** between statement 6 and 12 which infers high level of positive association between line management's commitment (LMC) for HRD and superior subordinate relationships (SSR) at the University. This is followed by correlation between statement 19 and 20 at 0.584 implying a relationship between the value of experimentation and positive attitude towards development (PATD) and at 0.580 between statement 30 and 31 regarding the OCTAPACE value of 'openness' before superiors and subordinates. Lowest level of positive correlation exists at 0.007 for the statement 14 and 16 regarding the value of 'authenticity' and 'reward' followed by 0.14 for statement 14 and 27 for the factor/variable of 'authenticity' and 'welfare mechanism' and at 0.21 for the statement 14 and 25 for the value of 'authenticity' and 'training mechanism'.

I I

Highest level of negative correlation at -0.050 in statements 14 and 34 relating to the OCTAPACE values of 'authenticity' and 'autonomy' followed by -0.018 for statement 14 and 36 regarding to the OCTAPACE values of' authenticity' and' openness/confrontation' . Lowest level of negative correlation exists -0.002 between statement 14 and 17 indicating lowest ebb relationship between 'authenticity' and 'appreciation' (RD+PAM+PATD+SSR) followed by -0.013 for statement at 14 and 35 implying lownegative relationship between 'authenticity' and 'collaboration' (team spirit). On the whole correlation matrix indicates that the value of ,authenticity' is correlated both at positive as well as negative levels and that the variables concerning various HRD practices are correlated at a low level since on 162 occasions out of total of 741 occurrences the correlation is found existing at 0.4 and above out of which on 36 occasions only it is found at 0.5 and above.

Chi-square

1--

Chi square test was administered to test the equal distribution frequencies on scale values/points with following hypothesis;

test of

Ho the distributions of responses for all the scale values are equal and the difference, if any found, may be treated as a matter of chance. A view of the P values in the Table 9 reveals that the significance in Management & Change, Volume 10 Number 2 (2006)

52 S.A.Mufeed and F.A.Gurkoo most of the cases is 0.000 and below 0.0 1.As the difference is significant at 0.0 1 per cent level null hypothesis (Ho) that the distributions of responses for all the scale values are equal and the difference, if any found, may be treated as a matter of chance is accordingly rejected at 1 per cent level of significance. Accordingly, the alternate hypothesis (H 1) that the distributions of responses for all the scale values are not equal and the difference so found are not a matter of chance is accordingly accepted at 1 per cent level of significance. CONCLUSIONS

AND IMPLICATIONS

On the whole, HRD climate of the sample study organization was perceived as significantly more motivational characterized by the OCTAPACE culture. This culture is not to be discussed but to be practiced by providing infrastructure facilities. Fallowing implementation it can help both individuals as well as educational institutions to fulfill their goals like water gushing from fountains endlessly and continuously. The present study indicates that there is still considerable scope for improving HRD practices at the University based on study findings. o

Employees in general perceived that the HRD climate at the University was 'poor'.

Employees in general differ in their level of satisfaction with the HRD practices.

Majority of employees in general are not satisfied with the HRD practices in vogue as 144 out of total of 2] 1 employees i.e 68.25 per cent view the status of these practices as 'poor'.

Majority of managerial staff are slightly less satisfied with the HRD practices in vogue as 51.4 per cent view HRD practices as 'poor'.

Absolute majority of non-managerial workers (ministerial staff) are not satisfied with the HRD practices as 4] out of 50 i.e 82 per cent perceived prevailing HRD practices as 'poor'.

Non-managers (non-teaching staff) are the most dissatisfied with the prevailing HRD practices.

Teaching staff were also dissatisfied as 84 out of 124 i.e 67.8 per cent teachers viewed HRD practices as 'poor'.

Management & Change, Volume 10 Number 2 (2006)

Nt'"

,'r,,,'"

l'V"-,..•.•

r;' ,. -

'l~prr7'

r"'.".,.,.,-"._,-,

.••

S.A.Mufeed and RA.Gurkoo 53

On the basis of findings the hypothesis that 'employees in general at the University are not satisfied with the existing HRD practices' is accepted. To conclude, the existing HRD practices followed at the University need improvement and changes as they are seen to be operational moderately. HRD climate ifnot taken care of by the University authorities, the morale, enthusiasm and commitment of employees can be affected. There is a need to consider setting up a separate HR Department besides other HRD interventions and mechanisms. This can help build HRD climate factors/variable such as role clarity, employee self development, awareness for developing competencies required, effective communication, etc. This would result in securing higher work commitment as job involvement, higher job satisfaction and work motivation and better image for institutional effectiveness on the basis of healthy introduction ofHRD mechanisms for faculty, officers and ministerial staff. A general statement can also be made that in an organization where personnel policies and roles which have direct bearing on performance of individuals are well defined and widely known, relationship between managerial, teaching, and non-managerial staff shall be more congenial and rewarding.

COME When the heart is hard and parched up, come upon me with a shower of mercy. When grace is lost from life, come with a burst of song. When tumultuous work raises its din on all sides shutting me our from beyond, come to me, my Lord of Silence, with thy peace and rest. When my beggarly heart sits crouched, shut up in a corner, break open the door, my King, and come with the ceremony of a king. When desire blinds the mind with delusion and dust. a thou holy One, thou wakeful, come with thy light and thy thunder. - Rabindranath Tagore

Management & Change, Volume 10 Number 2 (2006)

~-~~.~-~ .._~---_..._------_

.. _--- ..-_! •••.•..••••••••

III!1III1!t. ••••• PIWIII

54 S.A.Mufeed and F.A.Gurkoo

Table 8 Correlations Matrix for the University ofKashmir (KU) S.N. I

.478** .402** 1 .478** .517** 1 .402** .517** 1

.203** .257** .420**

.326** .400** .472**

.326** .369** .500** 211** 211 ** 211**

.282** .458**

.275** .447** .479** .312** .290** .402**

.224** .325** .318** .08;2

.283** .172* .327** .403** .446** .390** .377** .522** .375** .423** .555**

.184** .109 .246** .334** .251 ** .325**

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

.136*

.191** .259** .356** .333** .290**

.043 .230** .338** .368**

.098 .179** .376** .395**

.141* .164* .239** .266** .144* .146* .136* .101 .286** .222** .290** .310** .136* .075 .269** .291** .155* .280** .286** .387** .257** .378**

.360** .291**

-.016 .170* .169* .272**

.275** .211 ** .209** .356** .049 .323** .373** .338** .415**

.326** .258**

.257** .400** .420** ,472** 'n3**

.282** .000**

.000**

.458** .435**

.325**

.000 .318** .184**

.557** 1 .557** 1 .429** .482**

.429**

.351 ** .294**

.482**

.323** .290**

1 .323**

211** .435**

.274** .473** .212** .181 ** .064 .122 .316** .339** .220** .346** .301 ** .308** .230** .301 ** .454** .473** .230** .432** .440** .382** .379** .421 **

.198** .182** .352** .141 * .263** .441 ** .322** .316** .129 .233** .176* .178** .232** .274** .161 *

.203** .326**

.185** .494** .254** .417** .334** .291 ** .174* .255** .150* .241 ** .140*

.139* .250** .247** .301** .360** .306** .316** .314** .284** .171* .332** .310** .329** .305** .138* .269** .123 .164* .380** .281 ** .149* .192** .287** .198** .316** .292** .301** .399** .477**

.275**

.312** .136*

.369** .380**

.447**

.500** .498**

.479**

.290** .283** .402** .172*

.351 ** .323** .294** .290** .424** .477** .600** .476** .539** .464** .206** .112 .331 ** .276** .319** .275** .515** .454** .455** .280** .478** .390** .528** .435** .378** .344** .350** .316** .310** .202**

.362** .280** .317** I .280** .317** 1 .474** . .358** .432** .340** .358** .416** .434** .366** .145* 1 .362**

.142* .103 .348** .232** .052 .251 ** .126 .350** .319** .196** .316** .271 ** .264** .416** .360** .175* .402** .464** .310** .350** .330** .261 ** .325** .323** .292** .196** .273**

.259** .271 ** .296** .258** .241 ** .276** .371 ** .336** .418** .358** .278** .291 ** .218** .290** .342** .311** .297** .240** .214** .250** .259** .437** .332** .357** .500** .420** .445**

.269** .333** .479** .432**

.174* .377** .287** .370** .455**

.111 .309** .326** .318** .420**

.232** .158* .256** .272**

.302** .310** .096

.060 .378** .159* .168* .106 .495** .342** .428** .306**

.314** .378** .240** .273** .390** .141 * .191 ** .039 .125 .349** .484** .335** .301 ** .367** .215** .391 ** .273** .372** .400** .385** .289**

Management & Change, Volume 10 Number 2 (2006)

,,__

a.="lll*,;o

._ â&#x20AC;¢..-IIILIJIl!MUII!" ... t!I-----------------------------------~---

S.A.Mufeed andF.A.Gurkoo 55 S.N.

.327*

.390** .375**

.191 ** .259**

.356** .333**

.290**

.198** .141*

.122

.301 ** .454**

.440**

.182** .263**

.403** .377** .423**

.446** .522** .555**

.181 ** .339**

.308** .473**

.382**

.352** .441 **

.000** .000** .000**

.064

.220**

.230** .230**

.379**

.185** .254**

.301 ** .432**

.421 ** .494** .417**

.316**

.334** .325** .473**

.212** .346**

.424** .600** .539**

.206** .331 ** .319** .515**

.455**

.478** .528**

.477** .476** .464**

.112

.276**

.275** .454**

.280**

.390** .435**

.474** .340** .434**

.196** .273**

.251 ** .350**

.316**

.416* * .402**

.358** .358** .366**

.142*

.126

.319**

.271 ** .360** .464**

.432** .416** .145*

.573** .358**

.573**

.358** .498**

.044

.498** 1

.217** .204**

.348**

.103

.232**

.052

.196**

.264**

.175*

.044

.232**

.342** .423**

.325**

.406** .348** .375** .491 **

.310**

.217** .312**

.295** .503**

.444**

.204** .366**

.396** .452**

.494**

.424** .458**

.194**

.201** .200**

.217**

.232** .312** .366**

.217**

.342** .295** .396**

.007

.199**

.423** .503** .452**

-.002

.249**

.325** .444** .494**

.007

-.002

.199** .249**

.483**

.259** .453**

.540**

.405**

.417** .240**

1 .540**

1 .405** .501**

.501 ** .483** .477**

.194** .483**

.406** '.375** .424**

.201 ** .259**

.417** .483**

.459**

.348** .491 ** .458**

.240** .477**

.542**

.343** .350** .366**

.200** .453** .317** .120

.274** .400**

.447**

.459** .542** 1

.584**

I .412** .545**

.292** .327** .375**

.078

.208**

.221 ** .290**

.256**

.385** .332**

.229** .363** .438**

.060

.138*

.259** .301 ** .373**

.363** .283**

.220** .313** .14(*

.076

.214** .218** .219**

.021

.047 .064 .176* .261 ** .354** .413**

.340** .374** .493** .392** .331 ** .397**

.099

.370**

.403** .530**

.555**

.542** .561**

.014

.278**

.332** .465**

.369**

.491 ** .442**

.291 ** .300** .312** .467**

.414** .423**

.279** .360** .335**

.082

.286**

.227** .387**

.461 ** .407** .430**

.425** .362** .326**

.149*

.319**

.116

.187**

.289**

.226** .313**

.304**

.174*

.242**

.325**

.299** .429**

.314** .406** .351 ** .042 .313** .329** .205** .107

.313**

.060

.076

.339** .359** .368**

.169*

.297** .397**

.167*

.281 **

.174*

.234**

.449** .344**

.394**

.400** .486** .456**

.241 ** .227**

.370** .451 **

.395**

.551 ** .527**

.189** .285** .16(*

-.050

.072

.118

.183**

.248**

.113

.409** .461 ** .329**

-.013

.335**

.227** .293**

.272**

.350** .379**

.279** .288** .426**

-.018

.285**

.234** .239**

.280**

.311 ** .359**

.403** .360** .337**

.077

.273**

.318* * .376**

.477**

.395** .351 **

.366** .410** .436**

.131

.347**

.320** .462**

.413**

.481 ** .501 **

.178**

Management & Change, Volume 10 Number 2 (2006)

---------------------------

'II.U.UlIlnlll •••

•••••••

56 S.A.Mufeed and F.A.Gurkoo S.N.

.233** .232**

.129

.322** .176*

3 4 5 6 7

.316** .178(* .334** .174*

.274** .161* .150*

.350** .325** .259** .330** .323** .232**

]]

12 13 14 15 16 17 18 19 20 21 22 23 24 25

32 33 34 35 36 37 38

.338(** .368**

.164*

.266** .146*

.376** .395**

.360**

.291 ** .275**

.301 ** .306**

.314**

.171 *

.360** .316**

.284**

.332** .329**

.479** .432**

.358**

.218** .311 **

.276** .336**

.278**

.290** .297**

.296** .241 ** .371 ** .418** .158* .256** .272** .378**

.291**

.342** .240**

.168*

.495** .428**

.106

.342** .306**

.279**

.340** .392** .374** .331 ** .360**

.425** .314**

.335**

.326** .351 **

.082

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.319** .304** .]]6 .174*

.169*

.043

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.179** .250**

.140*

.313** .218** .146* .219**

.120

.078

.060

.317** .208** .138* .274** .221 ** .259**

.060

.220** .214**

.241 **

.506**

I .349** .506** .226** .346** .358** .386** .239** .273**

.323** .256** .265** .413** .297** .282** .333** .190**

.272**

.159*

.493** .397** .099

.014

.076 .047

.261 ** .370** .278** .354** .403** .332** .413** .530** .465**

.064

.346** .239** .358** .273** I

.356**

.555** .542** .561 ** .495**

.227**

.300** .408** .284** .300**

.193** .199** .321** .404** .357** .479**

310**

.362** .406** .042

.387**

.323** .413** .256** .297**

.250** .370** .325** .388**

.295**

.210** .138*

.341 ** .220** .295** .480** .149* .194**

.207**

.561 ** .500** 1 .540** .512** 1 .210** .561 ** .383** I .138* .500** .540** 1 .341 ** .480** .512** .383** .333** .311 ** .130 .149* .220** .295** .194** .327** .324** .290** .388** .157*

.187** .242** .289** .325** .461 ** .369** .491 ** .407** .226** .299** .442** .430** .313** .429** .376** .308** .161 * .265**

.356**

.293** .302** .187** .141 * .376** .359** .371 ** .290** .194** .312** .339** .403** .277** .511 ** .391 ** .369** .258** .315** .319** .331 ** .272** .408** .380** .299** .324**

.021

.400** .290** .301 ** .176* .447** .256** .373** .291 ** .467** .412** .385** .363** .300** .414** .545** .332** .283** .312** .423** .241 ** .349** .226** .386** 1

.161 *

.170*

.350** .327** .363** .366** .375** .438**

29 30

.239** .144*

-.016

.310** .096

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.261 ** .292** .302** .343** .292** .229**

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9 10

.206** .191 ** .263** .318** .390** .332** .511 ** .571 ** .424** .254** .207** .383** .242** .402** .349**

.130

.327**

.311** .324** .333** .290** 1 .490**

.490** 1

.462** .580** .284** .305** .333** .376** .219** .217** .497** .425**

.264** .338** .331 ** .458** .343** .391 ** .391 ** .403** .190** .160* .453** .482** .363** .310** .391 **

Management & Change, Volume 10 Number 2 (2006)

_______ .. .~_._~_~

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.291 ** .280** .38**

.211 ** .209** .356**

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.373** .338**

.415**

.305** .123

.281 ** .192**

.198** .292**

.399**

.138*

.269** .380**

.149*

.287**

.316** .301 **

.477**

.214** .437** .500**

.174*

.377**

.287** .370**

.455**

.250** .332** .420**

.111

.309**

.326** .318**

.420**

.259** .357** .445**

.125

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.301 ** .391**

.400**

.314** .240** .390**

.039

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.367** .273**

.385**

.378** .273** .141 *

.191** .335**

.215** .372**

.289**

.164*

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.286**

.286** .290**

211**

.313** .339** .400**

.189** .409**

.279** .403**

.366**

.329** .359** .486**

.285** .461 ** .288** .360**

.410**

.205** .368** .456**

.164*

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.426** .337**

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-.013

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.347**

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.297** .370**

.118

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.239** .376**

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.178** .379**

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.194** .277**

.258** .331 ** .380**

.299** .324**

.333** .302** .359** .312** .511 ** .315** .272** .190** .187** .371 ** .339** .391 ** .319** .408** .388** .141 * .290** .403** .369** .193** .321 ** .157* .300** .408** .284** .300** .199** .404**

.206** .318** .511 ** .254** .242**

.264** .391 **

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.191** .390** .571 ** .207** .402**

.338** .391 **

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.263** .332** .424**

.383** .349**

.331 ** .403**

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.462** .284** .333**

.219** .497**

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.580** .305** .376**

.217** .425**

.343** .160*

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.339** .196**

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.251 ** .313**

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.244** .393**

.402** .418**

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23 24

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.426** .258** .393**

.337**

.339** .251** .402**

.274** .519**

.196** .313** .418**

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.345**

.320** .385** .464**

.182** .456**

.364** .532**

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.519** .310** 1

.345**

.456** .364** .532** 1

Management & Change, Volume 10 Number 2 (2006)

Table 9 Chi Square Test for the University of Kashmir

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Scale

[ ~ ~

2" 3

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cr'

..â&#x20AC;˘'" tv N o o

rJJ

Statement

a'"

Expected frequencies

= [

Observed frequencies

42.2

Total

211.0 x2 p- value

211

39.640

23.147

31.441

50.872

0.000

00.000

0.000

69.687

16.796 42.578

30.303

64.853

44.521

60.161

39.924

76.417

0.000

0.002

Note: 0 cells (.0 per cent) have expected frequencies less than 5. The minimum expected cell frequency is 42.2. Figures in bold indicate highest frequency.

Who bravely dares must sometimes risk a fall. - Tobias George Smollett

~ ~ ~

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•

---

Statement Scale Expected frequencies

Observed frequencies 14

101

42.2

Total

211.0

211

p- value

41.251

32.104

40.351

80.919

21.204

56.038

41.915

45.090

67.175

55.517

96.464

0.000

4 I. 725 42.578 0.000

0.000

Statement

=r' ;:l

42.2

1 1»

(')

42.2

Scale Expected frequencies

Observed frequencies

rJ)

42.2

~ 0""

42.2

Total

211.0

211

~ ~

i: 3

(l)

(l) '"1

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P- value

211 57.318

0.000

46.749 72.957

17.412

49.166

74.379

58.550

50.066

45.848

83.905

57.033

43.194

0.000

0.002

0.000

211

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60 S.A.Mufeed and F.A.Gurkoo

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_""t,." .•

L.••" •••• "." ••,u~,Ci,a •••_'","n

.• ,1.

_,.&

".a. '.4 •.•

Ii _

'.'_.5=&1&£&;

, ii, ;

i ,1Si .••

....l

---------------------------

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S.A.Mufeed and F.A.Gurkoo 61

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Management & Change, Volume 10 Number 2 (2006)

--~-------------_

••__

! ----

••

_~!.IIMU!I!~I.I••••

-1

62 S.A.Mufeed and F.A.Gurkoo Mufeed, S. A. (2005) "Reward Superior Performance of Individuals: A Key to Achieve Competitive Advantage Through Competent People". In 'David, Jain and Upadhyaya (ed.), A Multidisciplinary Perspective, New Delhi: Tata Mcgraw Hill Publishing Company, 466-479'. Mufeed, S. A. (2006) "The Need for a Focus on Key Elements of HRD Climate in Hospitals", Management and Labour Studies, 31 (1): 57-69. Murthy, P.Y.R and Gregory, J.x. (1989) "Relevance of Japanese HRD Practices in Sundaram Clayton". In 'Rao, T.V., K.K. Verma, A.K. Khandelwal and E. Abraham (ed.), Alternative Approaches and Strategies of ERD, National HRD Network (1997), reprint (2002), New Delhi and Jaipur: Rawat Publications". Pakkeerappa, P. (2005) "HRD in Business Schools", University News, July, 43 (30): 25-31. Panchanatham, N. (1998) "Problem Solving Approach for Global Marketing Functions: An HRD Base", HID, 28(1), Jan- March. Parthasarathy, A. (1988) "Towards Developing Industrial Engineering Journal, 27:12-25.

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____.....---------------------------'

S.A.Mufeed and F.A.Gurkoo 63

Trend Report", April, 11 (20): 73-85. Sharif, N. As - Saber, Peter. J Dowling and Peter W. Liesch (1998 ) "The Role ofHRM in International Joint Ventures: A Study of AustralianIndian Joint Ventures", International Journal of HRM, October, 9 (5): 751-766. Sinha, J.B.P. and S. Singh (1995) "Employee Satisfaction and the Organizational Predictors, IJIR, 31 (2): 135-152. Shakeel, Ahmad (1999) Human Resource Development in Universities. New Delhi (Daryaganj): APH Publishing Corporation. Sharma, J.P. (2000) 'Professional Development in Indian Universities', Indian Journal of Training and Development, July-September, 30(3): 13-33. Sister Alphonsa, Y.K. (2000) "HRD Climate in a Private Hospital in Hyderabad: An Empirical Study", Indian Journal of Training and Development, October-December, 30(4). Inspiring Lives ANNIE BESANT: A GREAT SOCIAL REFORMER AND EDUCATIONIST Born on October 1, 1847 to Irish parents in London, Annie Besant was a social reformer who later distinguished herself as a theosophist. Annie Besant was very sensitive to the sufferings of others from her childhood. She would sacrifice her personal needs to help those who needed them more. In her childhood she would not even use sugar in her milk or tea to save money to help the poor. While in UK, she had pledged to work and dedicate her life to ameliorate the condition of the poor. She later moved to India on November 16, 1893 from UK and dedicated her life for the cause of poor in the field of scouting, education and women empowerment. A great orator, untiring worker and one of the founders of the Theosophical society, Annie Besant adopted India as her motherland. In 1907 she became President of the World Theosophical Society, which she had co-founded, a position which she held for remainder of her life. In 1908, she set up the Theosophical Order of Service (TOS) and called this association of individuals as 'a union of all who love in the service of all those who suffer.' While TOS had full functional autonomy but it functioned as a wing of the Theosophical Society only. Whereas Theosophical Society promoted the philosophy of universal brotherhood, the TOS had initially pro-

Management & Change, Volume 10 Number 2 (2006)

64 S.A.Mufeed and F.A.Gurkoo moted brotherhood locally rather than globally. She advocated a radical approach to r~ligion, which emphasized that it cannot be forced upon anyone, and that faith was a matter of personal belief. Inspired by Madame Blavatsky, her aim was to eventually found a universal brotherhood regardless of cast, creed and colour, to encourage the study of literature and philosophy, and to investigate unexplained laws of nature and physical powers latent in man. Annie Besant had once said, 'when we take up some work with the feeling of selfless service and dedicate it to God, it becomes the duty of the Almighty himself to find ways to help to complete it'. She started the Home Rule Movement and brought Congress and the Home Rule League together but invited the wrath of authorities who interned her. In appreciation of her distinguished services, Indian National Congress made her as its President at the Calcutta session of the party in August, 1917. In her Presidential Address, Annie Besant said: 'While I was humiliated you crowned me with honour; while I was slandered, you believed in my integrity and good faith; while I was crushed under the heel of bureaucratic power, you acclaimed me as your leader; while I was silenced and unable to defend myself, you defended me. When I was forced to serve in the lowest fashion, you lifted me up and placed me before the world as your chosen representative. I have no words with which to thank you, no eloquence with which to repay my debt. My deeds must speak for me, for my words are too'poor. I turn your gift into service to the Motherland. I consecrate my help anew to her in worship by action. All that I have and I am, I lay on the Altar of the Mother, and together we shall cry, more by' service, than by words, Vande Matram.' In India, apart from involvement in freedom struggle, she was involved in social development particularly education, one important contribution of her was in setting up the Central Hindu College at Banares, which later on grew into Banares Hindu University under the patronage and guidance of Pt. Madan Mohan Malaviya, a great Indian leader from north India. Annie Besant also wrote a number of papers and books comprising his 'autobiography', 'Religious Problems in India' and 'How India Fought for Freedom'. In view of her subsequent ill health, she later retired to Adyar in Madras in 1931 where she breathed her last on September 20, 1933. Veteran freedom fighter, Sarojini Naidu, a literary giant and popularly known as 'Bharat Kokila' while paying tribute to Annie Besant said 'Mrs. Besant was a great women, a warrior, a patriot and a priestess. Many creeds were reconciled in her. Her essential qualities were her unquenchable thirst for freedom.' Mrs Naidu added: 'Pondering over her incomparable devotion and her incalculable' service to the Indian cause, I can pay no finer tribute to her manifold greatness than to acclaim the sweet miracle wrought by her transcendent and transfiguring love for India, whereby she has created for herself an honoured arid legitimate place in the annals of glorious and heroic women of our own race and tradition.' -Editor Management & Change, Volume 10 Number 2 (2006)

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ORGANIZATIONAL CLIMATE IN PUBLIC SECTOR: AN EMPIRICAL STUDY Avinash Kumar Srivastav Organizational climate comprising three functional motives (achievement, expert influence and extension) and three dysfunctional motives (dependency, control and affiliation) was measured forAS3 randomly selected respondents from a large public sector industry, using MA 0 - Cinstrument. Dependency has been found to be the dominant climate. Affiliation was is the backup climate. Extension climate is weakest in the organization. Strong intercorrelations exist among the six climate motives, except for the pairs: expert influence - extension, extension - affiliation and control - affiliation which are not correlated. With the exception of dependency - affiliation pair, these correlations are found to be positive, when both the variables in the pair represent functional climate or when both of them represent dysfunctional climate. On the other hand, they are negative when one of the variables involved represents functional climate and the other variable represents dysfunctional climate. Dependency is negatively correlated with affiliation even though both these represent dysfunctional climate. Factor analysis of the six organizational climate motives or variables brought out that organizational climate is operating in the organization in two ways. 'Larger goal orientation' and 'friendly relationship orientation' represent the two meta motives of climate prominently operating in the organization. Generally the organizational members either focus on attaining the larger goals (making oneself relevant to others, identifying with the larger goals; working for attainment of goals, striving for excellence; de-emphasizing consolidation of personal power; undertaking responsibility instead of avoiding it) or they focus on maintainingfriendly relationships (disregarding the need for expertise). Key words: Organizational climate, public sector, motivation analysis. Management & Change, Volume 10, Number 2 (2006) 2006 IILM Institute for Higher Education. All Rights Reserved.

~---~--------------------

I.IW'ln!li •••

66 Avinash Kumar Srivastav UNDERSTANDING

ORGANIZATIOAL

CLIMATE

Organizational climate reflects the personality of the organization. It represents a conceptually integrated synthesis of organizational characteristics and depends on the perception of the organizational members about different dimensions of the organization. It influences the behaviour of the people in the organization and plays a very significant role in attainment of organizational goals. It is important to note that the conventional measures of organizational performance, such as profitability or return on investment are only lagging indicators of organizational achievements. They show up the results after they have occurred. On the contrary, organizational climate is a leading indicator of organizational achievements (Litwin, Humphrey and Wilson, 1978). It indicates what kind of results could be expected well before they have occurred. Study of organizational climate is therefore extremely important and relevant (Srivastav, 1993, 1994, 1995, 2005a, 2005b, 2006, 2007). Organizational climate is a set of relatively enduring characteristics describing an organization, distinguishing it from other organizations (Forehand & Glimer, 1964). It represents the extent to which it is seen by those inside and outside the organization as ego-supporting, hierarchical, ambiguous, conflict-prone and routinized, etc. (Korman, 1978). Reflecting the internal environment of the organization, organizational climate inl1uences the Quality of Working Life (QWL) (Walton, 1973) in the organization.Organizational climate can be defined as a set of perceived attributes of the organization that may be induced from the way the organization deals with its members, groups, issues and environment (Hellriegal and Slocum, 1974; Pareek, 2002, 2004.). Organizational climate reflects the psychological (or internal) environment of the organization which acts upon human resources therein (La Follette, 1983). MOTIVATIONAL

ANALYSIS OF ORGANIZATIOAL

CLIMATE

Pareek (1989) has described organizational climate as the result of interaction among five components of the organization: (i) Structure, (ii) Systems, (iii) Culture, (iv) Leader Behaviour and (v) Employees' psychological needs. He has developed a framework of organizational climate in the form of Motivational Analysis of Organizations - Climate (MAO-e) to facilitate the analysis of relationship between organizational climate and motivation, employing the following six motives:

Management & Change, Volume 10 Number 2 (2006)

J ,

Avinash Kumar Srivastav 67

(i) Achievement (ii) Expert Influence: (iii) Extension (iv) Control (v) Dependency (vi) Affiliation

Concern for excellence and achievement of goals. Emphasis on expertise. Concern for relevance to others. Concern for personal power. Dependence on approval from others. Concern for friendly relations.

Pareek (1989) has considered the following twelve dimensions of an organization: (i) Orientation, (ii) Interpersonal Relationships, (iii) Supervision, (iv) Problem Management, (v) Management of Mistakes, (vi) Conflict Management, (vii) Communication, (viii) Decision Making, (ix) Trust, (x) Management of Rewards, (xi) Risk Taking and (xii) Innovation & Change. MAO-C instrument captures the perception of the organizational members on the twelve organizational dimensions listed above. There are six statements for each of the organizational dimensions, representing the six motives of the organizational climate. Respondents are required to rankorder the statements under each dimension from 1 to 6. Scoring is done for each ofthe above-mentioned motives using the prescribed key. Total score for each motive is obtained by adding the motive score for all dimensions.

OBJECTIVES The study is aimed at developing a better understanding of organizational climate and how it operates in the selected public sector industry through the following: (i) Identifying the dominant and backup climates in the organization; (ii) Determining the correlation between different motives (types) of organizational climate; (iii) Identifying the meta motives of the organizational climate prominently operating in the organization.

METHODOLOGY A large, multi-unit, multi-location public sector industry was selected for the study. Workshops were conducted in different units and locations, explaining the framework of organizational climate and its impact on organizational performance. Due care was taken to ensure that the participants in the workshop represented all the diversity present in the organization (different genders, age groups, hierarchical levels, educational qualifications and funcManagement & Change, Volume 10 Number 2 (2006)

68 Avinash Kumar Srivastav tional groups). Participants were promised that they would receive their individual climate profile along with organizational climate profile and feedback on implications thereof. Motivational Analysis of Organizations - Climate (MAQ-C) (Pareek, 1989, 2002) instrument was administered for measuring the six motives (types) of organizational climate for each respondent. Responses that were complete and error-free constituted 453 MAO - C samples. Statistical analysis was done using SPSS. Means were calculated for each motive of organizational climate. Rank ordering ofthe means for the six motives of organizational climate was done to identify the dominant and backup climates in the organization. Correlation analysis was carried out to study intercorrelation between the six motives of organizational climate. Two tailed significance testing was done. Correlation coefficients with P < 0.05 were used for interpretation. Factor analysis was carried out on the six motives of organizational climate to understand the internal stlUcture of climate operating in the organization, determining the meta motives of the operating climate. Factors with Eigen Values greater than 1.0 were considered. Factor loadings oflesser than 0.25 were taken as low. Those equal to or greater than 0.25 but lesser than 0.5 were taken as medium. Factor loadings equal tb or greater than 0.5 were taken as high. Factor loadings of 0.25 and above were used for interpretation.

RESULTS OF THE STUDY Table 1 depicts the rank ordering of the climate variables. It can be seen that 'dependency' is the dominant climate (Rank 1) and 'affiliation' is the backup climate (Rank 2) in the organization. 'Extension' is the weakest (Rank 6) in the organization.

Table 1 Climate Varlable- Mean & Rank Variable

ACH EXP EXT CON DEP AFF

Mean

Rank

48.283

45.623

43.397

51.108

58.188

51.192

Management & Change, Volume 10 Number 2 (2006)

E.EmUtt __

Avinash Kumar Srivastav 69

Table 2 furnishes the correlation coefficients between different pairs of the six climate variables. 'Achievement' is positively correlated to 'expert influence' and 'extension'. 'Achievement' is negatively correlated to 'control', 'dependency' and 'affiliation'. 'Expert influence' is negatively correlated to 'control', 'dependency' and 'affiliation'. 'Extension' is negatively correlated to 'control' and 'dependency'. 'Control' is positively correlated to 'dependency'. 'Dependency' is negatively correlated to 'affiliation'.

Table 2 Intercorrelation

ACH ACH

EXP

EXT

CON

DEP

EXP

of Climate Variables

EXT

CON

DEP

AFF

1.000

0.000

0.165

1.000

0.000

0.417

0.058

1.000

0.000

0.217

0.000

-0.690

-0.388

-0.635

1.000

0.000

-0.420

-0.303

-0.570

0.362

1.000

0.000

-0.349

-0.428

-0.092

0.062

-0.093

1.000

0.000

0.052

0.187

0.048

0.000

AFF

. Table 3 furnishes the results off actor analysis of the climate variables for MAO-e sample taken from 453 respondents. Two factors explaining 62 per cent variation have been extracted.

Management & Change, Volume 10 Number 2 (2006)

70 Avinash Kumar Srivastav

Table 3 Factor Loadings of Climate Variable Variable

Factor 1

Factor 2

ACH

0.70221

-0.27705

EXP

0.12507

-0.73750

EXT

0.81349

0.15782

CON

-0.86877

0.15848

DEP

-0.63577

-0.08345

AFF

0.10129

0.80279

Eigen Value

2.56025

1.16029

Percentage Variance

42.7

19.3

Cumulative Variance

42.7

62.0

Factor 1 explains 42.7 per cent variance. It has high positive loadings on 'extension and achievement' and high negative loadings on 'control and dependency'. Factor 2 explains 19.3 per cent variance. It has high positive loading on 'affiliation' and high negative loading on 'expert influence' . DISCUSSION

AND CONCLUSIONS

(i) Rank Ordering of Climate Variables 'Dependency' is most predominant in the organization. This is highly dysfunctional. It signifies that generally people in the organization are not taking responsibility and initiative to work on their own ideas and proposals. They are invariably 'passing the buck' (i.e., shifting the responsibility for action or decision from selfto others) (Srivastav, 2006). There is excessive dependence on the approval and help from those higher in status or expertise. This type of dominant climate reflects a traditional type of organization (Pareek, 2004). This was true for the organization under study as confirmed by the respondents. 'Affiliation' is second ranking after' dependency'. This is also dysfuncManagement & Change, Volume 10 Number 2 (2006)

Avinash KumarSrivastav

tional as people in the organization have a heightened concern for building and nurturing close personal relationships, even when they come in way of achievement, quality and excellence. People work harder for maintaining friendly relationships than for attaining the organizational goals. This type of climate is more suitable for clubs where maintaining friendly relation is by far most important (Pareek, 2004). Strong presence of 'affiliation' in the organization was also confirmed by the respondents. 'Extension' represents a functional climate. It signifies that people have a heightened concern for being useful and helpful to others. When extension is dominant, organizational members make themselves relevant to the group, organization and society they belong; they want to contribute for the superordinate or larger goals. This type of climate is particularly suitable for community service organizations (pareek, 2004). Teamwork and collaboration naturally flourish when 'extension' is strong. 'extension' having the last rank in the organization points to near absence of teamwork which was endorsed by the respondents. 'Dependency - affiliation' combination of dominant - backup climate (Pareek, 2004), reflects a traditional organization in which the top management controls all matters using their own in-group members, who have high loyalty to their leaders. Characterization ofthe organization under study as above was also endorsed by the respondents. (ii) Intercorrelation

of Climate Variables

'Achievement' is a functional climate which is most suitable for industrial and business organizations. It stands for a heightened concern for achievement, quality and excellence. When 'achievement' is strong, organizational members persistently try for attainment of goals, employing all possible alternatives, inspite of repeated difficulties and obstacles (Pareek, 2004). Challenging goals are set for one-self and for others and serious efforts are made, not only to meet them but also to surpass them (Pareek, 2004). 'Expert influence' is also a functional climate which is most suitable for scientific organizations and university departments. It signifies concern for changing situations, developing people and making impact on others using one's own expertise. When 'expert influence' is strong, people in the organization do what they think is right (Pareek, 2004). Experts in different areas take their independent decisions without interference from others. Management & Change, Volume 10 Number-2 (2006)

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.."-=_!_--

1 72 Avinash Kumar Srivastav

'Expert influence' promotes performance through expertise which explains its positive correlation with 'achievement'. 'Extension' promotes performance through collaboration and teamwork which explains its positive correlation with 'achievement'.

'Control' is a dysfunctional climate which is most suitable for army and police. It is also very common in bureaucratic organizations in the government and public sector. It signifies heightened concern for displaying personal power and staying fully informed and in control all the time (Pareek, 2004). When 'control' is strong, 'empowerment' (Murthy and Srivastav, 1994) is weakened. Instead of delegating some of the responsibilities to the subordinates, they are frequently monitored and directed for everything they do. 'Control' promotes compliance, discourages responsibility and initiative taking. It dampens enthusiasm and motivation. It is obvious that 'control' comes in way of performance which explains its negative correlation with 'achievement'. 'Dependency' encourages excessive dependence on others and weakens responsibility and initiative taking in the organization. It comes in way of performance which clearly explains its negative correlation with 'achievement'. When there is extraordinary emphasis on maintaining friendly personal relationships, performance often needs to be compromised. This explains negative correlation between 'achievement' and 'affiliation'. 'Expert influence' stands for taking initiative to change situations, develop people and make impact on others, using one's own expertise. On the other hand, 'dependency' dwells on waiting for others' approval and discourages taking responsibility and initiative taking. The two are opposite to each other and hence the negative correlation between them. When there is a heightened concern for consolidating the personal power or for maintaining friendly relations, focus on expertise may be lost and one may not be able to work on changing situations, developing people and making impact on others using ones expertise. This explains negative correlation of' expert influence' with 'control' and 'affiliation'. 'Extension' stands for working for the superordinate or larger goals but control stands for consolidating personal power. The two are exactly opposite to each other and hence the negative correlation between them. 'Extension' stands for readily working with others in collaborative effort for the attainment of superordinate or larger goals. On the contrary, 'dependency' stands for 'passing the buck', withholding one's contribution pending others' approval. Management & Change, Volume 10 Number 2 (2006)

Avinash Kumar Srivastav 73

This explains the negative correlation between them. One's desire for consolidation of personal power (represented by 'control') encourages others to work on the basis of his approval. This results in strengthening 'dependency' and explains the positive correlation between 'control' and 'dependency'. Negative correlation of 'dependency' with 'affiliation' found in this study is unusual and not reported earlier. This points to possible functionality of 'dependency' or 'affiliation' and needs to be investigated further. One possible explanation for this unusual relationship could be as follows. When 'affiliation' is strong, juniors and seniors inter-mingle with ease. Relationship between them becomes warm and friendly to such an extent that the need for seeking formal approval of seniors comes down. This results in weakening of 'dependency'. There is lack of correlation between the pairs: 'expert influence - extension', 'extension - affiliation' and' control- affiliation'. These also need to be investigated further.

(iii) Factor Analysis of Climate Variables 'Factor I' signifies that organizational members are focused on attaining. larger goals by (i) making oneself relevant to others, identifYing with larger goals; (ii) working for attainment of goals and achieving excellence; (iii) deemphasizing personal aggrandizement or consolidation of personal power; (iv) undertaking responsibility instead of avoiding it. 'Factor l' can rightly be named as 'larger goal orientation'. 'Factor 2' reflects that maintaining friendly relations is the main concern of the organizational members who disregard the need and importance of expertise in the organization. 'Factor 2' has therefore been named as 'friendly relationship orientation'. It is therefore clear that climate is operating in the organization under study in two ways. 'Larger goal orientation' and 'friendly relationship orientation' represent the two meta motives of climate prominently operating in the organization. Organizational members either focus on attaining the larger goals (making oneself relevant to others, identifYing with the larger goals; working for attainment of goals, striving for excellence; de-emphasizing consolidation of personal power; undertaking responsibility instead of avoiding it.) or they focus on maintaining friendly relationships (disregarding the need for expertise).

Management & Change, Volume 10 Number 2 (2006)

74Avinash Kumar Srivastav

REFERENCES Forehand, GA. and B. von H. Glimer (1964) "Environmental Variations in Studies of Organizational Behaviour", Psychological Bulletin, 62: 361 -382. Hellriegel, D. and J.W. Slocum, JI. (1974) "Organizational Climate: Measures, Research and Contingencies", Academy of Management Journal, June, 17(2): 255-280; Korman, A.K. (1978) Organizational Behaviour. New Delhi: Prentice Hall ofIndia Private Limited, 119-121. LaFollette, W.R. (1983) "How is the Climate in Your Organization?", Personnel Journal, July 1975, Costa Mesa, California. Reprinted in "Gordon, J.R., A Diagnostic Approach to Organizational Behaviour. Newton, MA: Allyn and Bacon, Inc., 664-669". Litwin, GH., J.W. Humphrey and T.B. Wilson (1978) "Organizational Climate: A Proven Tool for Improving Performance". In "Burke, W.W. (ed.), The Cutting Edge: Current Theory and Practice in Organization Development. La Jolla, California: University Associate, 187-205. Murthy, P.Y.R. and A.K. Srivastav (1994) "Empowering People for TQM Through Redesigning Organizations". In "Kohli, U. and D.P. Sinha (eds.), Human Resource Development: Global Changes & Strategies in 2000 (Proceedings of 23rd IFTDO World Conference on Human Resource Development, New Delhi). New Delhi: Allied Publishers Limited, 327-344". Pareek, U. (1989) "Motivational Analysis of Organizations Climate (MAOC)". In "Pfeiffer, J.W. (ed.), The 1989 Annual, San Diego, California: University Associates, 161-180". Pareek, U. (2002) Training Instruments in HRD and OD, (2nd ed.). New Delhi: Tata McGraw Hill Publishing Co. Ltd, 20. Pareek, U. (2004) Understanding Organizational Behavioul: New Delhi: Oxford University Press, 411-417. Srivastav, A.K. (1993) "Study of Organizational Climate, Role Stress & Coping Strategy amongst Public Sector Executives". Ph.D. thesis, Management & Change, Volume 10 Number 2 (2006)

_____

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''''"'",,",'"'••••It •••

•••

='"r~I'!•• ~.~PM~_~'_ ••

~IU~"~.~ .... ,,~

Avinash Kumar Srivastav 75

Bangalore University, Bangalore. Srivastav, A.K. (1994) "ISO 9000 and Organizational Climate", In "Rao T.V., et aI., (eds.) HRD in the New Economic Environment. New Delhi: Tata McGraw-Hill Publishing Company Ltd, 99-107". Srivastav, A.K. (1995) "Behavioral Dimension of R&D: Implications for Change". In "Srivastav, AX., et al. (eds.) R&D Management, New Delhi: Tata McGraw-Hill Publishing Company Ltd". Srivastav, A.K. (2005 a) "Differential Climate in the Organization: An Empirical Study across Functions", Gitam Journal of Management, January - June, 3(1): 90- 97. Srivastav, A.K. (2005 b) "Climate Across Management Le~elsin an Organization", The 1CFA1 Journal of Organizational Behaviour, January, 6(1):7-10. Srivastav, AX. (2006) "Passing the Buck: An Empirical Stu9Y.on Depen. dency Climate in Public Sector", Management Stream, No~'ember, 7(1): 19-24. Srivastav, A.K. (2007) "Achievement Climate in Public Sec,tor: A Crossftmctional Study on Relationship with Stress and Copin'~l, 11MB Management Review, September (Under Publication). Walton, R.E. (1973) "Quality of Work Life: What is it?" Sloan Management Review, 15(1):11- 21. LiYing

Legends

ELA BHATT: A GANDHIAN AND SOCIAL ENTREPRENEUR Ela Ramesh Bhatt was born on September 7, 1933 in Ahmedabad. The second of three daughters, Ela grew up in a well-to-do family deeply interested and active in soCial causes. Her father, Mr. Sumant Bhatt, had a successful law practice, and her mother, Mrs. Varan Lila Vyas, was active in women's empowerment. She did her initial schooling at Sarjwanik Girls High School, Surat from 1940 to 1948, and obtained her BA degree with English as major from MTB College, Surat in 1952. In 1952, she obtained her law degree from L.A. Shah Law College (Ahmedabad) affiliated with the Gujarat University. In 1955 she joined the Legal Department of the Textile Labour Association (TLA), an organization which was founded by Mahatma Gandhi in 1917. In 1956, Ela married Ramesh Bhatt, who was then a faculty at Gujarat Vidyapeeth National University in

Management & Change, Volume 10 Number 2 (2006)

-----------------------_1

••••.011 .••.•

76 Avinash Kumar Srivastav

Ahmedabad

in economics

(1958) and Mihir (1959).

area. They were later blessed with two children Amimayi In 1972, she set up the SEWA (Self Employed

Women's

Association) for protecting the interests of informal and unorganized sector particularly small home based producers, which were not unionized earlier. Ela Bhatt is the Founder-Genera!

Secretary of the SEWA. Till 1981 ,SEWA was part ofTLA but later it

was carved out as an independent

organization.

In 1974, she set up the cooperative illiterate and poor women.

SEWA Bank, for providing

banking facilities

In fact, SEWA Bank has set the pace for providing

credit facility to rural poor in Gujarat and successful experiment

micro-

of this initiative is being

replicated elsewhere in other states. SEWA Bank is a cooperative where members save funds and raise loans usually first to redeem debts from private moneylenders and then to acquire assets: a handcart, a house, a work shed, a piece of land, a well, a handloom, a sewing machine, a biogas plant or a cow. These assets improve their family incomes by increasing productivity or adding an additional source of earning and diversifying the resource base. SEWA members make continuous efforts to own assets and improve productivity. A confluence of three movements, the labour movement, the cooperative movement and the women's movement, SEWA and its many subsidiaries including SEWA Bank, have helped over 200,000 self-employed women to be self-reliant. The SEWA Bank proves that poor women from the informal sector can profitably run a financial body like a bank. When the members own a bank, they can take keen interest in its management and ensure a high repayment rate, which enables the creation of surpluses and distribution

of largest possible dividends.

In an attempt to provide financial independence and power to the people of India, particularly women of India, GOI on April 12, 2006 introduced 'UTI Retirement Benefit Pension Fund' to the members of the SEWA, through monthly contributions. This became possible with UTI Mutual Fund joining hands with Shri Mahila Sewa Sahakari Ltd. to provide a 'Micro Pension Scheme' to unorganized women workers through the 'UTI Retirement Benefit Pension Fund'. Over 25, 000 women in Ahmedabad alone who were mostly illiterate and poor members of the SEWA had signed up for a micro-pension scheme that could invest up to 40 per cent of the total corpus in equities by April 14, 2006 when the scheme was announced. The Scheme

is not limited to women

but all workers

anywhere

in India can join this

scheme for their financial independence during their old age. The Scheme aims to provide pension to investors particularly self-employed persons after they attain the age of 58 years, in the form of periodical cash flow up to the extent of repurchase value of their holdings through a systematic

withdrawal

plan.

As the guiding spirit behind SEWA and its many projects, Ela Bhatt has shown that the weak and the poor can through their collective strength can overcome any limitation. Her great confidence in the ability of the self-employed women is seen in the structure of SEWA; it is a grass-root organization, which genuinely utilizes the talents and knowledge of its members. In view of her pioneering work for social cause, she had served as a member of the Rajya Sabha (1986-89) and the Planning Commission (1989-91). -Editor

Management & Change, Volume 10 Number 2 (2006)

ORGANIZATIONAL LEARNING AND SPECIAL CONTRIBUTION OF 'AFFECTIVITY': CASE STUDY OF AN INDIAN R&D ORGANIZATION Ashish Pandey

Rajen K. Gupta

Biswajit Roy

This case study aims at understanding 'organizational learning' with special reference to 'knowledge management'. Data was collected from multiple sources under an identified theme an interpretive approach was adopted. The paper seeks to describe 'social ecology' of an organization in terms of social structure, social identity, leadership, people and processes. The study was carried out by collecting narratives of peak learning experiences of the organizational members and thematically analyzing them, which bring out role of 'affect' in organizational learning. The paper has usual limitations of a single case study design. It however reemphasizes criticality of sociocultural fabric of organization for organizational learning. The paper also identifies 'positive emotions' that enhance propensity for knowledge acquisition and knowledge mobility in the organization which in turn makes 'knowledge management' a successful intervention. It indicates the importance of 'element of affectivity' as afuture area of inquiry in thefield of'organizationallearning'. Key words: Organizational learning, knowledge management, socio-cultural fabric, emotions. INTRODUCTION Forces of globalization and accelerating advancement of technology have brought new challenges and opportunities for business corporations for creating market value. Companies' predominant source of market value has shifted from tangible fixed asset to intangible assets like human capital, customer capital, brand equity, etc. particularly in last two decades (Henson 2003). This has resulted in making the firms aware and leverage those sources of competitive advantages which are considered less tangible in nature; for example creativity, etc. (Woodman, Sawyer, Griffin, 1993; Basadur, 1992, Sundgren, Dimenas, Gustafsson and Selart, 2005), Management & Change, Volume 10, Number 2 (2006) ÂŤ;I2006 IILM Institute for Higher Education. All Rights Reserved.

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••• 111•••[1

11•• '

78 Ashish Pandey, Rajen K. Gupta and Biswajit Roy innovation (Walker and Robert 2005, Hee-Jae and Pucik, 2005), and tacit knowledge (Nonaka, 1994; Grant, 2002). 'Knowledge based view offirm' is getting prominence in management literature in the wake of current development. In knowledge based view organizations are viewed as learning systems. It postulates that knowledge, both explicit and tacit, is embedded in the organization culture, routines and systems (Arm brecht, Chapas, Chappelow and Farris, 2000). This embeddedness makes it difficult to be imitated by competitors and produces long-term sustainable competitive advantage (Grant, Robert ,1997, Brown, Seely, Paul, 1998). Knowledge based view of firm has made a basic contribution in emergence of a new sub-field in management literature known as Knowledge Management (KM) and Organizational Learning (OL). KM refers to identifying and leveraging the collective knowledge in an organization to meet its strategic objectives and focuses on exposing individuals to potentially useful information to enhance their performance and learning on the job. It involves building and managing knowledge repositories and to ensure the flow of knowledge for further knowledge creation in order to build organizational competence for its sustainable advantage (Alvi and Leidner, 2001, Davenport, et al. 1998). In the light of 'knowledge based view' of firm Organizational Learning (OL), is identified as a major organizational capability. OL is defined as a process of improving organizational actions through acquiring and developing new knowledge and capabilities (Fiol & Lyles, 1985). Organizational Learning (OL) is also defined in terms of the processes of knowledge creation, retention, and transfer within an organization (Vera and Crossan, 2001). Development of knowledge management (KM) in theory and practice involves a wide range of disciplines each bringing their unique perspective. Two of the main disciplines that contribute to the KM are information systems and management (Shirley-Inn, Rodney, Seamus 2005). Information Technology has become a major enabler in the KM process. Acknowledging the economic and IT perspective ofthe KM, this paper identifies gaps in philosophical foundations of organizational learning and less explored assumptions that tend to impact the KM practices. Table 1 summarizes the different research focus maintained in the field ofKM and OL. Management & Change, Volume 10 Number 2 (2006)

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Ashish Pandey, Rajen K. Gupta and Biswajit Roy 79

Table 1 Different Research Management Perspectives in the field ofKM ofOL Research Focus

Authors

Organizational strategy

Desouza, Shigetaka and Umezawa (2005), Adam and Lamont (2003), Zack (1999).

Technical

Benbya, Passiante and Belbaly (2004), Skok and Kalmanovitch (2004), Dierkes and Teele, (2001), Marwick (2001).

Individual

Elkjaer(2003), Dueck (2001), Maier, etal. (2001).

Socio-cultural

Weir and Hutchings (2005), Park, Ribiere and Schulte (2004), Kellogg and Erickson (2001).

Rationale for the Study KM and OL are the two strands found to be parallel and being treated as intertwined phenomenon in many studies (Weir and Hutchings, 2005; Kellogg and Erickson, 2001). The current study follows similar lines. Studies about learning in organizational context take either individual learning theories or social learning theories as theoretical and conceptual foundations. Acknowledging contribution of individual learning based theories for explaining cognition in organization current study views organizational learning as a social process, an integral part of organizational life, a relational activity and result of participation and interaction. This is affected by what Gupta and Govindarajan (2006) call 'social ecology' of the organization, i.e. culture, climate, leadership and other human processes. This in turn affect the success ofKM intervention. The objective is less to show-case a best practice case but more to identify factors influencing KM and OL. Most of the OL and KM studies are based on twentieth-century rationalIstIC models of organIzatIOn. ThIS study attempts to mdIcate 'emotIOns' as factors beyond cognitive perspective of organizational learning. Through the narrative accounts of peak learning experiences of organizational members an attempt is made to identify dominant 'emotions' which result in organizational or group learning making KM, a successful practice. A case Management & Change, Volume 10 Number 2 (2006)

80 AshishPandey, Rajen K. Gupta and Biswajit Roy is made for empirical sociologists and management practitioners to include 'feelings' as elementary facts for success of KM as much as their social and technical infrastructure. The study was conducted in the R&D (Research & Development) unit of a large oil company in India. Knowledge creation and facilitating the refineries for application of knowledge is the core activity of this unit. Nature of the functioning of the unit provides a condensed view oflearning and knowledge creation and dissemination process in organizational setting. In order to understand the factor affecting KM and OL we entered in the research site with 'what' questions. This was strongly functional in approach. Later on, authors moved into asking open ended 'who', 'why' or 'how' questions, shifting away from immediate solution oriented functionalist approach to interpretive approach. The paper reflects two phases of their journey to understand this phenomenon. The first phase elaborates on KM system and covers technology, social structure and cultural context of KM practice. The second phase presents the narrative account of peak experiences of organizational members of their learning in organization. RESEARCH

METHOD

A case based interpretive approach was adopted for the study. As recommended by Eisenhardt and Kathleen (1989) this approach is appropriate in new areas of interest to generate some novel insights and testable hypotheses. The data was collected from multiple sources in accordance with Yin's (2002) recommendation. The KM champion and other leaders selected randomly cutting across all functional areas ofthe unit were interviewed. Each interview lasted for between forty five minutes to one hour duration. Total twenty interviews were conducted. The content of interviews was either noted down in the field notes or was tape-recorded, if allowed by the interviewee. These interviews gave authors richer understanding of social structure and cultural context ofKM and OL in the unit. Views presented herein included both mainstream and counter views of organizational members in a coherent manner so that it would provide comprehensive of the situation and create possibility of getting genuine insight about the organization and the research phenomenon under study. According to Chell (1998) this is a prerequisite for face validity. In the second phase of the study, authors searched for deeper insights about underlying success factors of OL and KM. In this phase, sample size of

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Ashish Pandey, Rajen K. Gupta and Biswajit Roy 81

interviewees was increased across hierarchical levels with more in-depth interaction. Interview of some of earlier interviewees were also conducted. Findings of the data were combined for multiple investigations. Besides interviews, the research relied on other sources of evidence such as noninvolved observation, organizational electronic records, etc. Authors also scanned KM Portal, Project Reports and Patent Documents available in the organization's library. With-in case and cross-case pattern matching was done. Comparison of findings is done with similar and conflicting literature.

Research site The R&D unit studied assets of a firm operating in the complete value chain of the downstream petrolewn sector. According to the General Manager of the R&D Center the mission of the R&D unit is to create new knowledge and use it for corporate gains. Their objective is to develop innovative solutions for helping the refinery units, improving their profit margins, reducing cost and optimizing process, thereby adding value to the refinery operations. R&D centre is committed towards fulfillment of the organization's vision of becoming an integrated transnational energy company. R&D unit was set up in early 1970's to cater to the R&D requirements of various divisions of the firm. The R&D Center is active for well over last three decades and has emerged as one of the largest patents holder organizations in the country. Beginning with import substitution of the lubricating oil and grease formulations in the seventies, the center has, over the years, acquired capabilities to develop products, meeting latest international specifications as well as deploying customized products to meet special application needs. People working in the R&D centre possessed sound educational qualifications. More than two hundred scientists and engineers are employed herein. Most of them are graduates or post-graduates in engineering or different streams of science from educational institutes of repute from India and abroad. The R&D unit has five major laboratories and one chemical ing department known by different departmental names such as bioenergy, lubricants, fuel testing, etc. All such laboratories are different products ofpetrolewn extraction chain or its utilization

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Management & Change, Volume 10 Number 2 (2006)

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j 82 Ashish Pandey, Rajen K Gupta and Biswajit Roy different commodities. Nature of work demands these different laboratories to depend on each other to accomplish almost any task or project. Different laboratories of the centre perform R&D work relating to extraction of oil, emission levels in oil combustion, its impact on environment, etc. Most of the work is undertaken in the form of projects for which intra-laboratory or inter laboratory teams are formed. A project team or taskforce generally comprises four to ten scientists with a varying mix of engineers and technicians. Its customer base includes public and private companies in the field of automobiles or petroleum refinery firms. As an organization it is networked with many chemical laboratories, automobile manufacturers, universities in India and abroad. It also interact extensively with many NGO's, government agencies, environment monitoring bodies like TERI (The Energy and Resources Institute) and NEERI (National Environmental Engineering Research Institute), etc. These linkages bring knowledge as well as business value to the unit. A good example of its business level collaboration is its joint research with R&D unit of an American firm. Initially both of these units were working on catalytic properties of a chemical. Research showed promising results and eventually parent companies of both the units came closer to set up a manufacturing unit of this catalyst in India. This is a good example of knowledge based collaboration and diversification. Research projects are decided as per the instruction of corporate office based on the feed back of marketing department. The centre also undertakes projects by its own. Such projects may not be immediately useful in the market but are taken up sensing the future requirements. Apart from the internal research projects, unit laboratories receive projects related to product development or formulation-analysis from other companies and laboratories. Head of lubricant laboratory told that when a project of similar nature, which has already been undertaken in the unit comes, they fix certain parameters pertaining to reducing the time required and cost involved in the project compared to the past. This is necessary as it is importantto remain competitive in the market. The most important thing about motivation is goal setting. You should always have a goal. - Francis Larrieu Smith Management & Change, Volume 10 Number 2 (2006)

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Ashish Pandey, Rajen K Gupta and Biswajit Roy 83 Knowledge Management System

K M Repository

Community of Practices

e-Project Reports

Best Practices

Intranet

Yellow Pages

e-Database

Internet

Details of Suppliers & Customers

Publication

Fig. 1 KM System of R&D Unit Need for KM Initiative Describing changes in the operating and remote environment for the firm, General Manager of the centre told that with the entry of global and private players, advanced technologies in refining and lubricants, shortened product life cycle, superior product at lower cost have emerged as major business challenges for the firm as a whole. Other than these specific challenge for the R&D unit is substantial portion of workforce nearing retirement. KM as a management intervention is aimed to tap knowledge available to the existing workforce, increase innovations, reduce cost of product development and increase overall efficiency of the company. Before launching the KM portal, ground work for facilitating the change management process was done. KM readiness assessment was conducted through KM preliminary study questionnaire and awareness workshops. Data was analyzed and gaps were identified in the way of success ofKM intervention. Process of change was facilitated through 'change management workshops', 'communication plan' and 'continuous involvement and ownership'. Management & Change, Volume 10 Number 2 (2006)

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I 84 Ashish Pandey, Rajen K. Gupta and Biswajit Roy

PHASE I Being a firm having 'knowledge' its main output R&D unit has to perfonn two main tasks; new knowledge acquisition, and sharing and mobilizing that knowledge throughout the corporate network. Knowledge acquisition involves knowledge creation, internalizing external knowledge and knowledge retention. Task of mobilizing knowledge involves uncovering opportunities for knowledge sharing, building effective channels for knowledge transfer and motivating organizational members to accept and use incoming knowledge. Human and technical systems in the unit are designed in view of these tasks. 'Team' is the basic functional unit of the R&D centre. In a 'project team' different members hold different levels or kinds of competence. In such a situation the challenge lies in group's ability to use unequally distributed information and knowledge to make the best decisions. IT proved a viable mechanism to connect large number of people.

KM System The KM portal was launched in mid-2003 with an objective of establishing a knowledge management system. For designing the portal, detailed workflows for key business processes were developed and classified. Departments, teams and leaders were identified as owners of different processes. Information from different sources was documented and stored. Information technology (IT) certainly played a central role in knowledge management. Following are the three major IT based parts of KM system in the unit. (Fig. 1). '

Expert System This is a comprehensive source of knowledge and information for the users. It has KM repository, best practice, electronic databases and links to research publications. This system is potentially helpful in minimizing costly mistakes such as errors in design and planning, etc.

Project Workplace This part in the portal contains status on all R&D projects and ads as a project control and monitoring tool. Search options provide the information of 'Documents about', 'Documents authored by Peoples about', 'People who know about', 'People whose profile contains', 'Places about', and Management & Change, Volume 10 Number 2 (2006)

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Ashish Pandey, Rajen K Gupta and Biswajit Roy 85

'Categories about'. This part also contains 'yellow pages' of technical competence of scientists of the unit and information about the collaboration projects. Interactive System This is the e-space for discussions, job allotment, meeting, document and knowledge sharing and storage place for all important documents. This allows restricted entry according to the relevance and confidentiality of the matter.

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Fig. 2 Different Sources of Project Idea Social Ecology for KM Effective KM depends not merely on IT platform but more broadly on what Gupta and Govindrajan (2006) call 'social ecology' of the organization. This is the domain where actual knowledge acquisition and mobilization takes place. It shapes individual freedom for taking initiatives and their expectation and drives employees' formal and informal interactions. Following section describes the social ecology ofthe R&D unit in specific context of KM and OL. Management & Change, Volume 10 Number 2 (2006)

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t 86 Ashish Pandey, Rajen K. Gupta and Biswajit Roy

A daily first hour meeting kick starts the day in centre. Heads of the department conduct meetings on 15th and 25th of each month. Communities of practice are sponsored as well as self organizing in the unit. Each community of practice has a convener and committee members. Openness in communication was evident in certain comments made by some scientists. One of them told that people here prefer to call up team members on telephones instead ofthrough e-mail. People can even visit personally to share ideas. For continuous innovation nurturance of employees' initiatives and tolerance for failure are prerequisites in any organization. General Manager of the unit and champion of the KM in R&D unit shared his views about congenial organizational environment for employees to take initiatives. Emphasizing his point he gave his own example and shared that the number of learning opportunities he got and number of initiatives he undertook with this organization, were immense through out his career. He shared that KM was his proposal. He proposed the idea of initiating KM to the top management who accepted the proposal and spent more than thirty million rupees on this project. Employees generally expressed their satisfaction about the learning opportunities that the organization provides. Employees can suggest new projects in the centre. They are also encouraged to attend national and international conferences for networking for knowledge sharing. Many scientists at different levels of hierarchy in the centre shared about publications in different scientific journals with a sense of pride. Some of them also sit on editorial or review boards of different scientific journals. This kind of proactive and professional attitude of the members of the unit was contrary to general perception prevailed in the society about government owned enterprise.

Organizational Leadership Involvement of top management in the success ofKM is well recognized in the related literature (Connelly and Kelloway, 2003; Gold, et al., 2001). Senge (1996) also comments about the role of leaders in organizational learning. Leaders are in a position to create such a social structure in the unit which facilitates ideation and experimentation for learning and innovations. Social learning takes place through modelling (Bandura, 1977). Leaders may also exhibit desired behavioral pattern which is rewarded, thus motivating the employees to adopt the desired way of job performance. Management & Change, Volume 10 Number 2 (2006)

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Ashish Pandey, Rajen K. Gupta and Biswajit Roy 87

The unit is run and governed by knowledge employees. Director of the R&D unit is a scientist. Below the level of Director, Executive Directors, General Manager, etc. are also scientists and specialists in the related areas. HoD's are accountable to the management for projects. Head of the Analysis Division said about his role that as a leader he should be able to solve their problems and create the desired environment to keep the people motivated. HoD oflubricants lab shared that in research there is no difference between a staff member and scientist in terms of their importance. In view of this 'complementary relationship' amongst the different roles of team members, decentralized decision-making gives the best results. On the same issue, HoD ofBioenergy labortory said that that motivation and 'example creation' are the ways by which people can be led. Only when people are involved and engaged they will contribute. It is endeavoured to give maximum exposure to people so that they can play their role in development activities. A Deputy General Manager told that in changing market environment they have to be more market savvy as an organization in all functional dimensions. Alternate sources for supply are also to be searched and checked to reduce dependence on single supplier. It has been attempted to highlight two issues. First, leaders' major responsibility is to foster three channels of communication to facilitate knowledge flow in the centre; first channel is 'within team' communic;ation, second, with internal members like top management and team members and third, with external members of the value chain i.e. customers, suppliers and research institutes. Secondly, as narration suggests that most of the HoDs and other leaders perceived their role to be an expert and guide of their subordinates. As suggested by Sinha (1980) in Indian organizations a leader is generally looked at as an 'expert' and capable of guiding and protecting his subordinates when they are facing difficulty, which Sinha (1980) term this as 'nurturant task leadership' . This proposition holds true in the current study also. Leaders in the unit show the nurturing attitude for task and projects accomplishment.

Managing Paradoxes Social system of an organization symbolizes some paradoxes to be managed. While interviewing leaders in the R&D unit one paradox appeared Management & Change, Volume 10 Number 2 (2006)

88 Ashish Pandey, Rajen K. Gupta and Biswajit Roy

between autonomy to employees and control on them. Autonomy for creativity and control for the order are the two necessary but opposite conditions that are to be balanced for effective and efficient knowledge creation, circulation and retention in the organization. Resources invested in organization learning should include substantial margin for failure of initiatives. Organizations need to be reac":yfor real time investment oftime and money for making people ready to take risks and to think beyond obvious. Another paradoxical situation that the managers and leaders face in the centre is to discourage 'knowledge is power' syndrome. Three group leaders (out of seven who interviewed) said that their major struggle was to get team members share their knowledge with others. On one hand knowledge gives them an edge over their co-workers for career growth and on other hand sharing of knowledge is an essential feature of organizational learning and knowledge management. Pillania (2005) also reported through the industrial survey that the 'knowledge hoarding culture' as one of the biggest challenge in success ofKM at least in India. To discourage 'knowledge hoarding' organizations need to provide certain incentives for knowledge sharing. Leadership behaviour also impact on people's attitude on this front. The managerial challenge is to resolve these tensions in a manner that is conducive to organizational learning. Perhaps there is need for going beyond thinking in terms of either-or way on many fronts like autonomy and control, homogeneity and heterogeneity of teams, etc. Organization as collective system needs to maintain a dynamic balance between many such opposite ends.

Social Identity There is an increasing realization oflink between identity and learning (Brown and Starkey, 2000). In social learning theories, learning content is to become a practitioner. Learning is a way of being and becoming part of social world and is a matter of identity formation. Through the interviews two identities amongst organizational members emerged prominently. Organizational identity and professional identity (as scientist) were found to co-exist in the organization. Scientists proudly shared information about their publications in journals. Senior scientists showed pride in being reviewer or in editorial board of scientific journals. . In growing competition and where many private players are establishing Management & Change, Volume 10 Number 2 (2006)

Ashish Pandey, Rajen K. Gupta and Biswajit Roy 89

their R&D centers with heavy investment and at times better! modern research facilities, people who see themselves primarily as professionals (scientists) are likely to get attracted towards private sector research centers. Therefore, for this public sector enterprise R&D centre bridging the professional and organizational identities of the employees is seemingly a challenge. Learning in Phase I We understood that firm's grand strategy directly impacts its knowledge strategy. Firm studied in the case adopted aggressive growth strategy in the market and expanding with more than ten percent rate. Aggressive strategy ofthe firm resulted in knowledge strategy driving innovation and new product development. As a result this organization has emerged as one of the largest patent holder in the nation. Technology ensures connectivity and networks executives for collaborative knowledge work in organizations. This study also reinforced this understanding that learning in organizational setting is affected by many overlapping social forces (Gherardi and Nicolini, 2002, Hackman, 1992) and takes place through participation in communities of practices (Wenger, 1998) or now better defined as communities of competencies (Smith, 2005). OL and KM requires alignment across human and technical elements. KM initiatives enable organization to acquire knowledge from inside and out side sources. KM is the initiative based on high connectivity within the organization and can be resulted in solidarity and co-ordination amongst the subsystems. Interaction of members within and outside team facilitated by IT can maintain social cohesion for enhanced learning within the organization. Not individual but team has become a basic unit of learning in the organization. Uniformity of reporting pattern, combined expertise and shared social identity facilitate cohesion in social system of an organization. A cohesive organizational system ensures optimal balance between freedom and harmony within the organization. Learning oriented strategic leadership plays key role to mobilize people for goal attainment in the organization. Searching and implementing best practice in an organization is not a sufficient condition to be a high performing organization. It is found that organizations have to interweave these best practices around their sociocultural fabric. This integration generates certain idiosyncratic processes Management & Change, Volume 10 Number 2 (2006)

92 Ashish Pandey, Rajen K. Gupta and Biswajit Roy

project to the other refineries and engineers there were able to implement the mechanism and improve the process. Some senior scientists in biofuel department also had a profound experience to share in interview. This was the experience of starting the biofuel department. Not many people could see the importance of this laboratory in the centre when it started. There were not many facilities and at times experiments had to be conducted on the floor. However, there was a sense of challenge and zeal for accomplishment amongst the team members to make a mark of the laboratory in the unit and in organization and they were able to establish India's only biofue11aboratory in the R&D unit in short span of three years. However, both these stories suggest that optimum challenge accelerates the knowledge acquisition and knowledge mobilization in the organizational learning. Above narration also substantiate the findings of Vail (1994) about emotions as the "on/off' switch to learning.

Identity and Pride Identities that people internalize as members of social groups can impact the organizational learning process (Child and Rodrigues, 2002). Enactment of social identity has potential to impact collective learning. Identities can develop around a functional role, professional membership, gencier, nationality, or a particular hierarchical status in an organization. These feelings came out particular! y in the interview of an engineer in Chemical Engineer .. ing Laboratory when he shared that the time he joined the unit in 1991, only twenty per cent problems faced by refineries used to be referred to the unit. Rest of the eighty per cent were referred to foreign experts and consultants. This situation has been changed and at present R&D unit solve sixty per cent problems of refineries. He shared that out of those forty per cent problems which refineries refer to foreign consultants unit can solve twenty per cent. This shows improvement in learning curve of the unit. He also said that "this is not only the matter of expenses but matter of national pride that we can solve our problems by our own." The strength of shared identities amongst organizational groups and community groups is relevant to the ability of organization to access relevant information as triggers for learning. Identity and pride gets associated in role performance (Hjerm, 1998). Pride brings effectiveness in role performance of the workers. Management & Change, Volume 10 Number 2 (2006)

Ashish Pandey, Rajen K. Gupta and Biswajit Roy 93

Celebration and Psychological Empowerment Knowledge workers in the unit showed great importance offaith shown by their superiors in them. They appreciated those superiors who gave them responsibility and showed faith in their capability and freedom. In response to the question about their most cherished learning experience they shared the memories of their superiors with whom they enjoyed working most. A scientist at Analytics Laboratory shared that his most memorable learning experience in the unit is about his superior who headed a department for ten years. This was still fresh in his memories because of two reasons; first is his way of celebrating success, no matter it is big or small. Celebration may be a picnic or a small party, but he established the culture of celebrating success in the laboratory. Secondly, his faith in the capability of his subordinates used to motivate to perform and stretch the limits of his subordinates. Leaders, who are able to extend their relation with team members beyond limited domain of jobs and technical expertise, enter their inner circle and provoke positive feelings are also able to bring out hidden potential of members. Aroused feelings of celebration and psychological empowerment were found to have positive impact on learning.

I II I ! I

All these stories are emotionally revealing in a number of ways. Situationally, all these stories are learning experiences but infused with private feelings-thrill, joy, courage, affection, anxiety, relief, etc. Peoples' private and public self identities were merging during these experiences. There are studies about emotions that interfere with effective learning among adults (Salzeberger- Wittenberg, et at. 1983; Snell, 1988, 1982, Vince, 2001). Stories of learning experiences bring out the role of emotions in the context of organizational learning. CONCLUSIONS

AND IMPLICATIONS

Learning experiences described in the case show that learning in the organization not only have behavioral or cognitive aspect but also involve certain emotional states. Along with the technical and socio-cultural determinants, learning in the organizational setting seems inescapably getting bound up with an element of affectivity. Certain emotions provoke the organizational members to look beyond their immediate jobs and strive for some thing that is beyond their limited job identities. Such transcendence when felt by more number of people in the team, generates a positive sense of urgency and Management & Change, Volume 10 Number 2 (2006)

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94Ashish Pandey, Rajen K. Gupta and Biswajit Roy drive, creates an atmosphere charged with energy and enthusiasm. Organizational objectives charged with 'positive feelings' enhance the propensity to learn and perform. Gratton (2002) also suggested such elements from strategic perspective. Current study brings down the underlying basic assumptions suggested in contemporary literature (Albrow, 1994, Flam, 1990 and Hochschild, 1979) about role of emotions in organization to specific context of OL and KM. This study also indicates emphatic emotion like 'pride' located at relationallevel in the organization which impact organizational learning. Study suggests that dominant emotions can be identified which facilitate learning in an organization and tend to guide the KM practice. It also suggests that 'element of affectivity' should be incorporated within organizational analysis as integral and essential modality. Findings indicate plausible inclusion of 'affective aspect' as one of the pillars of institutionalizing knowledge oriented management interventions. Acknowledging cognitive, normative and regulative pillars (Scott, 1995) as necessary for sustenance of social institu .. tion the study recommends plausible inclusion of 'affective element' as it reinforces the process of institutionalization, forms the basis of association of its members with the organizational cause and inculcates the 'sense of inclusion' within the organization. Research is a continuous journey and limitations act as its triggers. This study has limitations in terms of number of firms its covers. Authors have conducted this study as 'non participant' observer. Future research, if conducted with participative observation may result in improved grounded theory in this field.

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Armbrecht, R. F.M., Jr., B.R. Chapas, C.c. Chappel ow and F.G. Farris (2001) "Knowledge Management in Research and Development", Research Technology Management, 44 (4): 28-59. Bandura, A. (1977) Social Learning Theory. Englewood Cliffs: Prentice Hall. Barnard, C.l. (1938) The Functions of the Executive. Cambridge, MA: Harvard University Press .. Basadur, M. (1992) "Managing Creativity: A Japanese Model", Academy of Management Executive, 6 (2): 29-42. Benbya, H., G. Passiante, and N.A. Belbaly (2004) "Corporate Portal: A Tool for Knowledge Management Synchronization", International Journal of Information Management, 24: 201-220. Blau, P. M. (1955) The Dynamics of Bureaucracy. University Press.

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Brown, A. and K. Starkey (2000) "Organizational Identity and Learning: A Psychodynamic Perspective", Academy of Management Review, 25:102-120. Brown, John S. and D. Paul (1998) "Organizing Knowledge", California Management Review, 40 (3):90. Chell, E. (1998) Critical Incident Technique. In "Simon, G. and C. Cassell. (eds.), Qualitative Methods and Analysis in Organization Research: A Practical Guide. London: Sage, 51-72". Child, J. and S.J. Heavens (2001) The Social Constitution of Organizations and its Implications. In "Handbook of Knowledge Management. London: Oxford University Press, 308-326". Child, J. and S. Rodrigues (2003) "Social Identity and Organizational Learning" In "Handbook of Knowledge Management. London: Oxford University Press.' Mark, A. and L. Marjorie (eds.) Blackwell Handbook of Organizational Learning and Knowledge Management. New York: Pub. Malden, 535-556. Management & Change, Volume 10 Number 2 (2006)

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Connelly, C. and E.K. Kelloway (2003) "Predictor of Employees' Perception of Knowledge Sharing Cultures", Leadership and Organizational Development Journal, 24: 294. Crossan, M., H. Lane, and R. White (1999) "An Organizational Learning Framework: From Intuition to Institution", Academy of Management Review, 24: 522-538. Czarniawska, B. (1998) A Narrative Approach to Organization Studies. Thousand Oaks, CA: Sage. Dierkes, A. and B. Teele (2001) Technological Visions, Technological Development and OL. In "Easterby-Smith, M. and M.A. Lyles (eds.), Handbook of Organizational Learning and Knowledge, 282-304". Dueck, G. (2001) "Views of Knowledge are Human Views", IBM System Journal, 40(4): 1002-1 007. Esenhardt, A. and M. Kathleen (1989) "Building Theories from Case Study Research", Academy of Management Review, 14 (4): 532-551. Elkjaer, B. (2003) "Social Learning Theory: Learning as Participation in Social Processes". In "Easterby-Smith, M. and M.A. Lyles (eds.), Handbook of Organizational Learning and Knowledge Management. Blackwell, 38-53". Emery, F. E. (1959) Characteristics don: Tavistok.

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Fahey, L. and L. Pursak (1998) "The Eleven Deadliest Sin of Knowledge Management" Management Review, 40(3): 265-276. Fineman, S. and Y. Gabriel (1996) Experiencing Organizations. New Delhi: Sage. Fiol, C.M. and M.A. Lyles (1985) "Organizational Learning", Academy of Management Review, 10: 803-813. Flam, H. (1990) "Emotional 'Man': I The Emotional 'Man' and the Problem of Collective Action", International Sociology, 5: 39-56. Flam, H. (1990) "Emotional 'Man': II Corporate Actors as Emotion-Motivated Emotion Managers", International Sociology, 5: 225-234. Management & Change, Volume ION umber 2 (2006)

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I Ashish Pandey, Rajen K. Gupta and Biswajit Roy 97

Gherardi S. and D. Nicolini (2001) Sociological Foundations ofOrganizational Learning. In "Handbook of Knowledge Management, New Delhi: Oxford University Press, 35-60". Granovettor M. (1985) "Economic Section and Social Structure: The Problem of Embeddedness", American Journal of Sociology, 91: 481510. Grant, Robert M. (1997) "Knowledge Based View ofthe Firm: Implication for Management Practice", Long Range Planning, 30 (3): 450-454. Grant, R. M. (2002) "Knowledge Based View of the Firm". In "Bontis, N. and W.C. Choo (eds.) The Strategic Management of Intellectual Capital and Organizational Knowledge. New York: Oxford University Press". Gratton, Land S. Ghoshal (2005) "Beyond Best Practice", MIT Sloan Management Rev~~w, 46 (3). Hartley, J. F. (1995) "Qualitative Methods". In "Cassell, C. and G. Symon (eds.) Qualitative Methods in Organization Research: A Practical Guide. London: Sage,. 208-229". Hee-Jae Cho, Pucik and Vladimir (2005)"Relationship between Innovativeness, Quality, Growth, Profitability and Market Value", Strategic Management Journal, 26(6): 555-575. Hjerm, M. (1998), Acta Sociological,

41 (4): 335-347.

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., 98 Ashish Pandey, Rajen K Gupta and Biswajit Roy Marwick, A. D. (2001) "Knowledge Management Technology", IBM Systems Journal, 40(4): 814-830. Meyer, A. and B. Rowen (1977) "Institutionalized Organizations: Formal Structure as Myth and Ceremony", American Journal of Sociology, 83: 240-163. Moffet, S., R. McAdam and S. Parkinson (2002) "Developing a Model for Technology and Cultural Factors in Knowledge Management: Factor Analysis", Knowledge and Process Management, 9(4): 237-255. Nonaka, I. and H. Takeuchi (1995) The Knowledge Creating Company. New York: Oxford University Press. Park, H., V. Ribiere and W.D. Schulte (2004) "Critical Attributes ofOrganizational Culture that Promote Knowledge Management Technology Implementation Success", Journal of Knowledge Management, 8(3):106-117. Plaskoff,A. (2003) 'Inter-subjectivity and Community Building: Learning to Learn Organizationally'. In "Handbook of Knowledge Management. Blackwell, 161-184". Pillania, R.K. (2005) Leveraging Knowledge: Indian Industry's Expectations and Shortcomings, Global Business Review, 6(2): 231249. Salzberger-Wittenberg, I., G. Henry and E.L. Osborn (1983) The Emotional Experience of Learning and Teaching. London: Routledge and Kegan Paul Scott, W.R. (1987) The Adolescence ofInstitutional tive Science Quarterly, 32(4): 493-511.

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100 Ashish Pandey, Rajen K. Gupta and Biswajit Roy

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Real love always has, as its foundation, renunciation of individual happiness, and the affection towards all men which arises therefrom. Only upon this universal affection can spring up genuine love for certain peopleone's own reiatives or strangers, And such love alone gives the true bliss of life, and solves the apparent contradictions of the animal and the rational consciousness. - Tolstoy

Management & Change, Volume 10 Number 2 (2006)

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RISK AND RISK MITIGATION IN INDIAN INFRASTRUCTURE SECTOR: A CASE OF THE GOLDEN QUADRILATERAL PERTAINING TO THE PANAGARH - PALSIT STRETCH OF NH2 SantanuRay

Uddipto Roy

India has shown considerable interests in improving its infrastructural facilities with the help of private players from nineties onwards. Construction of the Golden Quadrilateral is a major initiative in the highway sector, which connects four major metros of the country - Delhi, Mumbai, Chennai and Kolkata. To ensure private participation in these projects, Government of India has accepted the significance of the state support in risk mitigation. This paper presents a case on Indian highway sector which unveils various dimensions of risks associated with road infrastructure development and risk mitigation efforts for attracting private participants in the road sector as well as ensuring success in implementing projects. Key words: Infrastructure, risk arialysis, SWOT analysis, Force Majeure. INTRODUCTION Development of infrastructure is a critical area of significance particularly in developing countries. Inadequate infrastructural facilities fail to create a conducive environment for investment that adversely affects employment generation and GDP growth. As a result of this adverse impact of inadequate physical infrastructure, social infrastructure also cannot grow properly, which again impacts productivity growth as such countries do not attract domestic investment and FDL It is thus important the government provides adequate support facilities - both physical and social, attuned to the specific needs of both manufacturing and the service sectors. Development of infrastructure suffers from several constraints. Though it is easy to realize benefits of state-of-the-art infrastructure, improvement of its standard is a gigantic task and linked to multi-dimensional problems. Management & Change, Volume 10, Number 2 (2006) ~ 2006 IILM Institute for Higher Education. All Rights Reserved.

102 8antanu Ray and Uddipto Roy First, volume of investment required for the infrastructure sector is so large that it mainly relies on government initiative as only a few private players can think of venturing into it. Second, up front cost and long pay-back period act as other disincentives. Third, often negative externalities and politicalization of these issues make such investment risky. Lastly, pricing for infrastructural facilities also invites socio-political interventions involving long gestation period, cost escalation and possibility of mismatch between projected demand and supply. In this paper, it is attempted to present a case of risk and risk mitigation based on a particular stretch ofthe Golden Quadrilateral (GQ), which consists of five sections. The first section includes introduction; the second section assessment of state monopoly; third section consists of financial aspects of infrastructure project feasibility analysis; and last section includes a well-documented case study. Infrastructure encompasses various sectors such as roads and highways, seaports, airports, railways, telecommunicat~J:J., water and sanitation, etc. In Indian economy, road transport plays an important role as it transports 65 per cent of freight and 85 per cent of passenger traffic. Though India occupies second position in the world in terms of road network with 3.3 million kilometer of road, the quality and condition of roads are often not suitable for smooth transportation of both passenger and freight. For improving road condition and increasing the length of road network, GO! undertook major projects of the GQ in Phase I and N-E and S-W corridors in Phase II connecting Srinagar and Kanyakumari and Porbunder and Silchar, respectively. Phase III covers selective widening of National Highways at several stretches. The GQ project could not be completed within the scheduled time. Table I show that only one third of the total project has been accomplished till August 2005, though the original deadline was December 2003.

Beyond the mountains there are mountains again. - Haitian proverb

Management & Change, Volume 10 Number 2 (2006)

c-_

....

.-.

I I

Table 1 Status ofNHDP as on August 31,2005 Item

NS-EW

Prot Connectivity

Others

NHDP Phase III

Total

Total length (kIn)

5846

7300

356

811

4015

18328

Already 4-laned (kIn)

4976

777

287

6139

870

2925

251

156

886

3016

Contracts under implementation (No.)

110

Balance length for award (kIn)

3522

358

3129

7016

Under implementation (kIn) ~ ~

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104 Santanu Ray and Uddipto Roy A PERSPECTIVE

ON ASSESSMENT

OF STATE MONOPOLY

During pre-globalization era till eighties, participation of private sector in Indian infrastructure development remained a debatable issue only. Privatization speeds up efficiency creating a new pool of fund, but it is often criticized on ground that 'hrough privatization the government often tactically withdraws from areas that could generate huge employment and is thus perceived to be silently moving away from its social commitments. However, government at the same time also has problems of huge resources constraints. One therefore needs to evaluate options of state monopoly versus private initiative.

Advantages of State Monopoly Over the years, the issue of developing and maintaining infrastructural facilities has remained by and large domain of public finance only. Private players are started showing interests in infrastructure development during last 2-3 decades. Selection and operation of infrastructure projects are totally different under two different patterns ofproject implementation. Advocates of public finance route of infrastructure development advocate that due to high investment involved in infrastmcture projects, large projects should be set up by government agencies only. This cost advantage can only be passed on to buyers if state monopoly is allowed. Otherwise, reduction in average cost of infrastructure development will only widen the profit of the private players and social welfare objective will be lost in the process. Secondly, strategic importance of a project is likely to be ignored in absence of state monopoly in infrastructure development especially where the ROI of the project in isolation is negative or very low. Thirdly, the argument that infrastructure projects are directly link with national security again supports that public finance route is more preferred option .. Fourthly, state participation in infrastructure development may achieve overall development and decline in regional imbalance. Private participation in infrastructure will only be concentrated in potential profit areas and the state will have to take the case of non profitable areas only. Management & Change, Volume 10 Number 2 (2006)

_..,J

Sarltanu Ray and Uddipto Roy 105

Finally, the state generally collects revenue for hard infrastructure following the 'equal marginal sacrifice principle', but private players generally rely on 'equal absolute sacrifice principle' to recover fixed and maintenance costs. As a result, in case of privately built and operated infrastructure, least tax liability is imposed on the rich whereas the poor are charged heavily. This situation oftax liability is opposite in case of 'equal marginal sacrifice principle' is implemented (Musgrave & Musgrave, 1989).

Problems of State Monopoly State participation in infrastructure is always preferred provided adequate capital is available for quick and overall infrastructural development. In developing countries funds availability is a constraint following low taxpaying ability of people. Accordingly, in developing economies partial dependence on private players for improving infrastructural facilities becomes a Hobson's choice. Government's record of managing state owned enterprises in India is generally not very ideal model as their performance record is of mixed type have shown consistent poor efficiency in PSEs is on account of the fact that employees are not afraid of anyone in government set up and their job is well secured. According to Bagchi (1997), "a considerable amount of the excess costs and dynamic inefficiencies of the public sector projects was due to the failure of the government to break out of dependence on foreign sources of funds which were tied to sales of particular types of technology for setting up the installations". Reasons for sub-optimal performance may be varied but the fact remains that the low efficiency level in PSEs is responsible for some optimal use of national resources. Das (1998) noted that enterprises owned by the GO! and state governments in India, while accounting for a major chunk of capital investment, are basically two third as efficient as private sector enterprises, as they are much less efficient than those in private sector. Such performance records and overall fund shortage underscore the need for public private cooperation in infrastructure development, which country needs. Public-Private partnership is a contract between th~rivate parties and the government bodies for sharing risks, responsibilities and rewards.

Management & Change, Volume 10 Number 2 (2006)

106 Santanu Ray and Uddipto Roy In infrastructure sector, this partnership may help provide rapid expansion and improvement of facilities. Slow development with state monopoly is possible but itis time consuming and pulls back overall development of the country. In public private partnership, government needs to spend much less as compared to the case when the government alone has to implement the projecL In recent times, GO! has realized that potential risk element inherent in infrastructure projects may refrain private players to invest in infrastructure sector. Unless proper support facilities are provided, private sector may not come forward. Accordingly, GO! has created a 'special purpose vehicle' vide 2004-05 budget operated by the India Infrastructure Finance Company (IIFC). IIFC is a fully owned GO! entity that provides financial support for infrastructure projects. It started with a fixed authorized capital of RS.1000 crore and initial borrowing limit was fixed at Rs.l 0,000 crore. Debt borrowed by the IIFC is guaranteed by the GOL It provides loans to the private sector at a risk discounted rate and also in Viability Gap Funding (VGF) mode where viability evaluation is done by the Inter Institutional Group (lIG), comprising a group of specified banks and financial institutions.

MANAGiNG FINANCIAL RISKS IN PROJECTS: THEORETICAL REVIEW At the time of feasibility study, risk is accommodated in different ways. Capital budgeting approach can be an appropriate design to incorporate risk elements. 'Certainty equivalent approach' and 'risk adjusted discount rate approach' are the popular options to determine (Brigham, et al., 2001) risk accommodated cash inflow and cost of capital, respectively. The former adjusts cash inflow by attaching probability of occurrence to it while the latter adjusts the cost of capital by accommodating return on risk differential. 'Capital asset pricing model (CAPM)' helps in identifying cost of capital for an unlevered firm by introducing concept of beta. Hamada (1969) modified the formula by combining CAPM and 'Modigliani-Miller approach' , which can be applied for levered firms. In absence of inadequate data, 'pure play' method can also be applied to find weighted average cost of capital of a project from 'pure play' proxy firms (Fuller & Kerr, 1981). Sensitivity analysis is another alternative to examine the responsiveness of projects with respect to any change in its determinants. However, it has a Management & Change, Volume 10 Number 2 (2006)

Santanu Ray and Uddipto Roy 107

serious limitation. Sensitivity determination finds out change in responsiveness of a project pay-off in regard to a single determinant only. From this point of view, scenario analysis is a preferred tool since it takes care of interdependence among variables and the its ultimate effect on the project. However, major weakness of both these tools lies in measuring fluctuations in independent variables which is stochastic in nature. Feasibility study of projects based on capital budgeting tools relies mainly on cost of capital and cash inflow which is determined by the interaction among various determinants. As future is uncertain and infrastructure projects are exposed to several exogenous variables and for obvious reasons, probability of occurrence plays key role. In view of the stochastic nature of cash inflow Songer, et al. (1997) favours Monte Carlo simulation for analyzing revenue dependent infrastructure projects, as these are particularly helpful in determining and controlling project risks Decision tree is another systematic and structured approach to calculate and compare the pay-offs in all possible situations a project may encounter. However, this method may suffer from two serious limitationsdifficulty to apprehend all possible situations and assessment of chance of occurrence of each possibility. Occurrence of risk is uncertain and variety of risks that a private operators may face in implementing infrastructure projects are numerous. In some cases these risk elements can be included in feasibility study if those risks can be properly identified. However, accommodation ofrisks cannot give a risk-free pay-off in view of inherent randomness of key variables. To provide a coverage from multi-dimensional risk elements which is extremely difficult to assess, support from the government becomes crucial for private players. Direct support by the government to mitigate risk is not unique. Instances of government support to mitigate risk have been observed in various projects implemented in different countries including India. Table 2 presents some examples of governmental role in developing countries to mitigate risk in infrastructure projects involving private participation (Mansoor & Michael, 1997). Next section includes a case relating to Phase I of the National Highways Development Programme (NHDP). This case highlights on risk and risk mitigation aspects of the Panagarh-Palsit stretch of the GQ in West Bengal. Management & Change, Volume 10 Number 2 (2006)

Table 2 Government Role in Mitigating Risk in Infrastructure Projects

3: ~ (1)

3 (1)

Item

Government Guarantees

Informal Agreements

Ro (J ::r

~ ~ ~

Country and Project

[ (1)

Z c:

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....â&#x20AC;˘ N

,-,

Project Cost

o o 0\

"-'

Date of FinancialOosure Example by Mechanism

India: Dabhol 695-MW power plant; combined cycle; imported liquefied natural gas (LPG)/oil distillate; 20 year PPA with Maharashtra State Electricity Board; tariff 2.4 ($126 per rupees KWh

Mexico: Mexico City Toluca Toll Road

Government Equity Participation Malaysia: Kuala Lumpur Sepang Airport

Government Debt (Senior and Subordinated) Pakistan: Rausch 412MW power plant CCPP residual fuel oil; 30-year PPA with Water and Power Development Authority

~ i.{1

Government Grants Brazil: Linha Amerala(lO yrs, ISkm, 6-lane road)

Preferential Tax Treatment Chile: 4S0-MW Empresa Electrica Pangue

$3924 million

$507 million

$174 million

$465 million

1995

1992 (February)

1993

1996

1996 (June)

1993

$112 million grant from the Rio de Janeiro municipal government

$10 million in

$390 million in

$40 million

equity provided by the government of Malaysia

standby loan by National Development Finance Corp. (NDFC) $140 m subordinated debt channeled to the Pakistan Fund from the World Bank ($70 m) and JEXIM ($70 m)

=S'

~ := ~

L: ~

$313 million

Concession guarantee traffic volumes by vehicle category, if traffic volumes fell short of amount specified in contract. Concessionaire entitled to request an extension of the concession term to permit recovery of its investments.

$922 million

12 year counter guarantee from the government of India for tariff payments by the Maharashtra State Electricity Board, and termination guarantee (capped at. $300 m)

deferred tax duties

.,.,

Santanu Ray and Uddipto Roy 109

PANAGARH-PALSIT

STRETCH

OF GQ (NH-2, 65 KM): A CASE

STUDY This project is a part ofthe NHDP and is one of the eight packages offered by the NHAI on BOT (build-operate-transfer) basis using annuity approach. As per this approach, NHAI is required to remit a fixed semi annual amount (annuity) to the concessionaire payable over the operation period of the project, while the concessionaire will be responsible for providing road service in accordance with a defined set of project needs in terms of design, O&M and handback requirements.The scheme has been particularly attractive as the entire traffic risk was assumed by the NHAI and the risk of the developer was limited to construction and maintenance risk only. The project was awarded by the NHAI on September 26, 200 I to a consortium consisting ofGamuda Bhd and WCT Bhd through competitive bidding process. Gamuda Bhd was the Lead Member of the Consortium. Accordingly, the consortium incorporated Mapex Infrastructure Pvt. Ltd. a 'special purpose vehicle' as a joint venture between Gamuda and WCT, respectively to act as the concessionaire. Traffic Study A detailed and comprehensive traffic study was undertaken before carrying out sensitivity analysis of the project towards traffic and cost incurred. The traffic study found that potential of traffic diversion from the project highway was very small. There is only one alternate road between Panagarh and Palsit. The alternate road in the stretch is in very poor condition and extremely narrow. The project clearly offered a distinct advantage both in terms of time and vehicle operating cost. There was a valid case to close down the truck movement in Delhi road in view of further damage to Delhi roads, incidence of accidents and rash and negligent driving by truck drivers. The study also covered sensitivity analysis oftraftic volume. It came out with a very disquieting traffic volume that was taken into account while assessing the financial viability of the project. The study involved measurement of the user willingness to pay based on the User willingness to pay and benefit principles. The user willingness to pay measures the user behaviour and the willingness to pay toll as a Management & Change, Volume 10 Number 2 (2006)

-----------------------~----_.~-~.~-._"..."'I

110 Santan" Ray and Uddipto Roy

trade-off between the cost and time saving on improved roads. The net benefit principle works on the premise that the toll levied should not exceed the time and cost savings normally enjoyed by the user. The tolls are generally set at around 50-70 per cent of savings to give the user a net benefit The study revealed that the willingness to pay toll rates were higher than the NHAI rates for passenger vehicles and it was marginally lower or at par with the NHAI rates for freight vehicles. SENSITIVITY

ANALYSIS

Following factors emerged as critical to the projections assumed by the company particularly in relation to their debt servicing capability and accordingly a sensitivity analysis has been carried out on the same. Increase

in Project

Cost

Engineering, Procurement and Construction (EPC) contract is primarily a fixed price contract. However, the project will be subject to increase in cost due to increase in cost of materials to be supplied by the project company. There is a contingency of 3 per cent in the EPC cost. The Infrastructure Development Finance Corporation (IDFC) has evaluated the impact of increase in construction cost and has concluded that the Debt Service Coverage Ratio (DSCR) remains unaffected even with increase in construction cost by 20 per cent. A suitable condition was included in the sanction wherein any increase in the project cost shall be borne by the project sponsors without any recourse to the lenders. Delay in Project Completion The EPC contractor, namely, Gamuda- WCT has sufficient experience and expertise in construction business. Contract period matches the period stipu .. lated by the 'concession agreement'. The contract provides for adequate liquidated damages to be charged from the EPC contractor in the event of any delay in completion of the project in time due to its fault which are sufficient to cover any losses suffered by the project on this account. Reduction

of Annuity due to Lower Lane Availability

The concession provides for proportionate reduction in annuity in the event the actual availability of the carriageway is lower than the assured availability. Additionally, this agreement provides for termination of the contract in the Management & Change, Volume 10 Number 2 (2006)

=.... .,.,=•.••.Il_._,=_.

.------------~-------~-~-----------

Santanu Ray and Uddipto Roy III

event ofnon-availability exceeding 1000 lane kms. Gamuda- WCT has sufficient experience and expertise in the field and no major problems are envisaged in this front. Further, non-availability of road due to routine and periodic maintenance is permitted under the Concession Agreement (CA). SWOT Analysis Strengths The project involves development of a major national highway and is part of the GQ, which is the major initiative of the GOL The project is based on annuity basis and therefore payment risk is on the NHAl whose financial instruments are AAA rated. The project receivables are not dependent on traffic volumes. A financially strong promoter with international reputation and experience was awarded the contract. The project has a reasonable strong and balanced concession agreement. The CA provides substantial security for the lenders. The project has already received sanctions from the JDFC, IIBI and other banks Weaknesses The EPC contractors are also the promoters of the project. Opportunities The project is a part of the GQ having very high growth potential. The promoters are involved in implementation of several road projects in the country Threats The CA provides for reduction in annuity in the event of delay in project completion or non availability of the road below the assured availability. The EPC contract provides for recovery of the loss of annuity caused as a result of delay or non availability of the road. It may be noted that as O&M and EPC contractor Gamuda- WCT has sufficient technical expertise and no major risks are perceived in this regard. RISK ANALYSIS AND MITIGATION Risk, impact and mitigation mechanisms of this project are as follows, which have been put in tabular form three different stages, namely, development stage, construction state and operational stage (Table 3). Management & Change, Volume 10 Number 2 (2006)

~ ~

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Table 3 Risk Impact and Mitigation Mechanism

'JJ

Risk description

Impact

Development Stage Statutory clearances including environmental clearances.

Delay in statutory clearances will affect project at development stage.

~ =S~

Risk Mitigation Mechanism Receipt of all clearances is a pre-disbursement

condition.

~ ~

t:=

The company has applied for all the necessary clearances. Land acquisition, environmental clearance and rehabilitation of project affected persons (PAP's)

Construction Stage Project completion / time overrun

j Delay may affect project at development stage.

As per Concession Agreement, NHAI shall provide land/site free of encumbrances within six months from the date of signing the Concession Agreement. NHAI shall also provide additional land if any required accommodating the project facilities within the above mentioned six months. NHAI shall be responsible for clearances in this regard.

Time overrull may affect project viability and will reduce annuity. Further failure ofthe concessionaire to achieve completion beyond 120 days of scheduled project completion will be a event of default.

EPC contractors have substantial experience and expertise with good track record.

n.~.'.

EPC contract is a fixed price contract and fixed time contract. Losses of annuity revenues due to the delay in project completion to the extent attributable to the EPC contract shall be recoverable from the EPC contractor. EPC contractors has substantial stake in the equity of project.

_ "'

•

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Table 3 (contd.) Cost overrun

Cost overrun may affect project viability.

EPC contracts are Fixed Price Lump sum contracts and the EPC contractors shall bear the risk of cost escalation. However, uncovered risk for remains for materials to be provided by the project company. Cost overruns beyond the contingency provision are to be funded by promoters.

Operational Stage Traffic shortfall Operation and Maintenance

~ ~ ~

Ro (J

~ ~ ~ ~ n> o

~ n> ...â&#x20AC;˘

Force majeure

Payment Risk Annuity payments

The project has been modeled on the annuity basis and the payment of annuity is irrespective of the actual traffic. Failure ofthe project to ensure actual availability lowers than that of the assured availability will result in reduction of annuity.

The project company itself shall be conducting the 0 & M activities. The sponsors have substantial experience in management of similar projects. Further, the sponsors would be providing undertaking for any overrun in O&M budget.

Comprehensive insurance package is envisaged. Lenders comfort through the support available to the project under force majeure is available in the CA. Project is dependent on receivables from the NHAI on account of annuity payment. NHAI is a statutory body constituted by the GOI and its financial instruments are rated "AAA" by CRISIL. Further, NHAI will provide an irrevocable and revolving letter of credit covering on annuity payment.

o o

0'1

'-'

For these stages Force Majeure Risk and Termination Risk are as follows:

= st ==

S~ =

~ ~

.-.-

_._----------~~~~~--------~~---

1 114Santanu Ray and Uddipto Roy

Force Majeure Risk Insurance is proposed for all non-political Force Majeure events and would include insurance for loss of profits and business interruption. The amounts proposed for insurance would be adequate to cover the debt service for the Project during the affected period. For other Force Majeure Events, the compensation will paid by NHAI and the same is adequate to cover the debt in the event oftermination.

Termination Risks The termination payments proposed in the Concession Agreement for NHAI 's event of default are adequate to cover outstanding debt at any point oftime during the Concession Period. Termination payment in concessionaire event of default is capped at 70 per cent of book value. As the project is funded at a 'debt to equity ratio' of 3: I , only 5 per cent of the outstanding debt is left uncovered in the first year, which progressively reduces, on repayment by the end of the fifth year. Termination

Payments During Construction

Period

In case of political Force Majeure (FM), termination payment is equal to book value of the assets as on the date of termination plus accrued interest thereon @SBl PLR Plus 3 per cent from the date of financial close. Termination payment covers the debt, which covers risk adequately. In case of non political PM, termination payment is by way of appropriation of insurance proceeds by concessionaire; The risk is covered through Insurance. A suitable confirmation to that effect is taken from the insurance consultant appointed by the lenders prior to disbursement In case of other events of FM, termination payment is equal to book value of the assets as on the date of termination. Termination payment covers the debt, which covers risk adequately. In the event ofNHAI's default, any termination payment is to be made equal to book value ofthe assets as on the date oftermination plus accrued interest thereon @ SBl PLR Plus 3 per cent from the date of financial closure. Termination payment covers debt risk adequately. Management & Change, Volume 10 Number 2 (2006)

_________________________

••••

=_11,&_.,_,,_,, __ • _

Santanu Ray and UddiptoRoy 115

In the event of concessionaire's default, risk is on contractor. No payment is to be made by the NHAI. The EPC contract was awarded to GamudaWCT. Both the sponsors had substantial financial and technical expertise in the field. The .EPC contract is a fixed time contract clearly outlining responsibilities of the EPC contractor. Remedial actions for the lenders in such an event would be to invoke step-in rights. In case of political FM, termination payment is equal to discounted value of future net cash flows at a discounting rate of 13.88 per cent. Termination payment adequately covers the debt risk. In case of non-political FM, termination payment is worked out as appropriation of insurance proceeds by the concessionaire. NHAI risk is covered through insurance for which the insurance company makes necessary provisions. In case of other events ofFM, termination payment is worked out as 75 per c(fnt of discounted value of future net cash flows with discounting rate being 13.88 per cent. Termination payment adequately covers the debt risk. In the event ofNHAI's default, termination payment is equal to discounted value of future net cash flows at a discounting rate of 13.88 per cent. Termination payment adequately covers the debt risk. In the event of the concessionaire's default, termination payment is equal to 70 per cent of the book value of assets as on the date oftermination. As lenders' exposure to the project is 75 per cent of the total asset cost, there remains an uncovered initial risk of 5 per cent. This gap is progressively reduced as tenure of loans is shorter than project duration and shall be nil by the end of the fifth year. CONCLUDING

REMARKS

There are few points can be attributed to the success of the GQ. First, the project was very well structured. Second, clear risk mitigation measures of different aspects were included in the project CA. Third, redressal and dispute reconciliation process were clearly defined. Fourth, political risk was duly accounted for. Thus, "Road" which was previously difficult to finance was successfully offered on pure PPP (public private partnership) structured BOT (build operate transfer) basis. This example also promotes the case for other PPP contracts in this segment. Management & Change, Volume 10 Number 2 (2006)

l--

~~ _

116Santanu Ray and Uddipto Roy

REFERENCES Bagchi, AK. (1997) "Public Sector Industry and the Political Economy of Indian Development". In "Byres, Terence J. (ed.) The State Development Planning and Liberalization in India". Brigham, E.P., L.c. Gapenski and M.C. Ehrhardt (2001) Financial Management: Theory and Practice. New Delhi: Harcourt Asia PTE Ltd. Das, S.K. (1998) "Privatization and its Impact on Labour", Management in Government, 30(1): 1-14. Fueller, R.J. and H.S. Kerr (1981) "Estimating the Divisional Cost of Cap ital: An Analysis of the Pure Play Technique", Journal of Finance, December: 997-1009. GO! (1996) The India Infrastructure Report: Policy Imperatives for Growth and Welfare New Delhi: Ministry of Finance, Government of India. Hamada, Robert S. (1969) "Portfolio Analysis, Market Equilibrium and Corporation Finance", Journal of Finance, March: 13-31. Mansoor, D. and K. Michael (1997) Managing Government Exposure to Private Infrastructure Projects: Averting a New-style Debt Crisis". In "Conference Proceedings on Government Support to Private Infrastructure Projects in Emerging Markets, Cartagena, Colombia, May 29-30". Musgrave, R. A and P.A Musgrave (1989) Public Finance. in Theory and Practice. New York: McGraw Hill Book Company. Rastogi, A (2006) The Infrastructure Sector in India, 2005, India Infrastructure Report, New Delhi. Songer, D., et at. (1997) "Risk Analysis for Revenue Dependent Infrastructure Projects", Construction Management & Economics, 15(4): 377-382. Many of life's failures are people who did not realize how close they were to success when they gave up. -John Waddy Management & Change, Volume 10 Number 2 (2006)

r-=---~~----~---l

WHY DO COMPANIES ISSUE BONUS SHARES? AN EMPIRICAL STUDY Srinivas Shirur It has been noticed many a times that the market react positively to the announcement of bonus shares. Issue of the bonus shares involves transfer of funds from capital reserve account to share capital account on liabilities side of the balance sheet. These decisions by top management do not lead to change in the value of the company. Theoretically speaking, each shareholder gets a greater number of stocks, but the value of the share declines proportionately since the value of the company remains same. This contradiction which does happen in practice evokes one simple question - If issue of bonus shares lead to increase in the price of shares, why do only few companies issue bonus shares? In this study it is attempted to analyze reasons issuance of the bonus shares. Period of the study is January 2000 to September 2006 in which 165 companies had issued bonus shares. All the companies listed on National Stock Exchange and which had issued bonus shares within the concerned period have been included. Key words: Bonus shares, Nifty, National Stock Exchange. INTRODUCTION Issue of bonus shares by the companies evokes many questions. One ofthe questions is why firms announcing bonus issues experience price increase over and above increase in the index. Answer to this question needs analysis ofthe aftermath ofthe decision taken by top management to issue bonus shares. Another equally important question is to find conditions under which the top management decides to issue bonus shares. This question needs some kind of empirical analysis of preconditions for issuance of bonus shares. As is well known that mere announcement of the issue of bonus shares leads to increase in prices, then why does this not encourage all the companies to issue bonus shares every year in case they have capital reserve. Data collected from the capital line shows that in last five years, only 165 companies had issued bonus shares in the National ~1;ockExchange (NSE). Management & Change, Volume 10, Number 2 (2006) ~ 2006 IILM Institute for Higher Education. All Rights Reserved.

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118 Srinivas Shirur Theoretically, issue of the bonus shares does not lead to any change in shareholders' value of stocks, capital structure and financial position of the company (Modigliani and Miller, 1961). Issue of bonus shares can be used to test both strong-form and semi-strong form of Efficient MarketHypothesis (EMH) (Fama, 1973). The semi-strong form of the EMH asserts that security prices adjust rapidly to dease of all public information: That is, current security prices fully reflect all public information. This hypothesis implies that investors who base their decisions on important new information after it is public should not derive above average profit from their transactions because the security price already reflects all such new public information (Br~wn and Warner, 1980). However, outcome of empirical researches shows that market reacts positively to the announcement of a bonus issue. Woolridge's (1983) empirical study of the American capital market showed 0.986 per cent positive average abnormal ex-date return for a sample of 317 bonus issues. Grinblatt, Musulis, and Titman (1984) examined results for the period 1967 to 1976 for the European capital markets and found an average abnormal return of 1.1 per cent. The strong-form EMH contents that stock prices fully reflect all inforJ!lation from both public and private sources. This means that no group of investors has monopolistic access to information relevant to the formation of prices. Thus, no group of investors should be able to consistently derive above average profit. Promoters with higher than average stake in the companies issuing bonus shares raises doubt whether some agency effect may be involved with this decision. Hence, effort should be made to relate strong-form EMH with agency effect at the time of issuing of bonus shares.

LITERATURE REVIEW OF THE HYPOTHESES PROPOSED There are different theories explaining rationale for issuing bonus issues with its own unique tests to check the hypothesis. These hypotheses will be discussed separately. Signaling Hypothesis. Several studies have shown abnormal returns around the announcement dates (Foster & Vickrey, 1978; Woolridge, 1983; Grinblatt, Musulis, and Titman, 1984). This hypothesis suggests that top management thinks that company is being undervalued by the investors as they are not taking good performance of the company into account while valuing shares. In order to send a message to the investors, top management decides to issue bonus shares. Management & Change, Volume 10 Number 2 (2006)

! Srinivas Shirur 119 Liquidity Hypothesis. This hypothesis suggests that top management issues bonus shares in order to increase trading volumes in the market so that shares are more widely held. This may be one ofthe tactics of pro moters to ward off potential take-over of the company. Laknoishok and Lev (1987) investigated liquidity hypothesis by examining trading volume changes after announcement of the bonus issue and found that trading volume did not increase as a result of bonus issue. Attention Getting Hypothesis. Grinblatt, et al. (1984) and Doran and Nachtmann (1988) were of the view that managers use the bonus issue to attract attention from professional analysts in order to improve valuation. Cash Substitution Hypothesis. Ghosh and Woolridge (1988) and Banker, Das and Datar (1933) held that companies issue bonus shares to conserve cash. Hence, they regard the bonus issue as a substitute of cash dividend. Semi-strong Form EMH. The semi-strong form of the EMH tests time taken for the security prices to adjust to release of all public information, if at all it is able to adjust. This hypothesis holds that it may take time for the information to be disseminated to all the investors. Obaidullah (1992) found a positive stock market reaction to the announcement of bonus issue. Rao (1996) estimated cumulative abnormal return of 6.31 per cent around three days of the announcement of the bonus issue. Strong form EMH. Effort is made to test whether agency effect is involved at the time of issuing of bonus shares i.e. whether there is any relation between issue of bonus shares and promoter stake which can be attributed to the role played by insiders. In India, it is difficult to test strong form EMH in view of lack of data. According to the law, directors of a company are required to inform trading in shares of the company to the stock exchange which in turn is then posted at its website. Still, insider trading can take place without the knowledge of the stock exchange through benami account and India does not have any mechanism to track it. Hence, this hypothesis has to be tested in India by indirect means. One method is to test the average promoter stake in the companies issuing bonus shares and see whether insiders could make abnormal profit out of it. In this way, it is possible to find whether some companies issue bonus shares to fool stockholders since many a times, a firm that is in trouble and unable to pay its regular cash dividend may announce that it is substituting an equivalent stock dividend (Damodaran, 2001). Management & Change, Volume 10 Number 2 (2006)

120 Srinivas Shirur

METHODOLOGY In this study it is attempted to find out values of key variables of companies which have issued bonus shares and compare them with the Nifty shares using Nifty index which is often used as a market proxy. A set of following variables have been used in the study. (i) Average annual rate of growth of net sales of the companies. This refers to one year rate of growth of net sales before the ex-date of bonus share issue. This is compared with the Nifty av.erage net sales growth for that particular year. (ii) Average annual rate of growth of operational profit. This refers to one year rate of growth of operational profit before the ex-date of bonus share issue. This is compared with the Nifty average operational profit growth for that particular year. (iii) Average beta of the companies. This refers to one year average beta value on the CNX Nifty before the ex-date of bonus issue. This is compared with the Nifty beta which has been taken as one. (iv) Differences in the promoter stake. Promoter stake at the time of ex-date is compared with the Nifty shares. Only 38 private sector companies of the Nifty index have been included as all these companies which had issued bonus shares till September 2006 were private sector companies. Hence, for uniformity of comparison, only private sector companies of the Nifty index were taken to calculate the average promoter stake. Rationale behind this comparison is to verify whether there is any agency effect involved at the time of issue of bonus shares. (v) Comparison of positive companies with total companies. Is there a significant difference between positive companies and total companies or variation in positive companies on year to year basis is merely on account of random variation. By positive companies, we mean companies which issued bonus shares and had positive sales growth and profit growth before the ex-date of bonus share issue. Rationale behind inclusion ofthis variable is to find whether company wants to give positive information to the public or hide negative information. Positive companies try to give positive information while negative companies issue bonus shares to camouflage their poor performance.

Management & Change, Volume 10 Number 2 (2006)

,, __ â&#x20AC;˘ ""',.=_,_,n""''

Srinivas Shirur 121 This study deals only with actual information within 12 months before issues of bonus shares based on which management took the decision. Changes in the management decision regarding dividend pay-out following issuance of bonus shares have not been taken into account.

HYPOTHESES PROPOSED Following are different hypothesis proposed. Hypothesis

1. Rate of growth of net sales

Ho There is no difference between the rate of growth of sales of companies which issued bonus shares and Nifty companies.

Hypotheses Rationale: To find out whether companies which decide to issue bonus shares have higher average rate of growth of net sales compared to the mean growth of net sales of the Nifty companies. Hypothesis

2. Rate of growth of operational profit.

Ho There is no difference between the rate of growth of operational profit which issued bonus shares and Nifty companies.

Hypotheses Rationale: To find out whether companies which decide to issue bonus shares have higher average rate of growth of operational profit compared to the mean growth of operational profit of the Nifty companies. Hypothesis

3. Beta value

Ho There is no difference between the beta value of the companies which issued bonus shares and Nifty companies.

Hypotheses Rationale: To find out whether companies which decide to issue bonus shares have lower average beta compared to the beta of the Nifty. Hypothesis

4. Promoters'

stake

Ho There is no difference between the promoters' stake ofthe companies which issued bonus shares and Nifty companies.

Hypotheses Rationale: To find out whether companies which -decide to issue bonus shares have higher promoters' stake compared to the Nifty. Hypothesis

5. Positive companies

Management & Change, Volume 10 Number 2 (2006)

122 Srinivas Shirur

Ho There is no difference between the positive companies and total companies which issued bonus shares. Hypotheses Rationale: To find out whether all the companies which have issued bonus shares are also positive companies. STUDY FINDINGS

In this study an advanced version of application software SPSS-13 has been used and paired sample t-test applied to test significance of each pair. All the pairs were evaluated at the significance level of95 per cent. All the five factors which have been considered in the study show significant difference between companies issuing bonus shares and Nifty. The most significant factor which differentiates between companies issuing bonus shares and nifty shares is the rate of growth of sales. Over these five years, sales of the companies issuing bonus shares have been 34.5 per cent while growth in the sales of Nifty companies have been 21.8 per cent as per Table 2. Value of 't' of 4.570 for degree of freedom of 5 as per Table 3 means that the differences between the two means is quite significant. This proves the fact that companies which issue bonus shares have significantly higher sales growth prior to the ex-date compared to the Nifty shares. Probably, this is the information which company intends to share with the public which may have been ignoring the company's good performance. Second significant factor is the rate of growth of operational profit. Over these five years, operating profit of the companies issuing bonus shares have been 80.27 per cent while growth in the operating profit of Nifty companies has been 29.2 per cent as per Table 2. Value of '1' of 3.532 for degree of freedom of 5 as per Table 3 means that differences between the two means is quite significant. This proves the fact that companies which issue bonus shares have significantly higher operating profit growth prior to the ex-date compared to Nifty shares. Probably, this is also the information which company may like to share with public which may have been ignoring the company's good performance. Third important factor has been the beta of the companies. Over these five years, beta ofthe companies issuing bonus shares have been 0.699 per cent while beta of the Nifty companies has been 1 as per Table 2. Value of 't' of -2.893 for degree of freedom of 5 as per Table 3 means that the Management & Change, Volume 10 Number 2 (2006)

Table I Comparative Statistics - Company Issuing Bonus Shares Vs Nifty

S.No.

Year

No. of Companies

Negatives

ROG-net sales (per cent)

Nifty index-ROG sales

2001

2002

2003

2004

2005

2006

50.61

21.80

29.59

33.52

31.99

39.44

27.868

18.26

19.29

15.73

23.04

26.78

~ ~ ~r>

ROG-PAT (per cent)

113.5

23.28

44.01

150.2

55.25

95.29

NIFTY -ROG profit

38.99

20.99

15.03

52.38

22.09

25.76

Beta value for year end on CNX Nifty

0.67

0.76

0.61

0.72

0.719

0.84

Nifty-beta

56.13

34.74

50.52

50.54

50.80

51.92

n :r

Total latest promoters (per cent)

~ ~ ~

Nifty - promoters

2" 3

:i"

~. '"00

Z c: 3

Q:l

cr" r> ...â&#x20AC;˘

o 0'-'

=::;. =., "'~"

'U.

124 Srinivas Shirur differences between the two means is quite significant. This proves the fact that companies which issue bonus shares have significantly lower beta prior to the ex-date compared to the Nifty shares. In addition to these three factors, the study tried to analyze whether agency effect has any role to play in the issuance of bonus shares. Average promoter stake in companies which issued bonus shares as per Tablel is 56.13 while average promoter stake in Nifty companies is only 39.33 (only 38 companies which are not public sector companies and have been in the Nifty for the major part of the year have been included to calculate promoter stake for the Nifty companies). Value of 't' of 3.488 for degree of freedom of 5 as per Table 3 means that the differences between the two means is quite significant. This proves the fact that companies which issue bonus shares have significantly higher promoter stake compared to the Nifty shares. Rationale behind this finding is that companies with higher promoter stake is more likely to issue bonus shares as promoters have vested interest to expand their business empire and may not like to part with their cash by paying as returns to shareholders.

Table 2 Company Issuing Bonns Shares Vs Nifty-Paired Samples Statistics Item (Pair 1) No. of companies Positive (Pair 2) Sales-org. Nifty-sales (Pair 3) Profit-org. Nifty-profit (Pair 4) Beta Nifty-beta (Pair 5) Promoter Nifty-promoter

Std. Deviation

27,500

15,73,213

6.42262

21,333

14,20,618

5.84047

3,44,951

9,76,379

3.98605

2,18,280

4,87,505

1.99023

8,02,739

47,78,603

19.50857

2,92,067

13,88,333

5.66785

0.6922

0.26068

0.10642

1.0000

0.00000

49.1129

7.35822

3.00398

39.3333

1.75119

0.71492

Mean

Management & Change, Volume 10 Number 2 (2006)

Std. Error Mean

Srinivas Shirur 125 Last factor which has been taken into consideration in this study is comparison between positive companies and total companies which have issued bonus shares. Rationale for taking this factor into consideration in this study is that there has been allegations of companies using bonus share issue to spread misinformation to the public. A total of 37 out of the 165 companies which have issued bonus shares had either negative sales growth or profit growth or both. Value of 't' of 4.561 for degree of freedom of 5 as per Table 3 means that differences between the two means is quite significant. Hence, number of negative companies may not result following random sample variations but following some inherent reasons. In such a situation, the above mentioned signaling hypotheses may not hold true for negative companies. Such companies have negative growth rate and may not be doing well. They issue bonus shares to mislead the investors and rig the price.

It is no exaggeration to call Sri Ramakrishna's teachings an Upanishad. Shri Ramakrisha was a Mahatma who saw God in heart and in all things in the world outside. He saw Him in all things with the same certainty and strength of feeling with which we see each other. Such remarkable seers have sprung in different lands from time to time. There is a peculiar power in the words of those who lead a Godly life. They have a force which the exhortations of merely learned and intellectual men do not have. When a Maharshi talks, it is his whole life that speaks through him, not mere intellect. Dialectics and exposition, however, beautiful and loaded with substance, cannot compare with the spoken words of Godinspired saints. Our society has come into its own in a political sense. To obtain happiness along with freedom, our people should thread the path of dharma. - C. Rajagopalachari

Management & Change, Volume 10 Number 2 (2006)

~ ~

Paired Sample Text

Mean

:or

~ ~ ~

(Pair 1)

No. of companies - Positive

(Pair 2)

Sales-argo - Nifty-sales

~ Z

~ rr ...â&#x20AC;˘ (l>

="00 '"l

Paired Difference

....

Table 3 Company Douns Shares Issuance Statistics Vs Nifty

Std. Deviation

Statistic Std. Error Mean

Sig. (2tailed)

:;:;. I\) ~ 00

=-::;. C

6.16667

3.31160

1.35195

4.561

0.006

12.66712

6.78999

2.77200

4.570

0.006

(Pair 3) .~ Profit-argo - Nifty-profit

51.06722

35.41175

14.45679

3.532

0.017

(Pair 4)

Beta - Nifty-beta

- 0.30783

0.26068

0.10642

-2.893

0.034

(Pair 5)

Promoter - Nifty-promoter

9.77956

6.86757

2.80367

3.488

0.018

N o o

If I have the belief that I can do it, I will surely acquire the capacity to do it, even if I may not have it at the beginning. - Mahatma Gandhi

'"l

Srinivas Shirur 127 ANALYSIS AND RESULTS First three factors analyzed together show that most obvious reason for the companies issuing bonus shares is that their rate of growth of profit and sales are growing at a rate above the rate of growth of the economy but .their beta is less than the index. In a booming capital market, this means that investors are ignoring these companies. That is the reason why despite performing better than the market, their share price lag behind the index and hence to signal their good result, they take recourse to issuing bonus shares. Hence, this proves the signaling hypothesis. Result of above three factors can also be evaluated within the perspective of semi strong-form Efficient Market Hypothesis. Sometimes, market may ignore the good performance of a company. In a booming market, especially beta of less than one may mean that price of shares of concerned companies is not increasing adequately to reflect their true value relative to other companies. In such a condition, there is a tendency for low beta stocks getting undervalued following the impact of skewness on expected returns (Mcenally, I974). Even when companies are performing consistently above average in terms of sales and profit growth, company's top management has to send a signal to the capital market so that investors could take note of good performance. When undervalued companies issue bonus shares, increase in skewness may be observed. This may increase price of shares as investors are willing to pay a premium for positively skewed shares which has abnormally large number of positive price changes (Kraus and Litzenberger, 1976). That is why, when companies with good performance issue bonus shares, abnormal profit is observed. The reason is that potential investors try to collect more information about the company which issues bonus shares and value the shares appr9priately. This shows that market takes significant time to adjust to new information. Sometimes, signal has to be sent to potential investors by top management to make the capital market semi-strong form. Hence, capital market is not inherently in semi-strong form and has to be made so through positive action like issuing bonus shares. Last two factors create doubts on ability of capital market to automatically achieve strong form of the EMH. Promoters always have a significant role to play in supplying information to manipulate the market. Empirical evidence shows that companies issuing bonus shares have significantly higher Management & Change, Volume 10 Number 2 (2006)

128 Srinivas Shirur promoter stake than average found in the capital market. This proves the fact that some kind of agency effect is involved in issuance of bonus shares. As promoters have knowledge about bonus issue even before its announcement, hence there is always a possibility of insider trading, which cannot be completely mitigated by legal means. In addition, there is always a possibility of the company making a fool of the retail investors as well as potential investors. When the company is not performing up to the mark and do not have cash to pay dividend, they issue bonus shares. Thus, as per the study, a significant number of negative companies issue bonus shares. This merely goes on to prove that capital markets are not inherently efficient even in the long run. Grossman (1976) and Grossman and Stiglitz (1980) argue that perfectly informationally efficient markets are an impossibility, for if markets are perfectly efficient, there is no profit to gathering information, in which case there would be little reason to trade and markets would eventually collapse. Alternatively, degree of market inefficiency determines the effort investors are willing to expend together and trade on information. Hence, a non-degenerate market equilibrium will arise only when there are sufficient profit opportunities, i.e., inefficiencies, to compensate investors for the costs of trading and information-gathering. Profits earned by these attentive investors may be viewed as economic rents that accrue to those willing to engage in such activities at the cost of noise traders who trade on what they consider to be information but which is, in fact, merely noise (Black,1986). Fama (1998) considers that anomalies are chance events and are quiet consistent with the market efficiency hypothesis. As per the MEH, apparent overreaction of stock prices to information is about as common as under-reaction and post-event continuation of pre-event abnormal returns is about as frequent as post-event reversal. In contrast to the theoretical prediction of the EMH, it can be seen that in majority of cases, bonus shares may lead to abnormal returns. Hence, market is not inherently efficient and information asymmetry and gaps may lead to inconsistency in matching of risk and return by the investors. In such situations, promoters have to step in and have to send right signals to investors so that their companies are valued properly by the market. There are also cases where promoters may issue bonus issues to mislead investors. In order to deal with such situations, law should be made stringent so that only positive companies could be allowed to issue bonus shares. Management & Change, Volume 10 Number 2 (2006)

l.Âˇ

Srinivas Shirur 129

CONCLUDING REMARKS A total of 165 companies have been included in the study over five year period. The annual average of all five variables has been taken and its mean and value of 't' have been calculated. First, three factors viz. rate of growth of sales and profit as well as value of beta significantly explain the difference between companies issuing bonus shares and the Nifty companies. This proves that capital market is not inherently semi-strong form of the EMH and top management has to send signals to make the market efficient. Similarly, the last two factors viz. stake of promoters and negative companies also significantly explain the difference between companies issuing bonus shares and the Nifty companies. This shows that market is not able to inherently depict strong form of the EMH.

REFERENCES Banker, RD., S. Das and S .M Datar (1993) "Complementarity of Prior Accounting Information: The Case of Stock Dividend Announcements," Accounting Review, 68:28-37. Black, F. (1986) "Noise", Journal of Finance,

41: 529-539.

Brown, S. and J. Warner (1980) "Measuring Security Price Performance," Journal of Financial Economics,.8: 205-222. Damodaran, G. (2002) Corporate Finance. New York: John Wiley & Sons. Doran, D.T. and R Nachtmann (1988) "The Association of Stock Distribution Announcements and Earning Performance," Journal of Accounting, Auditing and Finance, 3: 113-122. Fama, E. (1973) "Efficients Capital Markets: A Review of Theory and Empirical Work", Journal of Finance, 25: 383-396. Fama, E. (1998) "Market Efficiency, Long Term Returns, and Behavioural Finance", Journal of Financial Economics, 298-309. Foster, T.W. and D. Vickrey (1978) "The Information Content of Stock Dividend Announcements," The Accounting Review, 53(2): 367-381. Ghosh, C. and J.R Woolridge (1988) "An Analysis of Shareholder Reaction to Dividend Cuts and Ommission," Journal of Financial Research, 9: 287-292. Management & Change, Volume 10 Number 2 (2006)

----------------------

••

111•••• ' _III__.~

I I

! 130 Srinivas Shirur Grinblatt, M.S, R.W. Masulis and S. Titman (1984) "The Valuation Effects of Stock Splits and Stock Dividends", Journal of Financial Research, 9: 287-305. Grossman, S. (1976) "On the Efficiency of Competitive Stock Markets where Trades have Diverse Information", Journal of Finance, 31: 573-579. Grossman, S. and J. Stiglitz (1980) "On the Impossibility ofInformationally Efficient Markets", American Economic Review, 70: 393-412. Kraus, A. and Litzenberger (1976) "Skewness Preference and the Valuation of Risky Assets," Journal of Finance, September, 4: 1085-1094. Lakonishok, J. and B. Lev (1987) "Stock Price Reaction to the Wall Street Journal's Securities Recommendations," Journal of Financial and Quantitative Analysis, 25: 914-934. "

Mcenally, R. (1974) "A Note on the Return Behavior of High Risk Common Stock," Journal of Finance, May, 2: 199-202. Modigliani, F. and M. Miller (1961) "Dividend Policy, Growth and the Valuation of Shares," Journal of Business, 34: 67-91. Obaidullah, M. (1992) "How do Stock Prices React to Bonus Issues?", Vikalapa, 17(1): 20-36. Rao, K., Chandra Sekhara and T. Geetha (1996) Indian Capital Market: Informational Signaling and Efficiency, New Delhi: A.P.H Publishing Corporation. Woolridge, J.R (1983) "Stock Dividend as Signals, "Journal of Financial Research, 6: 12 -23.

Success is to be measured not so much by the position that one has reached in life as by the obstacles overcome whilst trying to succeed. - Booker T. Washington

Management & Change, Volume 10 Number 2 (2006)

LEARNING CULTURE AND PERFORMANCE OUTCOMES: EVIDENCE FROM MALAYSIAN ORGANIZATIONS Raduan

Che Rose

Arfah Salleh

Naresh Kumar

The empirical study aims to explore relationships between learning organization dimensions and perceived performance improvement within Malaysian owned MSC status organizations. Its findings generally support claims that learning organization can be easily,able to improve performance. On the whole, the findings of this study provided comprehensive empirical information for human resource development scholars and practitioners pertaining to the significance of a learning culture and its impact on financial and knowledge performance improvement. Key words:

Learning organization, financial performance, knowledge performance, HRD, MSC status organization, information and communication technology, Malaysia

INTRODUCTION Within the last three decades, the world has vigorously evolved from an economy primarily reliant on agriculture and industrial based economy to a knowledge based economy. Construction and application of knowledge significantly contributes to organizational success and to a larger extent in economic intensification and wealth formation. Indeed the knowledge based economy is no longer viewed as a buzzword rather it is the reality being faced by the world society. For the next decades, organizations will certainly focus on strengthening critical elements that support development of the knowledge-based economy. Endeavour toward a knowledge-based economy will be fruitful if the employees continue to be the engine of growth while the management provides supporting environment. It is undeniable that many organizations have devoted immense };esources to research and development, which is vital for human resources development (HRD). Additionally, it is apparent that contemporary organizations recognize education and training as the integral components for the HRD. The priority given Management & Change, Volume 10, Number 2 (2006) ~ 2006 IILM Institute for Higher Education. All Rights Reserved.

132 Raduan Che Rose, Arfah Salleh and Naresh Kumar

to education and training provides opportunities for academic pursuit and advancement of knowledge among workforce. Development and retention of high quality knowledge workers is invariably the foremost concern of organizations today.

i I

In a similar vein, there is no exception for individuals, teams and organizations from developing essential competencies to adhere in a world of working. Equipping individuals with appropriate knowledge and skills alone is not sufficient but help in developing a more efficient, resilient, and disciplined and technically competent workforce that are essential for developing economic competitiveness. Perhaps traditional approaches to training, learning and development will probably not provide the competencies which are required for improvement, innovation and sustainable development. Rapidly changing marketplace is forcing leaders to identify new ways to develop organizations that would be skillful at continuous adaptation and competent to look forward to the need for change. Sustaining competitive advantage needs amplification of learning capacity and a paramount shift from the traditional vertical organization (bureaucratic organization) to an organization that emphasizes on human capital development that works well in the turbulent environment.

Interest in the concept of organizational learning has blow up in the past two decades. Consequently an increasing body of evidence supports the linkage between an organization's learning culture and its performance. Indeed in the early 1990s, the learning organization notion has become a business phenomenon and thus a great deal ofliterature has been generated over the years particularly in regard to the link between organizational learning culture and various financial and no-financial performance improvement measures. Garvin (1993), Marquardt (1996), Pedler, Boydell and Burgoyne (1991), Senge (1990), Watkins and Marsick (1993, 1996) are some ofthe pioneers who have popularized the notion oflearning organization through their seminal books and articles. These authors together with many others (e.g.: Ellinger, Ellinger, Yang, & Howton, 2002,2003; Hernandez, 2000,2003; Marsick & Watkins, 1999; McHargue, 1999,2003; Power & Waddell, 2004; Selden, 1998, Selden & Watkins, 2001; Somerville & McConnell-Imbriotis, 2004; Watkins & Marsick, 2003; Yang, 2003; Yang, Watkins, & Marsick, 2004) suggested extensive and causal relationships between learning culture and organizational performance. Moreover they argued that a well defined and implemen.ted learning culture could enhance Management & Change, Volume 10 Number 2 (2006)

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Raduan Che Rose, AMah Salleh and Naresh Kumar 133

an organization's competitive advantage. Amplified competition, globalization, mergers, acquisitions, alliances, and workforce diversity have created a greater need for well defined organizational learning culture. Perhaps, in this ever changing world, it is transparent that organizational learning culture is even more significant than it was in the past d@cades. Schein (1991) emphasized that organizational cultures "provide group members with a way of giving meaning to their daily lives, setting guidelines and rules for how to behave, and, most important, reducing and containing the anxiety of dealing with an unpredictable and uncertain environment." (p.15). To a great extent scholarly attention has been focused on the proposition that a high degree of organization performance is related to an organization which has a strong culture with well integrated and effective set of values, beliefs and behaviours across an organization (Cameron & Quinn, 1999). However, some ofthe researchers noted that learning culture would remain linked with superior performance only ifthe organizational members are able to adapt to changes in environmental conditions. Furthermore, the learning culture must not only be extensively shared, but it must also have unique qualities, which cannot be easily. In short, higher levels of business performance were most closely associated with the values of competitive aggressiveness and outcome orientation and emphasizes on the values of flexibility and innovation in learning. Vast literatures on learning organization have advanced understanding of the determinants and performance effects oflearning culture. Nevertheless they go away unreciprocated the applicability of existing results across national boundaries. There are some aspects of learning culture that may enhance performance in one national setting, they may not be effective, and may even be dysfunctional, in another. It may be predicted that an organization who adopt the vastly different cultural orientations such as Malaysia and other Southeast Asian countries probably will experience lower performance outcomes. This is because the workforce in other countries with different cultural orientations from those of the western environment may perhaps not absolutely comprehend and be able to assimilate the management style and working procedures. Thus this creates to some extent weaker impression about the positive linkages betw'een the learning organization and performance improvement practices in the Asian Region. Moreover, it was apparent from the review of literature that additional research was needed to investigate relationship between learning organization constructs Management & Change, Volume 10 Number 2 (2006)

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134 Raduan Che Rose, Arfah Salleh and Naresh Kumar and organizational performance improvement particularly in the Asia Pacific Region where empirical studies remain elusive. As we get a better understanding of the learning organization constructs and its impact upon organizational performance improvement, it becomes easier to sort out the guidelines to help implement the ideal learning organizations. Specifically, this study aims to identify the rf.'!ationship between learning organization constructs and perceived measures offinancial and knowledge performance among Malaysia's MSC status organizations which are undoubtedly in the threshold of becoming global players. CONCEPTUAL

FRAMEWORK

Garvin (1993) stressed that the literature on the learning organization focused on "high philosophy and grand themes, sweeping metaphors rather than the gritty details of practice" (p.79). He affirmed that three critical issues for implementing the learning organization are still unresolved, yet it is considered as the foundation for launching learning organizations effectively: (I) meaning, a well-grounded definition that is actionable and easy to apply; (2) management, clearer guidelines for practice with operational advice; and (3) measurement, better too Is for assessing an organization's rate and level oflearning. In a similar vein, Campbell and Cains (1994) affirmed that noticeably in the learning organization literature, " ... what has been lacking is convergence on a definition capable of application to many organization plus guidelines to help implement the idea" (p.1 0). Nevertheless, Watkins and Marsick (1993, 1996; see also Marsick & Watkins, 1999) have developed an integrative model of a learning organization that provides powerful guidelines to help organization leaders' in successfully transfonn their organizations into learning organizations and at the same time "help answer the criticisms made by Garvin (1993) and ... (many other authors] that the literature about the learning organization is too reverential, utopian, mystical, idyllic, and abstract" (McHargue, 1999, p.23). Watkins and Marsick's (1993, 1996) learning organization model has the capacity for integrating people and structure to budge an organization towards continuous learning, change and development. Their proposed learning organization framework stressed three key areas: "(1) systems-level, continuous learning; (2) that is created in order to create and manage knowledge outcomes; (3) which lead to improvement in the organization's performance, and ultimately its value, as measured through both financial assets Management & Change, Volume 10 Number 2 (2006)

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Raduan Che Rose, Arfah Saneh and Naresh Kumar 135

and non-financial intellectual capital" (Marsick & Watkins, 1999, p, 10-11). The approach taken by Watkins and Marsick has seven distinct but interconnected learning organization dimensions at individual, team, and organizational level and indeed across the two core organizational constituents: people and structure, The seven dimensions of the learning organization are: (I) create continuous learning opportunities (continuous learning); (2) promote inquiry and dialogue (inquiry and dialogue); (3) encourage collaboration and team work (team work); (4) establish systems to capture and share learning (Embedded systems); (5) empower people toward a collective vision (empowerment); (6) connect the organization to its environment (system connections); and (7) provide strategic leadership for learning (provision ofleadership),

Based on the seven action imperatives, Watkins and Marsick (1993,996) developed the dimensions of the learning organization questionnaire (DLOQ), an instrument used "to measure the abstract construct of a learning culture" (Yang, 2003, p, 153). In addition, they have included two organizational performance outcome measures, namely, financial performance and knowledge performance in the DLOQ. Watkins and Marsick's learning organization action imperatives model served as the theoretical framework for this study. The framework has several distinctive characteristics: (1) it has a clear and comprehensive definition of the construct of the learning organization from an organizational culture perspective which provides sufficient measurement spheres for scale construction (i.e" the DLOQ); (2) it includes dimensions of a learning organization at individual, team, organizational and global levels; (3) it integrates major dimensions of the learning organization from the literature in a theoretical framework by specifying their relationships; (4) it delineates the seven learning organization dimensions from the perspective of action imperatives and thus has practical implications (Yang, et ai" 2004, p.35), Recently, Ortenblad (2002, 2004; see also Yang, et ai, 2004) reviewed the literature on learning organization as well as practitioner's understandings of the concept of the learning organization and developed a typology of the idea ofa learning organization, He.found four perspectives of the idea ofthe learning organization, First, old organization learning perspective that focuses on the storage of knowledge in the organizational mind and it is used in practice across the organization. Learning is believed to take place Management & Change, Volume 10 Number 2 (2006)

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136 Raduan Che Rose, Arfah Salleh and Naresh Kumar

when knowledge is applied at different levels in the organization. Second, learning at work perspective, which put forward that employees learn onthe-job rather than learning at formal courses. Third, learning climate perspective, this sees learning organization as one that facilitates the learning of its members. Lastly, learning structure perspective, that perceives the learning organization as flexible .::.rganizationand an organic organization. Among twelve understandings of the idea ofthe learning organization in the literature, Ortenblad (2002) found that Watkins and Marsick's framework of the learning organization covers all the four learning organization perspectives. The research framework for this study is as in Figure 1. Independent Variable Dependent Variable

LEARNING ORGANIZATION DIMENSIONS

FINANCIAL PERFORMANCE (I71e degree

and

of financial

resoun.:es

growlh).

heallh

available for

Continuous Leaming Inquiry & Dialogue

Team Leaming Embedded System Empowerment Systems Connection

Dependent~ KNOWLEDGE PERFORMANCE (The degree of enhancement of products and services because of learning

and

capacity (lead intellectual

knowledge

indicators of

capital).

Provision of Leadership

Fig. 1 Research Framework METHOD The survey instrument for this study comprised Dimensions of the Learning Organization Questionnaire (DLOQ) to measure the seven action imperatives ofthe learning organization and perceived improvements in financial and knowledge performance. Both the DLOQ and perceived financial and knowledge performance improvement measures were developed by Watkins and Marsick (1997). Several studies have been conducted to establish the reliability and content and predictive validity of the DLOQ (e.g., Ellinger, Ellinger, Yang, & Howton, 2002,2003; Hernandez, 2000, 2003; Hernandez & Watkins, 2003; Lim, 2003; McHargue, 1999,2003; Selden, 1998; Selden & Watkins, 2001; Sta. Maria, 2000; 2003; Sta. Maria & Watkins, 2003; Watkins & Marsick, 2003; Yang et al., 2004; see also Watkins, Selden, & Marsick 1997; Watkins, Yang, & Marsick 1997; Yang, Watkins, & Marsick, 1998 in Selden 1999). Moreover in this study, the reliability of the findings obtained via the DLOQ was assessed using Cronbach's alpha (Nunnally, 1978). The Cronbach's coefficient alpha for this study ranged from 0.82 to Management & Change, Volume 10 Number 2 (2006)

Raduan Che Rose, Arfah SalJeh and Naresh Kumar 137

0.88 for the seven learning organization dimensions. The coefficient for perceived financial and knowledge performance measures were 0.80 and 0.86, respectively. The results put forward a reasonable level of consistency in the responses since it met the Cronbach's coefficient alpha requirement of at least 0.70 as recommended by Nunnally (1978). Based on the directory ofMSC status organizations, there were a total of 825 Malaysian owned (51 per cent and above shares) MSC status organizations (Multimedia Development Corporation, 2005). A package of survey questionnaire was sent out to all the organizations. Human resource managers who were believed to be at the right position in responding to the survey questionnaire represented the organizations. A total of208 questionnaires were returned and used as the sample for this study. The response rate for this study was 25.2 per cent and it was considered good for a mail survey in Malaysia. The valid responses were tabulated and analyzed using SPSS. Multiple regression analysis was employed to accomplish the research objectives . .FINDINGS This study aims to identify to what extent do Watkins and Marsick's seven dimensions of the learning organization jointly explain the observed variances in two perceived performance improvement measures: financial and knowledge performance. The SPSS procedure for ordinary least square regression, ANOVA (analysis of variance) was used with the maximum R2 option which is designed to find the best predictors or model. Team learning (p = 0.0001), system connections (p = 0.003), and provision ofleadership (p = 0.016) were revealed to be the best predictors of financial performance, with the best model R2 = 0.528 and standardized coefficient ofteam learning at Beta 0.316, system connections at Beta 0.259, and provision of leadership at Beta 0.222. Based on the analysis, it can be concluded that 53 per cent of the variance in perceived financial performance could be attributed to the joint effect oftearn learning, system connections, and provision of leadership. On the other hand, provision of leadership (p = 0.0001); embedded systems (p = 0,0001); and inquiry and dialogue (p = 0.001) were revealed to be the best predictors of knowledge performance, with the best model R2 = 0.594 and standardized coefficient of provision ofleadership at Beta 0.332; embedded systems at Beta 0.267; and inquiry and dialogue at Beta 0.261. Based on the multiple regression, it was depicted that about 59 Management & Change, Volume 10 Number 2 (2006)

138 Raduan Che Rose, Arfah SaUeh and Naresh Kumar

per cent of perceived knowledge performance could be explained by the joint effect of provision ofleadership, embedded systems, and inquiry and dialogue. The multiple R for financial and knowledge performance models were (R = 0.726) and (R = 0.771), respectively. These demonstrated significant high correlations between the independent variables (learning organization dimensions) and dependent variables (financial performance and knowledge performance). The significant F-value provide evidence that the model fit the data. Based on the results, it has been concluded that there is a linear relationship between the predictors and the financial and knowledge performance. The Tolerance and variance inflation factor (VIF) values were used to assess collinearity or multicollinearity among the independent variables. All the Tolerance and VIF values were below the commonly accepted threshold value.of 10.00 and 1.00 respectively (Neter, Wassermann, & Kutner, 1990, SPSS Applications Guide, 1999). Thus, it was concluded that multicollinearity between the predictor variables does not exist.

Based on the multiple regression analysis, the estimated model equations for financial performance and knowledge perfonnance were derived. The prediction equations shows the overall contribution of learning organization dimensions in predicting Malaysia's MSC status organizations' financial and knowledge performance. The estimated linear functions are as in Fig. 1. F K

= =

4.881 + 0.321 X2 + 0.259 X4 + 0.213 Xs 4.109 + 0.235 Xs + 0.248 X3 + 0.271X)

Where F K XI X2

X4 Xs

Financial Performance Knowledge Performance Inquiry and dialogue Team learning Embedded systems System connections Provision of Leadership

Fig.2 Estimated Linear Function for Financial and knowledge Performance. Management & Change, Volume 10 Number 2 (2006)

Raduan Che Rose, Arfah SalJeh and Naresh Kumar 139

The prediction equation for financial performance shows that team learning and system connections were significant at the p < 0.05 level. Meanwhile provision ofleadership was significant at p < 0.10 level. Provision ofleadership, embedded systems and inquiry and dialogue were significant at p < 0.05 level in the linear equation for knowledge performance. In general, the equations explains a unit change in the respective learning organization dimensions will accompanied by a corresponding unit change in perceived financial and knowledge performance which are based on the value of the coefficients. Indeed, these estimated equations can be used to predict the value of the dependent variable (perceived financial knowledge performance) for new cases. DISCUSSION From the multiple regression analysis, it was revealed that five out of seven learning organization dimensions strongly influenced the perceived financial and knowledge performance of Malaysian MSC status organizations. Team learning, system connections, and provision of leadership explain 32 per cent, 26 per cent, and 21 per cent of variance in perceived financial performance improvement. On the other hand, provision ofleadership, embedded systems, and inquiry and dialogue explain 24 per cent, 25 per cent, and 27 per cent of variance in perceived knowledge performance improvement. Indeed the variables jointly accounted for 53 per cent and 59 per cent of the variance in financial and knowledge performance improvement measures. The following discussion will focus on the five learning organization dimensions that have significantly influenced the two performance measures. Promote Inquiry and Dialogue (Inquiry and Dialogue) The goal of dialogue is to establish a field for inquiry. In this setting, organizational members can become more aware of the context around experiences and the process of thought and feeling that created that experience. Dialogue provides an opportunity to defend and clarifies ideas about particular issues through positive talks. As of this standpoint, the power of talk is emphasized "by telling what is on one's mind, asking questions about its impact, listening for reasoning in people's answers, and keeping open to new viewpoints" (Watkins & Marsick, 1993, p.13). In addition, dialogues are exploratory in nature therefore call for open communication becomes vital in seeing the underlying potential in others and then cultivating those Management & Change, Volume 10 Number 2 (2006)

140 Raduan Che Rose, Arfah Salleh and Narcsh Kumar

talents in a meaningful way that provides benefits for the individuals and the organization as a whole. Based on the results of this study, it can be concluded that a culture of inquiry, feedback and experimentation perhaps have been created and in progress within the Malaysian MSe status organizations. Watkins and Marsick (1993) avowed that inquiry "involves questioning that simultaneously challenges assumptions and yet does not attack the individual" (p.14). Generally, strategies that could be used by the Malaysian MSe status organizations as well as other leT based organizations for this purpose are such as action learning, action science and the use of dialogue circles (Watkins & Marsick, 1996). Indeed dialogue and inquiry is dedicated to promote intellectual and professional activities, which foster organizational members' development. Furthermore, leaders in Malaysian MSe status organizations seem to engage in promoting inquiry and dialogue among their members that could encourage questions and be able to dispassionately debate disagreements, while maintaining collegial relationships among all concerned. Thus, it might lead the focus of the members to collective inquiry, with new insights being developed. It is also important to note that among the organizational members, the inquiry and dialogue have to be rooted in a strong sense of mutual support and gain rather than unbeneficial competition. In addition, Watkins and Marsick (1993, 1996) contended that inquiry and dialogue couldn 't.occur unless there is an environment supporting a developmental approach to learning whereby making error is acknowledged as part of the process of attaining better financial performance. Organizations can only foster learning if they are composed ofindividuals with a strong commitment to personal learning and self-improvement. The commitment for learning requires a strong curiosity and willingness to inquire and discover new knowledge. It also provides opportunity to reflect on one's learning and look for new ways to improve financial performance. Inquiry and dialogue helps the organizational members to learn more creatively and on a continuous basis. Furthermore they can integrate information from diverse sources, which are required in the development of new knowledge and skills, or even it could be useful when conscious changes are to be made. Surprisingly three different studies (Hernandez, 2000; McHargue, 1999; Selden, 1998) revealed that inquiry and dialogues does not predict financial performance. Nevertheless the research findings on Malaysian MSe status organizations showed that inquiry and dialogue preManagement & Change, Volume 10 Number 2 (2006)

Raduan Che Rose, Arfah SalJeh and Naresh Kumar

j 41

diets the perceived financial performance. Thus, it is strongly recommend that leT based organizations should make an effort to assess themselves and grow intellectually together through positive inquiry and dialogue as they embark to improve their financial capacity. Encourage Collaboration

and Team Learning (Team Learning)

Team learning or collective learning is becoming more prevalent in today's workforce and both scholars and practitioners in the field of organizational development are feeling its benefits. Obviously, the main purpose of team learning is to promote team cohesiveness and performance while facilitating individual learning. This is crucial to organizational members where the emphasis is on creation of new knowledge that cannot be completed by working alone. The team learning environment provides an opportunity for organizational members to contribute social support to each other, as well as fostering the development of job related skills. Team learning is built through meaningful conversation and these conversations can take in the form of dialogue and discussion. The findings of this study suggest that leaders in the ICT based organizations must encourage collaboration and team learning because team members bring complementary strengths to compensate weaknesses of each other that further accelerate their financial performance. Knowledge is shared most effectively when organizational members collaborate and the culture of collaboration can be cultivated by sharing responsibilities and credits. Certainly, from the basis of this study we could conclude that Malaysian MSC status organizations practices open communication whereby it is the essential process that link team members together so that they can learn continuously and generates new ideas to face the environmental challenges, which are constantly changing and evolving. In addition Malaysian MSC status organizations seems to call attention to the skills of "framing, reframing, experimenting, crossing bOlmdaries, and creating an integrative perspective" (Watkins & Marsiek, 1993, p.14) which are important to improve tea.'TIlearning and further acceleration of financial performance. One should notice that learning is turning knowledge into something of value to organizational members and it must be realized that social interaction are inseparable. The interaction, which provides direction to the organizations and gets the tasks done takes many forms and happens among the members. With collaborative effort and team learning, each member of an Management & Change, Volume 10 Number 2 (2006)

142Raduan Che Rose,Arfah Salleh and Naresh Kumar organization shares knowledge and experience with each other, resulting in jointly constructed knowledge and thus improves the organization's financial performance. The finding ofthis study has made this situation transparent. The key advantage to collaboration and team learning is apparently linked with combined strategies and thinking to build capacity systemically (Watkins & Marsick, 1993). Moreover, through collaborative and team learning culture, the individual learns, the group learns, and, finally, the organization learns to improve its financial capacity. Establish Systems)

Systems

to Capture

and Share

Learning

(Embedded

The overall aim on continuous learning should not neglect the opportunities offered by new technologies to harness and share knowledge through increased access to learning in the organizations. Malaysian MSC status organizations, undoubtedly have effectively exploited ICT to support continuous learning across the organization. Perhaps ICT have been fully deployedto support learners and learning as a major contribution to the development of a learning culture among MSC status organizations in Malaysia. In line with this, particular attention also seems to be given to widening access to new information technology and to ensure that organizational members' acquire the relevant knowledge and skills to access and be able to make full use of it. It is strongly believed that Malaysian MSC status organizations should have established and equipped learning centres, which open up new learning pathways. Increasingly a system that captures and embeds learning creates opportunities to work in partnership with other stakeholders worldwide. Arrangements amongst industrial leaders for appropriate knowledge sharing and transferring are vital in this digital era. This will strengthen the credibility of organizational members to perform more in their daily work with full range of practical knowledge. Effective partnership and greater collaboration with other stakeholders will make a major contribution towards providing continuous learning opportunities in the organizations. In order to cope with change, to meet new challenges, and to develop as professionals, learning should have been made constant in the Malaysian MSC status organizations. Leaders in Malaysian MSC status organizations must find new ways to transform the "tacit" knowledge into useable information, which is beneficial to all the members. In an organization, examples of tacit knowledge are Management & Change, Volume 10 Number 2 (2006)

_____________ .. .__..

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Raduan Che Rose, Arfah SaUeh and Naresh Kumar 143

"skills and competencies, experiences, relationships within and outside the organization, individual beliefs and values, and ideas"(Kidwell, Vander & Johnson, 2000, p.29). In order to capture and share this "tacit" knowledge, various strategies like" ... software such as Lotus Notes or Microsoft Access to capture ideas across dispersed teams and divisions; electronic "water coolers" to solve problems; journals of lessons learned; computerized maintenance and productions histories; "town hall" processes for collaborative development of new visions, structures, competencies, markets or other organizational directions so that all are involved in co-creating knowledge before using it; and celebration events to share new findings across geography, function, time and experience" (Watkins & Marsick, 1993, p. 6) need to be in place if ICT based organizations are embarking to improve their knowledge performance. Besides capturing individual knowledge so that it can be understood and applied by everyone, Malaysian MSC status organizations leaders' have seemingly realized the importance of know 1edge management to further enable their members to acquire and retrieve information as needed from time to time. Nowadays with the aid of retrieval technologies accessing and capturing "tacit" knowledge to meet daily demands becomes easier and the right knowledge gets to the right people at the right time. In a complex world, it is important to capture team learning and make it a part of a knowledge repository that all organizational members can access easily. Ifthe learning of individuals is not transferred to the team and consecutively from the team to the organization, the learning will diminish. Ideally, to be learning organization, everyone in the organization need to be linked through a system and this is established as means for sharing information. There should be a shared responsibility for the learning system development; with learners themselves having increased ownership of their own learning and its management throughout their career life. No doubt the end result will be skewed towards knowledge perfonnance improvement. Connect the Organization

to its Environment

(System Connections)

According to Marquardt (1996) the "purpose of ongoing scanning of the environment is to be prepared for future changes that are most likely to affect the organization" (p.64). The findings of this study proposed that financial performance ofICT based organizations could be improved ifthese organizations are effectively connected to their environment. Although Management & Change, Volume 10 Number 2 (2006)

144 Raduan Cite Rose, Arfah Salleh and Naresh Kumar schools, colleges and universities come to mind when we talk about continuous learning, even today most learning takes place elsewhere. Organizational members learn almost everywhere, sometimes as part of daily activity. They learn from colleagues and workers at all levels, in both formal and informal ways and also include resource persons from outside the organization who are invited to participate in learning activities. ICT based organizations should encourage their members to join professional associations and through such memberships they can engage in professional activities and can interact with practitioners in the field with their consent. Membership in community organizations can also enable one to draw upon community creativity and sensitivity, providing a more rewarding learning experience which help to generate ideas to improve the financial performance. To sustain success in a dynamic environment requires an ability to learn and innovate. Innovative organizations will ensure its opportunity for success by being well suited to the environment in which it operates. Furthermore, these organizations are far more likely to thrive in a world of constant change and intense competition. Regardless of the current success and depth of relationships across the environment, organizations must be able to change and innovate. The learning organizations ought to recognize both the internal and external environment interdependencies and act upon dilemmas connected with these interdependencies. In this digital era, one can access to global sphere of knowledge in a fast mode due to the rapid advancement in ICT. The application of information technology is more than just to triumph the inflexibility of the existing structure but also to bridging the gaps of knowledge, particularly behavioural changes and customer's expectations. Malaysian MSC status organizations, in particular, need to focus on continuous learning that emphasizes on continuous evaluation and improvement in ongoing process to maximize their current financial performance. Learning is about creating knowledge of alternative procedures and it is more towards shared ideas to contribute organizational performance improvement. Incremental performance improvements are not just dependent on the past track record of success but should give more attention to the possibility of future revolution in customer behaviours and product service's technology advancement for survival in rapid changing, globally competitive, and unpredictable environments. Thus, for this reasons all organizations Management & Change, Volume 10 Number 2 (2006)

I It

Raduan Che Rose, Arfah Salleh and Naresh Kumar 145

must give attention to environmental scanning and learn about a variety of design features and remain flexible to capture the competitive edge. In fact this study has revealed that systemic network between organizational members and other stakeholders most probably can lead to financial performance improvement. In this era, collaborative decision-making has become more practical whereby the information among decision makers can be easily shared and more rapidly updated. Furthermore, decision on performance improvement strategies could be communicated better across the organization through the use of Internet multimedia and techniques. This feat will also help to reach superior financial pertormance improvement within shorter time period. In fact there are various strategies used to connect the organization to the environment such as building global leaders, training for customer service, conducting employee opinion surveys, use benchmarking and computer data bases for environmental scanning, creating virtual and interpersonal networks across boundaries and creating programmes that bring both the community and organizational groups together (Watkins & Marsick, 1996). Provide Strategic Leadership for Learning (Provision of Leadership) Leadership plays a central part in developing an organization's talent pool. Leaders are in a unique position to enable employees to think beyond their environment. The fundamental of leadership are the same today as they were fifty years ago. Though the content has remained the same, the context has changed. From heightening uncertainty across the world to an intense search for meaning; the ever changing turbulent environment and the war for talent, the context has and is changing rapidly. , From the findings of this study, it can be perceived that leaders in Malaysian MSC status organizations have supported their members to acquire new insights and realize they have the potential to help change things for the better. In other words, leaders in Malaysian MSC status organisations probably have a strong charisma to encourage, recognize, and acknowledge the creativity of their members. It is well known that an important quality of leadership is that it should provide a "model", for others to observe and follow. Thus, it is believed that MSC status organizations' leaders have demonstrated personal mastery and it is pursued at all times. Certainly, the Management & Change, Volume 10 Number 2 (2006)

146 Raduan Che Rose, Arfah SaUeh and Naresh Kumar

leaders' realized that their role is not to create a monoculture, but to share and develop leadership among all the members so that everyone will cooperate and work together to ensure there are constant changes in the financial and knowledge performance. In the virtual world oftoday, it is necessary to have leaders who drive everyone to espouse the continuous learning and development mission. In fact, transformational leaders are needed to provide strong emotional supports to organizational learning as the entire organization is undergoing a radical change in the expedition to be world-renowned. It is anticipated that transformational leaders have necessary competencies to lead the organizational members to adapt new changes. Obviously, leadership plays a central part in developing talent of organizations members' which allow them to think beyond the precincts of their environment. In addition, recognizing good points of the members and rewards they appropriately would increase their commitment in improving the financial and knowledge performance. In short, the findings ofthis study shows that all the good leadership attributes were in practice in Malaysian MSC status organizations and therefore it have contributed to financial and knowledge performance improvement. CONCLUSIONS The rapidly changing marketplace is forcing HRD professionals to identify remaining ways to develop organizations that would be skillful at continuous adaptation and competent in a world of change. The psychomotor, cognitive, and affective domains are usually clustered in the competency assessment techniques and obviously competency assessment is outcome oriented. Thus the current application of criteria to assess the workplace or on-thejob performance of individuals needs constant refinement and specific ways of determining achievement of the competency. The new management paradigm emphasises the use of a variety of strategies to encourage the workforce to reflect upon and evaluate their own training and learning experiences. They are encouraged to plan for their own development with support from the top management especially in creating continuous learning opportunities to endure changes and challenges in the work environment. Bearing this in mind, discussion on the contemporary focus on competency assessment and development within the context of escalating and changing needs in practice is extremely vital. Management & Change, Volume 10 Number 2 (2006)

-,..----_...."--------------------------~~--------

â&#x20AC;˘

Raduan Che Rose, Arfah Salleh and Naresh Kumar 147

The idea of learning organization seems having propinquity with the ICT based organizations. However, knowledge based businesses need better tools and understanding to assessing their organization's rate and level oflearning to ensure that constant performance improvement being achieved. In fact, ICT based organizations managers' should have a firmer foundation for learning organization constructs and its potential impact on financial and knowledge performance. Without this basis, the importance of sculpting a learning culture is unlikely to be considered and thus opportunitY to improve financial and knowledge performance may fade out. Necessary ingredients for successful performance improvement among Malaysian MSC status organizations have been identified in this study. Findings of this study showed that team learning, system connections, and provision ofleadership strongly influence the perceived financial performance improvement. The perceived knowledge performance improvement is attributed to the joint effect of provision ofleadership, embedded systems, and inquiry and dialogue. It has been conceptually affinned in the literature that learning in an organization basically comprises three levels: individual, team, and organizational which is crucial to optimize organizational performance improvements. Based on the Watkins and Marsick's (1993, 1996) Learning OrganizationAction Imperatives Model, individual level oflearning includes two learning organization dimensions, continuous learning and inquiry and dialogue. The team-learning dimension represents team level oflearning and the remaining four dimensions: embedded systems, empowerment, systems connection, and provision of leadership represent organizational level of learning. Thus, this study provides an empirical substantiation that all the three levels oflearning could positively influence financial and knowledge performance improvement, particularly among MSC status organizations in Malaysia. To simplify, all the dimensions that significantly predict the financial and knowledge performance improvement measures were correspond to the three learning levels. The results from this study, in conjunction with additional research, may provide scholars and practitioners with an opportunity to better approach in human resource development practices through the consideration of learning organization dimensions in planning and implementation of organizational change. Additionally, those interested in learning and development may utilize the results of the study to inform planning and implementation Management & Change, Volume 10 Number 2 (2006)

-~--------------------

II•• !!!lU.' •••

148 Raduan Che Rose, Arfah Salleh and Naresh Kumar particularly in Malaysian MSC status organization, and ICT related organizations in general. The outcomes of this study also shed light on the strength and applicability of Watkins and Marsick's Learning Organization Action Imperatives Model in influencing the performance improvement in Malaysia as well as other Asian Region. Moreover, human resource personnel may utilize the findings of this study to promote Watkins and Marsick's seven action imperatives of the learning organization in their endeavour towards building and nurturing a learning culture, which have positively, sway performance improvement. Recommendation

for Future Research

It is hoped that this study will surely induce interest in future research as more such study initiative are needed particularly in Malaysia and other developing countries. Some of the issues that require immediate attentions from learning organization researchers can be recapitulated as follows: 1. In order to back up the estimated perfonnance functions proposed in this study, future researchers are encouraged to replicate this study to involve other industries which uses ICT extensively to explore relationship between seven learning organization dimensions and performance improvement measures. 2.

The current study shows that several dimensions do not predict financial and knowledge performance. More research is suggested to determine why these levels oflearning which were associated with learning organization dimensions were not significant and how it would possibly impact the performance ifthey were used more comprehensively.

In this study, financial performance outcome was a perceptual measure. Future studies must make attempts to use actual performance measures or some other tangible measure of financial performance (e.g., return on investment and return on assets) as well as knowledge performance and other possible performance improvement measures.

Future studies should include more than one response from an organization to get more precise idea on learning and performance outcomes.

It would be worthwhile to incorporate other organizational characteristics for example respondents educational experience, time spent by an individual on work-related learning, annual revenue and so forth to see

Management & Change, Volume 10 Number 2 (2006)

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Raduan Che Rose, Arfah SaUeh and Naresh Kumar 149

to what extent do these characteristics and learning organization dimensions jointly explain the variances in performance improvement measures. 6.

Future study would undertake a comparative study on learning and performance between public and private sector. Such comparisons will help in generating strategic plans to narrow down the performance gaps between the two sectors and get the most out of the potency in learning.

Limitations

of the Study

The survey exclusively seeks responses from human resource managers of Malaysian MSC status organizations. Thus, there is some tendency that their responses might be biased in view of the fact that they were at the managerial position. However, it is strongly believed that the respondents were in the right position to provide responses to the survey items. Secondly, the issue pertaining to generalizability of the findings beyond the Malaysian MSC status organization could be reasonably brought into compromIse.

REFERENCES Cameron, K. and R.E. Quinn (1999) Diagnosing and Changing Organizatinal Culture: Based on the Competing Values Framework. Reading, MA: Addison-Wesley. Ellinger, A.D., A.E. Ellinger, B. Yang and S.H. Howton (2002) "The Relationship Between the Learning Organization Concept and Firm's Financial Performance: An Empirical Assessment", Human Resource Development Quarterly, 13: 5-21. Ellinger, A.D., A.E. Ellinger, B. Yang and S.H. Howton (2003) "Making the Business Case for the Learning Organization Concept", Advances in Developing Human Resources, 5(2): 163-172. Garvin, D.A. (2000) Learning in Action: A Guide to Putting the Learning Organization to Work. Boston: Harvard Business School Press. Hernandez, M. (2003) "Assessing Tacit Knowledge Transfer and Dimensions of a Learning Environment in Colombian Businesses", Advances in Developing Human Resources, 5(2): 215-221. Management & Change, Volume 10 Number 2 (2006)

150 Raduan Che Rose, Arfah SaUeh and Naresh Kumar

Hernandez, M. (2000) The Impact of the Dimensions of the Learning Organization on the Transfer of Tacit Knowledge Process and Performance Improvement within Private Manufacturing Firms in Columbia. Ph.D thesis, University of Georgia, Athens. Hernandez, M. and K.E. Watkim (2003) "Translation, Validation and Adaptation of the Spanish Version of the Modified Dimensions of the Learning Organization Questionnaire", Human Resource Development International,6(2):187-196. Huysman, M. (1999) Balancing Biases: A Critical Review of the Literature on Organizational Learning. In "Easterby-Smith, M., Burgoyne, J. and Araujo, L. (eds.), Organizational Learning and the Learning Organization: Developments in Theory and Practice. London: Sage Publication". Kidwell, J.J., L.K. Vander and S.L. Johnson (2000) "Applying Corporate Knowledge Management Practices in Higher Education", Edu-cause Quarterly, 23(4): 28-33. Lim, T. (2003) Relationships Among Organizational Commitment, Learning Organization Culture, and Job Satisfaction in one Korean Private Organization. Ph.D Dissertation, University of Minnesota, Minneapolis. Marsick, v.J. and K.E. Watkins (1999) Facilitating Learning Organization: Making Learning Count. Brookfield, VT: Gower. Marquardt, M.J. (1996) Building the Learning Organization: A Systems Approach to Quantum Improvement and Global Success. New York: McGraw-Hill. Mc Hargue, S.K. (1999) Dimensions of the Learning Organization as Determinants of Organizational Performance in Non-profit Organizations. Ph.D thesis, University of Georgia, Athens. Mc Hargue, S.K. (2003) "Learning for Performance in Non-profit Organizations", Advances in Developing Human Resources, 5(2): 197-204. Moilanen, R. (2005) "Diagnostic and Measuring Learning Organizations", The Learning Organization, 12(1): 71-89. Management & Change, Volume 10 Number 2 (2006)

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Multimedia Development Corporation (2005). Available online at http:// www.mdc.com.my. Neter, J., W. Wasserman and M.H. Kutner, (1990) Applied Linear Statistical Models (3rd ed.). Homewood, Illinois: Richard D. Irwin, Inc. Nunnally, J. (1978) Psychometric Theory (2nd ed.). New York: McGrawHill. Pedler, M., J. Burgoyne and T. Boydell (1991) The Learning Company: A Strategy for Sustainable Development. London: Prentice Hall. Power, J. and D. Waddell (2004) "The Link Between Self-managed Work Teams and Learning Organizations Using Performance Indicators", The Learning Organization, 11(3): 244-259. Schien, E.H. (1992) Organizational Culture and Leadership (2nd Edition.) San Francisco; Jossey-Bass. Selden, G. and K. Watkins (2001) "Learning Organizations: What Impact Do They Really Make?" Troy State University Business and Economics Review, 25(2): 8-12. Selden, G. (1998) Dimensions of the Learning Organization in Familyrun Businesses. Ph.D Dissertation, University of Georgia, Athens. Senge, P.M. (1990) The Fifth Discipline: The Art and Practice of the Learning Organization. New York: Doubleday Publishing Group, Inc. Somerville, M., and A. McConnell-Imbriotis (2004) "Applying the Learning Organization Concept in a Resource Squeezed Service Organization", Journal of Workplace Learning, 16(4):237-248. SPSS (1999) Base 9.0 Applications Guide. Chicago, Illinois: SPSS Inc. Sta. Maria, R.F. and K.E. Watkins (2003) "Perception of Learning Culture and Concerns about the Innovation on its Use: A Question of Level of Analysis", Human Resource Development International, 6(4): 491508. Sta. Maria, R.F. (2000) Perception of Learning Culture Concerns about the Innovation, and Their Influence on Use of an On-going Innovation in the Malaysian Public Sector. Ph.D Dissertation. University Management & Change, Volume 10 Number 2 (2006)

I 152 Raduan Che Rose, Arfah Salleh and Naresh Kumal'

of Georgia, Athens. Sta. Maria, R.F. (2003) Learning for a Change! A Guide to Developing Learning Cultures in the Malaysian Public Sector. Kuala Lumpur: National Institute of Public Administration (LNTAN). Walton, J. (1999) Strategic H:unan Resource Development. Englewood Cliffs, NJ: Prentice Hall. Watkins, K.E. and V.I. Marsick (2003) "Demonstrating the Value of An Organization's Learning Culture: The Dimensions of the Learning Organization Questionnaire", Advances in Developing Human Resources, 5(2): 132-151. Watkins, K.E. and V.I. Marsick (1997) Dimensions of the Learning Organization. Warwick. RI: Partners for the Learning Organization. Watkins, K.E. and V.I. Marsick (1996) In Action: Creating the Learning Organization. Alexandria. VA: ASTD Press. Watkins, K.E., and v.J. Marsick (1993) Sculpting the Learning Organization: Lessons in the Art and Science of Systematic Change. San Francisco, CA: Jossey Bass. Yang, B. (2003) "Identifying Valid and Reliable Measures for Dimensions of a Learning Culture", Advances in Developing Human Resources, 5(2): 152-162. Yang, B., K.E. Watkins and V.I. Marsick (2004) "The Construct of the Learning Organization: Dimensions, Measurement, and Validation", Human Resource Development Quarterly, Spring, 15(1): 31-55.

The secret to success is to start from scratch and keep on scratching. - Dennis Green

Management & Change, Volume 10 Number 2 (2006)

STRATEGIC HR ROLE ANALYSIS OF MANAGERS OF MID SIZE MANUFACTURING SECTOR: EFFECT ON FIRM PERFORMANCE Jyotsna

Bhatnagar

In this study, data was collectedfrom 270 managers pertaining topublic sector, private sector and multinational mid size man ufacturing firms, in terms of financial turnover. Various industrial sectors differed in their perception of the strategic HR roles significantly. Result for measuring impact of organizational level contingency variables is significant. Using stepwise regression analysis it wasfound that organizational level contingency variables and strategic HR roles were predictors of firm's financial turnover and profit. The study establishes a business case for the Strategic HR roles and discusses implications for HR practices and roles including areas for future research. Key words: Strategic HR roles, contingency variables, organizational size, organizational life cycle, firm performance, strategic HRM. INTRODUCTION Research on mid-size firms has mainly confined to HR areas in culture (Erdem and Satir,2003), training practices and organizational performance (Huang, 2001), transfer of HR practices and firm size and firm performance relationship (Purcell, Nicholas, Merrett and Whitwell, 1999) and more recently relation between process innovations, climates for initiative and psychological safety, and firm performance (Baer and Frese, 2003). An international survey by the AMR Research of HR executives at more than 100 mid-size to large companies short that 'human capital management' projects will be abundant in the near future. "Overall 87 per cent of companies had planned to increase or maintain spending on the HCM technologies in 2003, and a large majority of companies are planning at least one major HCM initiative (Dev, 2003). The big winners in 2003 were - retention and employee performance management". Research on mid-size firms has concentrated on issues mentioned above, and very little research efforts focused on Strategic HRM, firm size and other contingency variables and Management & Change, Volume 10, Number 2 (2006) All Rights Reserved.

<&J 2006 lILM Institute for Higher Education.

154 Jyotsna Bhatnagar

the linkage with firm performance. The current study focuses on alleviating some ofthese limitations. The pre-liberalization period in India from 1947 to 1991 witnessed an economic policy, which was protective, regulated, monopolistic and noncompetitive.In 1991, following change of the Government at Centre and as a response to critical financial situation in the country the process ofliberalization began. From its traditionally insular and self-reliant stance the country was thrown into the global arena. For the Indian corporate world it meant a shift from a government protected system to an environment where it had to contend with market forces, large corporations with significant brand equity and also follow vastly different human resource strategies and practices (Monappa & Engineer, 1999). A number of reforms were made in the public sector, trade and exchange policy, the banking sector and foreign investment was liberalized. Of special importance is the strengthening of the public sector, wherein functional autonomy was granted by withdrawing 696 guidelines, issued by the Department of Public Enterprises. Granting freedom to eleven select public sector enterprises, mainly Navratnas, to incur capital expenditure, raise finances and decide on joint ventures and strategic alliances. In the area of global finances, automatic approval for foreign investment up to 51 per cent in 35 high priority areas, single and market exchange rate of the rupee, no restrictions on the usage of the foreign brand names and trademarks (The Columbia Journal of World Business, 1994).; foreign companies permitted to open branches in India (Kandula, 2001). Resurgence of the manufacturing sector to its pre-globalization glory is a case in point. The sector is fast spreading it's presence in foreign countries and many Indian multinationals are becoming true multinationals. By 2000-2001, there were 3.37 million units in India, having production ofRs.6454.96 billion, Rs.18.56 million employment and exports of RS.599.78 billion. As per a ClI-McKinsey report, manufacturing exports from India are expected to grow to $300 billion in 2015 from $48 billion in 2003. To reach this target, the industry has to grow at a rate of 17 per cent every year. Towards this end small and medium enterprises have a significant role (Singh, 2005). As has happened globally, Indian industry is realizing that technology, IT infrastructure, large-scale operations and capital are 'entry criteria' and not competitive tools anymore. competitive edge will come from a company's Management & Change, Volume 10 Number 2 (2006)

..J

Jyotsna Bhatnagar155 ability to innovate, create and use entrepreneurial energies of its people. Organizational members would be required to be more in 'not our way of doing things' mode. This requires coming to terms with the new environment, accepting the shortcomings in organizational practices and coming up with fundamentally different standards, norms relationships ... priorities.' (Nilakant & Ramnarayan, 1998). Jn other words, people and their effective management is where Indian business will have to invest in, to stand up to its foreign counter-parts. (Monappa & Engineer, 1999). The above has put pressure on HR function to develop people to meet this challenge, and Indian business is witnessing an interest in HR policies, practices and roles. In fact, Varadachary (2002) identified two aspects of small and medium enterprises namely, (i) being small it is easier for SME's to change fast, be resilient, and respond quickly to market conditions than a slow moving large firm; and (ii) being small its interpersonal relations are much closer and leadership can interact on continuous basis. Given this context of small and medium enterprises this research focuses on relevance of Strategic HR role in this area. STRATEGIC HRM AND HR ROLES The present debate about Human Resource in India is quite similar to the one that dominated the west in the eighties (Legge, 1995; and Schuler & Jackson, 1999). HRM debates in the early eighties sought to distinguish between 'Personnel Management' and HRM, incorporate industrial relations in HRM, examine relationship ofHRM to business strategies (Schuler 1992) and often concluding that HRM could be a key means to achieve competitive advantage in organizations (Barney, 1991). Contribution ofHRM towards success of overall organizational performance is duly emphasized in the literature (Guest, 1997; and Schuler & Jackson 1999). Many such developments took place in last two decades precipitating changes in nature of HR function from being reactive, prescriptive and administrative to being proactive, descriptive and executive (Legge, 1995). However, these views were challenged by Mabey, et al. (1998) that HRM is not all that effective in improving organizational performance. While Gratton, et al. (1999) stated that there was a mismatch between rhetoric and reality in the role ofHR function, and the role it actually plays in organization (Bhatnagar & Sharma, 2005). Concept of Strategic HRM role Management & Change, Volume 10 Number 2 (2006)

156Jyotsna Bhatnagar leaves many issues to be clarified (Novicevic & Harvey, 2001; & Manning, 2002). EVOLUTION

OF HUMAN RESOURCE

ROLES

In US, Nadler (1970) identified two primary roles of learning specialist, administrator role and the consultant role, while the American Society for Training and Development (1983), identified 15 key roles for HRD practitioners. In US, HRM evolution took place in four main periods: the 'mechanistic' period in the 1940s and 1950s; the 'legalistic' in the 1960s and 1970s; the' organistic' in the 1980s and the' strategic' in the 1990s (MacLachlan, 1998). In 1991, IBM reviewed HR roles looking at how employees relations, organizational development, etc., have affected HRM role (McKee, 1997). Impact of have been studied by Lancourt and Savage (1995) studied transformational change on HR roles. UK perspective on HR roles was refined in 1970s and 1980s by the Manpower Service Commission, a government agency. Identified roles were mainly covered trainers roles (Walton,. 1999). While exact shape ofthe human resources transfOlmation differed from company to company, several themes emerged: many functions traditionally performed by human resources department were shifted to the line:. human resources became a business oriented and a "partner" to the line; there was an increased focus on employee and career development; pay programmes focused on "pay for skills;" and many activities were aimed at creating and supporting a more egalitarian culture. According to Ulrich (1997), in past few years, roles for HRM professionals were often viewed in terms oftransitional form like operational to strategic; qualitative to quantitative; policing to partnering; short term to long term; administrative to consultative; functionally oriented to business oriented, etc. In order to create value and deliver results, HRM professionals should begin not by focusing on activities or work ofHRM but by defining de1iverables of that work as they only guarantee outcomes of HRM work. In terms of de1iverables four key roles that HRM professionals should fulfill are that of strategic partner, administrative expert, change agent and employee champion. The summation of these four results in the Business Partner role of HRM. In India, Venkataratnam (1992) reviewed present and proposed role ofHR personnel while Pareek (1997) expanded partnerManagement & Change, Volume 10 Number 2 (2006)

Jyotsna Bhatnagar

157

ship role of HR with different stakeholders. HR ROLES PORTFOLIO CONTEXT

SPECIFIC

TO ORGANIZATIONAL

According to HR experts HR roles can be divided according to organizational contexts such as organizational size, ownership pattern, marketing conditions, board representation and time, a brief review of some of them is as follows: Organizational

Size as a Context

Cleland, Pajo and Toulson, (2000), reviewed HRM profession in New Zealand based on a survey of] , 100 medium-sized and large organizations all employing more than 100 staff. Responses highlighted a number of trends in HRM. These included: the growth in specialist HRM employees; practitioners need for a greater professionalization; the changing demographic profile ofHRM staff; devolution ofHRM practices to line managers; and emphasize on diversity and strategic focus. Boxall (1995) noted that HRM role is becoming increasingly strategic. Prevailing labeling is changing from 'personnel' to 'human resource' management. This apart, HRM is being increasingly used to achieve competitive advantage. Firm Ownership Pattern as a Context Teo (2002) reported a similar research in Australia. He found a gap in empirical research in public sector settings, especially in relation to changing roles of HRM departments, before and after corporatization. To address the gap, he undertook a study of a large corporatized public sector entities in Australia. The aim of the study was to examine effectiveness of the roles of corporate HRM department and extent of strategic integration between HRM and corporate management. Data triangulation using survey, case studies, based on interviews and published records were used. HR roles as proposed by Ulrich (1996) were used and the major roles of administrative expert, employee champion and strategic partner were used. Change agent role was merged with the strategic partner role. The data was recoded and it was then used as degree of involvement in strategic HRM by major stakeholders in time 1 and time 2. From the analysis, stakeholder groups had the same perceptions ofHRM role effectiveness and the overall level of strategic integration throughout corporati zati on. Results supManagement & Change, Volume 10 Number 2 (2006)

158Jyotsna Bhatnagar ported the effectiveness ofthe organization wide HR role clarification project as it sought to improve corporate HR's visibility within the organization. Bhal (2000) similarly reported the four roles in India Industry. The methods used was a survey method company examples. There was emergence of one factor for the four roles. There were clear difference in the HR role played by HR managers and other professionals. Bhatnagar and Sharma ( 2002a &2002b) reported moderate levels of the four HR roles in Indian industry, the administrative expert role was maximum among the four roles. This finding is supported by the research of Ulrich (1997), which found that the transactional role ofHR is most dominant. Research study of Fisher (1989) is also in consonance with these results, where he points out that most ofthe work conducted by HR practitioners still consists of"traditional personnel administration activities" (p.158), and that strategic HRM is taking place primarily at the corporate level. These results are well supported by the results of the survey conducted by Saini, et al. (1999) that the HR departments in India had a higher level of sole responsibility for pay reward related decisions (35.9 per cent, industrial relations (29.4 per cent), health and safety (24.8 per cent), recruitment (23.8 per cent) and workforce expansion and reduction (18.1 per cent). This result is further supported by the study of Wright, et ai, (2001), who found that line executives seem to view HR as being best at providing basic HR services. Empirical study of Bhatnagar and Sharma (2002, 2005a, 2005b), also support this finding. Yet, strategic partner role is not the lowest in this study which is against the trends reported by Bhatnagar and Sharma (2002a), and Ulrich (1997), who reported strategic partner role to be the lowest in their study. Not much difference in the perception of the four roles across Indian industries was found. All four roles are present in organizations but they are linked to one another and HR managers are following a merged approach, not delineating strategic roles with functional roles. Research studies by Ulrich (1997) and Bhatnagar and Sharma (2002a) however do not support this trend. This supports the trend reported by 8hal (2000) that there may be one role instead of four. However, this is not the case in western literature as the following critique may suggest. CRITIQUE Proctor and Currie (1999) state that 'first, much of the work in this area, Management & Change, Volume 10 Number 2 (2006)

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Jyotsna Bhatnagar 159 which assesses the role of the personnel function in rather general terms' and is normative and prescriptive in nature. Wilkinson and Marchington (1994) do so in relation to a specific issue total quality management (TQM): 'We agree with their view that it is only by looking at specific issues that we can say what it is that personnel departments actually do". Second, in showing that with regard to TQM the personnel function in the organizations they study generally takes a 'facilitator' role, Wilkinson and Marchington attack the position implicit in storey that the function will take on only one role. They thus open up the possibility that a range of roles are possible within the same organization. There is a possibility that personnel managers will have different roles in relation to the different issues with which they are concerned. In other words there is a need to consider personnel function's portfolio of roles'. In this paper, an attempt is made to study portfolio of roles as highlighted by Ulrich, 1997. As is evident there has been a surge of research in other countries and regions, for example, New Zealand (Cleland, et ai, 2003), Australia (Teo, 2003), Europe (Storey, 1992), Thailand (Chiraprapha and McLean, 2001); and USA (Ulrich, 1997 & 2003). In India, these roles were studied by Bhatnagar and Sharma (200 I a & 200 Ib) and Bahl (2002). Studies conductedby Singh (2003), Kandula (2002) focused on the HR practices and firm performance. These roles were examined in terms of varying contexts mentioned earlier and varying economies of these countries, there exists several limitations in research literature especially in the areas of mid-size manufacturing firms to investigate the linkages between Strategic HR roles, organizational contingency variables and individual contingency variables, and firm performance. Chiraprapha and McLean emphasized the need to conduct such research in the Asian context at the AHRD 2001 Conference. A strategic approach to HRM seeks to provide competitive advantage proactively through its human resources. Jackson and Schuler (1995) reviewed this literature on Strategic HRM and firm performance, and the roots of the relationship between contingency variables and firm performance. More recently, Boselie, Paauwe and Jansen (2001) reviewed strategic perspective of HRcM(Table 1). In a research study conducted by Budhwar (2000), contingent variables influencing HRM in India were found to be organizational life cycle Management & Change, Volume 10 Number 2 (2006)

160 Jyotsna Bhatnagar

stage. Research in HRM also shows significant influence of organizational life cycle stages on HRM policies and practices (Hendry and Pettigrew, 1992). It would be addressing a research lacunae, if HR roles and their linkage with life-cycle stage is empirically investigated, further organizational commitment and organizationalleaming capability linkages to organizationallife cycle stage would provide a richer perspective to this research. According to Delery and Doty's (1996), in contingency mode relationship between relevant independent variable and dependent variable will vary according to such influences as company size, company age, technology, capital intensity, degree of unionization, industry/sector, ownership and location. In another empirical analysis ofMNCs, public sector and private firms in India,

Table I Categorizing Theories on HRM and Performance DelelY and Doty (1996) Three Dominant Modes of Theorizing on SHRM

Guest (1997) Three Broad Categories of General-Level TheOlY on HRM

Universalistic Mode Works ofOstennan (1994), Pfeffer (1994) and Huselid (1995) represent this approach. • Best practice' and 'high performance work practices' focus. • There is a linear relationship between HRM practices or systems and organizational performance. • Best practices' are universally applicable and successful. • Organizational success is best measured in terms of financial performance indicators like profits, or by market share and sales levels.

Normative theories ofHRM Works of Guest (1997), Walton (I 985), Lawler (1986), Guest (1987) and Pfeffer (1994) represent this approach. • They are more prescriptive in their approach, taking the view either that a sufficient body of knowledge exists to provide a basis for prescribed best practices or that a set of values indicates best practice . • According to Guest (1997), nonnative theories are predominantly focused on the internal characteristics ofHRM at the expense of broader strategic issues, while leaving unclear the basis for specifying the list of HRM practices.

Management & Change, Volume 10 Number 2 (2006)

Jyotsna Bhatnagarl61 Contingent Mode

Strategic theories

Work ofDelery and Doty (1996), Schuler and Jackson (1987) and Gomez-Meija and Balkin (1992); Woodward (1965), Pugh and Hickson (1976), Pugh and Hinings (1976), Pugh and Payne (1977) and Mintzberg (1979) represent this approach.

Work of Guest (1997), Miles and Snow (1984), Schuler and Jackson (1987) and Hendry and Pettigrew (1990) are examples ofthis type ofHRM theory.

• Relationship between the relevant independent variable and the dependent variable will vary according to such influences as company size, company age, technology, capital intensity, degree of unionization, industry/sector, ownership and location.

• Guest (1997) states that these theories are primarily concerned with the relationship between a range of external contingencies and HRM policy and practice. The central theme here is that 'a good fit (strategy, policy and practices with the context) will be associated with superior performance'.

• Contingency arguments imply potentially complex interactions between HRM variables, between HRM variables and perfonnance indicators, between HRM variables and contingency factors, and between performance and contingency factors. Configurational Mode

Descriptive Theories ofHRM

Work of Arthur (1994), Delery and Doty (1996), Mac Duffie (1995) shows that:

et al., 1986:

• Control and commitment HR systems are based on the idea that 'the closer an organization's HR practices resemble the correct prototypical system (for its business strategy), the greater the performance gains'

Work of Beer, et al., 1985; and Kochan, • Set out to describe the field in a comprehensive way. Researchers try to capture the broad field and to address some of the relationships e.g. they essentially seek to map the field and classify inputs and outcomes, with an emphasis on an open systems approach. • The perspective can be labelled as realistic but according to Guest (1997) it fails to provide a clear focus for any test of the relationship between HRM and performance.

Source: Boselie, Paauwe and Jansen (200 I). Organizational level Contingency Variables: Organizational Size, Organizational Life Cycle Stage, Type of Industry, Nature of Ownt:, 0)";7'),

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162Jyotsna Bhatnagar Vinnani and Guptan (1991), concluded that all finns used similar management practices, and differed only in degrees. Similar finn findings were reported by Amba-Rao (I994b). A key difference that the fonner authors observed, however, was that the practices of the Indian finns were more personalized and adhoc, subject to the whims of top management, while the practices of the western finns, were more likely to be impersonally institutionalized and stable. In addition, studies of managers in large public sector and private finns in the last two decades found wide disparity between desired and actual practices (Cyriac, 1992; Cyriac and Dhannaraj, 1994; Monappa, 1977; Soares, 1981). Thus, public sector enterprises may allow a limited amount of employee input into decisions (Sinha, 1994). Bose1ie, Paauwe and Jansen (2001) identified variables of finn size, finn age reflected in organizational life cycle stage; finn type, and nature of technology as organizational variables. Table 2 gives the linkage between organizationallife cycle and HR needs. Finn size (number of employees) has a positive effect on training and development facilities and absence due to illness (Leijten, 1992). Size of the organization has a positive relationship with profit and a negative relationship with employee turnover (Huselid, 1995). Size is positively related with net profit (Koene, et a!., 1998). Size is negatively related to the employee satisfaction with the amount of influence over job (Delbridge and Whitfield, 1999). Working in the public rather than the private sector is positively related with motivation (Guest, 1999a). Public sector is negatively related to the employee satisfaction with the amount of influence over job (Delbridge and Whitfield, 1999). This discussion shows that the organizational variables have shown encouraging evidence with the Strategic HRM dimensions identified by this study.

A long life may not be good enough, but a good life is long enough. - Benjamin Franklin

Management & Change, Volume 10 Number 2 (2006)

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Jyotsna Bhatnagar 163

Table 2 Organizational Stages and Human Resource

Management Needs Organizational

Human Resource Management Needs

Stage

Stage I Start-up

•

Entrepreneurship, founder management, informality, limited products and markets.

Stage II

• Recruiting to find key people, basic compensation and administrative systems.

Growth

• Dynamic growth, technical spe- • Advanced recruiting capability, cialization, expanded product lines and markets, added formality and structure, professional management introduced. Stage III

and socialization training programmes to adapt new employees to the organization.

Control

• Competition for resources, pres- • Cost control ofHR programmes, sure to increase productivity, controlled investments. Stage IV

•

controlled investments in business related skills. Computer used to analyse cost.

Integration

Diversification, decentralization, product groups or divisions, project management, focus on co-ordination and integration.

• Effective integration

mechanisms between various HR components, planning and organization development capability.

Stage V Flexibility

• Adaptability, collaborative team- • Highly developed monitoring and work, team- action, full integration across functional areas, multiple products and markets

scanning capability, flexibility to adjust to market and environmental needs.

Source: Baird, Lloyd and Mesholam, Ilan (1992) Getting pay-off from Investment in Human Resources Management, Business Horizons, Jan-Feb, 1968-75.

Management & Change, Volume 10 Number 2 (2006)

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•••

!64 Jyotsna Bhatnagar ANALYSIS AND RESULTS In this paper, it has been attempted to study contingency level variables of organizational life cycle stage, organizational size and nature of ownership, emanating from the literature. This study seeks to answer two broad research questions: (i) Do the perception of managers in the sectors differ significantly or not? In which manufacturing sector do the roles dominate? What is the relationship between the 5 variables of Strategic HR Roles (Ulrich, 1997) and the contextual variables in manufacturing firms? (ii) Does firm performance, measured by the market indicators of firm profit and firm's financial turnover predict contextual variables and Strategic HR roles in the manufacturing firms? Survey was undertaken to provide answers to the above two questions by following the procedure suggested by Baker (1994). In this study sampling was done in two steps. In the first step, 50 Indian organizations were chosen randomly from the national capital region. Out of these fifty organizations, 640 questionnaires were filled in by managers. Out of them 270 respondents belonged to the mid-size manufacturing firms with turnover ranging between 50 to 300 crores per annum. This industry segment covered dairy, pharmaceutical, engineering, telecommunication and automobile sectors with their sample profile given in Table 3.

" Go on doing good, thinking holy thoughts continuously, that is the only way to suppress base impressions. Character is repeated habits, and repeated habits alone can reform character", - Swami Vivekananda

Management & Change, Volume 10 Number 2 (2006)

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Jyotsna Bhatnagar

165

Table 3 Sample Characteristics (n=270) H Level Top management Middle Lower HType

Per cent 23.0 38.5 38.5

HR Line Age Less than 30 30-39 40-49 50-59 60 and above Gender Male Female Educational Qualification Bachelor Bachelors (Professional) Masters Masters (Professionals) Others including Ph.Ds Manufacturing Sector Pharmaceuticals Telecom Auto Dairy Engineering Organizational Stage Start Up Growth Maturity Dec Iine/transfonnation Organizational Less than 499 500-1000 1000-5000 5001-10000 10,000-50,000

13.0 87.0 27.8 38.5 20.7 11.1 1.9 84.1 15.9 5.1 10.0 16.2 30.0 12.3 30.4 18.5 14.8 20.4 15.9 11.1 52.6 28.9 7.4

Size 0 0 0 37 63

Management & Change, Volume 10 Number 2 (2006)

'I'

166Jyotsna Bhatnagar More than 50,001 Financial Turnover Rs. 100,000,000 - Rs. 500,000,000 Rs .. 500,000,001- Rs. 1,000,000,000 Rs. 2,000,000,0001- Rs 3,000,000,000 Rs. 3,000,000,001- Rs 5,000,000,000 Rs. 5,000,000,001- Rs 10,000,000,0001 Rs. 10,000,000,001- Rs 20,000,000,000 Rs 20,000,000,001- Rs 50,000,000,000 Above Rs. 50,000,000,000 Financial Profit Below Rs. 50,000,000 Rs. 5 - 10 crores Rs. 10 - 20 crores Rs. 20 - 30 crores Rs. 30 - 50 crores Rs. 50 - 100 crores Rs. 100 - 200 crores Rs. 200 - 500 crores Above Rs. 500 crores

0 7.8 80.0 12.2 0 0 0 0 0 0 13.3 43.7 23.0 0 16.0 5.0 0 0

Ulrich's (1997) human role assessment survey questionnaire was administered on the sample. This has 40 items, which have to be rated on a . five point Likert scale and measures the four roles of strategic partner (SP), administrative expert (AE), employee champion (EC) and change agent (CA). Business partner (BP) role is summation ofthe four roles. Cronbach alpha was found to be 0.97 and this is above Nunnally's (1994) standard, 0.70 threshold. To answer the first research questions ANaYA, means and standard deviations were calculated, while to answer the second research question, stepwise regression analysis was calculated (following Sharma and Sharma, 2002). Cronbach alpha was calculated to establish the reliability and validity of the tool in Indian conditions. One way ANaYA was performed on the means of perception of managers of five sectors for Strategic HR roles and it was found that the means for the perception of managers of the Automobile sector was ofthe highest value (162.2), indicating a good quality of strategic HR roles according to Ulrich (1997). Mean for the perception of managers dairy sector was ofthe Managernent & Change, Volume 10 Number 2 (2006)

Jyotsna Bhatnagar 167 lowest value(90.23). Summary of one way ANOVA found the 'f value' (1.32) to be significant at 0.0 1 level, indicating a significant difference in the perception of Strategic HR roles. This result is in consonance with prior research of Bhatnagar and Sharma (2002 a) and Bahl (2002). In Table 4, one way ANOVA analysis reflects impact of organizational level contingency variables of organizational size; organizational life cycle stage and organizational type on Strategic HR roles. 'F value' for organizational stage (1.574) is significant at 0.01 level. For organizational type, i.e. 'firms belonging to public sector, private sector and multinational 'fvalue' (1.380) is significant at 0.01 probability level. The 'fvalue' is not significant for organizational size in terms of number of employees. Results of the study are well supported by prior research study of Sahdev, et al. (1999) which reported effect of downsizing and HR responsiveness in public and private sectors. For HR's responsiveness to business needs, downsizing had a positive effect in both sectors. Before downsizing the difference between the two sectors was quite marked, with 72 per cent of the respondents in the private sector and 57 per cent in the public sector perceiving this to be a significant role. Further, Kelly (2001) found in case studies of23 MNCs in UK role of the personnellHR function at both corporate and subsidiary levels. Data was collected via semi-structured interviews with 23 CEOIMDs, eight at corporate headquarters of British MNCs and 15 at the subsidiary company level of foreign owned firms.

Be yourself, be natural, Be slow in choosing a friend, slower in changing. Be frank and simple like a child. -Anonymous

Management & Change, Volume 10 Number 2 (2006)

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Table 4 Summary of One way ANOVA Measuring Impact of Organizational Level Contingency Variables comprising 'Organizational Size', 'Organizational Life Cycle Stage' and 'Organizational Type' on Strategic HR Roles

0'1 0Cl

'< o

;~ Ro

::: :.l

(J :r

Range

Sum of Squares

Between Groups

123.667

Within Groups

Mean Square

113

1.094

1.574

0.004

108.500

156

0.696

Total

232.167

269

Between Groups

145.007

113

1.283

1.295

0.067

Within Groups

154.533

156

0.991

Total

299.541

269

Between Groups

115.202

120

0.960

1.380

0.022

Within Groups

140.488

202

0.695

(ll

::l

.'"

:3 '" o

Org. Stage

:30..., 'tv"

Org. Stage

o o

Nature of Ownership

-.,=-

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Sig.

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Table 5 Stepwise Regression Model for Organizational Level Variables and Strategic HR Roles as Predictors of Firm's Financial Profit Unstandardized Coefficients B

Std. Error

15.446

0.466

0.606

0.042

14.170

0.521

Nature of Ownership

0.530

0.043

Org Size

0.172

0.036

(Constant)

13.991

0.514

Nature of Ownership

0.532

0.043

Org Size

0.128

Org Stage Bp_Role

Model 1

(Constant) Nature of Ownership

2 ~ ~ ::l ~

(JQ

(Constant)

(1)

Rc (J :J""

~ ::l

Sig.

33.121

0.000

14.351

0.000

27.206

0.000

0.577

12.192

0.000

0.228

4.810

0.000

27.196

0.000

0.579

12.458

0.000

0.038

0.169

3.388

0.001

0.132

0.040

0.154

3.286

0.001

7.032

0.001

0.312

5.963

0.000

(1)

Standardized Coefficients Beta

0.659

(/0 ,(1)

C 3 (1)

(1)

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Table 6 Stepwise Regression Model for Organizational Level Variables and Strategic HR Roles Predictors of Firm's Financial Thrnover

Ro n ::r

Model

~ ~ ~

c 2

Z c 3 cr (D

., 3

o o

Standardized Coefficients Beta

29.125

0.000

~.,

9.111

0.000

27.528

0.000

0.040

12.212

0.444

Nature of OwnershIp

0.341

0.038

0.449

8.862

0.000

Org Stage

0.212

0.036

0.300

5.913

0.000

(Constant)

12.231

0.432

28.320

0.000

Nature of Ownership

0.295

0.039

0.388

7.520

0.000

Org Stage

0.202

0.035

0.286

5.774

0.000

3.80

0.001

0.20

3.968

0.000

(Constant)

Bp_Role

~o ~

=:=r ==S"

0.369

0.486

-= -..!

Sig.

0.447

Std. Error

13.030

(Constant) Nature of Ownership

Unstandardized Coefficients B

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Jyotsna Bhatnagar 171 In Table 4 one may see that organizational level variables and Strategic HR roles are predicted by both the firm's financial turnover and firm's profit, as all the beta values are significant at 0.01 level of significance. Researchers have argued that HRM practices should comply with business strategy (Miles & Snow, 1984), competitive strategy (Dowling & Schuler, 1990) and current stage of an organization's product life-cycle stage (Ferris, et al., 1984) or the industrial setting (Terpstra & Rozell, 1993). Results suggest a significant relationship between a number of contingent variables (such as size, age, nature and life-cycle stage of the organization, HR strategies, business sector and trade union membership) and HRM policies and practices. This is further supported by the study of Budhwar and Debrah (2001), who found impact of different contingent variables on HR1\1policies and practices. Moreover, a developing body of research has reported positive associations between firm-level measures ofHRM systems and orgat;lizational performance (Arthur, 1994; Huselid, 1995; Huselid & Becker, 1994; Ichniowski, Shaw, & Prennushi, 1994; and MacDuffie, 1995). Organizational context (e.g., fit) and goals (e.g., outcomes) may impact whether particular human resource practices have synergistic or independent effects on firm outcomes (Delery, 1998). Delaney and Huselid (1996) in 590 for-profit and non-profit firms from the National organizations survey, found positive associations between human resource management (HRM) practices, such as training and staffing selectivity, and perceptual firm performance measures. Results also suggested methodological issues for consideration in examinations ofthe relationship between HRM systems and firm perfo the assumption that human resource strategies and organizational performance are significantly related. This study extends theory of Strategic HRM to include strategic HR roles and the results imply that a better fit of strategic HR roles with the organizational level variables lead to better performance. This is in consonance with the earlier research of the strategic theory (Table 1). Further the results of the study are suppor1:ed by earlier research on Sustainable competitive advantage which has reported to result from tacit dimensions such as employee commitment but generally not from tangible dimensions such as flexible manufacturing systems (Powell, 1995). Thus, this study supports Strategic HR roles and emphasizes these roles of employees seen through line managers' involvement in these activities, which enhance a firm's competitive advantage. Management & Change, Volume 10 Number 2 (2006)

172Jyotsna Bhatnagar CONCLUSIONS,

IMPLICATIONS

AND LIMITATIONS

OF THE

STUDY Strategic HR roles and organizational level contingency variables are predicted by the firm's profit and financial turnover for these manufacturing firms, and proves that a better fit with the organizational variables of HR leads to better performance and hence competitive advantage. Results support the theory of the HR based view of the firm. A recent report by The Economic Times (Jan. 1,2004: 1) supports this claim: 'Manufacturing was the big comeback story of 2003, with every other engineering company, proving its mettle in the global markets ... Costs were reduced, productivity was hiked, quality was improved, operating margins increased and most important of all, India INC'S engineers and workers gained that confidence that they could produce goods on par with the best' . Small scale companies employ 40-50 employees and medium enterprises employ around 300-500 people in India. Any organization can grow and develop ifit can attract talented employees, and which make the role of HR even more crucial in such firms. Results of current study imply that since strategic posture ofthe firm is indicated through the business needs and the environment in which the firm is nested, analysis of the type and stage of various strategic responses and development of synchronized Strategic HR roles becomes the need for aU organizations. HR role is significant in determining its impact on the organization; hence, HR should be an equal partner in the business strategy forffiulation, with representation ofHR on the board of directors of the organization. HR deliverables become crucial to the firm, and the role of HR metamorphoses to line, with implications for the ICT, emerging as an enabler of the HR function. With radical change in the environment a shift in the role was an imperative for the HRM function, which the current study provides, the challenge, however, lies in institutionalizing the strategic roles in the working processes of the organization. Practical implications for the Strategic HR roles are thus: o

HR strategic interventions should be provided more visibility and a constant endeavour must be made within the organization to benchmark against the best practices or better still to set benchmarks, ifnot available. Thus, implying a need for continuous environmental scanning, both

Manageme)1t & Change, Volume 10 Number 2 (2006)

Jyotsna Bhatnagar173

internal and external, to facilitate this process. o

For internal environmental scanning, a constant vigil through HR audit would provide a better map for the function in the future, along with setting up of road maps for the evolving roles within the organizations ( Bhatnagar & Sharma, 2005a).

The research study establishes the business case for the mid size manufacturing sector, whereby Financial turnover and profit predict these roles. The above result about the significant difference in the perception of strategic HR roles, is well corroborated by the research studies of Ulrich (1997) and Wright, et al. (2001). The differences between the organizations may be explained due to variation in organizational climate, leadership styles, organizational learning capability of the firm, psychological empowerment and commitment levels of the managers within these organizations. Testing linkage among so many variables was outside the scope of this study. Future research studies may look at these relationships and throw more light on strategic HR roles in Indian organizations (Bhatnagar & Sharma, 2005 a). The sample size collected for the study is not homogenous in size and is not large enough from each industry. Further research can refine sampling technique. Single respondents who were managers were the points for data collection. Their biases and perceptions might have affected ratings in questionnaires (Whitener, 200 I). In many organizations, managers were afraid to express their opinion. Female managers were fewer, and the study could not analyze the male versus female perception on Strategic HR roles. The study focuses only on the managerial cadres of the organization. Further research in the area may include non-managerial employees in different units and functions ofthe organizations. Dynamic co-relational study comparing organizations in time period 1 and time period 2 would give more insights through further studies. In this survey firm performance indicators of return on equity (ROE), return on assets (ROA),Tobin's q, and Market Value Added (MVA), (Ellinger, et al. 2003) were also not used, which future researchers may like to consider. Acknowledgement. The author gratefully acknowledges guidance and support received from Ms. Anuradha Sharma, Emeritus Fellow, lIT Delhi in carrying out this research work. Management & Change, Volume 10 Number 2 (2006)

--'-----

III

174 Jyotsna Bhatnagar

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... __ ~~~

.• -Ul5"-,m:-, •••

S-'-"U-U ••-,[.,'-,,,C-LR-dl-Ud-u-au-.liB-tm-,m-==-m:Ui-Ill-.-U;-.i-.S-.

-::-_-1-11_-

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FLORENCE

Theory & Practice.

NIGHTINGALE: AN EPITOME OF HEAlTHCARE SICK AND WOUNDED

Florence Nightingale had a passion to serve the sick and wounded and accordingly emerged as epitome of service for the sick. In 1845 in UK, at an age of 25, Nightingale expressed her desire to work as a nurse in some hospital, a proposal which her father, a rich landlord, would not easily permit it, given a low status perception of nursing profession in those days. However, in spite of father not permitting but her keenness to serve the sick, Florence Nightingale, would privately visit hospitals, slums, and schools to serve the sick in individual capacity; and acquire some experience in serving them. As a young person, Nightingale approached her father to arrange mathematics and statistics coaching for her, she thought it was vitally important in documenting and analyzing large volume of health care data. Management & Change, Volume 10 Number 2 (2006)

182Jyotsna Bhatnagar Nightingale believed that statistical data were a means of discerning the will of God. Besides mathematics and statistics, in early years she also studied evolution and history of hospitals at her own initiative. At age 31 a proposal for marriage was made to her but she declined. A friend of her later sent to Nightingale a copy of the Yearbook of the Institution of Protestant Deaconesses at Kaiserwerth, Germany, containing vital information about nursing profession; from which she gathered considerable knowledge of the nursing services. Given her insatiable desire to serve the sick, Nightingale once again pleaded parents to permit her to pursue her dream profession. In 1853 at the age of thirty three, Nightingale was finally allowed by her parents to accept an unpaid nursing position as Superintendent of the Institution for the Care of Sick Gentlewomen in London, where she earned appreciation of the hospital authorities, and the sick whom she had served with devotion and compassion. A major turning point in pursuit of this profession occurred when she was given charge to serve wounded soldiers on the North Coast of the Black Sea in a war that broke out between Turkish forces and Russia. She arrived in Scutari on November 4, 1854 where she served wounded soldiers with a sincere and heart-felt care, along with administrative responsibilities in managing the hospital. With a combination of tact, good sense, political influence, and calm authority, Nightingale reorganized the military hospitals in Scutari and earned the reputation of an excellent healthcare administrator besides her very high reputation as a nurse. At Scutari, she introduqed improved record ~eeping, built new kitchens and laundry rooms, made sure that soldiers used sterilized cutlery, washed with fresh towels and soap, and wore clothes that had been laundered in boiled water. She set up reading rooms andlrecreation rooms, conducted classes, and assisted soldi~rs in filling their money order forms for sending money home. She used even her own resources to clothe soldiers. After the war, Nightingale returned to England as a national heroine. While she had acquired worldwide fame in serving the sick, but she would not accept public honours. In view of her unparalleled service in nursing care to which she brought unprecedented glory, she emerged as epitome of service of the sick and wounded, and eternal source of inspiration to all those who work in this noble profession. In India, Nursing Division, Ministry of Health and Family Welfare, Government of India, in her memory every year gives away Florence Nightingale Award to distinguished nurses on the International Nurses Day (May 12). -Editor Management & Change, Volume 10 Number 2 (2006)

Perspectives

GLOBALIZATION AND BANKING INDUSTRY: CHALLENGES AND OPPORTUNITIES R.K. Uppal

RimpiKaur

Globalization is providing both an opportunity and challenge to Indian and foreign banks to expand their overseas operations. In India, leadingforeign banks such as Standard Charted Bank, Citibank, ABN Amro Bank, etc have been carrying out their operations vigorously for over a decade with ambitious plans to expand them in rural areas as well. Similar(v, many leading Indian banks, both public and private, have also been expanding their social banking and overseas activities by opening up overseas branches and expanding portfolio of their products and services for overseas operations. Being more IT and web-enabled and superior technology driven over the years, many overseas banks currently operating in India have long experience of overseas operations. Foreign banks accordingly earn greater revenues and profits, generate more business per branch, earn greater revenues from different market segment, operate with less overheads, and have greater market share and customer retention with their more established products and services. Indian banks have traditionally limited their operations within domestic markets only but realizing vast untapped potential unleashed by globalization, many leading Indian banks have expanded their overseas activity and pursuing them within the WTO framework. WTO promotes trade among nations by facilitating deals which are acceptable to member nations in a fair and balanced manner. Several leading Indian banks like Bank of India, State Bank of India, Bank of Baroda, etc. have a successful track record of their overseas operations. In this paper, it is attempted to review challenges and opportunities of select leading banks in India within the backdrop of their plans for overseas markets and financial inclusion covering all sections of society in domestic sector in keeping with the social objectives of the Government of India. Key words: Globalization, WTO, financial inclusion, micfOfinance corporate governance, social banking, commercial banks. Management & Change, Volume 10, Number 2 (2006) (() 2006 lILM Institute for Higher Education. All Rights Reserved.

184 R.K. Uppal and Rimpi Kaur INTRODUCTION Banks playa crucial role in mobilizing and distributing a nation's wealth for a healthy growing economy and platform for decision support, data warehousing, data mining, and executive support systems. In fact, banking industry is driving force of economic reforms. A national banking system consists of hundreds of individual national banks, their branches and extension counters, located in cities, towns and vii lages. Leading banks in India have a large bank network with branches exceeding thousand mark for many. Banks provide credit to several sectors including agriculture, industry, trade and commerce, services, institutions and household sector. Being highly data-oriented industry IT and web offers enormous potential for banks to enter into overseas markets. Banking industry is one which has both internal and external perspective as a bank deals with money that is transferred from person to person, from business to business and from country to country. A bank customer can be an individual or an organization with a current or saving account with the bank (Verma, 1992). RBI as a nodal government bank performs regulatory role for the banking sector as a whole. This includes scheduled commercial banks, private and foreign banks, PSU banks, regional rural banks, and scheduled cooperative banks. Among commercial banks, State Bank of India, is still the largest public sector bank in India with a market share of around 20 per cent. ICICI Bank and HDFC Bank are among leading private banks in India, which have made a mark both in domestic and overseas operations. Standard Chartered Bank, City Bank, ABN Amro Bank, HSBC, etc. are leading foreign banks in India, which are already firmly established and currently expanding their activities in the countryside. Banks perform a number of activities including lending which is its core business activity. A bank provides loans, term loans, guarantees, letters of credit, bank drafts, credit cards, traveler cheques, letters of credit, etc. Banks also provide investment counseling, design bank products, marketing of their products and services and products, etc. Overseas operations involve operations such as e-remittances, multiple currencies, external commercial borrowings, etc. These are only typical activities but actual activities for any bank may be many more (Dave, 2006). Retail banking is the new mantra in the banking sector following expansion in retail chains and building Management & Change, Volume 10 Number 2 (2006)

R.K. Uppal and Rimpi Kaur 185

activity. Home loans constitute a large chunk of retail portfolio of a bank which is growing at a high rate of20-25 per cent per annum. Credit is very important input for carrying out agriculture or rural development programme. In pre-independence India, several legislations were introduced such as the Land Improvement Act (1871), the Land Improvement Loans Act (1883), the Agriculturists' Loans Act (1884), Cooperative Credit Societies Acts (1904), etc that provided institutional credit support to rural people. These legislations aimed to prevent moneylenders from abusing their position and protect farmers from losing their land in case of de~ fault. RBI as early as 1935 had set up a separate agricultural credit department for meeting the need for institutional credit for agricultural development in the country. After independence, cooperative banks provided bulk of rural credit to farmers. In 1969, an 'All India Rural Review Credit Committee' was set up to speed up agricultural credit sanction by commercial banks. This was followed by bank nationalization of 14 commercial banks to facilitate more free flow of credit for agriculture and rural units. Banks were also asked to open minimum four branches in un-banked rural areas for every branch opened in metropolitan area. Specific lending targets in actual figures were also earmarked for different sectors. In fact, this was the first major initiative for target-oriented lending among different economy sectors. GOI also came out with a definition of the priority sector in 1972. RBI monitored credit lending by commercial banks (RBI, 2003). RBI also provided liberal re-finance facilities to banks and introduced a career guarantee scheme as a separate measure to promote lending in priority sector. Banks were instructed to achieve a target of 40 per cent of their credit to priority sector by 1985. This apart, banks were also instructed to direct 14 per cent of net bank credit to agriculture and allied activities within the priority sector. This target was progressively raised to 16 per cent in 1987, 17 percent in 1989 and 18 per cent in 1990. In order to provide further boost to rural credit, a working group headed by former Reseve Bank Governor, M. Narsimhan, in 1975, set up Regional Rural Banks, which combined important features of both cooperative and commercial banks, and also set up an apex bank, National Bank for Agriculture and Rural Development (Nabard) in 1982. In other words, till around Management & Change, Volume 10 Number 2 (2006)

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186 RK. Uppal and Rimpi Kaur 1989, credit availability was enhanced though enlarged branch network of nationalized banks. However, in wake of reforms process ushered in 1991 within the backdrop of globalization, GOI brought a paradigm shift in eco .. nomic planning and emphasis shifted towards 'privatization' instead of'nationalization' of private entities. Mr. M. Narsihman, a former RBI Governor, had laid down the foundation of banking sector reforms, way back in 1991, as in-charge of a banking reforms committee. Indian banking has come a long way from 1991 onwards when the reform process was started. The Narsihman Com .. mittee proposed a broad structure of the banking system for growth with stability in a competitive environment. Its recommendations covered host of areas including structure, organization, functions and procedures of the banking system. The committee recommendations covered adoption of IT and web-enabled technology, specialized skills, greater risk control systems, dismantling of fixed interest rate regime, introduction off1exible and supervision norms, restructuring of non-profitable banks, liberalized branch licens .. ing policy, etc. (Arora, Kaur, 2006). It also suggested diversification of bank portfolios and operating them as diverse business units with greater functional autonomy. Later in 1998, GO! set up the Narsihman Committee II to introduce second generation reforms for improving overall efficiency and viability of the existing public sector banks and encouragement for start up of new generation private and foreign banks. It sought to bring greater accountability and market discipline in banks through second generation reforms. Branch banking, the traditional forte, coupled with ATM networks, and in more recent periods, Internet and mobile banking services, etc. are the outcome of second generation reforms that have brought about revolutionary changes in the banking industry (Arora, Kaur, 2006). In view of the reform process set in, RBI permitted commercial banks to start other diverse activities such as security related transactions, foreign exchange transactions, leasing and cross selling, etc. Several banks also diversified into other non-traditional banking activities such as insmance, underwriting brokerage, wholesale lending business, retail banking, e-bank .. ing, etc, besides routine lending and deposit services in investment and Management & Change, Volume 10 Number 2 (2006)

R.K. Uppal and Rimpi Kaur 187

developmental banking. Corporate and retail banking mix may change in coming periods as retail sector is growing at very rapid pace. The real difference will come in the future when retail will contribute to profits in proportion of revenue (Arora, Kaur, 2006). Growing integration ofthe country's economy with the global economy is benefiting several economic sectors including banking. Globalization is both a challenge and an opportunity for Indian banks to gain strength in the domestic market and increase presence in the global market (Bhide, et al., 2001). Banking sector is driving economic reforms. Success ofleading Indian banks in global arena will depend if they do higher business in overseas markets as only then they can reap the benefits of globalization (Santhanakrishnan (2005). In globalization era under the WTO regime, Indian banking Industry which was highly regulated in pre-reform period is re-orienting to face challenges and harness opportunities with greater autonomy (Uppal and Kaur, 2006). Basic reasons for hitherto poor performance of some major Indian banks have been stringent regulation, limited flexibility, administered interest rates, directed and concessionallending, diminishing returns from the existing portfolio of products and services, poor recovery processes and lack of major competition from private and foreign banks (Arora, Kaur, 2006). Overseas investors have for long been seeking access to India's financial markets. Trade is the driver of the world economy as well as a nation's economy. 'No nation was ever ruined by trade,' said Benjamin Franklin. Swadeshi though a sacred word is no guarantee for economic growth beyond a point. There is ample empirical evidence to show that the more a country trades, the more prosperous it will be. The same applies to banking industry and many other sectors. When one talks of foreign trade, reference to WTO (World Trade Organization) is unavoidable. WTO is currently only legal multilateral institution, while all other multilateral institutions function not on the basis of rules alone, but more on the basis of consensus (wherever possible) or on the basis of balance of power (Chidambram, 2007, p.26). As WTO is essentially rule and agreement driven, it is in the interest of all countries particularly developing countries to clinch deals under WTO umbrella. Management & Change, Volume 10 Number 2 (2006)

188RK. Uppal and Rimpi Kaur It is not only private, foreign and public service banks that are providing financial inclusion, but there are cooperative banks which can be perceived as micro-finance institutions (MFIs) that are providing core banking solutions in rural areas. Many small and mid-sized urban cooperatives, known for their personalized services, are also offering banking solutions. There are host of cooperative banks in the country such as Bharat Cooperative Bank, Janata Sahakari Bank, Punjab and Maharashtra Cooperative Bank, Abhudaya Cooperative Bank, Dombivli Nagari Sahakari Bank, etc. Out of these only about two-third of the cooperative banks, which are professionally managed, are regulated by the RBI. Among them, SEWA Bank founded by Ila Bhatt has earned a name in providing micro-credit to the rural women. Corporate governance is as important in banking industry as in corporate world (Kamesam, 2002). In fact, corporate governance in banks is considerably more complex in than in other sectors. While banks have to comply with the same code of board governance as other companies but in addition other factors like risk management, capital adequacy and funding, internal control and compliance, etc. are some extra dimensions, which banks have to additionally deal (The Economic Times, November 3, 2006). CRM FOCUS IN BANKING

INDUSTRY

A bank needs to work with CRM as a core philosophy to serve existing and prospective customers. As a growth strategy, banks are turning increas .. ingly CRM focused, which is facilitating cross-selling of bank products among existing customers in the first instance rather than searching new avenues. A customer centered culture and responsive attitudes, a tradition of adapting IT automation swiftly and painlessly, competent product development personnel, strong growth plans in its business segments, and commitment to constant training and development of its people are some ofthe key requirements of this philosophy (Dumblekar, 2001). Private and foreign banks in India have a greater experience of application ofIT-enabled systems and superior technology platforms than public sector banks. Despite their having low customer coverage base as compared to public sector banks, private and foreign banks generate much greater business from cross-selling and up-selling from their existing customers than public sector banks in view of their being more IT driven (Arora, Kaur,. 2006). Management & Change, Volume 10 Number 2 (2006)

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RK. Uppal and Rimpi Kaur 189

CRM, which provides IT driven customer focus, is embedded in a call center, which is an arrangement where the division of &norganization or its intermediary acts as a link with their customers. In a call center, specially trained employees handle queries and complaints, on products and services, which in ultimate sense improves service quality to customers. It also helps to get new customers, retain existing customers, and grow profitable customers through cross-selling (Dumblekar, 2001). Call enters provide a range oftele-banking facilities for bank customers, such as account balance enquiry, statement of specific account transactions between specified dates, information on interest rates for different types of accounts, exchange rates for different foreign currencies against the rupee, credit card payment information, etc (Bhaduri, 2005). Effectiveness ofCRMcan be analyzed in several ways. For instance, effectiveness of a call center measured in terms of 'caller satisfaction' can be analyzed through customer interviews. Other performance evaluation parameters could be the 'proportion of calls handled without further transfers', 'proportion of calls diverted for more specific replies', 'calls rate', 'call service time', 'calls abandoned' or 'clarifications provided through a second call'. Some possible efficiency parameters for the call center can be the' cost per call', 'revenues per seat' or 'revenue per call' (Dumblekar, 2001). Gains and experiences of overseas banks and financial services firms for CRM through call centers is widely reported in literature. For example, Fleet Bank, Boston, MA handled over 100,000 inbound calls per month and made 150,000 outbound calls per month at its call centers (Call Center Magazine, 1998). In India, HDFC Bank operated a 19 seat call center in Mumbai in 2000 to serve its customers (Dumblekar, 2001). FINANCIAL INCLUSION: A SOCIAL OBJECTIVE

FOR BANKS

Financial inclusion is defined as the process of ensuring access to timely and adequate credit and financial services and financial products by vulnerable groups at an affordable cost (Kamat, 2007). Banks initiatives in rural areas until recently have been guided by underlying philosophy of social obligation rather than as a commercial venture. Financial inclus-ion is a distant goal in this country as only 31 out of adult population of 100 in this country have a bank account. Management & Change, Volume 10 Number 2 (2006)

190 R.K. Uppal and Rimpi Kaur

Inclusive growth is an important policy objective both for providing uniform growth opportunities as well as improved risk management for poor households. This goal aims to provide ease of access and flexibility of choice to every individual in the society for basic financial services covering savings, loans and insurance in a manner that it would be reasonably convenient and flexible in terms of access and design and reliable in the sense that the savings are safe and the insurance claims will be paid with certainty (Mital, 2006). The growth ofNGOs, coupled with the SHG movement, has brought in its wake a radical change in rural financing. With low levels of non-performing assets and with high recovery rates of 99.5 per cent, MFIs are seen as a very valuable initiative to help the rural poor. Tna situation where credit is asset based, i.e., ownership of assets commanding accessibility to credit, equitable distribution of credit is a major challenge for inclusive growth (The Economic Times, January 9, 2007). According to C.K. Prahalad, a noted management thinker, 'the future lies with those companies who see the poor as their customers'. Guided by such notions, the Union Bank ofIndia launched a new initiative called 'Village Knowledge Centers' to help farmers improve his productivity. Bank staff at the VKCs act as relationship managers, liaising between local authorities and farmers, facilitating the opening of accounts and ensuring that credit is provided to the needy. Growth through inclusion is the new challenge for the banking system (Nair, 2006). GOT,cooperatives and individuals in past have taken several initiatives to achieve inclusive growth objective. This it aimed to achieve, among others, through expansion of state-owned banks into rural areas such as the regional rural banks (RRB) and spread of micro finance institutions like SEWA Bank in India or Grameen Bank in Bangladesh. Creation of specialized rural finance institutions and cooperative banks hold the key for inclusive growth by making low cost funds easily accessible to rural poor. Cost-effective inclusive growth can be realistically achieved if avail.able entities such as MFIs, NGOs, local business facilitators and possibly even the money lenders, who have first hand knowledge of the credit risks and individual needs, and who are available down to dusk and speak local language, are taken as partners by the commercial banks in rural areas. The RRB network under the RRB Act 1976 has grown significantly Management & Change, Volume 10 Number 2 (2006)

R.K Uppal and Rimpi Kaur 191 over the last 30 years, and currently has over 15,000 branches in 525 districts out of a total of 605 districts. It has distributed some Rs. 10,000 crores to 200 lakh families in the last 30 years. Average portfolio at risk among the RRBs is over 20 per cent, while it is below 3 per cent for MFIs. As per the RRB Act, GOI may enhance the number of directors on an RRB Board up to 15. For targeting financial inclusion, country's postal department is also exploiting its rural network and entering into commercial banking operations. Activities under web-enabled e-commerce are particularly helpful in this regard. E-commerce through client and server technology and M -commerce through mobile telephony are destined to bring far reaching changes in the banking sector. All interfaces i.e. business to business (B2B) involving business organization as buyer and seller; business to consumer (B2C) involving physical retailing; consumer to consumer (C2C) involving consumer as seller and buyer; and consumer to business (C2B) involving customization of bus iness, are all set to bring paradigm shift in bank working. International venture funds have forayed into the microfinance sector which is expected to growtoRs. 35,000 crore by 2010. Big funds planning to make a foray into the sector include the Maharashtra government promoted VC fund Urjankur; UK based CDC, Unitus Private Equity and Delhi-based Lok Capital (The Economic Times, January 9, 2007). Design aspects of financial system architecture are crucial to universalizing access. Affordable financial services are not merely the cost of the need-based credit, but also covers cost of services, payment and remittance facilities, and financial advice. Accordingly, lending rates ofMFIs in the country are considerably high (20-40) as it includes the cost of lending (9-12 per cent), operating costs which can be as high as 20 per cent, cost of bad debts (1-3 per cent), profits to maintain capital (2-5 per cent). Even in Bangladesh, where the experiment of 'Grameen Bank' has been remarkably successful, lending rates by the MFIs have been in the range of 20-35 per cent, which though seemingly high, but justifiable on account of economy-of-scale and transaction costs. Capping interest rates charged by the MFls by the GOI may slow down MFIs growth if the lowering is sizeable, as there are some valid reasons for it to be high due to Management & Change, Volume 10 Number 2 (2006)

192 R.K. Uppal and Rimpi Kaur transaction costs involved. While GOI does not propose to control interest rates charged by the MFls directly, but it plans to propose broad interest rate bands to be regulated by the Nabard. GOI has named Nabard as the regulator for protecting the interests of large number of farmers for obtaining credit from MFls, who otherwise may not be in a draw credit from commercial banks in view offarmers' inability to provide financial security to the commercial banks. MFls are seen as profitable venture, with low levels of non-performing assets, while commercial banks have high levels of non-performing assets. There is however need for supportive legal framework and rural body to ensure smooth running of the microfinance sector. Managing the cost per transaction is a key challenge in rural areas as the rural loan ticket size is roughly one-tenth of that in urban areas. Accordingly, rural banking operations by commercial banks have not been as lucrative as in big towns and cities. They could hardly perform superior to RRBs or rural cooperative banks (MFls), which charge high interest rates, which commercial banks cannot and they also need security, which rural poor cannot provide due their low economic status. Traditionally, involvement of commercial banks in rural sector has been of small value and largely towards dispensing government sponsored schemes, which do not pose recovery risks. As MFls incur less transaction costs, they are more viable alternative to loans from commercial banks. MFls have tailored their products and services to meet the needs and income generating activities of rural poor. While 5 per cent of the annual demand ofMFls is made by population living below the poverty line, nearly 80 per cent of the demand is made by the informal sector. Commercial banks generally do not have reach or cost structure to expand directly. They prefer to form partnership with retail microfinance institutions that are already experienced in developing low cost customer centric operational models. This partnership can be done with no subsidies as the retail MFI channel is financially sustainable. For financial inclusion government should try both channels, both government-led as well as private initiatives such as those of private banks andprivate microfinance institutions. Entry of private PS U commercial banks in rural and underbanked areas will certainly help but due to reasons explained Management & Change, Volume 10 Number 2 (2006)

R.K. Uppal and Rimpi Kaur 193 they can more profitably do in partnership with MFIs and other rural groups which are experienced in rural financing. Competition between different credit providers will in the long run shall provide benefit to the rural societies who stand to gain in terms of better services and lower interest rates. As per broad estimates, some 100 million people have availed microfinance, out of which half are located in India (34 million) and Bangladesh (16 million). This shows that there is tremendous scope for rural poor to harness the facility of microfinance in India considering that India is ten times bigger than Bangladesh in population. Poverty was reduced at a rate of 1 per cent per annum in Bangladesh in 1990s and it may reduce at a rate of2 per annum between 2005 and 2010 achieving a cumulative reduction of 20 per cent by 2010, and thus may become one of the few countries to achieve the millennium development goals (The Economic Times, January 31,2007). Mr. Mohammad Yunus, Founder of the Grameen Bank, and Nobel Laureate (2006) from Bangladesh, corporates should take up social business initiatives that aim at serving the poor through a non-loss and nondividend business, which should not be mixed up with philanthropy. People should invest more in organizations which are working on no-loss and noprofit basis, and the dividend accrued should be spent on social development projects. Socially motivated individuals who make investments in such organizations should accordingly not expect any dividend from such organizations, as the entire dividend sum is spent for social development goals. Companies undertaking CSR and running on no loss or no profit basis and diverting their dividend accrued for social development projects should be listed on 'social stock market'. A social business should be treated like any other business activity but without profit or loss involved (The Economic Times, January 31, 2007). Financial services in rural areas immediately conjures up a picture of credit delivery to farmers. Although this is largely the case but there are other aspects such as the micro insurance too. Micro insurance helps to overcome the problem of default in loan repayment EMIs. In the absence of insurance, many rural borrowers are unable to cover production and price risk, which in tum leads to defaults on loans. Micro insurance is a system by which people, businesses and other organizations make payments to share risk. Management & Change, Volume 10 Number 2 (2006)

194 R.K. Uppal and Rimpi Kaur Access to insurance enables entrepreneurs to concentrate more on growing their businesses, while mitigating other risks affecting property, health, or the ability to work. MFIs are increasingly entering micro insurance, going beyond conventional credit and saving services. While formal insurance is a regulated industry, micro insurance is often a form ofliquidity management and risk pooling (Mital, 2006). GLOBAL STANDARDS BANKING INDUSTRY

OF CORPORATE

GOVERNANCE

Globally competitive Indian banks will only be those that have superior corporate governance and risk management practices in place; and enjoy greater flexibility in offering wide range of services to customers at home and abroad. Banks which are well organized with technology back-up, cash rich, customer centric, IT and web-enabled, and transparent as per its corporate governance norms, can only make headway in overseas markets (Jalan, 2001). Foreign investors and creditors are more comfortable in dealing with economic entities that adopt transparent and globally acceptable accounting and governance standards. Companies that embrace high disclosure and governance standards invariably command better premium in the market and are thus able to raise capital at lower costs. Only those banks will have greater success overseas that possess needed competency to enter global markets. For strengthening the functioning of the boards, banks should appoint a risk management committee of the board in addition to the three other board committees, viz" audit, remuneration and appointment committees. As banks and financial institutions are highly leveraged entities their failure could pose risks to the economy as a whole. Banks should have clear strategies for guiding their operations and establishing accountability for executing them. Banks like other corporate entities should maintain high degree oftransparency for information disclosure (Mital, 2006). Banks should have clear strategies for guiding their operations and establishing accountability for executing them. Banks like other corporate entities should maintain high degree of transparency for information disclosure. It is important that effective corporate governance mechanisms are in Management & Change, Volume 10 Number 2 (2006)

R.K. Uppal and Rimpi Kaur 195 place. GOT and RBI need to bring about significant changes in the corporate governance mechanism adopted by banks and other financial intermediaries. As a matter of principle, RBI should not appoint its nominees on the boards of banks to avoid conflict of interests. Current governance practices adopted by the public sector banks have created equality among different types of directors. Special status amounting to veto powers given to government directors is not in the interest of good corporate governance. For improving corporate governance, RBI set up the Consultati ve Group of Directors of Banks and financial institutions in April 2002 to review the supervisory role of boards of banks and financial institutions and obtain feedback on the functioning of the boards' vis-a-vis compliance, transparency, disclosures, audit committees, etc. The Group made a comprehensive review of boards of banks and financial institutions and came out with a set of recommendations, after studying the international best practices made by the Basel Committee on Banking Supervision, as well as other committees and advisory boards, to the extent applicable in the Indian environment. In the present context of banking becoming more complex and knowledge based, there is an urgent need for making the boards of banks more professional by inducting technical and specially qualified individuals. Appointment/ nomination of independent/ NEDs to the boards of both public and private sector banks should be made from a panel of distinguished professionals of proven track record in corporate world, prepared and maintained by the RBI on ongoing basis. In the case of private sector banks, where promoter directors may act in league, independent directors should provide checks and balances that the bank does not build up exposures to entities connected with the promoters or their associates. Besides expertise of NEDs/ IDs in financial disciplines such as risk management, credit recovery, investment banking, development banking, accounting policy, etc., boards of banks should also have representation in the areas such as finance, information technology, HRD, financial engineering, etc. Degree of remuneration payable to the bank directors should be commensurate with their background and work expectations in the bank as directors. As in case of corporates, it is desirable to have a two-layered top brass Management & Change, Volume 10 Number 2 (2006)

196R.K Uppal and Rimpi Kaur in public sector banks, by separating the office of Chairman and Managing Director. Whereas the chairman and the board will focus on policy and strategic issues including interface with the stakeholders, the managing director will be concerned with operations management and policy implementation. MD should put up before the board on regular basis, risk management policy, strategic initiatives, exposures to related entities, and asset classification of such lending! investments, adherence to the corporate governance norms, etc. Audit committee in a bank should ideally be constituted with IDslNEDs and the ED should only be a permanent invitee. However, in case of PSU banks, the existing arrangement of including the ED and nominee directors ofthe GOI and the RBI in the Audit Committee may continue. As the committee responsibilities include overall bank management issues, the chairman of the audit committee may not always be a chartered accountant professional but can be a one with banking or finance background so that he may provide necessary directions/ guidelines to the audit committee (Mital, 2006). Banks should formalize and operationalize 'risk management committee' in accordance with the RBI guidelines. Banks should also have nomination committees for appointing IDslNEDs from among general public as shareholder representatives. Banks should also have grievance committee to look into grievances of investors and shareholders, with the company secretary acting as a nodal point. Both public and private banks should also consider having a supervisory committee of directors, which should monitor exposures (credit and investment), review adequacy of risk management process in place, review internal control processes, etc. ANALYSIS AND RESULTS In India as per available statistics out of 102 banks only 11 banks have their branches overseas. Leading Indian banks with overseas branches whose performance was analyzed in this paper included: State Bank ofIndia (SBI), Canara Bank (CB), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank ofIndia (BOI), Indian Overseas Bank (lOB), Syndicate Bank (SB), Indian Bank (IE), UCO Bank, Bharat Overseas Bank (BHOB), and ICICI Bank. Some foreign banks in India whose performance was studied vis-avis Indian banks are: Citibank, Hongkong and Shanghai Banking Corporation Ltd (HSBC), Standard Charted Bank (SCB), Standard Charted Grindlay Management & Change, Volume 10 Number 2 (2006)

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I R.K. Uppal and Rimpi Kaur 197

Bank (SCGB), ABN Amro Bank, Bank of America, Deutche Bank, and BNP Peribas Bank. Comparative performance for the two groups of banks was analyzed for the periods between 1999-00 and 2004-05. Comparative performance was analyzed in terms of eight parameters, namely. (i) per cent share ofIndian banks in global market, (ii) per cent share ofIndian banks in foreign countries and foreign banks in India, (iii) business per branch of Indian banks abroad, (iv) business per branch of foreign banks in India (v) deposits per branch ofIndian banks abroad, (vi) deposits per branch of foreign banks in India, (vii) advances per branch of Indian banks abroad, and (viii) advances per branch of foreign banks in India. Data used in this paper are secondary in nature (RBI, 2005). These have been collected from the RBI published reports, reports on 'Trends and Progress of Banking in India' and from websites of 'Data on the Indian Economy' for the period from 1999-00 to 2004-05. It may be seen that 'per cent share ofIndian banks in global market' as an indicator ofIndian banks presence in foreign countries at bank level was 0.55 which declined to 0.42 per cent (Table I) in 2004-05. Indian banks which have played major role in this respect are the SBI, BOB, BOI, lOB, SB, IB, UCO, BHOB and the ICICI Bank. In similar way, per cent share of Indian banks in foreign countries and foreign banks in India (at group level) is covered in Table 2. In overall terms, average share of Indian banks in foreign countries declined from 0.24 in 1999-00 to 0.23 in 2004-05. In our country fine arts, particularly music and dance, have been looked upon as an integral part of our cultural heritage. That is why these arts came to have religious sanction behind them and the lovers of art associated Gods and Goddesses with dance and music. Incarnations like Nataraja and Shri Krishna came to be associated with some musical instrument. It is difficult to imagine Saraswati without Her Veena. All this goes to show that a high place had been assigned to music and other arts in Indian society. If efforts are being made in free India to revive these arts and to popularize them, the reason is not merely love for the old and the traditional. These arts, specially music and dance, are so well developed and have so much inspirational value that they may be looked upon as a means of sublimating human society and imparting true happiness to it. - Rajendra Prasad Management & Change, Volume 10 Number 2 (2006)

Table 1 Percentage Share of Indian Banks in Global Market

~ ~ ~o

;:0

'"l~

Banks

::t ~

n ::r

~ ::l

(JQ

2" 3

'"o

2002-03

200/-02

2000-0/

2003-04

2004-05

Average

C.V

s.D.

0.57

0.56

0.53

0.59

0.56

0.03

5.38

e:. ~

0.04

0.03

0.04

0.00

Q,.

Canara Bank PNB

0.02

BOB

1.43

1.38

1.41

1.39

1.41

0.02

1.42

0.23

32.86

::I

BOI

0.75

0.25

0.70

0.89

0.88

lOB

0.42

0.34

0.33

0.39

0.04

10.26

'"..,

0.06

0.65

0.16

0.24

150.00

0.13

0.15

0.14

0.13

0.14

0.01

7.14

UCO Bank

0.23

0.24

0.23

0.24

0.23

0.22

0.23

0.01

4.35

Bh.OB

1.31

1.29

1.27

1.25

000

0.85

0.66

77.65

0.49

0.39

0.44

0.07

15.91

Average

0.55

0.49

0.53

0.41

0.42

S.D.

0.52

0.50

0.45

0.43

C.Y.

94.54

106.12

94.34

109.76

102.38

u IV

N o o

0.58

0.70

r: "0 "0

SBI

/999-200C

IerCI Bank

~ 3

'E. ~ c: ""l

Source: RBI, Various reports.

.•

••••.

T!'

-ceo

R.K. Uppal and Rimpi Kaur 199 It may be seen that the SBI alone has average 0.37 branches in global markets whereas Indian private sector banks covering both new and old branches have barely 0.02 per cent branches. It can be easily inferred that both Indian public sector and private sector banks have only a marginal presence in the global markets. In other words, Indian banks are not reaping the benefits of globalization and some strategic initiatives need to be undertaken. Bank of Baroda is among the leading banks in India and currently has 60 offices in 21 countries and within India it has 2700 branches. The UK operations account for some 40 per cent of the bank's operations (The Economic Times, January 31,2007). Bank of Baroda opened its first branch in UK in 1957 and at present it has eight branches. In the 50th year of its operation, the BOB plans to bring core banking solutions and connectivity with the Indian operations. The bank plans to introduce fast remittance facility to India for the residents of UK wherein the funds can be transferred instantly to the bank's branches in India who are on core banking solution and to other branches/ branches of other banks within 24 hours. BOB was the first Indian bank in the UK to launch a debit card in 2002 and was the first Indian public sector bank to launch credit card in the UK in 2005. BOB's customers in the UK today have access to the entire network of VISA ATMs and can make their cash withdrawals from ATMs displaying VISA electron sign, which are located at almost the high streets and shopping centers throughout the globe. BOI is today a truly global bank with network of 6 branches in UK and 24 offices across the globe that provides all types of international banking services. It has the facility of express remittances from UK, Japan, Hong Kong and Singapore. Bank of India was the first ever bank from India to open a branch abroad at London in 1946, which was later followed by branches in Birmingham, East Ham, Leicester, Manchester, Wembley and Jersey. Its seven branches in UK provide varied banking services including corporate credit, ranges of foreign exchange products, loans and advances, deposits and remittances, etc. BOI is a leading member of the trade bodies like the 'Association of Foreign Banks' and is also actively involved with the institutions like the Bhartiya Vidya Bhawan and representative associations ofIndians settled in UK in their business development. In 21 st century, BOI has been assisting Indian corporates for firms acquisitions in UK, Germany, Italy, Management & Change, Volume 10 Number 2 (2006)

~ ~

Table 2 Percentage Group-wise Share of Leading Indian Banks in Foreign Countries Banks in India

and Foreign

(J~

'"['1>3

Bank Groups

/999-200G

2000-01

200/-02

2002-03

v'" <: o

;:: 8

Gr. I

0.39

0.38

0.35

0.37

C.V

Average

0.35

0.39

0.37

0.02

5.41

0.22

0.01

4.54

f/l'

n ::r ~ aq

S.D.

2004-05

2003-04

E. ~ ::

a:: a

0.22

0.21

0.22

0.03

0.27

0.26

0.25

0.26

0.27

0.22

0.10

45.45

"5!.

Gr. I & II

0.02

0.05

0.02

000

0.03

0.02

66.67

100.00

Z t: 8

Gr. IV

0.02

0.17

0.03

0.10

Gr. III & IV

0.02

0.01

0.02

0.04

0.03

0.02

0.01

50.00

---N

Gr. V

0.32

0.36

0.38

0.39

0.42

0.52

0.40

0.07

17.50

Average

0.24

0.25

0.24

0.23

S.D.

0.16

0.17

0.16

0.23

C.Y.

66.67

64.00

70.83

69.56

100.00

o o

"I:l "I:l

Gr. II Gr. III

~ ~ ~

0.22

'"o

cr"

o o

~ ~ ""I

Source : RBI, Various reports. Theworth

of a man is known only through his activities. -Anonymous

;:.;;:.

~.",

",-~-",~~",,!,:"~'.';;~"""

;',.::'"

**z.,..r:...*(":"~~,-=;;_:::':.:]~.~_:-~:-'~~:.~~:;;:~o.-:::~'A;.~~iE~

~ .â&#x20AC;¢.

R.K. Uppal and Rimpi Kaur 201

Spain, Norway and other European countries. Bank ofIndia recently opened its branch in Shenzhen (SEZ) in China, which was inaugurated by Mr. P. Chidambaram, Finance Minister, on March 29,2007. Its products and services include: e-remittances, external commercial borrowings (ECB), foreign currency convertible bonds (FCCB), global trade finance, multiple currencies, etc. BOI has 22 branches and 3 representative offices that cover 13 countries in 5 continents. Countries where BOI operates in several countries which include USA, UK, France, Singapore, Hongkong, Japan, China, Vietnam, Kenya, Indonesia, Belgium, Zambia, etc. (The Economic Times, March 29, 2007). Some foreign banks have made fairly deep inroads into the Indian markets and some more may be making. For instance, per cent share offoreign banks (Table 3) in 1999-00 India was 15.25 per cent that grew to 18.50 per cent in 2004-05. Average business of Indian banks per branch abroad is also growing considering that on average basis it has increased from Rs. 1145.21 crore in 1999-00 to 2052.79 crores in 2004-05. In this regard, Canara Bank and Syndicate Bank have particularly performed well, as compared to other Indian banks (Table 4). Average business offoreign banks in India per branch has also shown some downtrends. It declined from Rs. 1826.26 crores in 1999-00 to Rs. 913.51 crores in 2004-05. Among foreign banks in India, Citibank has gen. erated much bigger business as compared to others (Table 5). As part of its growth strategies, Citibank is engaged in making deeper penetration into semi-urban and mral areas.

We know that technology has greatly advanced, and technology has got us the atom bomb and hydrogen bomb which after all is the result of technological progress. When we reach higher levels of technique, the higher levels demand a higher level of international cooperation; they demand really a higher level of social organization. You cannot have an advanced technology and an out-of-date society and an out-of-date system of international relations. - Jawaharlal Nehru

Management & Change, Volume 10 Number 2 (2006)

Table 3 Prominent Foreign Banks Working in India

3::

(l:l

cf3

:'"3 a'"

Banks

P::>

1999-2001

2000-01

2001-02

2002-03

2003-04

2004-05

Average

S.D.

c.v

(")

Citibank

20.83

8.57

41.14

HSBC

32.00

4.94

15.44

SCGBank

36.25

5.62

15.50

:3 'o"

SCB

37.40

25.66

68.61

4.12

31.28

::r

.'"

ABNAmroBank

13.17

'":3r:r

Bank of America

4.67

0.52

11.13

Deutsche Bank

5.33

0.52

9.76

BNP Peribas

8.17

0.41

5.02

Average

15.25

16.25

16.12

18.88

23.00

18.50

S.D.

12.66

12.74

10.03

20.39

22.23

15.28

c.Y.

83.02

78.40

62.22

108.00

96.65

82.59

...,

N o o

"I:l "I:l

Source : RBI, Various reports.

Small opportunities are often the beginning of great enterprises. - Demosthenes

e:. ~

:: Q.

a:: "e. = ~

= ""I

Table 4 Overseas

Business of Indian (Rs. crores)

1999-2000

2000-01

2001-02

SBI

418.21

428.52

417.39

1717.00

1869.00

2260.00

PNB

Banks

2002-03

Banks per Branch

2003-04

440.95

372.39

1843.00 9133.00

2004-05

Average

S.D.

C.V

427.68

37.79

8.84

10932.00 4625.67

4230.49

91.46

26.17

488.61

BOB

245.46

266.03

337.34

352.63

395.13

546.55

357.19

108.17

30.28

BOI

808.58

829.63

1059.60

1202.88

961.95

1133.39

999.34

161.01

16.11

lOB

351.16

327.17

327.63

393.50

1126.40

629.00

525.81

315.63

60.03

4569.00

3815.00

4870.00

2921.00

5632.00

5945.00

4625.33

1129.54

24.42

1226.50

1189.00

1245.50

1020.00

947.50

867.50

1082.67

159.38

14.72

n ::l"

UCO Bank

610.00

665.50

658.25

611.25

767.00

940.50

708.75

127.11

17.93

2581.50

507.88

563.37

585.08

641.05

648.50

921.23

815.02

88.48

361.00

369.00

429.00

482.00

0.00

273.50

216.35

79.10

27.00

1072.00

549.50

738.93

134.47

361

369

429

482

1337.50

1557.10

755.93

541.79

71.67

Average

1145.21

1084.32

1289.41

1029.69 1936.24

2052.79

3 'E.

S.D.

1371.10

1146.09

1481.05

862.66

3011.40

3369.02

C.Y.

119.72

105.70

114.86

83.78

155.53

164.12

~ III

::l

crc; (1)

3 (1)

~ III

::l

~ ~

Total of PSBs Bh.OB

JCJCI Bank

(1)

Total Private Sector Banks

o Z c: 3

N o o

;:0 "0 "0

?' c: e=. ~ ::I

=.,

ffi

--~-~--'--'-------

•• __

""IIIIlI" __

.'_

•• "

'IIIIll.!III'••••• !fIilll

••••

204 RK. Uppal and Rimpi Kaur

Average deposits ofIndian public sector banks in foreign countries (Table 6), which was Rs. 3496.33 crores in 1999-00 later rose to Rs. 3658.60 crores in 2004-05. Among them, State Bank ofIndia and the Bank ofIndia, have particularly performed well. Similarly, advances ofIndian public sector banks in foreign countries, which stood at Rs. 3180.56 crores (Table 7) in 1999-00, later increased to Rs. 5402.11 crores in 2004-05. Average deposits offoreign banks in India (Table 8), which stood at Rs. 16751.75 crores in 1999-00 but later declined to Rs. 10769.71 crores in 2004-05. However, advances of foreign banks in India (Table 9) which stood at Rs. 3703.13 crore in 1999-00, later increased to Rs. 9716.71 crores in 2004-05. Data concerning comparative number of branches per bank for Indian public sector banks, Indian private sector banks and foreign banks are summarized in Table 10. Foreign banks are generating two times higher business per employee as compared to public sector and private banks in India. Reasons are not far to seek. Foreign banks employ top-notch professionals with no overstaffing whereas public sector banks are known for overstaffing. As per RBI statistics, during 2004-05, foreign banks generated business per employee to the tune ofRs. 882.01 lakh a year, as against Rs. 420.71 lakhs by Indian private sector banks and Rs. 360.281akhs by public sector banks. In 2006 India, was the 10th largest profit contributor for Europe's most valuable bank, HSBC. State Bank of India, which is the largest PSU bank, has seven associate banks, and has a market share of 20 per cent. McKinsey and Co, the renowned global management consultancy firm, has taken step to consolidate with its seven branches. Out of the seven associate banks three are wholly owned by the SBI - State Bank ofHyderabad, State Bank ofPatiala and State Bank of Saurahtra. In the remaining four, SBI holds 98.65 per cent in the State Bank ofIndore, 92.65 per cent in the State Bank of My sore, and 76 per cent each in State Bank of Bikaner and Jaipur, and State Bank ofTravancore. On a stand-alone basis SBI's assets are around $120 billion .. and consolidation will raise it to $120 billion, which make it much bigger entity globally (The Economic Times, February 7, 2007).

Management & Change, Volume 10 Number 2 (2006)

___________ .~_.

"_~

M_n_ •• _•••,'•••• hiii•••• a••• i•••••hi ••• t1m

1& ••••••••••

••••••

•••••••

=•••••••• ;.•.••.• ;""'"ff_=". -al 1"'1'1

Table 5 Business per Branch of Leading Foreign Banks in India Banks

1999-200(

2000-01

2001-02

2002-03

2003-04

2004-05

Average

S.D.

9929.82

1555.00

1479.28

1518.60

1374.00

1131.29

2831.33

3480.89

122.94

HSBC

507.31

578.46

672.57

636.45

719.39

759.85

645.67

92.67

14.35

SCGBank

308.20

292.54

300.37

11.07

3.68

SCB

518.33

540.79

856.63

477.62

546.98

588.07

152.57

25.94

ABNAmroBank

918.88

. 982.78

719.38

697.93

836.87

890.16

841.00

113.01

13.44

Bank of America

1549.50

1460.50

967.80

968.60

929.60

1042.40

1153.07

276.48

23.98

(I>

Deutsche Bank

659.00

736.33

872.80

710.60

926.20

1233.20

856.36

210.60

24.59

BNP Peribas

219.00

346.00

351.22

375.25

381.50

424.13

349.52

69.72

19.95

Average

1826.26

811.55

845.67

709.29

816.36

913.51

S.D.

3300.83

481.45

343.42

380.29

318.16

293.22

180.74

59.32

40.61

49.43

38.97

32.10

Citibank

J'6 (I>

Ro ("l

::r-

(JQ "(I>

c.v.

Source: RBI, Various reports.

C.V

?:l

?: ~

:g e:. ~

z a

~ I

'S. ~

Can anybody remember when the times were not hard and money not scarce?

- Ralph

Waldo Emerson

.=, N = Ul

Table 6 Deposits of Indian Banks Working

~ ~ ~

:r'

~ ::l GO ,(1)

~ '" 3 (1)

Z '" 3

PNB BOI SB

18 UCO Bank

N o o

8095.50

799.47

9.88

1968

2486

1661.17

477.89

28.77

8621

6966

7272

10341

7611.33

1601.47

21.04

13040

10519.83

1526.09

14.51

1425

967.00

271. t1

28.04

862

982

11288 1104

1417

1932

1542

2333

2589

1957.33

448.54

22.92

1138

1009

703

811

727

925.00

204.98

22.16 15.92

10424

10353

8796

1931 1162

725

1435

1529

1625

1602

1777

2193

1693.50

269.60

31269

29062

32609

30754

36727

47076

34582.83

6643.70

19.21

199

197

226

259

284

319

247.33

48.87

19.76

1080

3440

2260.00

1668.77

73.84

199

197

226

259

1364

3759

1000.67

1426.82

142.59

Average

3496.33

3250.89

3648.22

3251.78

3658.60

S.D.

3689.87 105.54

3368.50

3791.87

3445.78 3726.41

4413.51

103.62

103.94

3907.87 120.18 108.14

All PSBs Bh.OB lCICI Bank Indian Private Sector Banks

C.Y. Source: _________

1544

704

lOB

1407

9218

C.V

7257

1285

6117

S.D.

8011

1277

6351

BOB

7932

9182

SBI Canara Bank

Average

2004-05

2003-04

2002-03

2001-02

2000-0/

/999-2000

Banks

(1)

(')

Pl'

outside India

~_~ __

e 't:I '[ ~

=::0

si"

"5!.

~ ~ ""l

120.63

RBI, Various reports. ~

~~-~

~"""

•..•.•

.•....••.••.••

.••••••••••••

"""!:!!O••••__

=l!Ill

••• __

•••••••••••• "'."',_,._ •••••.•••••••••• _~

Table 7 Advances of Indian Banks Working outside India Banks

SBI

'3" g '"

?l' n ::r

~ ~

i: 3

'o" Z .: 3 r::r ...,

2000-01

2001-02

2002-03

2003-04

2004-05

13276

13909

15907

432

462

716

566

512

591

546.50

102.50

PNB

0.17

BOB

2984

3992

5547

6434

6404

7729

5515.00

1747.18

44.07

BOI

6145

8164

9779

11226

10837

13028

9863.17

2430.67

1.65

lOB

1403

1238

1375

1379

1505

1720

1436.67

162.90

29.91

SB IB

2638

2398

2938

2392

3299

3356

2836.83

429.73

6.08

1291

1240

1482

1337

1084

1008

1240.33

172.47

17.83

1005

1569

1174.83

221.21

703.24

52899 38367.00

8261.93

DCa Bank All PSBs Bh. OB ICICI Bank Indian Private Sector Banks

23899 15651.17 4194.85

26.80 18.76

1133

1008

1043

1291

28658

33398

36122

38285

40840

162

172

203

223

247

305

1064

6218

1849.50 2950.69

159.53

162

172

265

277

1311

6523

1451.67 2522.98

173.80

218.67

52.74

24.12 "0

?:l ~ ~

Q.,

3180.56

3683.33

3638.60

3856.30 4215.00

5402.11

'N"

S.D.

3957.87

4700.84

4528.29

4978.18

5283.81

7324.09

C.Y.

124.44

127.62

124.45

129.09

125.36

135.58

-2)

C.V

s.D.

14351

Average

o o

Average

12565

Canara Bank

~ ~

1999-2000

2:1 3

'E.

., c

= -.l

.--------~-------_

.._---

208 RK. Uppal and Rimpi Kaur

Canara Bank recently on March 21,2007 opened its branch in Hong Kong with a view to tap the growing financial, economic between India and greater China region. Within the backdrop of banking sector reforms, diversification into less explored areas of activities is the need of the hour. As a casein-point, recently, Canara Bank and Oriental Bank of Commerce (OBC), formed partnership with the insurance arm of the HSBC to set up a life insurance venture. Banks' entry into insurance sector is definitely promising considering that eighty per cent of Indians do not have any access to insurance products - not home, not fire, not riot, and not theft. In fact, insurance products are unknown to millions of people in the country (Chidambram, The Economic Times, March 6, 2007). The three banks controlled JV is controlled by the Canara Bank (51 per cent), OBC (23 per cent) and the remaining 26 per cent stake to be held by the HSBC - the maximum permissible limit for a foreign partner under the present regulatory system. Earnest and Young is the advisor for the proposed JY. The new life insurance company will have a paid up capital of Rs. 325 crore of which the HSBC will contribute Rs. 170 crore, which includes a premium for accessing the vast branch network of public sector banks. The new company will have exclusive access to customer bases of the state-owned banks, Canara Bank and the OBC, as well as that of the HSBC in India. This comprises more than 40 million people and a network of 3,600 branches. India is the 10th largest profit contributor for HSBC globally as against being the 16th largest contributor in 2005 after moving ahead of Singapore, Turkey and Malaysia. HSBC India reported a growth of 85 per cent in profit before tax at Rs. 1739 crores in 2005 with bulk coming from banking operations with marginal contributions coming from securities business (The Economic Times, March 16, 2007).

What is the meaning of life? To be happy and useful. - Dalai Lama

Management & Change, Volume 10 Number 2 (2006)

Table 8 Deposits of Foreign Hanks Working In India Banks

Citibank

/999-200C

2000-0/

200/-02

2002-03

2003-04

2004-05

Average.

S.D.

ev.

102608

14052

15242

17743

20465

21484

31932.33

34742.85

108.80

HSBC

8755

9951

12341

12801

16270

17013

12855.17

3300.35

25.67

SCGBank

8478

8256

8367.00

156.98

1.88

SCB

5011

5088

7244

18003

19949

22522

12969.50

8044.09

62.02

ABN Amro Bank

3423

4609

4865

5022

5856

7077

5142.00

1231.60

23.95

Bank of America

2512

2324

1906

1545

1589

1993

1978.17

387.06

17.57

Deutsche Bank

2167

2322

2476

1945

2533

3625

2511.33

586.02

23.33

BNP Peribas

1060

1706

1634

1580

1737

1674

1565.17

253.52

16.20

Average

16751.75

6038.50

6529.71

8377.00

9771.29

10769.71

S.D.

34807.46

4371.47

5396.54

7587.88

8750.20

9276.64

c.Y.

207.78

72.39

82.65

90.58

89.55

86.14

~ ~ ~ (D

Ro ::r OJ

:; (JQ ~(D

~ [

Source: RBI, Various reports.

Z t::

:3::r

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'E.

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Table 9 Advances of Foreign Banks Working In India

'" 3 a'"

Banks

1999-200C 2000-01

2001-02

2003-04

2002-03

2004-05

Average

S.D.

C.V

"I:l

R<> (")

::T'

~ ~ ~

2" 3

'"o Z t: 3

'" ---'"l

N N

?" ?:: c: "I:l

Citibank

6620

9273

11385

12629

15259

HSBC

4435

6246

7836

8202

9628

SCGBank

4158

3738

SCB

4319

5187

9032

ABNAmroBank

3928

4236

Bank of America

3686

Deutsche Bank

e:.

18111 12212.83

4119.43

33.73

12621

8161.33

2817.85

34.53

- 3948.00

296.98

7.52

3 "S.

13042

16152

19970 11283.67

6212.74

55.06

4487

5447

6697

9836

5771.83

2231.06

38.65

3518

2933

3298

3059

3219

3285.50

280.92

8.55

1787

2096

1888

1608

2098

2541

2003.00

323.43

16.15

692

1062

1527

1422

1315

1719

1289.50

365.47

28.34

Average

3703.13

4419.50

5584.00

6521.14

7744.00

9716.71

S.D.

1789.62

2548.50

3850.60

4904.68

6150.53

7546.72

C.V

48.33

57.66

68.96

75.21

79.42

77.67

D:l

:::s

BNP Peribas

Source : RBI, Various reports.

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Table I0 Comparative Number Branches per Bank

~ ~ ~

Bank Groups 1999-2000 2000-01

2001-02

2002-03

2003-04

2004-05

Average

S.D.

C.V

BNP Peribas

692

1062

1527

1422

1315

1719

1289.50

365.47

28.34

Indian PSBs

4.55

4.51

4.37

4.48

4.78

4.54

0.14

3.08

Indian Private Sector Banks

0.03

0.07

0.04

0.02

50.00

Foreign Banks

4.31

4.52

4.29

5.11

6.61

4.55

4.90

0.89

18.16

Source: RBI, Various reports.

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C 3 (1)

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3 "E.

..,

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212 R.K. Uppal and Rimpi Kaur

HSBC Holdings Group has a long standing franchise in most emerging markets such as Latin America, Middle East, Mexico, China and Turkey. India occupies a special place for HSBC, given the optimistic business environment, connectivity with the global economy and less susceptibility to external shocks. In India it is planning foray in insurance sector. In 2006, HSBC India opened four new branches at Jodhpur, Patna, Mysore and Lucknow (The Economic Times, March 16, 2007). ICICI Bank is diversifYing its business rapidly and gaining market share in all its segments. ICICI Bank has identified two growth engines, international and rural banking, which are expected to push asset growth as the business matures. The Bank enjoys considerable pricing power given its high retail exposure. ICICI Bank plans setting up ICICI Holdings, a subsidiary, which will have all the investments made till date in the insurance and asset management business ofthe bank. ICICI Life and ICICI General will be looked after by this subsidiary. Its wide distribution reach and growing asset book enable rapid expansion of its insurance, asset management, venture capital, investment banking and equity brokerage businesses (The Economic Times, March 12, 2007) .. HDPC went overseas in 2007 by opening an office in Dubai and service centers in Gulf countries. to assist NRls in buying property in India. It later moved to UK by opening an office in London to assist NRIs in buying property in India by offering necessary guidance and sanctioning loans. HOPC's network of over 225 outlets in India assist NRIs and their family members in India to smoothly complete the entire home buying process. Buoyancy in the Indian economy, coupled with the real estate boom is attracting a large number ofNRIs to invest in property in India. This is reflected in the growing number of properties bought by NRIs to invest in property in India, which according to the developers estimation is approximately 10 per cent. In 2007, ABN Amro Asset Management, an arm of the ABN Amro Bank, announced ABN AMRO Sustainable Fund, a socially responsible investing (SRI) fund. The fund will invest in equity and equity related securities primarily of the socially responsible companies focusing on sustainable development. The fund will choose from a list of companies filtered by Crisil. The credit rating agency will screen and score S&P CNX 500 companies on environmental, social and corporate governance (ESG) template Management & Change, Volume i0 Number 2 (2006)

R.K. Uppal and Rimpi Kaur213

based on public disclosures made by these companies. The fund will subsequently conduct financial analysis before investing in specific stocks (The Economic Times, March 9, 2007). UK's third largest bank by assets, Barclay, plans a big leap in investments in India with a fourfold jump in employee strength for its retail and corporate banking business in the country. It is a leading bank in domestic and international capital markets offering clients a range of onshore and offshore debt financing options. Barclay's activities in India cover investment banking and risk management services. It also specializes in investment banking and derivatives business. Barclays also plans to enter the Indian credit card market. CONCLUDING

REMARKS

Banking sector will face challenge in 2009 after the domestic sector opens to foreign books. Banks borrow money at high rates but lending rates are very competitive. Resource mobilization through higher bank deposits is major challenge, which the Indian banking industry faces. How to make bank deposits attractive is a major issue. Banks need to go to unbanked areas and open branches. Deepening of banking services in rural sector and financial inclusion is an important objective of banking industry. Banks need to enhance their volumes so that they can increase their incomes (Shetty, 2007). Industrial Development Bank of India (IDBI), a financial institution all along, is also emerging as a commercial bank besides retaining its focus on development. The bank plans to enhance its current and saving bank account portfolios. It is also planning to diversify into insurance sector, for which it has already finalized a deal. IDBI is also planning to go expand its overseas activities. It plans to start branches in Singapore and Baharain, and set up its business offices in Shanghai, Moscow and Dubai. Mergers and acquisitions are showing upswing in banking industry as in corporate world (Shetty, 2007). United Western Bank (UWB) has traditionally been the most active player in Western Maharashtra, with fewer branches outside the state. UWB is planning to merge with the IDBI, when the combined entity will be reorganized into three business units, (i) IDBI Development Banking-SBU, (ii) IDBI Commercial Banking-SBU, and (iii) United Western Bank-SBU. All three SBUs will have a single IT platform, Finacle. While different banks Management & Change, Volume 10 Number 2 (2006)

214RK. Uppal and Rimpi Kaur

prior to merger may have different technology platforms but it is always beneficial if different merged entities have a single technology platform for all bank SBUs (Shetty, 2007). While comparing the overseas performance of Indian versus foreign banks, though arguably such comparisons may not be appropriate as they relate to different groups of banks in different territories regions, however, it is apparent that foreign banks, which enjoy much longer span of being IT driven and professionally managed, have a successful track record of performance in overseas markets while Indian Banks' entry is of recent origin. Attrition rates are also low in foreign banks. GOI needs to evolve a policy framework for remuneration and rewards ofPSU banks which should be based on the strengths and performance of banks for motivating employees to stay. Attrition rate in banking sector is one of the highest between 3035 per cent. It may kept iIi mind that some new age private banks that came after 1994 in the wake of banking sector reforms introduced Employees Stock Option Plans to enhance their monetary earnings and create sense of ownership with the organization (Vikraman, 2007). Information technology is at the helm of efficient banking. While private sector banks, both Indian and overseas, are fully computerized, the same can't be said about public sector banks, which have yet to complete computerization process of branch networks and their operations to get quicker and greater access to information. Initially, Indian banks can provide quality services at low costs. IT can help identify areas for strategic initiatives in overseas markets. High operating cost is a major factor affecting the profitability' of public sector banks. This challenge, among others, can be met by keeping a control on operating cost through higher labour productivity, updated technology, low cost funds and restructuring ofunremunerating branches. Banks in India are also gradually switching over to other new potential growth segments like retail banking by offering low cost funds. Public sector banks need to become more market driven and innovative in product offering with customer-oriented outlook which includes factors such as extension of working hours, net banking, tele-banking, which enable customers to transact as per their convenience. Public sector banks enjoy an edge over the foreign banks in terms of their extensive reach through branch network and wide customer base but they need to be CRM driven in Managp.rnent & Change, Volume 10 Number 2 (2006)

...J

R.K. Uppal and Rimpi Kaur 215

their core philosophy to harness cross-selling benefits. Overseas operations of banks need to be studied within the backdrop of opportunities and challenges offered by the WTO regime. It will be wrong to infer that all the foreign banks in India have been successful either. It is only a small number out of a total of some thirty odd that have made significant headway in their operations in India. For example, Grindlays Bank in past had to sell its India operations to the Standard Charted Bank and exit the Indian scene. Cross-cultural issues and strategic marketing issues assume considerable significance for the success of overseas operations. In fact, barring ICICI Bank and the Bharat Overseas Bank, other Indian banks have hardly made any discernible impact overseas. Accordingly, strategic initiatives by the Indian banks including offer of incentive to prospective new customers and adherence to sound CRM principles, are need of the hour for expanding their overseas business. Indian banks should make adequate publicity of their products. Indian banks working overseas have to be managed by top-notch IT professionals who should be knowledgeable about Basel II norms. Indian banks should make inroads into the international capital markets and work in close association with other financial institutions such as investment banks, insurance companies, venture capitalists, credit rating agencies, etc. They should form strategic alliances with leading banks particularly in oil rich countries where opportunities for expansion are enormous.

REFERENCES Arora, S. and Shubpreet Kaur (2006) "Financial Performance of Indian Banking Sector in Post Reform Era", GYAN Management, July-December, 1(1): 35-47. Bhide, M.G., A. Prasad and S. Ghosh (2001) "Emerging Challenges in Indian Banking", Working Paper No. 103, Center for Research in Economic Development and Poli~y Reform, Stanford University, USA. Chidambram, P., A Viewfrom the Outside, Penguin Portfolio, New Delhi, 2007. Dave, G.B. (2006) Banking Deficiencies: A Study of Select Cases, Synergy (Journal ofSardar Patel University), 7&8(1&2): 23-33. Dumblekar, V. (2001) "Building Customer Relationships Through Call CenManagement & Change, Volume 10 Number 2 (2006)

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216 R.K. Uppal and Rimpi Kaur

_..:.--_-----------------

ters in Banking and Financial Services". In Jagdish N. Sheth (ed.), Customer Relationship Management: Emerging Concepts. Tools and Applications. New Delhi: Tata Me. Graw Hill Publishing Company Ltd, p.463-471. Jalan, B. (200 I) "India and Globalization", Talk delivered at Indian Statistical Institute, Kolkata. Kamat, R. (2007) "Financial Inclusion vis-a-vis Social Banking", Economic and Political Weekly, 62(15): 1334-1335 (April 14-20). Kamesam, V. (2002) Cooperative Banks in India: Strengthening through Corporate Governance. Talk delivered at the National Convention of Urban Cooperative Banks, Mumbai. Mital, K.M., Corporate Governance and Social Responsibiltiy, A Manual, IILM Institute for Higher Education, 2006. Nair, M. V.(2006) "Inclusive Growth Through Financial Inclusion", A Supplement on Bankers Conference (BECON), Hyderabad, November 3-4, The Economic Times, November 3. RBI (2003) "Globalization: The Role of Institution Building in the Financial Sector: An Indian Case Study", Working Paper, Mumbai, August. RBI (2005) "Trends and Progress of Banking in India: 1999-00 to 200405", Working Paper, Mumbai. Santhanakrishan, S. (2005) "Globalization: Impact on Indian Banking", Analyst, 11(I 0): 64-66. Shetty, v.P. (2007) "Banks May Have to Ratio Credit Flow to Some Sectors", The Economic Times, January 4. Uppal, R.K. and Rimpi Kaur (2006) "Globalization ofIndian Banking Sector: Challenges and Future Prospects". In Proceedings International Conference on Global Arena: Challenges of Tomorrow, New Delhi, December 28-30. Verma, M.S. (1992) "Commercial Banking: New Vistas & New Priorities". Ahmedabad: lIM. Vikraman, S. (2007) "Inept HR Policy May Spell Doom for Public Sector Banks", The Economic Times, January 4. Management & Change, Volume \ 0 Number 2 (2006)

Short Communications

CROSS CULTURAL MANAGEMENT AND INCLUSIVE GROWTH: LESSONS FROM JAPANESE EXPERIENCE Parag Dubey In the globalization era when countries are coming together and world economies are integrating, technology and cultural issues are coming under sharper focus. While India Inc. aims competitive advantage with emphasis on inclusivity and sustain ability, Japan Inc. targets competitive advantage with emphasis on resource optimization and conservation. In India's case need for development of everyone in society on sustained basis, puts cross cultural management issues on priority, as without everyone's support goal of sustainable and inclusive growth cannot be achieved. In Japan ~ case its management style is based on collective leadership, unparalled teamwork and high degree of ethical standards in corporate governance. An organization that has low credibility due to poor standards of business ethics may find it difficult to survive in competitive world. In Japan, Matsushita experiment of spiritual management initiated in thirties to achieve higher performance standards in Matsushita Electric Industries (MEl) is a reference point and trend setter as to how spiritual leadership can make a difference in achieving high performance standards. In this paper, it is attempted to review relevance of cross cultural management, business ethics and inclusive growth which are very relevant in Indian context by deriving insights from Matsushita experiment and corporate governance philosophies based on Japanese values and ethics. Key words: Cross cultural management, inclusive growth, corporate governance, spirituality, Matsushita Electric Industries. INTRODUCTION Globalization has brought in its wake greater connectivity, competition, economic uncertainties, volatile markets, new emerging technologies and Management & Change, Volume 10, Number 2 (2006) ~ 2006 IlLM Institute for Higher Education. All Rights Reserved.

218 Parag Dubey . tumultuous work environment (Vickers, 2006). Barriers across the world are gradually diminishing under the changing global, economic and technological scenario. India is also gaining access to large markets and production, and due to its large resource base and human resource capabilities is playing a major role in the world economy. While Japan is constrained by natural resources on land, India is much better placed in this regard due to country's vastness. While Japan's priorities may be towards conservation of natural resources, India's priority due to its large population is certainly inclusive growth. With continued success of coalition governments at the centre and states, country is poised with economic and political stability. Over the past few years, GDP has registered a growth rate of more than 8 per cent, compared with around 6 per cent in the 1980s and 1990s - and a much lower around 3 - 3.5 per cent during decades preceding eighties (The Economist, 2007). An average Indian is much more financially strong today then he was before nineties when the globalization begun. Significant successes made so far however do not mean that future is assured without technological and economic risks as future can never be risk free. In fact, every business organization is today affected by risks and uncertainties. To manage risks, business has to be flexible to counter uncertainties and sustain business in the changing market. A flexible enterprise is one which is adaptable in seizing opportunities and effectively managing the risks. Flexible enterprises quickly synthesize pertinent data; transform it into business intelligence, and then act based on available information. As organizations operate in global environment, which is competitive, and they have to deal with people of different socio-cultural background, managers in the emerging scenario, have to be tuned to cross cultural management. Cross cultural issues have anyway been important in India as people of different faiths and background live and work here from time immemorial. A large number of expatriates and foreign nationals have also arrived in the country, who are contributing in the industrialization process. Accordingly, organization policies should be such that they encourage individuals with diverse background to contribute their maximum in achieving organizational goals, without hurting sentiments of any individual or ethnic group. Management & Change, Volume 10 Number 2 (2006)

Parag Dubey 219

Economic and social reforms initiated by the GO! in past have put the country on a fast growth trajectory. India may emerge as leading economic power by 2025 and may join the ranks of US, EU, Russia and China if the country maintains growth momentum. While at one end it is necessary to maintain sustained growth at the same time it is equally necessary to maintain inclusive growth by making development reach all societal groups. With globalization taking its deeper routes, accordingly subjects like cross cultural management, corporate governance, corporate social responsibility, strategic management, customer relationship management, performance management, etc have acquired added significance. Eleventh plan document Wasemphasized the need for faster and inclusive growth during the plan period (2007-12). In order to attain the desired sustainable and equitable growth objectives the plan document emphasizes the need for higher savings in the domestic sector, to be channelized to productive sectors. Banking sectW as the most important financial intermediary for mobilization of savings leading to investments facilitating growth would thus play the most critical role in attaining the eC<Qomicgoals of the country. It is generally seen that economic growth is accompanied by skewness, marginalization and exclusion of certain sections when growth strategies do not adequately address them. An idea similar to 'inclusive growth' is 'financial inclusion' which means that country should provide financial support to countrymen uniformly across the nation, say, by extending the network of bank branches in vast unbanked and under-banked areas of the country, as only then objectives of 'inclusive growth' and 'financial inclusion' can be attained. In India, branches of commercial banks in rural areas, network of Regional Rural Banks (RRBs), micro finance institutions (MFIs), cooperative banks, and self help groups (SHGs), are addressing to the credit needs of the Bottom of Pyramid Population. However, banking in rural areas is beset with problems as it is uneconomical for commercial banks to work in rural areas, with their high transaction costs. Thus, better alternative for commercial banks is to function in partnership with MFIs and SHGs that function with low transaction costs. With such low cost options of partnerships with MFIs, commercial bank Management & Change, Volume 10 Number 2 (2006)

220 Parag Dubey

products can be more economically distributed at attractive costs. A participatory and partnership-based model for financial inclusion, coupled with community-linked financial initiatives is ideal approach for attaining 'financial inclusion'. A collective effort of public and private banks, Nabard, RRBs, MFIs and SHGs would provide momentum towards inclusive growth. Investing in India is beset with difficulties as there are infra structural constraints, problems of cross cultural management, low literacy levels of large population base, rigid socio-cultural norms, steeply escalating land prices, inflexible labour laws, political uncertainties, and irksome regulatory and legal framework. GOI can make the climate investment friendly by pursuing the economic refonns agenda in right earnest. For mobilizing resources, GOI can privatize public sector enterprises (PSEs) selectively, which are not performing profitably, the proceeds of which in tum could be utilized for infrastructure development such as roads, highways, airports, ports, etc. In globalization era, corporates are realizing that a homogeneous organization cannot serve the needs of a diverse and heterogeneous marketplace. Diversity serves a buffer between marketplace and workplace. Gender diversity is a starting point for diversity management. An organization which is inclusive, i.e., which has people with disabilities, minorities, different linguistic abilities and age groups, is happier and productive workplace. As a case-in-point, Hindustan Lever Ltd (HLL), for improving its gender diversity, it introduced several initiatives like a six-month fully-paid maternity leave as well as five year sabbatical. It also introduced maternity leave in cases of adoption. When women return from maternity leave, the company makes sure that they are given a meaningful role. With such initiatives, proportion of female employees' percentage increased from 5 per cent in 2000 to 16 per cent in 2007 (Jayashankar, 2007). DuPont India, which ranks among the world's best places for working women, makes sure that for every job opening there is at least one female candidate who is called for interview. At IBM more and more women have full-time jobs working from home. Male managers at IBM are sensitized not to schedule meetings after 6.30 pm. IBM India in 2006 had 26 per cent women in its workforce. Wipro has 1500 people of nationalities as diverse as Portugal, Austria, Sweden and Finland in its workforce. The company collects 360-degree feedback from team members on whether their leaders encourage diversity of viewpoints (Jayashankar, 2007). Management & Change, Volume 10 Number 2 (2006)

--l~

Parag Dubey 221

Starting from DPS (Delhi Public School), R.K.Puram, New Delhi, many other schools ofDPS family, are promoting inclusion in education, by providing quality education of same standards, to children in the surrounding slum areas for deprived children. Inclusive growth aims reducing disparities in development. LESSONS FROM JAPANESE MANAGEMENT Japanese management literature has not grown in a manner that it could be branded as a 'General theory of Japanese management'. No single comprehensive theory of Japanese management has emerged that combines available business management practices in Japan through the process of 'mutual mediation'. Japanese management is characterized by some Japanese traits discernible through use of specific terms like 'kaizen', 'kigyoshudan', 'keiretsu,' etc. Japanese style of management is based on ethics, honour and credibility. An individual or a group that has lost its credibility has little chance of survival. In Japan there is considerable emphasis on cultural issues embedded in business, societal factors including relationship with the government, improvement and development focus often expressed in popular Japanese tenns. Japanese system works on collective wisdom and consensus rather than any unilateral action. While in Japanese parlance, 'kaizen' refers to improvement, 'kigyoshudan' and 'keiretsu' are taken as a synonym for neverending efforts for development through everyone's involvement in team spirit and collective leadership. In Japan people prefer to use fallen twigs and leaves in instead of cutting trees. In a country with limited land mass, if their development was based on 'felling of trees' , they would have been left with hardly any paper. Japanese management is characterized by continuous improvement, employees commitment for quality and precision, zero defect philosophy, high employee morale, loyalty, reduced overheads, transparency, and collective efforts and team spirit. In US and western world in decision-making there is more emphasis on optimization and trade-offs while in Japan vagueness, ambiguity, tentative decisions-making and heuristics (sub-optimal) decisions are acceptable in the first instance (Ohmae, 1982). Japan obtained extraordinary success in technology and management through sheer common sense approach and using technology and manageManagement & Change, Volume 10 Number 2 (2006)

222 Parag Dubey ment perfected through collective efforts. According to Pascale and Athos (1981) management can be thought of as falling into seven broad groups comprising strategy, structure, systems, skills, staff, style, and subordinate goals. The first three of the seven S's were called hard factors - and this is where US executives have cutting edge. The remaining four aspects covering skills, staff, style, and subordinate values are essentially 'soft factors' which as per Japanese perception have been better harnessed in Japan than in us. Whereas in US and western world, business life and personal life are perceived as separate domains, in Japan the two are an integrated whole and high performance standards can be achieved when problems of both fronts are simultaneously addressed. Pascale and Athos (1981) also studied difference between decision-making styles and management by consensus in us versus Japan. According to them while in us business effort is more peace meal, in Japan on the other hand the management process is more holistic covering economic, social, psychological, and spiritual aspects. The remarkable success story ofKonusus Matsushita in shaping the Matsushita Electric Industries is a case-in-point as to how spirituality can raise performance standards to unprecedented levels by creating competitive advantage over all other companies. CORPORATE

GOVERNANCE

IN JAPAN

A Corporate Governance Committee chaired by Tadao Suzuki reviewed the state of art of corporate governance in Japan that took over two and half years. In May 1998 the committee came out with a report entitled 'Corporate Governance Principles' that set tone and tenor to improve Japanese corporate policy framework. These Principles presented a model for companies to meet the challenges posed by globalization (JETRO, 2000). This was followed by the Japan Corporate Governance Committee that came out with 'Revised Corporate Governance Principles' on October 26, 2001. The Committee held 31 meetings over the course of three years from November 1998 to October 2001. The Principles are based on the understanding that good governance will create a good company, which is essentially the economic property of its shareholders (JCGF, 2001). Based on a survey conducted by the Corporate Affairs Division of the Ministry of Economy, Trade and Industry in October 2001, covering 3523 Management & Change, Volume 10 Number 2 (2006)

Parag Dubey 223

companies with 1026 responses, more than 80 per cent companies expressed the need to have proper corporate governance systems in place. The reasons given for such systems in descending orders were 'improvement in disclosure norms' by 70.2 per cent respondents, 'strengthening of functions of board of directors' by 63.6 per cent, 'strengthening of functions of board of auditors' by 45.3 per cent, and 'improvement in accountability' by 44.8 per cent (JETRO, 2000). US and UK, who are pioneers in evolving corporate governance codes, serve as anchor for many nations including India and Japan. US and UK practice of dividing responsibilities between executive management concentrating on actual running of the business and board of directors evolving policies and supervising execution by the executive committee them and deciding on business policies from an overall company perspective is being increasingly adopted in Japan also. Executive management, however, have an accountability to prove that they are fulfilling the duties entrusted to them by the shareholders. The board of directors supervises the executive managers to confirm that they are carrying out their duties in desired fashion (JETRO, 2000). Corporate governance policies in Japan place equal emphasis on employees as on shareholders, while in US and UK it is overwhelmingly in support of the latter. In Japanese system cross-shareholding has been a traditional corporate governance practice whereby friendly firms cross hold each other's shares to prevent others taking their control against their wishes. In November 1996, asset structures of several financial institutions and business companies were reviewed and arising out of emerging recommendations the practice of cross-shareholding is being gradually wound up (JETRO, 2000). German boards of auditors are halflabour-management types including representatives of labour UtU0ns and employees. For example, in October 2001, Daimler-Chrysler (Germany) introduced the US type 'board of directors'. This was done on the beliefthat a labour-management style of 'board of auditors' does not sufficiently reflect the interests of the general shareholder. Trends in Germany based on adoption of US style of corporate governance also confirms that in US protection of shareholders concern receive greater priority than company employees (JETRO, 2000). Management & Change, Volume 10 Number 2 (2006)

224Parag Dubey

Starting with liberalization and growth of the direct financing market that began in eighties, means for raising capital in Japan have been diversified. Several large companies have switched from indirect financing to direct financing. Share of foreign investor that was below 20 per cent at the beginning of 1990s rose to 40 per cent in 1998. Japan at present depends more on foreign investors for the supply of the risk capital which supports corporate growth. Stock prices are accordingly affected by trends in foreign funds flow. Foreign investors at present more directly impact Japanese stock exchanges. ROE as the return on equity is the ratio of net income to total equity. This measure serves as useful indicator of returns on stocks invested by the shareholders, which is an important assessment measure both for the investor and the management. It not only determines how much dividend is payable per face value of stock held, but also determines total return payable from share price (capital gain). Return on investment (ROI) as the ratio of net income before taxes to total assets is a measure of return from assets. In Japan many companies besides 'board of directors' also have 'board of auditors' who are mostly taken from outside the company and different from permanent directors who are on the board. The practice is similar to 'auditors committee' made of independent directors in India. Average number of outside directors on 'boards of auditors' are 13, which are mostly from outside the company. 'Board of auditors' supervises management and monitors the actions of the CEO. The actual work of running the company is performed by executive officers selected by the 'board of directors'. Risk management is the vital role of the board of directors which seeks to control risks for the shareholders. Risk management is the protection against situations that may have significant adverse consequences for the interests of the shareholders, as well as implementing appropriate measures in order to mitigate any resulting losses if such a situation were to arise. A stock company is an organization that pursues the interests of all of its shareholders based upon the investments and risks that they shoulder. A good company maximizes the profits of its shareholders by efficiently creating value, and in the process contributes to the creation of a more prosperous society by enriching the lives of its employees and improving the welfare of its other stakeholders. Management & Change, Volume 10 Number 2 (2006)

Parag Dubey 225

Japanese believe that shareholders value can be maximized through stable and robust cooperation between employees and management. To achieve smoother and morc effective cooperation, Japanese companies have introduced such uniquely Japanese devices as the 'bonus system' and 'stockholding plans', which essentially share profits with employees. The goal of these systems is to achieve compatibility between maximizing shareholders profits, and maximizing the profit "pie" for all stakeholders. Board of directors should consist of outside directors and inside directors with majority pertaining to the outside directors. An outside director is one who is not and has never been a full-time director, executive or employee of the company, subsidiaries or aftliates. An independent director is one who does not hold any business interest in the organization (JCGF, 2001). An independent director must not have been a full-time director, executive or employee of the company; its parent, subsidiary or affiliate or a relative of a full-time director or executive. A person who is currently providing legal, accounting, strategic or other professional services to the company, or a person who is currently a major client or trading partner of the company cannot be an independent director. Board of directors should also set up a nomination committee, compensation committee, and audit committee within the board. The board can also set up a litigation committee or any other committee for a specific purpose. Each committee should consist of three or more directors. Majority of directors on the nominating committee and the compensation committee should be outside directors, and there should be one or more independent directors. The majority of audit committee members should be independent directors. An outside director should be appointed as chairperson of each committee. Purpose ofthe nomination committee is to select candidates for directorships who meet certain pre-set qualification criteria and recommend removal of non-performing directors at the shareholders meetings. This committee can also propose appointment, removal and related matters with regard to executives. The CEO may submit requests or opinions to the nominating committee, or may attend meetings of the Committee to present the requests or opinions.

Management & Change, Volume 10 Number 2 (2006)

226 Farag Dubey Compensation committee should review the executive compensation programmes and of each director's and executive's compensation pursuant to pre-set compensation principles. The objective of the compensation programme is to motivate directors and executives to work deligently, The committee should carefully review incentive plans, which should be designed in a fair and reasonable manner. In case the CEO plans to adopt incentive plans for employees, the CEO should obtain approval ofthe compensation committee. Audit committee should organize overall accounting and audit functions, assess the audits conducted by certified public accountants, appoint and discharge certified public accountants, evaluate and improve internal audit procedures and controls, etc. The audit committee should evaluate the CEO's policies for strengthening internal audit and control. The CEO should prepare an internal report on the state of internal audit and control, and include that report in the business report which should be audited by a certified public accountant (JCGF, 200 l). Special committees can also be set up to deal with situations that may significantly affect the interests of shareholders, such as derivative lawsuits, takeover bids and other serious matters. In Japanese corporate governance, a litigation committee is a sub-committee of the board which can be either temporary or permanent. The majority of members of the litigation committee should be independent directors. None of the members of the committee should be in a relationship of interest with the directors or executives that the subject oflitigation. CEO who functions under the board of directors, should evolve high level management strategies to enhance corporate value. An executive management committee is recommended to be set up under the CEO who should assist the CEO in conducting all aspects of the company business (JCGF, 2001). Corporations use societal resources for their operations and enjoy tremendous economic and social power and a just relationship demands that they should not lag behind in discharging their social obligations. Corporate social responsibility (CSR) is regarded as part of corporate governance as only company board can accord budgetary approvals for development projects involving expenditure of significant sums. Management & Change, Volume 10 Number 2 (2006)

-~ ~----~-~---

Parag Dubey 227

Konusuke Matsushita, a highly respected Japanese business leader, was great champion for fulfilling social commitments besides maximizing shareholder value. He was not opposed to generating wealth as such but wanted that it should benefit everyone including society in some measure. In this context he once said (Kotter, 1997): "Possessing material comforts in no way guarantees happiness. Only spiritual wealth can bring true happiness. If that is correct, should business be concerned only with the material aspects oflife and leave the case of human spirit to religion or ethics? I do not think so. Businessmen too should be able to share in creating a society that is spiritually rich and materially affluent"'. KM had high social commitment who once said (Matsushita, 1976), "The mission of a manufacturer is to overcome poverty, to relieve society as a whole from the misery of poverty and bring it wealth. Business and production are not meant to enrich only the shops or the factories of the enterprise concerned, but all the rest of society as well". MATSUSHITA EXPERIMENT TUALITY IN ACTION

IN JAPAN: A STORY OF SPIRI-

India, which is a reservoir of religious values but paradoxically has hardly any major organization, which is run on spiritual lines. Japan took lead in this regard quite some time back when its very distinguished business leader Konusuke Matsushita (KM) way back in 1930 had set up and run Matsushita Electric Industry to function on spiritual lines. The organization achieved extraordinary milestones and key was its committed workforce and spirituality driven principles of its leader. His life is an inspiring story of how vision, hard work and spirituality can achieve wonders without the benefits of an enlightened background, education and charismatic leadership. The fascinating story shows how moral leadership based on spiritual values and ethics could produce amazing results. KM set the direction of his company through a blend of inspired business acumen and spirituality. He was one of the greatest upholder of human values which he taught to others but only after presenting before employees his own personal example of first adopting them. Thrown into poverty at age 4, KM struggled with the early death of family members. An apprenticeship which demand 16 hours days at age nine. All the problems associated with starting a business with neither money Management & Change, Volume 10 Number 2 (2006)

----------,

228 Parag Dubey nor connections. The death of his only son, the Great Depression, the horror of World War II in Japan and many more heart rending adversities (Kotter, 1997). From a sickly, heartbroken, and poverty - stricken nine year old boy, he soon started acquiring worldly wisdom from the position of apprentice in a bicycle shop where he learnt such basic principles that customer is all and all in business. In his youth he emerged as a promising employee in the Osaka Light Company and started developing his own business philosophies that were radically different from those of other contemporary business leaders. Undeterred by all kinds of problems and setbacks faced during his childhood he went ahead to fulfill his life mission and emerged one of the greatest business leaders of the 20th century. His accomplishments as a leader, author, educator, philanthropist, and business wizard are amazing and place him in the category ofSoichiro Honda, J. C. Penney, Sam Walton, Henry Ford, and Jamsetji Nasarvanji Tata (Mital, 2001). It was Matsushita's belief that public repetition of lofty ideals about service, honesty, and teamwork eventually helps to make them an integral part of one's life philosophy. Most of his employees took his spiritual advice seriously and derived inspiration from daily recital of his ideals in public assemblies often conducted by him. Recital of the company vision, mission and core values everyday in the morning assembly inspired employees to put their very best and achieve highest levels of productivity standards. He believed that setting high goals ideals and working for their realization ultimately resulted in achieving inspired response. He noted: 'Human beings are sometimes slaves to the ugly and weak sides of human nature. However, if you set high goals for yourselves and every day continue to reflect on them, step by step you will be more focused and make yourself a better human being, becoming a happier person for it.' Matsushita was a spiritual leader par excellence. He took steps forward every day, little by little, towards his goal. He had conviction that only with cooperation of his people and all those who have stake in the organization, he would not be able to achieve his goals. He believed that by improving other people, he could improve himself, and that helping others was like helping oneself. These ideas were almost religious beliefs (Kotter, 1997). Some of his very popular quotes are (Kotter, 1997): 'Treat the people Management & Change, Volume 10 Number 2 (2006)

Parag Dubey 229

you do business with as if they were a part of your family', 'Prosperity depends on how much understanding one receives from the people with whom one conducts business','Don't sell customers goods that they are attracted to, sell them goods that will benefit them', 'Any waste, even of a sheet of paper, will increase the price of a product by that much', and 'To be out of stock is due to carelessness. If this happens, apologize to the customers, ask for their address, and tell them that you will still arrange to deliver the goods immediately'. Matsushita's saga is far more than a business story. It is a story of overcoming adversity and drawing strength from trauma and hardships. His example shows Matsushita saga is about how tough times pave the way for developing indomitable will, non-stop journey for growth and progress, decades of continuous learning, and emergence of a legendary hero. When he died in the spring of 1989, his funeral services had attracted crowd of over twenty thousand people. CHALLENGES

FOR BUSINESS LEADERS

Leadership plays an important role in shaping organization policies and strategies. In many organizations it is seen that organization culture is more affected by the CEO's work philosophies and leadership styles especially when the organization does not have well documented policies for employees' welfare, work-life balance, human resource development, stress management, occupational health, etc. (Jack, et al., 2006). When the organizationalleadership is strong and visionary, it can make real difference in facing challenges, managing risks and meeting organizational goals and objectives. Peter Drucker once said, 'management is doing things right; leadership is doing the right things'. In corporate world leaders have a major role in inspiring work teams. A leader by definition cannot be pessimist. Mahatma Gandhi in his SevagramAshram at Wardha on February 2, 1946 said, "only he can be leader who never loses hope". A leader has always vision, positive outlook, and optimism. In many cases employees leave organizations when leaders do not inspire. It is generally a myth that money is the main motivator for job switch but quite often it is lack of inspiring leadership and challenging assignment which makes people move from one organization to another. Management & Change, Volume 10 Number 2 (2006)

230 Parag Dubey Leaders often drive insights from obstacles and hurdles they face in their day-to-day life. A leader often regards business hardships as driver for change, not loss or failures. Engineers India, a leading public sector enterprise in petroleum sector, in wake of worldwide recession in petroleum industry faced tight job order position and accordingly the company leadership initiated several cost containment and downsizing initiatives. However, later when the boom returned the organization following initial contraction later consolidated by expanding again in strategic areas of growth. A recent finding suggests that an open work culture is more sought after goal in corporations for which leaders can play more decisive role (Wallace, et al., 200 I) as they can facilitate cultural changes more easily (Plowman, 1990). Customer satisfaction assessment is another widely recognized strategy for performance improvement (Jones, 1996). With dynamic and effective leaders at helm corporations can attract talent with diverse educational and cultural background (Florin, et al., 2007). MANAGERIAL IMPLICATIONS FOR CROSS CULTURAL MANAGEMENT AND INCLUSIVE GROWTH Changeover from an ordinary to an extraordinary organization requires a visionary leadership, latest technology, innovative change management mechanism and innovative business strategies. A dynamic and innovative work culture may inspire everyone to contribute. It was realized that at the heart great companies was a great corporate culture that fostered disciplined people to think and act in disciplined manner. Japanese leaders have generally excelled in making their organizations globally competitive by developing a work culture in which everyone contributes his very best (Collins, 2005). Imagination and dreaming by business leaders are real drivers of corporate growth. A study on manufacturing firms demonstrates that companies perform better under a new leader ifhe has been groomed for the post within the organization. The outsider lacks intimate knowledge ofthe firm, its management and work culture (Scott, 2004). The 'relay succession' was adopted in Infosys Technologies after the Mr. Narayan Murthy, Chief Mentor, decided to relinquish his active role in favour of the company's senior executive, who has been associated with the organization since inception, who can mould the company more easily than an outsider. Management & Change, Volume 10 Number 2 (2006)

______________________ .~_.-_~

--l

Parag Dubey 231 Japanese corporate product development strategies are outcome of dynamic and continuous process of adaptation to change with changing environment. Strengths and weaknesses of Japanese industrial product development practices are related to the Japanese cultural heritage and the rationale for such practices can be explained in terms of the Japanese culture (Jacobs, 1998). Japanese leadership style can help achieve a dynamic balance between strategy formulation and implementation that achieve value creation through innovation for competitive advantage (Baba, 2004). The one sure way companies can survive in a global economy, is by having a competitive advantage. In Japan there exists what is called shacho style of leadership. The legitimacy of the shacho is really derived from his sense of commitment to shareholders, who always look for maximization of the shareholder value. As the leader of his company, an effective shacho is the CEO, or even the chairperson of the 'board of directors'. As the leader of his company, an effective shacho is hardworking, spirited, and reliable, level headed, has good communication skills and a realistic grasp of the scenario that may impact the organization, and is simultaneously committed in enhanci.ng the corporate value, which in India is commonly understood as maximization of shareholder value. Japanese economy has demonstrated time and again, that natural and physical resource constraint cannot be a limiting factor in achieving success. Undeterred by limitations of their country's resources, many multinationals have set up supply chains and integrated production networks that tend to locate each stage of production in the country with the lowest cost. East Asia is a major participant in this global supply chain and produces parts and components for a variety of manufactures. Affiliates of a multinational in one country often exports to another for eventual sales to a third country market. All that is required is a conscious and genuine effort to connect everybody with a shared goal. When people are inspired by a vision to optimize resources, there will be synergy of plans and action .. According to Mr. Narayan Murthy, Chairman, Infosys Technologies Ltd. (The Economic Times, May 16,2006), " the future is all about how open minded you are to learn from other people. Companies like Infosys that bring innovation in making this' collaborative distributed development Management & Change, Volume 10 Number 2 (2006)

232 Farag Dubey

model' more and more efficient is where the future is. This model in simple words means sourcing capital from where it is cheapest, sourcing talent from where it is best available, producing it is where it is most cost effective, and selling where the markets are. This model also enables inclusive growth as it taps resources from diverse work areas (Mital, 2005). Multiculturism though often used as synonym of diversity is in fact different from it. As the word implies multiculturism is diversity in narrow sense, which refers to languages and life patterns of people of different cultural background and nationalities who work in an organization. Multiculturism is subset of diversity as the latter is wider in meaning. Diversity is on account of other varying factors such as gender, age profile, knowledge, skills and abilities (KSAs). Managing diversity means organizing people's diverse groups in a manner that reaps the benefits of working and synergizing as a team. Diversity management means treating members of all groups alike without any discrimination (Cheng, 2007). Diversity management gives due weightage to all groups and values everyone's contribution alike. Goals of diversity management and inclusive growth are therefore identical. Matsushita was big supporter of open (sunao) mind which was at the heart of his personal philosophy. He often said that solving difficult problems requires an open mind and the willingness to learn. A sunao mind is composed mind free and flexible to adapt to any situation. A person with sunao mind looks at things as they are without any bias or misconception. A biased person is unaware about the reality and his decisions are bound to be biased and often inappropriate. A person with sunao mind always avoids impulsive actions (Kotter, 1997, p.20). He may be ideally suited for cross cultural management and inclusive growth. A sunao mind can be cultivated by any individual with proper training and effort which can be developed at any stage, be it, at school, college or a management institute. With a sunao mind, one can learn from any source, any situation, anytime, and anyplace (Kotter, 1997, p. 207). With his immense faith in the power of sunao mind, KM transformed his organiza. tion into a very adaptable and flexible organization. A sunao mind can prove effect in dealing with cross cultural issues in the globalization era. In the new economy, networking and shared values are replacing individual Management & Change, Volume 10 Number 2 (2006)

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Parag Dubey 233

values (Mital, 2001). Cultural issues of diverse workgroups need to be properly understood. Leadership has to be clear about organizational goals and objectives, relationships and behaviours cutting across diverse work cultures so that it can remove barriers, build capacity and, communicate passionately at all levels in diverse work areas so that goal of inclusive growth is more easily attained (Fig. 1). Fig. 1 Model for Cross Cultural

Management

and Inclusive Growth

Cultural Definition and Audit

Strategic Planning

Management

Team Building

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Personal Changes

Restructuring

CONCLUDING

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& Follow up

REMARKS

Business needs to make sustained efforts by bringing some strategic and cultural changes in their working to meet challenge posed by the fast changing technological and economic environment. To manage risks, corporates have to be agile and flexible to survive in the rapidly changing environment. In highly competitive era, it is important to form value chain partnerships with other business units (Li and Mitra, 2006). The Japanese model does not encourage labour flexibility through hasty labour restructuring. Economic ineffectiveness should be corrected not by Management & Change, Volume 10 Number 2 (2006)

234 Parag Dubey terminating employees, but by redeploying them in the wider framework where the interests of society do not suffer. It prefers reducing number of administrative levels that are superfluous than reducing number of individual positions or laying of employees while in US labour scene 'hire and fire' is a very common phenomenon. Corporates should follow global standards of corporate governance arising out of economic liberalization, deregulation of industry and growing integration of the economy with rest of the world for achieving competitive advantage. This is particularly necessary as stakeholders in the Indian industry are no longer confined to this country alone but spread all over the world. In India, many family owned enterprises have moved from private limited companies to both closely and widely held public limited companies. Corporate governance in the country has accordingly moved in line with this trend.

RFERENCES Baba, S. (2004) "Remodelling Employment for Competitive Advantage: What will follow Japan's 'Lifetime Employment'?", Asian Business & Management, 3 (2). Cheng, P.L.K. (2007) "A Kazakhastan Perspective on Diversity", The ICFAI Journal of Organizational Behaviour, 6( I): 18-31. Collins, J. (2005) Good to Great and the Social Sectors: Why Business Thinking is not the Answer. A published Monograph. Florin, J., R. Karri and N. Rossiter (2007) "Fostering Entrepreneurial Drive in Business Education: ArfAttitudinal Approach", Journal of Management Education, 31(1): 17-42 .. Jack, S., J. Hyman and F. Osborne (2D06) "Small Entrepreneurial Ventures Culture, Change and the Impact on HRM: A Critical Review", Human Resource Management Review, 16 (4): 456-466. Jacobs, L. and P. Herbig (1998) "Japanese Product Development Strategies", Journal of Business and Industrial Marketing, 13 (2). Jayashankar, M. (2007) "India Inc. M.astering the Diversity Game", The Economic Times, January 23. Management & Change. Volume 10 Number 2 (2006)

Parag Dubey 235 JCGF (2001) "Revised Corporate Governance Principles". porate Governance Forum, Tokyo, October 26.

Japan Cor-

JETRO (2000) "Corporate Governance in Japan ;'. Japan External Trade Organization, Tokyo. Jones, C. (1996) "Customer Satisfaction Assessment for Internal Suppliers", Managing Service Quality, 6(1): 45-48. Kotter, J.P. (1997) Matsushita Leadership. New York: The Free Press. Li, J. and J. Mitra (2006) "Exploring Entrepreneurial Networking: An Investigation into Patterns of Firm-Specific Behaviour", Industry and Higher Education, 20(2):135-142. Matsushita, K. (1976) Japan at the Brink. New York: Harper & Row. Miles, M., L. Munilla and J. Darroch (2006) "The Role of Strategic Conversations with Stakeholders in the Formation of Corporate Social Responsibility Strategy", Journal of Business Ethics, 69(2): 195-205. Mital, K.M. (2001) "Indian Ethos and Technology Management: Insight and Contemporary Relevance". In Sushil and K. Momaya (ed.) Globalization Flexibility and Competitiveness: A Technology Management Perspective. New Delhi: Vikas Publishing House Pvt. Ltd, 159182. Ohmae, K. (1982) The Mind of the Strategist: The Art of Japanese Business. New York: McGraw Hill Book Co. Pascale, R. and A. Athos (1981), The Art of Japanese Harmondsworth: Penguin Books.

Management.

Plowman, B. (1990) "Management Behaviour", TQM Magazine, 2(4): 1. Post, J., L. Preston and S. Sachs (2002) Redefining the Corporation: Stakeholder Management and Organizational Wealth. Stanford, California: Stanford University Press. Sachs, S., M. Maurer, R. Edwin and R. Hoffmann (2006) "Corporate Social Responsibility from a Stakeholder View Perspective: CSR Implementation by a Swiss Mobile Telecommunication Pr~vider", Corporate Governance, 6(4): 506-515. Management & Change, Volume 10 Number 2 (2006)

! 236 Parag Dubey

Scott, E., S. Seibert, W. Silver and A. Randolph (2004) "Taking Empowerment to the Next Level: A Multiple-Level Model of Empowerment, Performance and Satisfaction", Academy of Management Journal,. 47(3): 332-349. The Economist,. (2007) "India on Fire - India s Growth Rate is Close to China s; but Signs of Overheating Suggest that this Pace Cannot be Sustained", February 3, London. Vickers, S. (2006) "International Risk Comment on the Opportunities and Challenges Faced by Foreign Investors in India". In International Risk: India Outlook 2005, Hong Kong. Wallace, L., P. Spurgeon, L. Latham, T. Freeman and K. Walshe (200 I) "Clinical Governance, Organisational Culture and Change Management in the New NHS", Clinician in Management, 10(1): 23-31.

Be civil to all, sociable to many, familiarwith few, friend to some, enemy to none. -Anonymous

Management & Change, Volume 10 Number 2 (2006)

BOOK REVIEWS V. Srinivasan, New Age Management Philosophy from Ancient Indian Wisdom. New Delhi: Roli Books Pvt. Ltd. M-75, GK. II Market, New Delhi no 048), 2006, xiv + 121pp. Rs. 295 hardbound. S. Bagchi, The High Performance Entrepreneur: Golden Rules for Success in Today's World. New Delhi: Penguin Portfolio (Penguin Books India Pvt. Ltd, 11, Community Centre, Panchsheel Park, New Delhi n0017), 2006. ix + 244 pp. RS.395 hardbound. Peter Drucker once famously observed, 'we don't understand anything about motivation. The only thing we can do is to write a book about it'. We can quite truthfully add a couple of other subjects, which we don't really understand; for example, leadership and entrepreneurship quality, prominently among them. The less we understand, more we write, which is quite justified because the process of writing a book is nothing but a voyage of discovery of the unknown. The two books, at the surface so very different, have this in common - both deals with subjects which are quite difficult to quantify, to be precise about. Take leadership as an example. Like beauty, we recognize leadership once we see it but if asked, what exactly makes one a leader we will have to grapple with very uncertain responses. Both the books deal with various dimensions ofleadership in vastly different ways. The book by Srinivasan is quite unique. There are more books on Gita on Management than you can count in the fingers of both hands together. But I have not seen even one onThirukural considered as the Tamil Vedawhat it has to offer to the theory and practice of management. In his delightful as well as insightful preface, N.Vaghul, Chairman, ICICI Bank - the author served under him with great distinction - observed that the greatness of the Thirukural is in its ability to transcend and propound universal truths which have applicability across time and borders. Valluvar, the author of the Kurals, a genius from Tamil Nadu, wrote really what was a treatise on the' Art of Living'. He lived at a time when king and kingdom prevailed, the social organizational structure was strictly traditional and the moral values appropriate to that kind of society. Management & Change, Volume 10 Number 2 (2006)

238 Book Reviews

What Srinivisan has done is to show how the teachings, insights and exhortations of Thirukural are useful, insightful and full of pleasant surprises even in today's post-modem context of managing corporations, human relations management and intra-corporate diplomacy. Reading his book, I quite often remembered Chankya's Arthasastra and Machiavelli's Prince, more than the some of the modem management thinkers, like Drucker, Srinivasan has referred to. The best that I can do is to reproduce a few Kurals which I found to be most penetrating. "The end of all deliberations is to arrive at a decision; and when a decision is reached, it is wrong to delay its execution." "Gifts to the poor alone can be classified as gifts. All other gifts are of the nature of expecting something in return". "A leader should have the virtue to hear the words that are bitter to his ears." "The four qualities should never be wanting in a leader - courage, liberality, knowledge and energy." "After you have decided that a man is fit for an office, raise him to the dignity of that office and give him the conveniences that will enable him to fit office worthily." Subrata Bagchi addresses a very special group - those who think they have the potential to become high performance entrepreneurs. Bagchi has the right credentials. He was a founding member of Mind Tree Consulting, a high profile IT Consultancy firm. Only problem is that it is highly unlikely that these kinds of people will have the time and inclination to read this book _ they will be more busy to seek out entrepreneurial opportunities. But if they do read, they will get some sane advice. Bagchi has no illusion as to either his audiences or his advice, as in 'The Last Word', he writes 'you really do not need to read this book - for that matter any book - to start your own enterprise.' The sub-title of Bag chi's book is: "Golden Rules for Success in Today's World". This I find to be inconsistent with the dynaJllics of business world. Like universal truths, which are mostly in the minds of philosophers and are hardly found, they are hardly any golden rules for success. It is more unlikely that those which have worked in the past will work tomorrow. Management & Change, Volume 10 Number 2 (2006)

Book Reviews 239

But despite this caveat, Bagchi has indeed given, on the basis of his experiences mostly in Mind Tree Consulting, sound advice on several ethical dimensions of business, how to create and sustain trust among the peers, employee retention and motivation. These are management issues not those intangibles which make a person an entrepreneur. The closest he comes. to the discussion of the specifics is in Chapter 2 where he attempts to identify the attributes of an entrepreneur. It may help a potential entrepreneur to introspect and evaluate whether he stands a reasonable chance. This may give him a pause, but ultimately it is his call whether he would take the plunge. B. Bhattacharyya, Distinguished Professor and Director, IILM Institute for Higher Education. Dewakar Goel, Living a Stressful Life with Joy. New Delhi: UBSPD; UBS Publishers' Distributors Pvt. Ltd (5 Ansari Road, New Delhi 110002), 2005, ix + 203 pp. Rs. 175 paperback. Stress can arise from an opportunity, threat or challenge posed when the outcome of the event is both uncertain and important. Stress is the result of lack of fit between a person in terms of his personality, aptitudes and abilities, and his environment when he is unable to cope with the constraints or demands encountered. Stress may also occur due to fears mismatch between expected and actual outcome. Stress often arises when one is unable to perform in a set of circumstances in view oflimitations of his knowledge, skills and abilities (KSAs). While a certain amount of stress may prove fruitful which drives individuals to perform; it is the excessive stress which is harmful. Persistent stress may lead to headaches, boredom, and irritability; and may even drive individuals towards permanent depression that can make them often absent from workplace. It is the continued stress levels that give rise to permanent distress in life. Organizations are network of roles and occupation of a role is a potential source of stress. Role occupant interacts with the organization through his role and performs certain functions in response to his role expectations. Stress due to occupation ofa role is known as 'role stress' the measure of which reflects the quality of role design. Well-designed roles have a good matching between the organization in terms of its structure, systems, proManagement & Change, Volume 10 Number 2 (2006)

240 Book Reviews

cesses and goals, and the organization in terms of its personality, competence and needs. When roles are ill-designed, role stress is high, role occupant gets de-motivated and role performance is low. Stress may also arise when one is unable to perform in the manner one likes and constraints are imposed by seniors. In office supervisors have a major role to play in stress management as they are potential source of employee 'overload'. Overload is experienced due to too high or too much expectations, difficulties in balancing between different roles occupied, conflicting expectations, and expectations for which resources perceived may be inadequate. In view of his inability to perform, it creates tension in mind and may even impact one's mental health at some stage. Fear to meet work deadlines is a very common stressor. Ability to say 'no' when one is afraid to say, 'yes' may keep stress away in some situations. Uncontrolled stress may affect individual health and weaken muscles. A stress may cause both short term and long term effects. While short term impact may make individuals anger prone, fail to make them concentrate on jobs on hand, and affect their emotional stability, long term effects may give rise to heart ailments, mental disorders, loss of memory, etc. Stress may undermine individual capacity to perform and in the process also affect overall organizational performance. Stress cannot be generalized with a single yardstick. Factors that cause stress in one individual may not cause them in another. Author has chosen a particular definition of stress (p.2), according to which, stress emphasizes a person's perception and evaluation of potentially harmful stimuli, and views the perception of threat vis-a-vis demands imposed and the individual's ability to cope with these demands. A perceived imbalance in this mechanism gives rise to stress response which may be physiological and/ or behavioural. Given this background, the book aims to provide set of guidelines and tools that can make individuals joyful all along in the midst of everyday stress and strain they experience. The author has presented his ideas in seven chapters which he has titled them as, (i) what is stress? (ii) causes of stress, (iii) experiencing stress, (iv) measurement and analysis of stress, (v) dealing with stress, (vi) sex: cause and remedy, and (vii) profession makes a difference.

Management & Change, Volume 10 Number 2 (2006)

Book Reviews 241

Chapter 1 titled as 'What is stress?' deals with some important issues like the origin of the word stress, mental state and stress, stress symptoms, individual response to stress, stress as symbol of mismatch between expectation and reality, body response to stress, and unfulfilled desires as constant source of stress. Stress is outcome of some kind of burden, pressure or hardships. Stress is caused by a stimulus, physical or psychological, and it is up to an individual how he responds to it. Chapter 2 titled as 'Causes of stress' deals with a set of common stressors broadly, which the author has divided into two categories, external sources and internal sources. External sources include factors such as one's job profile, inter-personal relationships in the organization, career objectives and external factors beyond one's organization such as the relationship with neighbourers and so on. Internal sources relate to the individuality of a person and hereditary characteristics, which broadly cover his personality, needs, values, goals, age, race, education, etc. In this paper, the author enumerates issues such as symptoms and causes of stress, job related stress, and ego and individuality as stress factors. Chapter 3 titled as 'Experiencing stress' deals with topics like consequences of stress, stress as mismatch between reality and expectation, stress burnout, emotional suffering and implications by way of recourse to alcoholism as a desperate measure to deal with stress. The chapter emphasizes the need for measuring and analyzing stress level of employees in the organizations as only then appropriate stress relieving measures could be suggested. Meditation is recommended as a major stress buster. Meditation helps in calming the agitated mind. It can be practiced in several ways. Chapter 4 titled as 'Measurement and analysis of stress' deals with a number of issues starting with the importance for stress audit, implications of role stress, design of a questionnaire for analyzing stress, need for attitudinal change, analysis of assertiveness at workplace, behavioural analysis, stress monitoring, stress levels and personality traits, stress levels ofteam leaders, career objectives as stress drivers, role of teachers in handling stress, and other related aspects. Chapter 5 titled as 'Dealing with stress' relates to stress-coping strategies and issues pertaining to stress management. Chapter 6 deals with issues relating to male-female relationships. The author has come out with Management & Change, Volume 10 Number 2 (2006)

242 Book Reviews interesting suggestions in managing stress for individual and organizational gains. Finally, Chapter 7 entitled 'Profession makes a difference' reviews stress-related issues in select professions including medical, legal, teaching, politics, bureaucracy, police, business, army, nursing, support services, senior citizens, prisoners, housewives, students, etc. Proper time management and general orderliness in life may however ke,ep stress away. Physical activity and meditation, which brings calmness and positive thoughts to mind may often act as effective stress busters. Meditation brings gains to both individuals and society at large. As concen .. tration levels improve with proper stress management, individual performance and productivity levels at work may also improve. The heart muscle when relaxed reduces pulse rate, heart beat and blood pressure. Many organizations these days have set up yoga and meditation centers in their premises to enable employees relieve their stress. Organizations also encourage employees to go on vacations and in some chronic cases to even go for sabbaticals for stress relieving. Yoga therapy which includes yogic exercises, pranayamaa (breathing exercise), asans (postures) and yognidra (yogic sleep), may help in cleansing the internal system, enhancing immunity and functioning of internal organs, improving body flexibility and agility, and ability to relax. According to the author, a very effective relaxation technique called 'imagery' can go a long way in stress management. In this process one can make good use of mental imagery as a means of achieving a deeply relaxed state. Rudraksha, which refers to Lord Shiva's tears has played an important role in Indian culture. Many yogis prescribe to wear a 'Rudraksha mala' (garland) perhaps driven by 'imagery' approach for its ability to maintain good health and provide relief from stress. Some more examples of imagery can be cited. For instance, remembrance of a holy person can help achieve peace. When one thinks of Jesus Christ, an embodiment oflove and compassion, one feels loving and serving others. Similarly, when thinks of Lord Rama, epitome of ideal son, brother, husband and king or when remembers Lord Krishna, apostle of wisdom and symbol of duties towards one's commitments without attachment, one is invariably drawn towards their idealism they stood for. To explain the author's suggested technique of 'imagery' further, one Management & Change, Volume 10 Number 2 (2006)

Book Reviews 243

can visualize a serene or peaceful scene such as tapovana which finds expression in works of Kalidasa, great Indian poet, often remembered as 'The Shakespeare of India', who was essentially a man of culture, nature and fine arts. Kalidasa vividly described tapovana where the Indian cul.. !UTewas known to flourish. It provided an environment where all men and animals lived in perfect harmony and bliss. This blissful state was a source of all values and philosophies based on the basic principles of sacrifice, detachment, renunciation and all that is necessary in this life and beyond. Kalidasa's vision of tapovana had all desirable environment features such as peace, harmony, tranquility and divinity, where one could experience eternal joy, anandam, and at the same time part of the wide and infinite universe. This picture of tapovana imagined for short spells but on frequent basis during the day can surely reduce individual stress levels which could prove self-healing. The success of 'imagery' technique will however depend on with what conviction and sincerity the approach was practiced by an individual. The book is expected to help readers to understand the nature and sources of stress in individuals and in organizations, familiarize and educate them with techniques in dealing with stress such as 'imagery' technique which the author has very nicely portrayed, and scores of other practical tips such as adherence to Indian value system and yoga which can go a long way in freeing oneself from stress. The book is written in a very easy-to-follow style which can be understood by people working in all walks of lives, be it, executives, workers, housewives, engineers, doctors, students, nurses or any supporting personnel. In this book the author has attempted to study and analyze stress patterns in different professions including nursing where one may experience most severe stress levels. This, in fact, this is the most noted contribution of this book that opens new windows to the questions of 'why' and 'how' in stress in different professions though severity may vary among them from profession to profession. As the book is a blend oftheory and practice, inclusion of a glossary of terms such as 'stressor', 'role stress', 'role overload', 'organizational role stress', etc. at the end of the book could have added to the utility of the book, particularly for researchers. A book should also generally have a Management & Change, Volume 10 Number 2 (2006)

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244 Book Reviews

bibliography and an index at the end particularly when it includes many ideas that were also emphasized by many other thinkers. Author may thus consider adding a glossary, bibliography and index at the book end as and when the book is due for the next revised edition. Language of the book also needs some tightening here and there. Mr. Dewakar Goel has done a pioneering work by bringing out invaluable book on state-of-art of stress management by studying the subject from every possible angle including the study of common stress patterns in different professions. Author should be congratulated for bringing out a comprehensive book on such a vital issue, which brings considerable awareness on stress including its physiological and behavioural implications. This book would help individuals to make constructive or gainful use of stress to fulfill their career objectives and life's goals; and live their stressful lives, if that is inescapable, with joy and happiness. K. M. Mital, Professor of Strategic Management and Chairperson, General Management Area, IILM Institute for Higher Education. Charles W.L. Hill and Gareth R. Jones, Strategic Management: An Integrated Approach (Sixth Edition-Indian Adaptation). New Delhi: Biztantra (An Imprint of Dreamtech Press, 19..A Ansari Road, New Delhi 110002), 2004. xxxii+495+Cases 647+Indian Cases 46pp. Rs. 449 paperback. In this special Indian adaptation of the book 'Strategic Management: An Integrated Approach' a number of specific Indian case studies have been added to make the book more India friendly so that it becomes more relevant for Indian students and readers at large. This sixth edition is revised version of first edition brought out in eighties. This apart, the book includes many cases on MNCs such as Yahoo, Coke and Pepsi which already have considerable presence in India and provide a visible India-specific dimension to the text. The book is essentially case oriented as it contains a wide collection of 43 cases (spanning over 400 pages) that provide invaluable reading material to students for quicker and deeper understanding. Organizations chosen for these cases represent wide range from large companies to small entrepreneurial businesses that managed varied challenges from strategic management point of view. Many of these cases were contributed by faculty memManagement & Change, Volume 10 Number 2 (2006)

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Book Reviews 245

bers of several US universities and contribution to the book is thus made not just by two principal authors but many more. The book is divided into five parts: Part I (Introduction to Strategic Management in Ch.l and 2), Part II (Strategies in Ch. 3 and 4), Part III (The Nature of Competitive Advantage in Ch. 5 to 10), Part IV (Implementing Strategy in Ch. 11 to 13) and Part V (Cases in Strategic Management including Indian cases). Every chapter begins with an overview outline and ends with a 'chapter summary' and 'discussions questions'. The 'opening case' at the start of the chapter reviews 'strategy in action', includes 'small group exercises' and ends with 'closing cases'. Short experiential exercises are framed involving students participation by working in groups that often leads to a scenario that can be addressed with a particular strategic management approach. A short closing case provides an opportunity for a short class discussion on a chapter-related theme. Some chapters have interesting discussion on 'running cases' - changing rivalry in the personal computer industry (Ch. 2); drivers of profitability for Dell Computer and Compaq (Ch. 3); Dell's utilization of the Internet (Ch. 4); Compaq and Dell go head to head in customer service (Ch. 6); Dell's global business (Ch. 8); and beating Dell - why Hewlett Packard wanted to acquire Compaq (Ch. 9). Indian case studies include (i) Ideal Stores- Coimbatore: Adjusting to the Winds of Change in Retailing; (ii) Coca-Cola and Pepsi: Blindsided by Pesticides in the Soft Drink; (iii) TUCAS: Reaching out to the Farmers; (iv) Changing Needs in the Pharmaceutical Packaging Industry and Challenges for XYZ's Foil and Packaging Business; and Compusoft - The Dilemma of Strategic Fit and Stretch, and Success of Strategies. Each chapter provides a clearly focused synopsis, a list of teaching objectives, a comprehensive lecture outline that includes references to the transparencies, and answers to discussion questions. Each of the chapter opening cases also has a corresponding teaching note to help guide class discussion. Furthermore, the lecture outlines include summaries and teaching notes for the 'strategy in action' boxes. It also includes comments on the 'practicing strategic management' sections and suggested answers to the 'closing case discussion questions'. Management & Change, Volume 10 Number 2 (2006)

246 Book Reviews Inclusion of assignments/ exercises at the end of each chapter that offer hands-on and interactive learning possibilities are some of the very unique features of the book. In small group exercise category, student groups discuss a scenario concerning some aspect of strategic management. For example, the scenario in Chapter 11 may help students identify stakeholders of their o~ academic institution wi!h which they are more conversant and evaluate how stakeholders' expectations are being met and should be met. The book in Chapter 13 has highlighted synergy between corporate governance, strategic management and business ethics. The chapter explains how poor corporate performance can be caused by a combination of poor corporate governance systems and unethical behaviour. The book reviews the strategic importance of managing stakeholders, putting strong corporate governance mechanisms in place, and making ethical decisions. Agency theory is used to explain failures of corporate governance and poor managerial ethics. Extensive pedagogy including study of record 43 case examples can transform strategic management into a truly interactive experience. This apart, article file exercise requires students to search business magazines to identify a company that is facing a particular strategic management problem. These way students may locate and research a company, say, pursuing a low-cost or a differentiation strategy, and to describe the company's strategy, its advantages and disadvantages, and core competencies needed to pursue it. Each chapter has appropriate choice of questions. Each question is keyed to the teaching objectives in the 'Instructor's Resource Manual' and includes an answer and page reference to the manual. The Internet exercise requires students to explore a particular web site and answer chapter-related questions. For example, the Chapter 8 assignment seeks students to visit IBM site and analyze its strategy for competing in the global marketplace. Students may also explore the Web for relevant sites of their own choice and then answer book questions accordingly. Students in small groups may choose a company to study through webbrowsing and actual visits and then analyze the company with the help of questions provided at the chapter ends. For instance, students might select SAIL, BHEL or Engineers India and with the help of chapter questions, collect information on these organizations top executives, vision, mission, Management & Change, Volume 10 Number 2 (2006)

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Book Reviews 247

core values, global strategy, structure and other company specific issues. This may help students develop a case study of the identified company as a strategic management 'class assignment' or end term 'major project' assignment and come out with their ideas and recommendations developed from the analysis of the case. Students' presentations of their findings may lead to lively discussions and may help them develop cases. The book is ideal reference and textbook in all respects. Strategic Management issues in real world are complex and involve a consideration of pros and cons and willingness to accept tradeoffs. Strategic management issues are not exclusive but inclusive as they are based on information and data generated internally within its domain but also from information and literature of economics, marketing, organizational theory, operations management, finance and international business. The book is written in manner that facilitates building on concepts from one another, with earlier chapters serving as basis for subsequent ones. Authors have very successfully integrated strategic issues from these diverse disciplines into a comprehensive whole and presented a very novel approach in grasping strategic management fundamentals. The authors have gone beyond an uncritical presentation of text material to debate the strengths and weaknesses and advantages and disadvantages of various techniques, strategies, and structures. K. M. Mital, Professor of Strategic Management and Chairperson, General Management Area, IILM Institute for Higher Education. Arthur A Thompson Jr, A J Strickland III, Jon E Gamble and Arun K Jain, Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases (Fourteenth Edition). New Delhi: Tata McGraw-Hill Publishing Company Limited. xxiv+401+C405+I23+EN8 pp. Rs. 425 paperback. This is indeed a very timely revised text on fast growing field of business strategy. As a text book it takes reader through entire journey from strategy formulatiOl: \0 implementation and all related aspects in between. Each chapter is discussed with several examples and cases drawn from across the glohe covering wide range of industries that help focus on all related aspe(;(s of strategy formulation and implementation. Being a voluminous text Management & Change, Volume 10 Number 2 (2006)

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248 Book Reviews

on strategic management, it contains large volume of relevant information and cases. In spite of rigorous treatments and plethora of information it contains, the book makes interesting reading all through out and is very reader friendly. The target segment of the book thus would find very comprehensive coverage of the subject matter and related cases. This book is broadly divided mto two parts. Part one includes concepts and techniques for crafting and executing strategy and part two includes large number of cases in crafting and executing strategy. Each part is further sub-divided into a number of sections and chapters, giving a very clear and organized structure to the book. Part one includes thirteen chapters divided into four well documented sections from A to D, namely, introduction and overview, core concepts and analytical tools, crafting a strategy and executing the strategy. Section A in the initial chapters deals with different types of strategic processes including process of crafting and executing strategy. First two chapters are substantiated with illustrations pertaining to companies like South West Airlines and Intel. Each chapter ends with a summary of the key points and a short exercise. The key points help readers have an overview and snapshot of each chapter right in the beginning. A short exercise given at the end provides the students and an opportunity of grasping key ideas presented in each chapter. First two chapters explain the basic concept of strategy and the managerial processes of strategy formulation and implementation and set the stage for the book to roll the rest of the sections in line with the process described in the second chapter. Section B is again divided into two chapters that cover the analyses of the external environment, company resources and competitive position. It includes numerous diagrams and flow charts for different models chosen for strategic analysis of external and internal environment. However, though chosen models have been illustrated with company examples, an overall strategic analysis for the organization as a whole could have made understanding of the two in wider perspective and helped students appreciate strategic analysis in a more holistic framework. Section C and D deal with crafting and executing various strategies. Six chapters included in the section on crafting strategy cover different approaches. The first chapter in this section deals with five generic strateManagement & Change, Volume 10 Number 2 (2006)

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Book Reviews 249

gies for competitive advantage by Michael Porter by including an illustration for each type of strategy and then summing up through a comprehensive summary of different strategies presented. The book thus makes an interesting review of generic strategies and wide range of strategies dealing with strategic-alliances to competing in foreign markets. Global strategies ofMNCs are discussed with examples drawn from Coca-Cola, Mc Donald's, Nestle and several others. Industry specific strategies have been covered in Chapter 8 including diversification strategies with illustrations and discussions based on diversified organizations such as Johnson and Johnson. Authors have included a separate chapter on strategy, ethics and social responsibility which imparts uniqueness to the book. The Part II of the book also includes a separate case on ethics and social responsibility as a distinct business strategy. The last section of the conceptual part of the book deals with executing the strategy described in three chapters with each chapter focusing on a critical component of effective strategy execution. The last chapter in this section focuses on 'corporate culture and leadership' by reviewing aspects relating to leading an organization for effective strategy execution and building a culture that is conducive for strategy execution. This book has been duly illustrated using a comprehensive case of South West Airlines. Part II of the book provides cases on various sections included in Part I cutting across industry sectors and geographical domains. This may help students grasp intricacies of strategy formulation and implementation across geographical domains. This apart, authors have included a separate section that deals with cases specific to the Indian market. The cases cover wide spectrum ranging from the strategy of Mumbai's famous dabbawalas to larger and formal organizations like NlRMA and Arvind Mills. Though the coverage of the cases is quite comprehensive and extensive, a chapter on how to use cases for learning in the beginning of Part II would have helped students further in improving learning process and made useful value addition to the book. A case grid in the beginning of the Part II would have also been useful for students. This book on the whole is a very well written text on strategy formulation and implementation for which authors need to be complimented for their Herculean efforts in bringing out this text. Authors have been able to link different organizational functions with corporate strategy and keeping readers interest alive all throughout in Management & Change, Volume 10 Number 2 (2006)

250 Book Reviews

a manner without affecting readability and its easy comprehension anywhere in the text. Sapna Popli, Assistant Professor - Marketing and Dean - PGP, IILM Institute for Higher Education. MY Khan, Indian Financial System, (5th Edition). New Delhi: Tata McGrawhill Publishing Company Limited, (7 Wet Patel Nagar, New Delhi 110008), 2006, xvi+17.68+17pp. Rs. 375 paperlback. The book is a comprehensive treatise about the financial sector oflndia. It covers almost the entire spectrum of financial markets right from the preindependence India and up to now. Like his other books, this book also contributes to the knowledge distribution mission of the author. The book is split into five parts. These are (i) background; (ii) financial markets; (iii) financial intermediaries; (iv) financial instruments; and (v) private foreign investments. The book starts with the first part which has at couple of chapters and introduces the Indian financial sector. The second part has eight chapters and covers stock markets and money market. Primary Markets and the financial intermediaries of this market, listing of stock, secondary markets including stock exchanges and their structures have been comprehensively covered. The last chapter of this part (chapter 10) details about Indian money markets, their operations and regulatory control by RBI. The third part of the book has five chapters, two of them are talking about management of bank funds and the risks associated with the same. The exposure norms, prudential norms, Asset-Liability Management (ALM) practices, credit and country risk management practices have been elaborated in the most convincing fashion. The next three chapters are dedicated to ~FCs, mutual funds and insurance organizations respectively. The fourth part has only one chapter and deals with the instruments of the capital markets including equity, debentures and preference shares, bonds etc. It also talks about the innovative derivative instruments like Futures and Options contract. The last part again has only one chapter and details about various modalities of foreign investment and related instruments like External ComManagement & Change, Volume 10 Number 2 (2006)

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Book Reviews 251 mercial Borrowings (ECB), Foreign Institutional Investors (FII) and offshore mutual funds etc. The entire book has got references of various clauses of regulatory organizations like Reserve Bank Of India, Securities and Exchange Board ofIndia, Insurance Regulatory and Development Authority etc. The references have been absolutely pertinent and relevant. There have been references of various recommendations of several committees constituted from time to time for suggesting reforms to financial sector of the country. The author has exhibited his sound and authoritative understanding of Indian Financial Sector. This book complements the other book of the same author titled as "Financial Services". The book may prove very beneficial and valuable for all students undergoing business management courses. As finance is always one of the focus points of all such courses. The readers will be able to understand, grasp, assimilate and then apply the treasure of knowledge that the book encapsulates. The book is very informative and handy not only for the students, but also for the professionals who are working in the area of financial market operations like brokers, sub-brokers, banking and insurance professionals, . Overall, it is an enlightening and comprehensive book to possess and read. I would like to thank the author for his great contribution to the Indian finance in the form of this book. Greesh Chandra Tripathi, Assistant Professor, Finance Area, IGSM (ULM Graduate School of Management), 16 Knowledge Park II, Greater Noida 201306. Andrew Inkpen and Kannan Ramaswamy, Global Strategy: Creating and Sustaining Advantage Across Borders. New York: Oxford University Press, 2006. xii+247pp. USD 14 hardbound. Global strategy is a young and emerging field. It involves two exciting and challenging areas of strategy and international business, particularly from multinational enterprises point of view. Starting from J. Dunning in 1970s others like Sumantra Ghoshal, c.K. Prahalad and M.E. Porter have done pioneering work in the area. Considering dynamic nature of the subject, Management & Change, Volume 10 Number 2 (2006)

252 Book Reviews there is however there is scope for expanding research frontiers of high quality in global strategy. There is still a lot of ongoing debate on global vs. local strategy. New issues are emerging with globalization, which require an explanation and understanding from strategic management perspective and vice versa. Taking globalization as a reality today and showing how industry after industry is increasingly becoming global and lamenting the lack of focus given to global strategy, the authors review issues which are of prime significance for the study of strategic management in a global context. Authors observe (p.5) "In our thinking, linking strategic management and globalization requires some new thinking. The book blends the theoretical insights that form the mainstay for students of strategy with the practical relevance for international managers." Knowledge has emerged as a key resource with knowledge management as a source of sustainable competitive advantage which has received considerable research interests in recent years. The authors devote full two chapters on issues relating to global knowledge management and leveraging knowledge resources globally, which make an interesting reading. They stress that multinational enterprise is a repository of knowledge and the source of new knowledge should be the world. They propose a six step process for multinational enterprises for leveraging subsidiary knowledge. They examine the issue of offshoring form knowledge value chain and find that most industries and value-chain activities remains mainly non-global. They identify 'best practices' for successfully leveraging offshoring. Emerging markets are the driving force behind the recent growth in global economy. Together they constitute of forty-three per cent of world exports, seventy per cent of foreign exchange reserves, consume more than fifty per cent of global energy and represent more than eighty per cent of global population. Interestingly, multinationals from 'triad' countries barring a few have been more successful in 'triad' region than emerging markets and few explanations behind the failures have been suggested, like institutional voids in emerging markets put forward by ProfTarun Khanna of Harvard Business School. The writers devote a full chapter on global strategy in emerging markets and discuss key issues in emerging markets, demystify common myths related to emerging markets, suggest ways for successfully competing, argue in favour of value-creating opportunities and Management & Change, Volume 10 Number 2 (2006)

Book Reviews 253

warn multinationals from developed countries not to ignore emerging markets and be aware of emerging multinationals from these markets. The book is divided into nine chapters and in each chapter authors touch upon one of the most burning topics like globalization and global strategy, global market place, global strategy and organization, international strategic alliances, global knowledge management, leveraging knowledge, global strategy in emerging markets, corporate governance, and ethics and global str~tegy. The book is full of interesting examples and thought provoking case studies which make it easier to understand the complex academic research involvep in understanding and explaining various strategic issues in global context. The book provides a one-point source for the latest issues in global strategy which are quite relevant for students, academicians and strategic management practioners at large. Rajesh K. Pillania, Assistant Professor, Management Institute, Mehrauli Road, Sukhrali, Gurgaon 122001. Vithal Kamat, 1dti, Orchid and Will Power. Mumbai: tions, 2006, x + 170 pp. Rs 220 paperback.

Development

Orchid Publica-

West has a tradition of both great entrepreneurs as well as great managers writing their memoirs, be it, great entrepreneurs like Bill Gates and George Soros or great managers like Lee Icocca and Jack Welch. They have all given vivid account of mental and emotional challenges they faced while overcoming roadblocks in their entrepreneurial and business careers. In India, Mr. Vithal Kamat, the promoter of Orchid Hotels, has recently come out with his own memoirs in keeping with such trends. This book is a first hand account of the saga of a great entrepreneur who had at some stage even thought of ending his life in wake of bankruptcy and financial hardships following division in his family business. The title ofthe book in the first instance seems hilarious but the author has figuratively chosen to drive the point that his company made a long journey from the start-up of selling idli to ultimately establishing a chain of Orchid Hotels. This company later bagged the 'best hotel chain award' instituted by the International Hotels Association which could not have been possible without tremendous hard work and determination put up by company owners. The book begins with the family background of Mr. Kamat and how his thinking later transformed the organization into a mighty chain Management & Change, Volume 10 Number 2 (2006)

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254 Book Reviews of hotels. Born in a traditional south Indian Brahmin business family of hoteliers with brands like Kamat Hotels and Udupi restaurants, it was not easy to introduce changes. He brought significant changes in business environment by serving non-vegetarian items and liquor not served earlier and even introducing discotheques in the midst of opposition from elderly family members. The book provides interesting reading of how he convincingly managed such opposition and brought new thinking. After division in his family business, he single handedly promoted the Orchid Hotels by borrowing capital from banks, overcoming all attendant difficulties and running the company on fast growth trajectory. Two of the most important aspects of the book are about his views on innovative implementation of marketing strategies and his concept of service quality. As a case-in- point, Mr. Kamat believes that efficient restaurateur should focus more on kitchen rather than cash counter. Providing quality food and service would automatically impact bottom-line. His advice to budding restaurateurs is to analyze reasons for leftovers in customer plate which could provide important clue to improving food quality. Apart from his emphasis on quality food and service, employees welfare and development have been his equally important concerns. Even after his hotel became a grand success and received international recognition for most environment friendly hotel in world, he vowed not to buy chauffeur driven Mercedes till his lowest level employee also drives minimum a scooter. He has put numerous ideas for managing hotel industry on efficient lines. According to him, one should be careful to trust one's chartered accountants beyond a point who may at times try to blackmail the owners and demand their pound of flesh. Similarly, one should also never rely too much on wisdom of family members. According to him, one should use more one's head rather than heart in managing one's business. The book also provides some very interesting ideas and guidelines for entrepreneurs in hospitality industry. However, some of his ideas such as that one should not rely on chartered accountants beyond a point may not appeal to many readers as it is more influenced by one's personal experiences rather than any logical rationale behind it, which could be more contextual and case specific rather than generalized and applicable in a wider context. On the whole the book which contains lot of interesting and valuable ideas is very appropriately suited for reading by budding entrepreneurs Management & Change, Volume 10 Number 2 (2006)

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Book Reviews 255

and members of family run businesses. Srinivas Shirur, Assistant Professor, IGSM CIILM Graduate School of Management), 16 Knowledge Park II, Greater Noida 201306.

funing

Events RAJA RAM MOHAN ROY: A GREAT SCHOLAR AND

SOCIAL REFORMER Rammohan Roy was born in Radhanagar village near Krishnanagar in Hoogly district on May 22, 1772. His great grand father, Krishna Chandra Banerji, worked under the Nawab of Bengal, and was honoured with the title "Roy Roy" which was later contracted into "Roy", and the family subsequently retained it as surname in place of caste title "Banerji". Braj Benode, the third son of Krishna Chandra and the grandfather of Ram mohan, served the Nawab Siraj-ud-Doula in a disatinguished capacity. He had tive sons, of whom Ramkanta, the fifth was father ofRammohan. Very early in life Rammohan Roy showed signs of visible talent and father Ramkanta accordingly sent him for education to Patna for study of Arabic and Persian; and later Banaras for study of Sanskrit and Upanishads. After completing his studies oflanguages and Indian culture he returned to Kolkata, but with the changed mind set to publicly challenge traditions and rituals of Hinduism and other Indian religions that he believed were taking the country backward. This obviously invited opposition from locals who believed in orthodox traditions including his own father creating a situation that constrained him to leave his paternal roof. In search oftruth he went out on travel, which was not confined to India alone but extended to far-off Tibet. After about three years of travel Rammohan Roy returned to his father when he was about 20 years old - and on his return he was taken back with great kindness and affection. He however could not continue to live at home this time also for long as he found environment inhospitable for fultilling his cherished plans in life. He thus once again proceeded to Banares in 1793. While at Banares, Rammohan, besides his multi-faceted development in three years, also acquired proficiency in English in 1796 when he was 24. Later, in wake of death of his father ten years later in 1803 under family compulsions, he moved from Benares to Mushirabad, the old Mogul capital of Bengal, where he published his first work entitled Tuhfat-ul-Muwahuddin. In English, Management & Change, Volume 10 Number 2 (2006)

256 Book Reviews it translated as, "A Gift to Monothiests", a treatise in Persian with an Arabic preface, which gave expression to his disapproval of some of the country's orthodox traditions and rituals. He tried to convey that strength of any religion is faith in one 'Supreme Being' and all else is religious dogma. In the meanwhile for earning livelihood Rammohanjoined East India Company as a clerk where he was later promoted as Dewan, 'the principal native officer in the collection of revenue'. During his stay at Rangpur, Rammohan raked up several religious controversies with pandits, wrote tracts in Persion, translated portions of the Vedanta, studied the tantras and made a study of Kalpa Sutras and other Jaina scriptures, which all set pace for his strenuous preparation for future work. After about ten years Rammohan retired from service around 1810 with a view to finding more time for the work which was closest to his heart. Leaving government service he went back home to stay with his mother, Tarini Devi, but again found continuation at home inhospitable due to opposition from local pandits who would not s~pport his non-traditional ways of living and preaching to others. He then went to Raghunathpur, a neighbouring village. It was during that time that an unfortunate event took place at home, emerging as a turning event in his life, which created an indelible impression and a far reaching impact on Rammohan's mind, and strengthening his resolve to remove orthodoxy and inhuman practices from country's social life. Rammohan had an elder brother named Jaganmohan, who died in 1811. His wife who was devotedly attached to him committed sati on his funeral pyre. Rammohan had tried to dissuade her from this heinous act, though it had religious sanctions ofthose times, but he had failed to dissuade her. However, on pyre when flames touched her, she tried to run away and escape but the orthodox relatives intervened and managed to keep her on the pyre using bamboo poles, and through noise of tomctoms and other instruments they drowned her frantic shrieks. Rammohan, though a witness of this awful scene, having failed to avert this tragic end, was stricken with pity and remorse. It was at the funeral pyre he took the vow that he would not sit at peace till this heinous practice was brought to an end. Given his firm resolve to end immolation of widows, he made arguments and appeals in court proceedings, which ultimately won backing of Lord William Bentinck, the then Viceroy and Governor-General oflndia, who appreciated humane sentiments of people and Rammohan's indefatigable and forceful arguments, and as supreme authority, decided to bring an end to Management & Change, Volume 10 Number 2 (2006)

Book Reviews 257 this inhuman practice. In 18 I4 Rammohan settled in Kolkata with a view to begin his life work in right earnest thinking that period was congenial and favourable for his work. He had now set his heart on waging war against the current idolatry and superstition, and on reviving the unidolatrous Hindu monotheism of old. With this object, he first published, at considerable expense, the Sanskrit original with annotations ofa few of the Upanishads. In 1815, he published Vedanta Sutras in Bengali. In 1816, he published abridged version of Vedanta in Bengali, Urdu and English and translated the Kena and Isha Upanshads into Bengali and English. In 1817, he translated Katha and Mundaka Upanishads into Bengali and English, and in 1818 translated Mandukya Upanishad into Bengali. In 1818, he also wrote 'A Defence of Hindu Theism' and 'A Second Defence of the Monothiestical System of the Yedas'. These publications, appearing in quick succession one after another, caused a great commotion in the orthodox camp. In 1820 Rammohan published 'The Precepts ofJesus, the Guide to Peace and Happiness' and published three' Appeals to the Christian Public in Defence of the Precepts of Jesus'. He also edited two journals 'Sam bad Kaumudi' in Bengali and the Mirat-ul-Akhbar, in Persian for disseminating historical, literary and scientific knowledge. Rammohan Roy fought for women's rights. He founded Brahamo Sama} in 1828, which discouraged idol worship, discouraged orthodox rites and rituals, believed in universal religion of one God, extended respect to all religions, and derived considerable wisdom from Vedas and Upanishads. Rammohan was a scholar of Islam, Hinduism, Buddhism and Christianity and knew eight languages including Arabic, Greek and Latin. In 1829, the Sati Act was passed in India and this inhuman and heinous practice put down for ever. Though Rammohan tried to bring many other social reforms as mentioned above, but his name is inseparably linked most profoundly with his courageous role in bringing an end to this heinous practice of committing sati which immortalized him. In 1830 he went to UK to promote Indian renaissance and bridge the gap between the East and West thinking on contemporary issues. He died at Bristol on September 27, 1833 where he had gone to rest and re-coup his tired nerves. His earthly remains lie interred inArno's Yale Cemetry at Bristol. -Editor

Management & Change, Volume 10 Number 2 (2006)

258 Hook Reviews Inspiring Lives ISHWAR CHANDRA VIDYASAGAR: AN EPITOME OF MODESTY AND SOCIAL SERVICE Ishwar Chandra Vidyasagar was born in a Brahmin family on September 26, 1820 in Bengal. After elementary education, he moved to Calcutta where he studied and later acquired a law degree. In 1841 he studied Sanskrit and obtained Certificate of Proficiency in Sanskrit and later became a faculty at Fort William College in Calcutta. He later joined the Sanskrit College in Calcutta in 1850 as Professor of Literature and later served as the Principal of the College. He believed in value-based education and he ensured that caste played no role in the admission process. In fact, he was a symbol of simplicity and modesty. In 1855, he also became an assistant inspector of schools besides being the college principal. Vidyasagartoured Bengal extensively and set up 20 model schools in villages and 25 girl schools during 1857-58. With his untiring efforts females were encouraged to pursue higher education and take up jobs. Miss Kadambini Bose became the first woman to pursue graduate studies at Calcutta University in 1878. The senate of the Calcutta University for the first time admitted a female member. Widow remarriage was prohibited for centuries among the Brahmins and other high castes. Vidyasagar, though not an originator of the cause of widow remarriage, presented his case with force and ability and it was through his consistent efforts and petitions to the Government that the Widow Remarriage Bill was finally passed into an Act in 1856. Thus, while Raja Rammohan Roy, a great son of India, was instrumental in ending the inhuman practice of committing sati on husbands' pyre by bringing a legal end to it and bringing the Sati (Abolition) Act in place in 1829, Vidyasagar was instrumental in passing of the Widow Remarriage Act, and providing momentum to widow remarriages in the country. Proceeding parallely with the widow remarriage movement, Vidyasagar also worked to eradicate polygamy from the society. He published series of pamphlets drawing people's attention to the horror of polygamy in the society. In 1855, he sent a petition signed by 25 thousand persons seeking prohibition of polygamy and in 1866 realizing that not enough done till date, he put up another petition from 21000 persons. He emerged as a champion to free society from social evils of his times such as Management & Change, Volume 10 Number 2 (2006)

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polygamy and superstitions hindering widow remarriages. Apart from being social reformer, Vidyasagarwas an eminent literary figure of Sanskrit and Bengali literature. He lived a life dedicated for the service of community. He once went to a railway station to receive a guest whom he had not seen before. The visitor not finding any porter around used Vidyasagar to carry his luggage and the latter had no hesitation in offering his services. It was only after reaching the destination he found that the porter was none else but Vidyasagar he had come to see. When confronted by the guest that why he did not disclose his identity, he said that according to his personal philosophy no job was menial for him and any act that served others always pleased him. To commemorate his distinguished life which was characterized by social service and modesty, Kolkata's famous suspension bridge Vidyasagar Setu, a great feat of civil engineering built with Japanese assistance, is named after him besides several academic institutions and social organizations. He breathed his last on July 29, 1891 and lelt a rich legacy of humility and social service. - Editor Source: Bhatnagar, R.K., Ishwar Chandra Vidyasagar, Bhavan's Journal, 53 (11), January 15, 2007

Treat every body with politeness, even those who are rude to you. For remember that you show courtesy to others not because they are gentlemen but because you are one. -Anonymous

Management & Change, Volume 10 Number 2 (2006)

l 260 Book Reviews Distinguished Careers VAN DANA SHIVA: AN EMINENT ENVIRONMENTALIST Vandana Shiva is a world-renowned environmental thinker and activist. She obtained her Ph.D degree in Quantum Physics from the University of Western Ontario, Canada. Being born in a mountainous region, she was naturally drawn to environmental concerns. She was attracted to 'Chipko Movement' even while she was pursuing her doctoral programme. Accordingly, she later shifted her area of concern in areas such as sustainable growth, ecology, environment, agriculture, natural resources, biodiversity, bioenergy, social justice and women empowerment. In 1982, she set up the Research Foundation for Science, Technology and Natural Resource Policy, which she looks after as its Director. In 1991, she founded 'Navdanya', which literally means nine seeds, a national movement for protecting the diversity and integrity of living resources, especially native seed, and for promotion of organic farming and fair trade. She feels there is greater merit in building water harvesting structures and tanks than building large dams. According to her, organic matter increases soil moisture retention tenfold and increases the ability to recharge ground water because whichever soil can hold water can also recharge better. Soils that do not hold water make for instant run-off of the water. Instant run-off also means lower recharge and combined with famine and extra extraction of ground water can also lead to disastrous consequences. This could have led to the idea that the only place water can be held is in large dams. Gujarat, in the last decade, has played a huge role in creating tanks and water harvesting structures. Karnataka has always been a land of tanks which are also a source of protective irrigation. She has authored a number of books which include, 'Protect or Plunder? Understanding Intellectual Property Rights', 'Stolen Harvest: The Hijacking of the Global Food Supply, 'Biopiracy: The Plunder of Nature and Knowledge', 'Monocultures of the Mind', 'The Violence of the Green Revolution', 'Staying Alive' and 'Water Wars: Privatization, Pollution and Profit' . Her book 'Monocultures of the Mind' is largely an outcome of her work at the Indian Institute of Management, Bangalore and association with the 'Chipko Movement'. She has received several globally acclaimed awards including 'Right Livelihood Award, 1993', 'Order of the Golden Ark', 'UN Global 500 Award " and 'Earth Day International Award'. -Editor Source:

Manikutty, S., An Interview with Vandana Shiva, Vikalpa, 31(2), 89-97 (2006).

Management & Change, Volume 10 Number 2 (2006)

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