MB0036 Strategic Management and Business Policy


Explain the different circumstances under which a suitable growth strategy should be selected by any company to improve its performance (i.e., intensive,

integrative or diversification growth). You may select an example of your choice to substantiate your views. Strategies to Improve Sales There are three alternatives to improve the sales performance of a business unit, to fill the gap between actual sales and targeted sales: a) Intensive growth b) Integrative growth c) Diversification growth a) Intensive Growth: It refers to the process of identifying opportunities to achieve further growth within the company’s current businesses. To achieve intensive growth, the management should first evaluate the available opportunities to improve the performance of its existing current businesses. It may find three options: · To penetrate into existing markets · To develop new markets · To develop new products At times, it may be possible to gain more market share with the current products in their current markets through a market penetration strategy. For instance, SONY introduced TV sets with Trinitron picture tubes into the market in 1996 priced at a premium of Rs.10, 000 and above over the market through a niche market capture strategy. They gradually lowered the prices to market levels. However, it also simultaneously launched higher-end products (high-technology products) to maintain its global image as a technology leader. By lowering the prices of TVs with Trinitron picture tubes, the company could successfully penetrate into the markets to add new customers to its customer base. Market Development Strategy is to explore the possibility to find or develop new markets for its current products (from the northern region to the eastern region etc.). Most multinational companies have been entering Indian markets with this strategy, to develop markets globally. However, care should be taken to ensure that these new markets are not low density or saturated markets, which could lead to price pressures. Product Development Strategy involves consideration of new products of potential interest to its current markets (e.g. Gramophone Records to Musical Productions to CDs) – as part of a Diversification strategy. Study the following example to understand what Product Development Strategy is.

MICROSOFT’s New Strategy It is called PC-plus. It has three elements: a) Providing computer power to the most commonly used devices such as cell phone, personal computer, toaster oven, dishwasher, refrigerator, washing machines and so on. b) Developing software to allow these devices to communicate. c) Investing heavily to help build wireless and high-speed internet access throughout the world to link it all together. Microsoft envisions a home where everyday appliances and electronics are smart. According to Bill Gates, ‘In the near future, PC-based networks will help us control many of our domestic matters with devices that cost no more than $ 100 each ‘. It is also said at Microsoft that VCRs can be programmed via e-mail, laundry washers can be designed to send an instant message to the home computer when the load is done and refrigerators can be made to send an e-mail when there’s no more milk. Microsoft plans to give these appliances ‘brains ‘and provide them the means to talk to each other through their Windows CE Operating System. b) Integrative Growth: It refers to the process of identifying opportunities to develop or acquire businesses that are related to the company’s current businesses. More often, the business processes have to be integrated for linear growth in the profits. The corporate plan may be designed to undertake backward, forward or horizontal integration within the industry. If a company operating in music systems takes over the manufacturing business of its plastic material supplier, it would be able to gain more control over the market or generate more profit. (Backward Integration) Alternatively, if this company acquires some of it’s most profitably operating intermediaries such as wholesalers or retailers, it is forward integration. If the company legally takes over or acquires the business of any of its leading competitors, it is called horizontal integration (however, if this competitor is weak, it might be counterproductive due to dilution of brand image). c) Diversification Growth: It refers to the process of identifying opportunities to develop or acquire businesses that are not related to the company’s current businesses. This makes sense when such opportunities outside the present businesses are identified with attractive returns and that industry has business strengths to be successful. In most cases, this is planned with new products that have technological or marketing synergies with existing businesses to cater to a different group of customers (Concentric Diversification).

When you create a business plan. Show this by including a brief analysis of the characteristics of your potential market. c) A company dealing in computer floppies plans to set up a Software Technology Park. the carefully calculated sales projections and your plan to repay the loan. . Use the Executive Summary section of your business plan to accurately describe the nature of your business venture including the need that you plan to fill. The classic examples for this would be engineering and textile firms setting up software development centers or Call Centers with new service clients. Like a good recipe. a business plan needs to include certain ingredients to make it work. 2. Finally include the numbers that those reviewing your business plan want to see . b) A vendor supplying engine boxes to Maruti decides to supply the same with modifications to Hyundai. If they do not see those crucial decision-making components. Show the reasons why people need your product or service. Executive Summary Section Every business plan must begin with an Executive Summary section. Also. products or markets (Conglomerate Diversification). Alternatively. A well-written Executive Summary is critical to the success of the rest of the document. they'll see no reason to precede with their review of your business plan. Describe the organization of your business including your management team. briefly describe your sales and marketing plan or approach. it's a summary.A printing press might shift over to offset printing with computerized content generation to appeal to higher-end customers and also add new application areas (Horizontal Diversification) – or even sell stationery. Here is where you need to capture the attention of your audience so that they will be compelled to read on. no matter how great your business idea. The format of a Business Plan is something that has been developed and refined over the years and is something that should not be changed. Remember. don't attempt to recreate its format.the amount of capital you seek. Those reviewing this type of document have expectations you must meet. the company might choose new businesses that have nothing to do with the current technology. What are the components of a good Business Plan and briefly explain the importance of each. so each and every word must be carefully selected and presented. Situation Analysis Sales Improvement Strategies: a) A supplier of computer stationery invests in a computer stationery manufacturing unit.

a description of your pricing plan and packaging and a description of your company policies. You wish to start a new venture to manufacture auto components. Devote the balance of your business plan to providing details of the items outlined in the Executive Summary.tomorrow! 3. . Use one today and produce a professional quality Business Plan . Explain different stages in the process of starting this new business. Otherwise. Well you do. Financing Section The Financing section must show that you are as committed to your business venture as you expect those reading your business plan to be. Show the amount of personal funds you are contributing and their source. trends within the industry.including all critical components . projected cash flow statements and a balance sheet. they'll close the document and add your business plan to the heap of other rejected ideas. Show staffing projection data for the next few years. a break-even worksheet. Include all pertinent financial worksheets in this section: annual income projections. Describe how you plan to better serve your market than your competition is currently doing. Also include the amount of capital you need and your plan to repay this debt. corporation or limited liability corporation. Never assume that those reading your business plan have the same level of technical knowledge that you do. These software packages are easy to use and affordable. This section is basically a summary of your Marketing Plan. It's important to keep the description easy to read using common terminology. Management Section Outline your organizational structure and management team here. It needs to show the demand for your product or service. The Business Section Be sure to include the legal name. Market Analysis Section An analysis of the market shows that you have done your homework. Include resumes and biographies of key players on your management team. physical address and detailed description of the nature of your business. the proposed market. By now you're probably thinking that you don't need Business Plan just yet.If you've captured your audience so far they'll read on. Include the legal structure of your business whether it is a partnership. and there is business plan building software that can help you through this immense project.

launching a test marketing campaign. According to the Biz Ed website. we are to make a research on all the auto companies which are procuring the spares from the outside vendors. or conducting surveys. you are attempting to find what the level of interest is in the products (or services) you wish to market. While many would argue that the idea stage is not a stage at all. Hence we are also to make a research on the feasible area where we can start our organization and licenses that we need to take keeping in mind the environmental factors as well. or revolves around a better way of making and marketing an existing one. Here in this case supposing we are to start a new venture of manufacturing auto components and also to market them.Every business starts out as an idea. it is actually a turning point. or if you wish to lease a building. As Pendrith points out. such as a small business loan or grant. As part of the initial research process. you need to consult with an attorney or business adviser for assistance. And also the competitors who are all marketing that. it is important to consider the legal requirements of selling your product or service. If insurance is a requirement. examine the legal ramifications of your business. The object of your research is to find out who is marketing the same product or service in your area. 1. Also. 2. Here as the main goal is to start a company that manufactures the auto components. their existence and also how successful they are. you as a business builder must refine this idea into a moneymaking reality. Business Plan Formulation You must write a business plan. Idea Researching In this stage. At this stage. and how successful the marketer has been. This idea usually involves the invention of a new product. You can accomplish this by a Google search on the Internet. In the business plan you typically include following heads: i) Executive Summary ii) Company and Product Description iii) Market Description iv) Equipment and Materials v) Operations vi) Management and Ownership vii) Financial Information and Start-Up Timeline viii) Risks and Their Mitigation . prepare to budget for it. this is crucial if you want funding. Know the tax laws governing your business. Also. We will see here in the following paragraphs different stages of achieving the same goal. be aware of any safety laws governing you as an employer. After this. you are researching your idea. as business adviser Mike Pendrith points out. Pendrith advises.

the prices you wish to charge your customers. Here in this case more than TV. 5. Think about what you look for in an employee. Due diligence Of course. They need to have real time experience in the shop floor activities. a better advertising media will be road side sign boards placed close to the auto companies for getting the deals to manufacture their spares. your commercial partner will need some reassurance about the quality of the offer you are making to them.’ When a future partner is considering whether or not to license technology. Consider your budget and your target audience. According to the Biz Ed website. the newspaper. Hence a sign board is the feasible solution and also pamphlets circulated across the pioneers. your name and the name of your business. Preparing for Launch Advertise for employees. This also requires adequate planning. Make sure that they are of the most professional quality. If you are involved in licensing technology or seeking commercial support for your research you are likely to hear of ‘due diligence. This includes the planning of whether to take any loans or make personal investments in the company. if a potential . This apart personal marketing is much more suggested. Make up business cards with your logo on it. The employees apart. Lower level people at the shop floor people. and how you wish to set up financial reserves in case of an emergency or an event causing significant loss to the business. The process of assessing the viability. Financial Planning Financial planning involves thinking about the financial costs of starting and maintaining your business. or to support your research. Then begin requesting resumes and setting up interviews. Thus these are all the stages that I would consider performing if incase I plan to start a manufacturing unit producing automobile components. Explain the process of due Diligence and why it is necessary.’ Indeed. they will need to satisfy themselves that it is a viable proposition. potential liabilities and commercial prospects of a project is known as ‘due diligence. of course. As TV is useful only to reach the common man and he is not our target customer. 4. one needs to plan on the plant and machinery as well.3. risk. 4. Advertising Campaign Decide how you will market your product. making hiring decisions based on the standards you have set. to buy a share of patent rights. radio or TV is also wise. you should consider such issues as the costs of running the business. the size of your advertising budget. Be specific about the requisite skills and experience you are seeking. Utilizing print. cash flow control. the Internet. considering. In this case we will be looking for a few candidates in managerial position who must be good in managing things apart from minimal technical knowledge.

assets and liabilities of a business that is being purchased or otherwise financially supported. · Independent advice from patent attorneys on issues such as patent ownership. and the way the proceedings were resolved. So in a due diligence process. that may limit the value of their investment in the original technology. Other intellectual property rights – such as related trade mark or design registrations. as these may also affect the commercial partner’s interests in the technology. due diligence will involve assessing the overall commercial operations. It may transpire that a student. or key trade secrets or copyright material (such as manuals or software) – may also need to be identified or located. your commercial partner may undertake a range of checks and need various forms of information. They may want the right to use your trade mark in association with the patented technology. Due diligence may also involve searching for information about the full range of IP rights that might impact on the relevant technology – for instance. Generally. particularly if the relationship assumes some degree of risk and investment on their part. a potential commercial partner would not want to invest in patented technology only to find out that patent renewal fees have not been paid and the patent has lapsed. · Checks on employment contracts. The same applies to a potential investment involving intellectual property.partner seems not to be interested in this kind of issues. or to find out that the patent was being opposed by another company. especially if they have run into this kind of difficulty before. . such as patent registers and patent databases. or if there were doubts about whether it really owned its assets. · Details of the patent prosecution such as examiners’ reports and other opinions. confidentiality arrangements. it may actually raise questions about their commitment to the project or the credibility of their business plan. · Searches of patent databases for conflicting technology. patent validity and scope of patent claims. For instance. or to find that there is prior art available that calls into question its validity. For example. they may be unwilling to take out a license for your patent without getting access to the software you have developed for a related process. and contracts with other parties that may interfere with the exercise of IP rights. Even a serious level of uncertainty or doubt could be enough to deter a potential partner. · Details of any legal challenges to the patent. cash flow. including foreign patents. These may include: · Checks on external records. or was about to be involved in difficult litigation. a contractor or a visiting researcher could actually be legally entitled to some or all of the patent rights. to check whether you have later filed patent applications on improvements to the original patented technology. You would think twice about purchasing a business if you found that it was burdened with debts. · Checks on laboratory notebooks in the event that the validity of US patents is of concern to the commercial partner (this also provides reassurance as to claims of ownership of the patent).

and possibilities of conflict. and ultimately the commercialization of your intellectual property. regardless of legality. . planet.[1] is a form of corporate self-regulation integrated into a business model. 5. responsible business. Consequently. sustainable responsible business (SRB). corporate citizenship. or corporate performance. Ideally. also known as corporate responsibility. and voluntarily eliminating practices that harm the public sphere. profit. CSR is the deliberate inclusion of public interest into corporate decisionmaking. CSR policy would function as a built-in. and the honoring of a triple bottom line: people. consumers. you will be able more effectively to reassure your commercial partner. It should also speed up the licensing negotiations. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. short-term profits. in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate. and · Analysis of freedom to operate issues. Corporate Social Responsibility has been redefined throughout the years. self-regulating mechanism whereby business would monitor and ensure its support to law. stakeholders and all other members of the public sphere. Proponents argue that there is a strong business case for CSR. Is Corporate Social Responsibility necessary and how does it benefit a company and its shareholders? Corporate social responsibility (CSR). business would embrace responsibility for the impact of its activities on the environment.· Surveys of the activity of competitors and owners of competing technology. CSR-focused businesses would proactively promote the public interest by encouraging community growth and development. others argue that it is nothing more than superficial window-dressing. others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Critics argue that CSR distracts from the fundamental economic role of businesses. ethical standards. you should consider in advance these kind of due diligence issues. However. In preparing to license your technology. it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. and you will be in a stronger negotiating position in negotiating license terms. communities. The practice of CSR is much debated and criticized. Essentially. Furthermore. employees. and international norms. If you can anticipate and provide comprehensive answers to these questions.

CSR may be based within the human resources.. and Rynes found a correlation between social/environmental performance and financial performance. As a corporate practice and a career specialization. In some cases. The term "CSR" came in to common use in the early 1970s. However. corporations have re-branded their core values in the light of business ethical considerations (e. Deming's Fourteen Points. social responsibility charters).g.[11] or may be given a separate unit reporting to the CEO or in some cases directly to the board. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). pressure is applied on industry to improve business ethics through new public initiatives and laws (e. Potential business benefits The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise. businesses may not be looking at short-run financial returns when developing their CSR strategy. It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. Business ethics can be both a normative and a descriptive discipline. Historically. and are difficult to quantify. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values.[2] ISO 26000 is the recognized international standard for CSR (currently a Draft International Standard). Simultaneously. Orlitzky. today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e. interest in business ethics accelerated dramatically during the 1980s and 1990s. Some companies may implement CSR-type values without a clearly defined team or program. The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. after many multinational corporations formed. particularly within the competitive graduate student market. The term stakeholder. The UN has developed the Principles for Responsible Investment as guidelines for investing entities. In academia. was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984.g. higher UK road tax for higher-emission vehicles). balanced scorecards). both within major corporations and within academia. although it was seldom abbreviated. Schmidt. the field is primarily normative.g. BP's "beyond petroleum" environmental tilt). The business case for CSR within a company will likely rest on one or more of these arguments: Human resources A CSR program can be an aid to recruitment and retention.g. For example. business development or public relations departments of an organization. Potential recruits often ask about a firm's CSR . descriptive approaches are also taken.In the increasingly conscience-focused marketplaces of the 21st century. though there is a large body of literature exhorting business to adopt measures beyond financial ones (e. the demand for more ethical business processes and actions (known as ethicism) is increasing. meaning those on whom an organization's activities have an impact. ethics codes.

particularly when staff can become involved through payroll giving. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks. Business service organizations can benefit too from building a reputation for integrity and best practice.[14] Several major brands. . higher productivity. more loyalty. Brand differentiation In crowded marketplaces. companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can also help improve the perception of a company among its staff. courts. consumers. See also Corporate Social Entrepreneurship. increased retention. academics.policy during an interview. By taking substantive voluntary steps. Key external stakeholders include customers. regulators. The Body Shop and American Apparel [15 ] are built on ethical values. 6.e. improved recruitment. fundraising activities or community volunteering. and communities in the areas where the corporation operates its facilities. governments and media. and so on). and having a comprehensive policy can give an advantage. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i. such as The Co-operative Group. whereby CSR can also be driven by employees' personal values. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. and the media. investors (particularly institutional investors). Risk management Managing risk is a central part of many corporate strategies. in addition to the more obvious economic and governmental drivers. CSR can play a role in building customer loyalty based on distinctive ethical values. or the environment seriously as good corporate citizens with respect to labour standards and impacts on the environment Stakeholder priorities Increasingly. License to operate Corporations are keen to avoid interference in their business through taxation or regulations. Distinguish between a Financial Investor and a Strategic Investor explaining the role they play in a Company. they can persuade governments and the wider public that they are taking issues such as health and safety. diversity. These can also draw unwanted attention from regulators.

but. The other type supplied them with know-how.all depend on the strategic investor. A single investor (or a small group of investors) could no longer accommodate the needs even of a single firm. As knowledge increased and specialization ensued – it was no longer feasible or possible to micro-manage a firm one invested in. The financial investor has little interest in the company's management. The stock exchange is a popular exit strategy. technology. So are. nor the resources to get seriously involved in any one of them. in many cases. Actually. But. the rate of the introduction of new products. In many cases. more and more. his money buys for him not only a good product and a good market. but also a good management. This is "bottom line" short termism which also characterizes operators in the capital markets. Micro-management is left to others . Investors of all colors sought to safeguard their investment by taking over as many management functions as they could. The price of his shares is the most important indication of success. This is the extent of its involvement. Invested in so many ventures and companies. The financial investor participates in quarterly or annual general shareholders meetings. so is macro-management.In the not so distant past. searching for willing buyers for his stake. Optimally. marketing techniques. and the education of the workforce . for instance. That there is a . clientele and a vision. are purely financial investors. As markets grew. on the other hand. management skills. The quality of management. The financial investor represents the past. Its money is the result of past . there was little difference between financial and strategic investors. separate businesses of money making and business management emerged. Venture capital and risk capital funds.right and wrong . A firm resembled a household and the number of people involved – in ownership and in management – was correspondingly limited. two classes of investors emerged.decisions. the level of customer satisfaction. to a growing extent. the scales of industrial production (and of service provision) expanded. intellectual property. investment banks and other financial institutions. investments were small and shareholders few. it is the strategic investor that has the greater influence on the value of the company's shares. A manager was expected to manage. One type supplied firms with capital. Thus. not to be capable of personally tackling the various and varying tasks of the business that he managed. But his interpretation of the rolls and functions of "good management" are very different to that offered by the strategic investor. a sense of direction. Paradoxically. a separation was maintained. the success or failure of marketing strategies. The strategic investor. represents the real long term accumulator of value. People invested in industries they were acquainted with first hand. the financial investor has no interest. An investor was expected to excel in obtaining high yields on his capital – not in industrial management or in marketing. For "exit strategy" read quick profits. The financial investor is satisfied with a management team which maximizes value. Additionally. The financial investor is always on the lookout. the strategic investor also provided the necessary funding. Its orientation is short term: an "exit strategy" is sought as soon as feasible.

as financial management is implemented. lack of compliance.strong relationship between the quality and decisions of the strategic investor and the share price is small wonder. the income. the expenditures. To timely. to generate profits. investment memoranda and all other financial and business documents as may be required from time to time by the Board of Directors of the Firm. the budgets and any other matter of a financial nature or which could or does have a financial implication. financial plans. To comply with all reporting. This is usually achieved both during a Due Diligence process and later. People understand that money is abundant and what is in short supply is good management. supervise and implement a timely. To implement continuous financial audit and control systems to monitor the performance of the firm. . 1. the management echelons. 3. To alert the Board of Directors and to warn it regarding any irregularity. Given the ability to create a brand. gradually. the financial operations. the balance between financial investors and strategic investors is shifting in favour of the latter. These are the functions normally reserved to financial investors: Financial Management The financial investor is expected to take over the financial management of the firm and to directly appoint the senior management and. 4. to issue new products and to acquire new clients .money is abundant. To regulate. 5. The strategic investor represents a discounted future in the same manner that shares do. 2. accounting and audit requirements imposed by the capital markets or regulatory bodies of capital markets in which the securities of the firm are traded or are about to be traded or otherwise listed. the accounting. 6. the adherence to the budget. feasibility studies. the audits. the financing plans. lack of adherence. the cost of sales and other budgetary items. To prepare and present for the approval of the Board of Directors an annual budget. other budgets. which directly deal with the finances of the firm. lacunas and problems whether actual or potential concerning the financial systems. business plans. especially. Indeed. full and accurate set of accounting books of the firm reflecting all its activities in a manner commensurate with the relevant legislation and regulation in the territories of operations of the firm and with internal guidelines set from time to time by the Board of Directors of the firm. its flow of funds. regularly and duly prepare and present to the Board of Directors financial statements and reports as required by all pertinent laws and regulations in the territories of the operations of the firm and as deemed necessary and demanded from time to time by the Board of Directors of the Firm.

distributor. 9. including accountants. 6. financial consultants. The provision of corporate guarantees and letters of comfort to suppliers. the attainment of its development plans and its investments. put in charge of: 1. or supplier. usually. 5. to initiate and engage in all manner of activities. 3. Otherwise. or the average period of such arrears and overdue payments. underwriters and brokers. Collection and Credit Assessment 1. To fully computerize all the above activities in a combined hardware-software and communications system this will integrate into the systems of other members of the group of companies. the growth prospects and the fulfilment of investment plans of the firm to the best of his ability and with the appropriate dedication of the time and efforts required. To coordinate an educational campaign to ensure the voluntary collaboration of the clients. data gathering methods and venues in order to properly evaluate and predict the credit risk rating of a client. Minimizing the costs of infrastructure by deploying proprietary components and planning. – in order to determine the changes in the credit risk rating of said factors. To improve the collection methods in order to reduce the amounts of arrears and overdue payments. 10. industrial processes. raw materials. 2. 2. To analyse receivables and collectibles on a regular and timely basis. non-payment and non-performance events.7.. the banking system and other financial venues. The selection of infrastructure. regularity. etc. The strategic investor is. To construct and implement credit risk assessment tools. 8. quantitative methods. arrears and overdue payments and other collectibles. law enforcement agencies and private collection firms in assuring the timely flow and payment of all due payments. auditors. To maintain a working relationship and to develop additional relationships with banks. 4. questionnaires. Negotiations and agreements with providers and suppliers. put in charge of the following: Project Planning and Project Management The strategic investor is uniquely positioned to plan the technical side of the project and to implement it. To collaborate and coordinate the activities of outside suppliers of financial services hired or contracted by the firm. To collaborate with legal institutions. financial institutions and capital markets with the aim of securing the funds necessary for the operations of the firm. conducive to the financial health. 4. whether financial or of other nature. 3. equipment. He is. etc. distributors and other debtors in the timely and orderly payment of their dues. therefore. To constantly monitor and analyse the payment morale. .

It has numerous off the shelf marketing plans and drawer sales promotion campaigns. inventory and accounting controls. 5. Special events. etc. Marketing and Sales 1. new market niches. sponsorships.5. The planning and erecting of the various sites. 7. 2. a franchising network. Project planning. images. new marketing ploys. advertising. The strategic investor also implements these plans or supervises their implementation. 7. advertising campaigns. PR and image materials. The strategic investor is also in charge of "vision thinking": new methods of operation. co-branding. protocols. collaboration with other suppliers – are all the responsibilities of the strategic investor. it accumulated years of marketing and sales promotion ideas which crystallized into a new conception of the business. It is the market leaders in certain territories. individual users and businesses in the territory. The planning and implementation of incentive systems (e. image. etc. pricing. The planning and implementation of line connections. market analyses and research.). structures. vouchers). network control. its recognition and market awareness. It owns libraries of material. or a sales network (retail chains) including: training.. profiles of potential social and economic categories of clients. can attract users. The strategic investor is usually possessed of a brand name recognized in many countries. The strategic investor usually organizes a distribution and dealership network. It has built large databases with multi-year profiles of the purchasing patterns and demographic data related to thousands of clients in many countries. . articles. The presentation to the Board an annual plan of sales and marketing including: market penetration targets.. public relations and other media campaigns. collaboration with businesses. premises. 3. solving issues of compatibility (hardware and software. It developed software and personnel capable of analysing any market into effective niches and of creating the right media (image and PR). local marketing and sales promotion and other network management functions. distributors. pecuniary and quality supervision. sales promotion methods. The dissemination of the product as a preferred choice among vendors. which. The enhancement of the brand name. buildings. etc. sounds. Above all. 4. implementation and supervision. paper clippings. points. reliably. and proprietary trademarks and brand names. 6. predicting the future trends and market needs.g. if properly used. The strategic investor typically brings to the firm valuable experience in marketing and sales. 6. computer network connections. advertising and sales promotion drives well suited for it. market penetration. It has been providing goods and services to users for a long period of time. factories. This is an important asset.

Education and Training The strategic investor is responsible to train all the personnel in the firm: operators. The planning and implementation of a fully operative computer system (hardware. . or persons. in collaboration with other suppliers or market technological leaders. To secure the unobstructed flow of relevant information and the protection of confidential organization. 3. implement and supervise all the stages of the technological side of the business. Only the introduction of outside investors can resolve the dilemma. sales personnel. its clients and suppliers. They may be less visionary – but also more experienced. The planning and implementation of new technological systems up to their fully operational phase. The strategic partner's engineers are available to plan. To represent the firm in its contacts. The strategic investor puts at the disposal of the firm proprietary software developed by it and specifically tailored to the needs of companies operating in the firm's market. communication. To run the day to day business of the firm. The training is conducted at its sole expense and includes tours of its facilities abroad. 2. representations and negotiations with other firms. authorities. 4. The encouragement of the development of in-house. The planning and the execution of an integration program with new technologies in the field. But the very personality traits which qualify them to become entrepreneurs – also hinder the future development of their firms. 5. distributors. 3. customer services. Entrepreneurs are excellent at identifying the needs of the market and at introducing technological or service solutions to satisfy such needs. Outside investors are not emotionally involved. vendors. This is why entrepreneurs find it very hard to cohabitate with investors of any kind. The entrepreneurs – who sought to introduce the two types of investors. technological solutions to the needs of the firm. intranet) to deal with all the aspects of the structure and the operation of the firm. To oversee the personnel of the firm and to resolve all the personnel issues. To structure the firm in an optimal manner. most conducive to the conduct of its business and to present the new structure for the Board's approval within 30 days from the date of the GM's appointment. 2. software. 4. in the first place – are usually left with the following functions: Administration and Control 1. proprietary.Technology 1.

This is where nine out often entrepreneurs fail . They rebel and prefer to remain small or even to close shop than to give up their cherished freedoms. corporate predators.in knowing when to let go. . for fear of losing all their money. They feel that they are losing their creation to cold-hearted. And – being well acquainted with entrepreneurs – they insist on having unmitigated control of the business.They are more interested in business results than in dreams. These things antagonize the entrepreneurs. mean spirited.

MB0037 International Business Management 1. a) How has liberalizing trade helped international business? .

Overall. reflecting more rapid economic growth in developing countries. The group of low-income countries. Enhance your domestic competitiveness . But the amount accruing to developing countries would still be more than twice the level of aid they currently receive. Estimate of the gains from eliminating all barriers to merchandise trade range from US$250 billion to US$680 billion per year. Countries that have opened their economies in recent years. Vietnam. have experienced faster growth and more poverty reduction. Indeed. Moreover. In contrast. however. Developing countries would gain about equally from liberalization of manufacturing and agriculture. Although there are benefits from improved access to other countries’ markets. because their economies are more highly protected and because they face higher barriers. trade opening (along with opening to foreign direct investment) has been an important element in the economic success of East Asia. Freeing trade frequently benefits the poor especially. Moreover. No country in recent decades has achieved economic success. without being open to the rest of the world. Developing countries can ill-afford the large implicit subsidies. countries benefit most from liberalizing their own markets. including India. in terms of substantial increases in living standards for its people. where the average import tariff has fallen from 30 percent to 10 percent over the past 20 years. There is considerable evidence that more outward-oriented countries tend consistently to grow faster than ones that are inward-looking. New jobs are created for unskilled workers. In these countries. The evidence on this is clear. and Uganda. the increased growth that results from free trade itself tends to increase the incomes of the poor in roughly the same proportion as those of the population as a whole. one finding is that the benefits of trade liberalization can exceed the costs by more than a factor of 10. defined by the World Bank as the "new globalizers. raising them into the middle class.The Benefits of Trade Liberalization Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. On average. The main benefits for industrial countries would come from the liberalization of their agricultural markets. inequality among countries has been on the decline since 1990. those developing countries that lowered tariffs sharply in the 1980s grew more quickly in the 1990s than those that did not. Opening up their economies to the global economy has been essential in enabling many developing countries to develop competitive advantages in the manufacture of certain products." the number of people in absolute poverty declined by over 120 million (14 percent) between 1993 and 1998. b) What are the merits and demerits of international trade? Advantages and Disadvantages of International Trade Advantages to consider: i. would gain most from agricultural liberalization in industrial countries because of the greater relative importance of agriculture in their economies. often channeled to narrow privileged interests that trade protection provides. developing countries would gain more from global trade liberalization as a percentage of their GDP than industrial countries. The potential gains from eliminating remaining trade barriers are considerable. About two-thirds of these gains would accrue to industrial countries. in part the result of trade liberalization.

You may need to wait for long-term gains Hire staff to launch international trading Modify your product or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait long for payments Apply for additional financing Deal with special licenses and regulations 2. vii. few executives can afford to turn a blind eye to global business opportunities. Table 2. ix. iii. ix. vi. and nudged international business (IB) research into some new trajectories. iv. The following can be looked as the various aspects of the cultural dichotomies.ii. One such new trajectory is the concern with national culture. Executives of Hollywood movie studios need to weigh the appeal of an expensive movie in Europe and Asia as much as in the US before a firm commitment. Discuss the impact of culture on International Business. vi. ii. The globalizing wind has broadened the mindsets of executives. iii. Japanese auto-executives monitor carefully what their European and Korean competitors are up to in getting a bigger slice of the Chinese auto-market.1: Cultural Dichotomies In this new millennium. vii. v. viii. x. Increase sales and profits Gain your global market share Reduce dependence on existing markets Exploit international trade technology Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for expansion of your business Sell excess production capacity Maintain cost competitiveness in your domestic market Disadvantages to keep in mind: i. . viii. v. iv. extended the geographical reach of firms.

(1966) and the publication of Industrialism and Industrial Man by Kerr et al. and knowhow’ (Govindarajan and Gupta. 1. (1960).. and is conducted via government international organizations such as the North American Free Trade Agreement (NAFTA) and the European Community. technology. convergence and divergence in an era of partial globalization An issue of considerable theoretical significance is concerned with cultural changes and transformations taking place in different parts of the world. 2002) to group performance (Gibson. multinational companies (MNCs). 1999). We first review the issues surrounding cultural convergence and divergence. global organizations such as the International Organization for Standardization (ISO). 4). and the processes underlying cultural changes. see’ Boyacigiller and Adler’ (1991) and ‘Earley and Gibson’ (2002). The purpose of this Unit is to provide a state-of-the-art review of several recent advances in culture and IB research. 2. Finally.Whereas traditional IB research has been concerned with economic/ legal issues and organizational forms and structures. If cultures of the various locales of the world are indeed converging (e. In the following section. which are rarely employed in the field of culture and IB. culture-free business practices would eventually emerge. It is not our purpose to be comprehensive. we examine the usefulness of experimental methods. IB related practices would indeed become increasingly similar. 1999). and the prevalent term was ‘international trade’ (Drucker. we review the evidence on the issue and conclude that such an outlook pertaining to the convergence of various IB practices is overly optimistic. and how to enhance the precision of cultural models by pinpointing when the effects of culture are important. international trade has culminated in the emergence of a global economy. since the landmark study of Haire et al. However today. as reflected in the increased cross-border flow of three types of entities: goods and services. and inefficiencies and complexities associated with divergent beliefs and practices in the past era would disappear. Cultural change. money. For reviews. with an eye toward productive avenues for future research.g. consisting of flows of information. researchers have continued to search for similarities in culture-specific beliefs and attitudes in various aspects of work related attitudes and behaviours. Heuer et al. the importance of national culture – broadly defined as values. our goal is to spotlight a few highly promising areas for leapfrogging the field in an increasingly boundary-less business world. Few spoke of ‘world economy’ 25 years ago. beliefs. We then examine novel constructs for characterizing cultures. 2001.. and the like. and that their juxtaposition in the present paper represents our attempt to highlight their importance rather than their coherence as elements of an integrative framework. Standard. . norms. and people. capital..1. In fact. Evolution of partial globalization Globalization refers to a ‘growing economic interdependence among countries. largely as a result of the classic work of Hofstede (1980). A schematic summary of our coverage is given in Table 2. from capital structure (Chui et al. National culture has been shown to impact on major business activities. consumption patterns. 1995). which suggests that the topics reviewed are loosely related. and behavioural patterns of a national group – has become increasingly important in the last two decades.

‘Universal culture’ often refers to the assumptions.e. Strong opposition to globalization usually originates from developing countries that have been hurt by the destabilizing effects of globalization. less than 10% of the world’s population is fully globalized (i. such as NAFTA. 2003). and the Association of Southeast Asian Nations. Popular culture. Therefore. are extensively involved with international commitments. and a great majority of the world’s economic and military capabilities.and cross – border alliances in the form of joint ventures. the fact is that the world is only partially globalized. including the former republics of the Soviet Union. In fact. and parts of South Asia. Indeed. parts of Latin America. the European Union. the flow of goods. and have become a key to domestic economic growth and prosperity (Drucker. being active participants in the consumption of global products and services) (Schaeffer. Although those belonging to the Davos group control virtually all of the world’s important international institutions. values. 1995. the cultural values of the Davos group are probably embraced by only a small fraction of the six billion people of the world. and believe strongly in market economics and political democracy. Africa. globalization is not without its misgivings and discontents (Sassan. work with symbols and numbers. Although it is often assumed that countries belonging to the World Trade Organization (WTO) have embraced globalization. 1998). workers in manufacturing and farming in advanced economies are becoming increasingly wary of globalization. many of the world’s governments. 153). Switzerland. international mergers. Furthermore. 2003). and practices of people in the West and some elites in non-Western cultures. However. also contributes to a convergence of consumption patterns and leisure activities around the world. and other parts of the world. 1997). Africa. Yet. and investments across national borders has continued to fall after the rapid gains of the 1990s. the creation of regional trade blocs. Huntington (1996) suggested that it originates from the intellectual elites from a selected group of countries who meet annually in the World Economic Forum in Davos. again mostly Western European and American in origin. as their income continues to decline significantly. A vivid image associated with the G8 summits is the fervent protests against globalization in many parts of the world.. as shown in television and reported in the popular media. and travel frequently outside their country. but in recent times we have also seen heated debates in Western economies triggered by significant loss of professional jobs as a result of off shoring to low – wage countries. and acquisitions. These inter – relationships have enhanced participation in the world economy. Many parts of Central Asia and Eastern Europe. are fluent in English. at best (Schaeffer. They share the cultural value of individualism. have been sceptical of globalization (Greider. In parallel to the angry protests against globalization. have stimulated discussions about creating other trade zones involving countries in South Asia. services. it is imperative that we analyze the issues of cultural convergence and divergence in this partially globalized world. and have only a small influence on . the convergence may be superficial. These individuals are highly educated.

In fact. 1994). we may also talk about Easternization of values in response to forces of modernity and consumption values imposed by globalization (Marsella and Choi. Jung et al. it seems implausible that Americans and Europeans have espoused more Chinese values because of their fondness of Chinese Kung Fu and food. It is also conceivable that. This argument is obvious if we reverse the typical situation and put Western Europeans and Americans in the shoes of recipients of cultural influence. The issues of cultural identity and emotional reactions to other cultural groups in an IB context constitute a significant gap in our research effort in this area.fundamental issues such as beliefs. A major argument against cultural convergence is that traditionalism and modernity may be unrelated (Smith and Bond. corporation. as in the case of Israelis and Palestinians. 2003. not the Magna Mac. or situation is the most important determinant of the cultural identity that people develop in a given locale (Triandis. in an attempt to identify several productive avenues for future research. Although clusters of some countries in . or what Triandis (1994) calls subtractive multiculturalism. such as group solidarity. 2003). it may be called integration. and feminism. paternalism. The ‘melting pot’ ideology suggests that each cultural group loses some of its dominant characteristics in order to become the mainstream: this is assimilation.. 3. but remain rather consistent over time. 2002). We explore in the following the roles of several factors that simultaneously cause cultures of the world to either converge or diverge. if there is a significant history of conflict between the cultural groups. However.g. A case in point is the findings that Chinese in Singapore and China indeed endorsed both traditional and modern values (Chang et al. Both of these processes are essential for cultural convergence to proceed. and other important social agencies ought to function. can co-exist with modern values of individual achievement and competition. The fact that non-Westerners may bite into the latter has no implications for their accepting the former’. Huntington (1996. 58) noted that ‘The essence of Western civilization is the Magna Carta. significant divergence of cultures persists. Hofstede (2001) asserts that mental programs of people around the world do not change rapidly. and ideas about how individuals. while Chinese Kung Fu dominates fight scenes in Hollywood movies such as Matrix Reloaded. 1993). especially in consumer values and lifestyles. institutions. For instance. it is hard to initiate these processes. interpersonal harmony. 4.. Zhang et al. Although the argument that the world is becoming one culture seems untenable. although there has been some research on the typology of animosity against other nations (e. or additive multiculturalism. In contrast. groups. 1998). and Chinese restaurants abound in the West. Role of multiculturalism and cultural identity The broad ideological framework of a country. Strong traditional values. norms. when people from a cultural group add appropriate skills and characteristics of other groups.. His findings indicate that cultural shifts are relative as opposed to absolute. In general. we do not know much about how emotional antagonism against other cultural groups affects trade patterns and intercultural cooperation in a business context. just as we talk about Westernization of cultural values around the world. In fact. Implications of convergence and divergence issues One message is clear: while convergence in some domains of IB activity is easily noticeable.. there are some areas that do show signs of convergence.

in discussing issues of convergence and divergence. or without long periods of resistance. the changes do not diminish the absolute differences between such countries and those of the Anglo countries (i. 2003). which have significant implications for IB. 5. Scholars of IB should recognize that the issue of convergence and divergence in this era of partial globalization will remain as a persistent and complex issue whose direction might only be assessed on a region-by-region basis. Chile) might indicate significant culture shifts towards embracing Anglo values. How these complex relationships and processes play out on the stage of IB remains to be uncovered by IB researchers. (2003) have recently argued that adaptation is another approach that could characterize the tendencies of some cultures in the face of mounting pressures to globalize. The cause-effect relationships of globalization and its various outcomes. and innovation (Bhagat et al. However.g. are not only characterized by bi-directional arrows. which could result in the redistribution of national power in the conduct of international affairs. there are countries that will reject globalization. Furthermore. US...given geographical locales (e. The attempt by the Davos group to bring about uniform practices in various aspects of IB and work culture. it is necessary to recognize that the shift in values is not always from Western society to others. we make the point that. Canada. in Understanding Globalization. as is found in Western countries. in his ‘The Clash of Civilizations’ (1996). In this section. For example. As explained before. Brazil.e. we delineate a general model that describes and explains the complex processes underlying cultural changes. especially the cultural outcomes. IB is both an agent and a recipient of cultural change. Processes of cultural changes In the previous section. Argentina. UK). our analysis suggests that there is no guarantee that such convergence will come about easily. creative synthesis. thereby sustaining the forces of globalization. These different approaches highlight once again the complex dynamics that underlie cultural convergence and divergence in a partially globalized world. but whether or not these changes will bring about cultural convergence is yet to be seen. not only because of its adverse economic impacts (Greider. is certainly worthwhile. economic and other changes. Huntington. through the process of globalization. It is also wise to adopt an interdisciplinary perspective in understanding the forces that create both convergence and divergence of cultures in different parts of the world. Bhagat et al. IB scholars need to understand that although some countries might exhibit strong tendencies toward cultural convergence. Schaeffer (2003) has provided an insightful discussion of the social consequences of political. presents the view that there is indeed a resurgence of non-Western cultures around the world. For instance. but are embedded in a complex web of relationships. the emphasis on quality and teamwork in the West is partly a result of the popularity of Japanese management two decades ago. Other approaches are rejection. reactions to globalization may take other forms. Also. 1997) but also because globalization tends to introduce distortions (in their view) in profound cultural syndromes that characterize their national character. cultures influence each other and change. and for .. but can result in the change of Western cultural values as well.

(2002). For instance. In line with the view of Hofstede (2001) that culture changes very slowly. Kitayama (2002) proposes a system view to understanding the dynamic nature of culture. Cultural stability helps to reduce ambiguity. Leana and Barry. 1993). Their findings showed that masculinity and domestic violence are higher in moderately warm countries than in countries with extreme temperatures. therefore. as well as to the broader ecological and socio-political influences. distinguished between theories driven by the underlying assumption that adaptation is the mechanism to cope with change. Yet. suggesting that ineffective forms of organization disappear.international business to flourish it is important to understand its complex. High fit means high adaptation of managerial practices to a given culture and. and are likely to be configured in different ways across different socio-cultural groups. reflecting a shared knowledge structure that attenuates variability in values. Lewin and Kim (2004). 2000). Their analysis showed that economic development was associated with shifts away from traditional norms and values toward values that are increasingly rational. Van de Vliert et al. and new forms emerge. culture has been treated as a relatively stable characteristic. the issue of cultural change at the national level has rarely been addressed. in their comprehensive chapter on adaptation and selection in strategy and change. although organizational changes as a reaction to environmental changes have been subjected to considerable conceptual analyses. the end of the 20th century and the beginning of the new millennium have been characterized by turbulent political and economical changes. and participatory. and leads to more control over expected behavioural outcomes (Weick and Quinn. One exception is the eco-cultural model by Berry et al. most existing models of culture and work behaviour assume cultural stability and emphasize the fit between a given culture and certain managerial and motivational practices (Erez and Earley. behavioral norms. Inglehart and Baker (2000) examined cultural change as reflected by changes in basic values in three waves of the World Values Surveys. 1993). concurrently. However. Similarly. (1999) identified curvilinear relationships between temperature. reciprocal relationships with cultural change. Yet. trusting. masculinity and domestic political violence across 53 countries. There are relatively few theories of culture that pertain to the dynamic aspect of culture. and patterns of behaviours (Erez and Earley. and theories driven by the underlying assumption of selection and the survival of the fittest. high effectiveness. For example. as opposed to the entity view that sees culture as a static entity. and views individual psychological characteristics in a population as adaptive to their cultural context. many aspects of the psychological systems develop rather flexibly as they are attuned to the surrounding socio-cultural environment. which included 65 societies and 75% of the world’s population. which views culture as evolving adaptations to ecological and sociopolitical influences. 1999. These adaptive views of culture are supported by empirical evidence. which instigate cultural changes. tolerant. . This system view suggests that each person’s psychological processes are organized through the active effort to coordinate one’s behaviours with the pertinent cultural systems of practices and public meanings. In line with this argument. The assumption of cultural stability is valid as long as there are no environmental changes that precipitate adaptation and cultural change.

group cultures. leaves an enduring imprint on traditional values despite the forces of modernization. changes at micro-levels of culture. multi-layer construct The proposed model consists of two building blocks. global organizational structures need to adopt common rules and procedures in order to have a common ‘language’ for communicating across cultural borders (Kostova. viewing culture as a multi-level construct that consists of various levels nested within each other from the most macro-level of a global culture. etc. as portrayed in Figure 2. culminate into macro level phenomena and change the macro-levels of culture. In the absence of research models that can shed light on this complex process of cultural change. they vary in their local organizational cultures. Figure 2. respect of freedom of choice. which are also shaped by the type of industry that they represent. and then. with its effects filtering down to the national. Further down are local organizations. Erez and Gati (2004) proposed that the general model of multi-level analysis (Klein and Kozlowski. One is a multi-level approach. through national cultures. and cultural values that are represented in the self at the individual level. 2000). organizational. it becomes a shared value that characterizes the aggregated unit (group.. Given the dominance of Western MNCs. the values of the founders.1: The dynamic of top-down–bottom-up processes across levels of culture. the data also showed that the broad cultural heritage of a society. Orthodox. organizations.However. whether it is Protestant. 2003. group and individual levels. the most macro-level is that of a global culture being created by global networks and global institutions that cross national and cultural borders. . when shared by the members of the society. Below the global level are nested organizations and networks at the national level with their local cultures varying from one nation or network to another. and although all of them share some common values of their national culture.g. The second is based on Schein’s (1992) model viewing culture as a multi – layer construct consisting of the most external layer of observed artefacts and behaviours. The process of globalization described before has introduced the most significant change in IB.1. democracy. the values that dominate the global context are often based on a free market economy. and the deepest level of basic assumption. the type of ownership. Roman Catholic. 2000). individual rights. Within each organization are sub-units and groups that share the common national and organizational culture. 6. Reciprocally. The dynamics of culture as a multi-level. organizational cultures. Kostova and Roth. but that differ from each other in their unit culture on the basis of the differences in their functions (e. when shared by individuals who belong to the same cultural context. acceptance and tolerance of diversity. In the model. Gupta and Govindarajan. which is invisible and taken for granted. The present model proposes that culture as a multi – layer construct exists at all levels – from the global to the individual – and that at each level change first occurs at the most external layer of behaviour. 1999. or nations). or Communist. As exemplified by the effort of the Davos group discussed earlier. which is testable by social consensus. and openness to change (Gupta and Govindarajan. 2000) could be adopted for understanding the dynamics of culture and cultural change. R&D vs manufacturing). Confucian. the deeper level of values.

and caused behavioural changes. Individuals who belong to the same group share the same values that differentiate them from other groups and create a group – level culture through a bottom-up process of aggregation of shared values. However. For example. which differentiate them from other organizational units. and. in line with Schein (1992). a top-down process of training and education led to changes in work behaviour and work values. over time. The study identified a cultural gap between the two companies. all members of this unit share similar core values. and local organizations that share similar values create the national culture that is different from other national cultures. either above it through top-down processes or below it through bottom-up processes. Upon returning to their company. and the professional and educational level of their members. A study by Erez-Rein et al. and a managerial philosophy that encompasses all organizational functions. which is an advanced method of quality improvement. on a cultural shift from traditional values to modernization. and explain how culture at different levels is being shaped and reshaped by changes that occur at other levels. these managers introduced quality improvement work methods and procedures to the local company. and different parts of the multinational company. Thus. The latter insisted on sending the Israeli managers to intensive courses in Six – Sigma. with the Israeli company being higher on the cultural dimension of innovation and lower on the cultural dimension of attention to detail and conformity to rules and standards as compared with the acquiring company. Similarly. Their leader also typically facilitates the display of these personal characteristics because they are crucial for developing innovative products. For example. These global rules and values filter down to the local organizations that constitute the global company. they shape the local organizations. and upper levels through a bottom-up process of aggregation. (2004) demonstrated how a multinational company that acquired an Israeli company that develops and produces medical instruments changed the organizational culture of the acquired company. enhanced by globalization. followed by the internalization of quality – oriented values. having local organizations join a global company may introduce changes into the global company because of its need to function effectively across different cultural boarders. Sharing common behaviours and values by all employees of the local company then shaped the organizational culture through bottom–up processes. That means that there is a continuous reciprocal process of shaping and reshaping organizations at both levels. Global organizations and networks are being formed by having local-level organizations join the global arena. the deep basic assumptions still reflect the traditional values shaped by the broad cultural heritage of a society. . At the bottom of this structure are individuals who through the process of socialization acquire the cultural values transmitted to them from higher levels of culture. employees of an R&D unit are selected into the unit because of their creative cognitive style and professional expertise. Groups that share similar values create the organizational culture through a process of aggregation. Reciprocally. changes at each level affect lower levels through a topdown process.their leaders’ values. Thus. multinational companies that operate in the global market develop common rules and cultural values that enable them to create a synergy between the various regions. The changes in national cultures observed by Inglehart and Baker (2000) could serve as an example for top-down effects of economic growth. Both top-down and bottom-up processes reflect the dynamic nature of culture.

The change process examined was a shift from choosing to work alone to a behavioural choice of working as part of a team. Harzing and Hofstede (1996) proposed that certain cultural values facilitate change. Finally. in this complex circumstance. · The reward structure and its congruence with the underlying cultural values. A recent study by Erez and Gati (2004) examined the effects of three factors on the change process and its outcomes: · The cultural value of individualism – collectivism. and therefore will be avoided in high power distance cultures. low uncertainty avoidance. At the same time. Consider the following scenario. Working alone is more prevalent in individualistic cultures. Factors that facilitate cultural change Culture itself influences the level of resistance or acceptance of change. we also argue for the importance of examining contingency factors that enhance or mitigate the effect of national culture. Understanding when culture matters: increasing the precision of cultural models Beyond exploring new cultural constructs and the dynamic nature of culture. whereas working in teams dominates the collectivistic ones. Put another way. creating efficiencies and synergies across the sites. A senior human resource manager in a multinational firm is charged with implementing an integrative training program in several of the firm’s subsidiaries around the globe. Over the term of her career. which is highly valued in collectivistic cultures.The case of cultural change via international acquisitions demonstrated the two building blocks of our dynamic model of culture: the multi-level structure explains how a lowerlevel culture is being shaped by top-down effects. 2000). and individualism facilitate change. 8. She approaches the implementation with trepidation. whereas others hinder it. bottom – up processes of shared behaviours and norms shape the local organizational culture. 7. Change also threatens the power structure. and therefore will not be easily accepted by collectivists (Levine and Norenzayan. In the long run.. and that the cultural layer that changes first is the most external layer of behaviour. A key challenge is to determine whether the program should be implemented in the same manner in each subsidiary or modified according to the local culture at each site. Change threatens stability. and vice versa. The values of low power distance. and resistance to change will therefore be higher in cultures of high rather than low uncertainty avoidance (Steensma et al. does culture matter? . she understands the strategic need to create a unified global program that serves to further integrate the firm’s basic processes. and introduces uncertainty. 1999). and · The degree of ambiguity in the reward structure. change breaks the existing harmony. the manager has been educated about differences in national culture and is sensitive to intercultural opportunities and challenges.

Structure of World Trade Organization (WTO) The WTO’s overriding objective is to help trade flow smoothly. based in Geneva. Secretariat The WTO Secretariat. At the next level. a) Explain the brief structure of WTO. This is typically by consensus.3. GATT. has around 600 staff and is headed by a directorgeneral. and was extremely rare under the WTO’s predecessor. The WTO’s agreements have been ratified in all members’ parliaments. It does this by: · Administering trade agreements · Acting as a forum for trade negotiations · Settling trade disputes · Reviewing national trade policies · Assisting developing countries in trade policy issues. Around 30 others are negotiating membership. working groups and working parties deal with the individual agreements and other areas such as the environment. accounting for over 97% of world trade. fairly and predictably. Services Council and Intellectual Property (TRIPS) Council report to the General Council. The WTO’s top level decision-making body is the Ministerial Conference which meets at least once every two years. . The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body. development. membership applications and regional trade agreements. the Goods Council. freely. through technical assistance and training programs · Cooperating with other international organizations Structure The WTO has nearly 150 members. A majority vote is also possible but it has never been used in the WTO. Below this is the General Council (normally ambassadors and heads of delegation in Geneva. but sometimes officials sent from members’ capitals) which meets several times a year in the Geneva headquarters. Numerous specialized committees. Decisions are made by the entire membership.

But for now. Decisions are normally taken by consensus. for example. and to explain WTO affairs to the public and media. And despite the difficulty. The Ministerial Conference can take decisions on all matters under any of the multilateral trade agreements. influence a country’s policy by threatening to withhold credit. whose membership consists of all WTO members. But those sanctions are imposed by member countries. with decisions taken by consensus among all member governments. Reaching decisions by consensus among some 150 members can be difficult. to provide technical assistance for developing countries. the WTO is a member-driven. It does not have branch offices outside Geneva. either by ministers (who meet at least once every two years) or by their ambassadors or delegates (who meet regularly in Geneva). consensus-based organization. The countries make their decisions through various councils and committees. Highest authority: the Ministerial Conference So. Nevertheless. In the WTO. the WTO belongs to its members. This is quite different from other agencies whose bureaucracies can. power is not delegated to a board of directors or the organization’s head. In this respect. The WTO is run by its member governments. Since decisions are taken by the members themselves. When WTO rules impose disciplines on countries’ policies. The Secretariat also provides some forms of legal assistance in the dispute settlement process and advises governments wishing to become members of the WTO. Topmost is the ministerial conference which has to meet at least once every two years. including the possibility of trade sanctions. some remarkable agreements have been reached. the rules are enforced by the members themselves under agreed procedures that they negotiated. Second level: General Council in three guises Day-to-day work in between the ministerial conferences is handled by three bodies: · The General Council . Its main advantage is that decisions made this way are more acceptable to all members. All major decisions are made by the membership as a whole. the WTO is different from some other international organizations such as the World Bank and International Monetary Fund.Its annual budget is roughly 160 million Swiss francs. that is the outcome of negotiations among WTO members.1: Structure of WTO The WTO is ‘member-driven’. The Secretariat’s main duties are to supply technical support for the various councils and committees and the ministerial conferences. and authorized by the membership as a whole. proposals for the creation of a smaller executive body – perhaps like a board of directors each representing different groups of countries – are heard periodically. to analyze world trade. Figure 5. the Secretariat does not have the decision-making role that other international bureaucracies are given with.

and more back to top Three more councils. market access. which consists of a chairman and 10 members acting in their personal capacities. Two more subsidiary bodies dealing with the plural-lateral agreements (which are not signed by all WTO members) keep the General Council informed of their activities regularly. all three consist of all WTO members. At the General Council level. regional trading arrangements. They report to the Ministerial Conference. although they meet under different terms of reference. The Singapore Ministerial Conference in December 1996 decided to create new working groups to look at investment and competition policy. Third level: councils for each broad area of trade. Fourth level: down to the nitty-gritty Each of the higher level councils has subsidiary bodies. The Goods Council has 11 committees dealing with specific subjects (such as agriculture. It meets as the Dispute Settlement Body and the Trade Policy Review Body to oversee procedures for settling disputes between members and to analyze members’ trade policies. transparency in government procurement. and groups dealing with notifications (governments informing the WTO about current and new policies or measures) and state trading enterprises. each handling a different broad area of trade. report to the General Council: · The Council for Trade in Goods (Goods Council) · The Council for Trade in Services (Services Council) · The Council for Trade – Related Aspects of Intellectual Property Rights (TRIPS Council) As their names indicate. They cover issues such as trade and development. Again. Again. The scope of their coverage is smaller. the three are responsible for the workings of the WTO agreements dealing with their respective areas of trade. Also reporting to the Goods Council is the Textiles Monitoring Body. The General Council acts on behalf of the Ministerial Conference on all WTO affairs. the environment. But they still consist of all WTO members. so they are “committees”. Six other bodies report to the General Council. and administrative issues. domestic regulations. anti-dumping measures and so on). and trade facilitation. The Services Council’s subsidiary bodies deal with financial services. these consist of all member countries. These three also have the subsidiary bodies.· The Dispute Settlement Body · The Trade Policy Review Body All three are in fact the same – the Agreement Establishing the WTO states they are all the General Council. the Dispute Settlement Body also has two subsidiaries: the dispute settlement “panels” of . subsidies. GATS rules and specific commitments. Again they consist of all WTO members.

with regular reports back to the full membership. The membership as a whole would resist attempts to impose the will of a small group.experts appointed to adjudicate on unresolved disputes. It is used to refer to meetings of 20 – 40 delegations. Similar smaller group consultations can be organized by the chairs of committees negotiating individual subjects. The “Green Room” is a phrase taken from the informal name of the director general’s conference room. but for a completely different reason. Since decisions are made by consensus. decisions have to be taken by all members and by consensus. The way countries now negotiate has helped somewhat. or in groups of 20 – 30 of the most interested delegations. although the term Green Room is not usually used for these. In some subjects such as agriculture virtually all countries are members of at least one coalition – and in many cases. such as those of the Heads of Delegations (HOD). but those commitments are the result of numerous bilateral. countries have formed coalitions. and that they have an opportunity to participate or provide input (it must be “inclusive”). several coalitions. The key is to ensure that everyone is kept informed about what is going on (the process must be “transparent”) even if they are not in a particular consultation or meeting. No one has been able to find an alternative way of achieving consensus on difficult issues. A common recent practice is for the chairperson of a negotiating group to attempt to forge a compromise by holding consultations with delegations individually. such as at Ministerial Conferences. In order to increase their bargaining power. and the Appellate Body that deals with appeals. least of all in the higher level councils. The coordinators also take responsibility for both “transparency” and “inclusiveness” by keeping their coalitions informed and by taking the positions negotiated within their alliances. and can be called by the minister chairing the conference as well as the director general. Heads of Delegations and other boards: the need for informality Important breakthroughs are rarely made in formal meetings of these bodies. because it is virtually impossible for members to change their positions voluntarily in meetings of the full membership. without voting. More difficult issues have to be thrashed out in smaller groups. The final outcome is a multilateral package of individual countries’ commitments. These meetings can take place elsewhere. Market access negotiations also involve small groups. One term has become controversial. In the past delegations have sometimes felt that Green Room meetings could lead to compromises being struck behind their backs. usually at the level of heads of delegations. In the end. informal consultations within the WTO play a vital role in bringing a vastly diverse membership round to an agreement. This means that all countries can be represented in the process if the coordinators and other key players are present. informal . One step away from the formal meetings is informal meetings that still include the full membership. So. These smaller meetings have to be handled sensitively. in twos or threes. but more among some outside observers than among delegations. extra efforts are made to ensure that the process is handled correctly.

the GATT had been found wanting: for instance. the success of GATT in promoting and securing the liberalization of much of world trade over 47 years is incontestable. outside the tariff reduction results. and ultimately for confirming decisions. these and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. Both these changes undermined the credibility and effectiveness of GATT. GATT’s success in reducing tariffs to such a low level. Apart from the deterioration in the trade policy environment. putting countries’ positions on the record. Together. . it also became apparent by the early 1980s that the General Agreement was no longer as relevant to the realities of world trade as it had been in the 1940s. And the momentum of trade liberalization helped ensure that trade growth consistently out-paced production growth throughout the GATT era.) So. The rush of new members during the Uruguay Round demonstrated that the multilateral trading system. international investment was exploding and trade in services – not covered by the rules of GATT – was of major interest to more and more countries and. High rates of unemployment and constant factory closures led governments in Europe and North America to seek bilateral market-sharing arrangements with competitors and to embark on a subsidies race to maintain their holds on agricultural trade. was a sign of difficult times to come. world trade had become far more complex and important than 40 years before: the globalization of the world economy was underway. which depend on individual countries’ interests. however. was recognized as an anchor for development and an instrument of economic and trade reform. Given its provisional nature and limited field of action. with respect to agriculture where loopholes in the multilateral system were heavily exploited – and efforts at liberalizing agricultural trade met with little success – and in the textiles and clothing sector where an exception to the normal disciplines of GATT was negotiated in the form of the Multi-fiber Arrangement. b) Highlight the drawbacks of GATT. at the same time. Even the institutional structure of GATT and its dispute settlement system were giving cause for concern. precisely because they are informal. The limited achievement of the Tokyo Round. For a start. They are the forums for exchanging views. They are necessary for making formal decisions in the councils and committees. (Examples include the traditional tariff negotiations. Nor are the formal meetings unimportant. but they do not appear in organization charts. and market access talks in services. That effort resulted in the Uruguay Round. closely tied to further increases in world merchandise trade. The art of achieving agreement among all WTO members is to strike an appropriate balance. as then represented by GATT. combined with a series of economic recessions in the 1970s and early 1980s. drove governments to devise other forms of protection for sectors facing increased overseas competition. Continual reductions in tariffs alone helped spur very high rates of world trade growth – around 8 per cent a year on average during the 1950s and 1960s. informal consultations in various forms play a vital role in allowing consensus to be reached. They are not separate from the formal meetings. so that a breakthrough achieved among only a few countries can be acceptable to the rest of the membership.bargaining sessions. In other respects.

and they cut costs 9. Ten Benefits of WTO 1. and nowhere is this more evident than in the vastly different integration processes taking place in the regions of Europe and East Asia. In addition to these differences. it will include some comparisons between the two regions. but the driving force is the market rather than policy or institutions. the origins of integration have been institutional in nature. progress in this area has been slow and the few existing institutions are fairly weak and ineffective. In fact. Freer trade cuts the cost of living 5. Thus. The subject of this paper is regional integration as it has developed in East Asia with a focus on the drivers of that integration. Trade stimulates economic growth and that can be good news for employment 8. It gives consumers more choice and a broader range of qualities to choose from 6. Corporations and the production networks they have established are driving integration in East Asia. Thus. The system encourages good government . The system shields governments from narrow interests 10. The system helps to keep the peace 2. regional institutions have been the driving force behind integration in Europe. the development of regional institutions has also occurred. In Europe. regional integration is taking place in East Asia. Integration in East Asia has progressed very slowly and is still in an early stage despite that the process has continued for decades. b) Mention the benefits of WTO. The system allows disputes to be handled constructively 3. While the paper is not intended as a direct comparison of integration in East Asia and Europe. In East Asia. it could be said that the process began centuries ago – even as far back as the 15th century. a) Give a short note on the regional economic integration. the drivers behind the integration process in each region are different. Trade raises incomes 7. however.4. Regional Economic Integration Regional integration can take many forms. and the development of institutions has been prominent throughout the process. European integration has progressed steadily and has gradually deepened over the last 50 years to reach an advanced stage today with a common currency and well-developed regional institutions. A system based on rules rather than power makes life easier for all 4. the speed of progression and the level of integration attained in the two regions are quite dissimilar. Nevertheless. By comparison. The basic principles make the system economically more efficient.

The EOL element requires that a decision be made about the preceding version at each major redesign: continue production. there are an increasing number of product variations on the market. Process engineering activity shadows that of design engineering. the varying activity levels are a direct result of product introductions and redesigns that. For example. Note that design engineering has a peak of activity level at each upgrade. keep blueprints active so that parts can be made as ordered. process engineering. Vesey (1992) . That the five-element wave is grounded in reality becomes apparent when considering the recent research that suggests product introduction cycles are being compressed. The Five-Element Product Wave As illustrated in Figure 4. as system changes will be contemplated and made to facilitate the changes made in the product or service. rather than time. result from differing activity levels within the five elements. The last wave begins shortly before original production ceases and ends when the product is no longer manufactured or supported by the EOL Company or division. Slater (1993) observes that product life cycles are growing shorter and shorter. Rather. do not necessarily determine the trigger points. must take into account company strategy. represented by the vertical axis. The wave effect comes from the fact that the process repeats for the successful firm.5 shows only a two-product model ("A" and "B" versions). Production has one activity peak that results from demand management and production planning through master production scheduling. in and of themselves. The five-element product wave. enter into a manufacturing and support agreement with another entity. and end-of-life activities as elements. the EOL curve peaks at each redesign. Figure 4. For the sake of parsimony. It starts just before the traditional life cycle maturity stage and lives until sales decline to a point at which an EOL decision must be made. Changes in magnitude. core capabilities. the wave model employs design engineering. The first wave is associated with the "A" version of a product or service. Simple changes in levels of dollar or unit product sales. process engineering. forming swells in design engineering. and the state of the competitive environment. Bayus (1994) claims that knowledge is being applied faster. further distancing that product from the competition. production. Finally. as the horizon over which the element curves vary. there may be hundreds of significant redesigns. such as with Caterpillar’s innovative high-drive bulldozers. from the outset. lagged somewhat for product introduction. and manufacturing curves before the final crest at EOL activity. In reality. make a short-term run of spares. resulting in increasing levels of new product introductions. the markedly improved second model. uses trigger points.5. a product with strong sales may be redesigned in a preemptive strike against competitors. a) Explain five-element product wave model. or discontinue production.5. and survives through the traditional PLC introduction and growth phases. product marketing. A second wave begins with the "B" version. or FPW. and product marketing. Yet since product removals are not keeping pace with introductions. Product marketing also has activity level spikes that closely match engineering design activity.

) What is the recent experience with teams? There is evidence that using concurrent design teams speeds the product to market and provides substantial savings. and floors are soon gridlocked and littered with unanswered correspondence and things to do. production itself grinds to a halt. and product marketing elements of the wave model. The effect of this is a compression of the design engineering. more and more information is thrown over the wall. This is particularly true in today’s rapidly compressing environment of speeding products to market. Members from each discipline optimize the system. (Note that the authors have taken a great deal of artistic license here! No meaning should be attached to the actual measure of overlap area in Figure 4. The interrelationships of the elements clearly illustrate the benefit of working product introductions. (The EOL curve may remain unchanged because accelerated introductions do not necessarily affect EOL efforts. whether a given firm’s product is a service or a manufactured good. Taken to the extreme. Each element is connected to all of the others and is focused on the customer. Forget quality. Furthermore. thus decreasing costs. b) What do you mean by globalization? . The solution is to maximize the advantage of the relationships within the five-element wave and work in concurrent teams. Recipients find themselves with less and less time to take action. production. conference rooms. That way. As the elements compress. Westinghouse recently suggested that concurrent engineering would eliminate 200 duplicate processes in a project that consisted of 600 using traditional over-the-wall approaches. as illustrated in Figure 6. design changes required after initial production began were reduced by some 76 percent. responsibility is shared throughout the system. The focal point becomes the customer.) The five-element wave clearly shows the inefficiency of traditional "over-the-wall" systems as speed to market increases. Regardless of whether life cycles are actually being compressed or knowledge is simply being applied faster. phone lines. process engineering. the model is flexible and may be expanded or contracted to include those functional areas relevant to the production team. The system is totally interactive and bound together. Boeing expects that concurrent design will save some $4 billion in the development of its 777 airliner. The strength of the five-element product wave is the fact that it illuminates critical decision points in the life of a product or service. and end-of-life decisions in teams. it is apparent that firms are increasing the speed with which they bring their products to market. desks. in-baskets.6. Thus. The method tears down barriers between departments and speeds the introduction process. Ford’s Team Taurus was able to cut a full year out of model turnaround.reports that the strategy for the 1990s is speed to market and discusses the pressures the market is exerting to shorten product introduction lead times. In addition. the five-element wave is a powerful tool that can be deployed to accelerate effective decision making in markets demanding ever-increasing levels of speed and agility. design changes. rather than the task.

versatile graduates of other fields in Northern Ireland. IMR recognized an untapped resource in the well-educated. reflecting technological advances that have made it easier and quicker to complete international transactions – both trade and financial flows. technology. 6. president of IMR (NI) Ltd. the company is hiring 12 to 18 programmers a month in Northern Ireland and is well on its way to meeting its staffing goal of 300 by 1999. McFerran credited Northern Ireland’s Training & Employment Agency (T&EA) with helping place the company’s staffing on the fast track. Markets promote efficiency through competition and the division of labor – the specialization that allows people and economies to focus on what they do best.Economic "globalization" is a historical process. But markets do not necessarily ensure that the benefits of increased efficiency are shared by all. or financial centers. it is also assisting us with a unique initiative to bring additional sources of high quality talent to the company. political and environmental dimensions of globalization that are not covered here. IMR was up and running with more than one-third its target staff. It means that they can have access to more capital flows. "The success to date in building a quality work force has surpassed our expectations and opens up new ambitions for our interests in Northern Ireland. There are also broader cultural. urban industries. cheaper imports. and in the case of the poorest countries may need the support of the international community as they do so. A PERSPECTIVE OF THE NORTHEN ISLAND SOFTWARE COMPANIES. Give some examples of companies doing international business and discuss how they have they have managed their business in the international markets. The term sometimes also refers to the movement of people (labor) and knowledge (technology) across international borders. Countries must be prepared to embrace the policies needed. It refers to the increasing integration of economies around the world.5 million to establish its new software development center in Northern Ireland.. "The fast start-up of the Belfast facility reaffirms our confidence to locate in Northern Ireland. Global markets offer greater opportunity for people to tap into more and larger markets around the world." an intensive 20-week training program at the Belfast . IMR developed "IMR Academy. The term has come into common usage since the 1980s. particularly through trade and financial flows. the result of human innovation and technological progress." said Sanan. Innovation in Training Impressed by the number and quality of information technology graduates from the region’s universities." McFerran said. RAPD M–UP Within six months of announcing it would invest $4. Working with the T&EA."The T&EA not only has helped us to identify and recruit qualified software graduates from Northern Ireland’s universities. At its most basic. It refers to an extension beyond national borders of the same market forces that have operated for centuries at all levels of human economic activity – village markets. and larger export markets." According to Arthur "Bro" McFerran. there is nothing mysterious about globalization.

to expand the skills of qualified applicants who are not computer software graduates. Now IT graduates have the chance to find good jobs in Northern Ireland. and graduates from other fields can take advantage of the IMR Academy training program to get a head start on a career in the growing software sector. Fujitsu." said Richard W. Recruitment research by IMR indicates that traditionally. and one that is delivering us an impressive pool of incremental programming talent. Competitive Advantage Northern Ireland recently has attracted information technology – based investments from other multinational companies such as BT. . "The availability of high-quality graduates combined with the region’s competitive operating costs and attractive incentives made Northern Ireland the best possible location for STB. Smart and Available "The recent software investments by IMR and other companies provide a new opportunity for Northern Ireland’s computer graduates. exclusive of property taxes and service charges.Institute of Further and Higher Education. These companies cite Northern Ireland’s work force and favorable cost base in their decisions to locate in the region. and low employee turnover and favorable rates for office space. Typical starting salaries for IT graduates in Northern Ireland are $22. McFerrin said. Approximately 40 trainees have already participated in the program. nearly half of the region’s computer graduates have been forced to seek jobs outside Northern Ireland due to the lack of available information technology positions." McFerrin said. STB Systems and UniComp. range from as low as $5 per square foot in some development areas.Tom Scott of the T&EA said IMR applicants are assessed throughout the program and those who successfully complete the course are awarded a National Computing Certificate and full-time employment with IMR. Annual costs per square foot for office space. but who are equally well educated in other Disciplines and who have demonstrated aptitude for learning computer software programming. the overall annual per capita operational costs to develop high quality software can be significantly less compared with these same costs in the United States." McFerran said. nearly half of the region’s computer graduates have been forced to seek jobs outside Northern Ireland due to the lack of available information technology positions. Cooke.000 to $25. Seagate Technology. Liberty Mutual Group. With salaries and fringe costs for well trained software engineers in Northern Ireland approximately 50 percent lower than costs for US engineers. to approximately $14 in Belfast. At less than three percent annually. These costs can be as much as 50 percent lower than office space costs in other European cities. Recruitment research by IMR indicates that traditionally.000 annually. STB’s director of engineering operations. Northern Ireland’s employee turnover rate is a fraction of the rates typically experienced in other parts of Europe and the United States. "IMR is extremely pleased with the T&EAs ability to design and deliver a training program customized to our needs.

MU0006 Compensation Benefits


Explain the objective of a sound compensation planning.

The most important objective of any pay system is fairness or equity. The team equity has three dimensions: a) Internal equity: This ensures that more difficult jobs are paid more. b) External equity: This ensures that jobs are fairly compensated in comparison to similar jobs in the labour market. c) Individual equity: It ensures equal pay for equal work, i.e. each individual’s pay is fair in comparison to others doing the same jobs. In addition, there are other objectives as well. The ultimate goal of compensation administration (the process of managing a company’s compentation program) is to reward desired behaviours and encourage people to do well in there jobs. Some of the important objectives that are sought to be achieved through effective compensation management are listed below: a) Attract Talent: compensation needs to be high enough to attract talented people. Since many firms copete to hire the services of competent people, the salaries offered must be high enough to motivate them to apply. b) Retain Talent: If compensation levels fall below the expectations of employees or are not competitive, employees may quit in frustration. c) Ensure Equity: Pay should equal the worth of a job. Similar jobs should get similar pay. Like wise, more qualified people should get better wages. d) New and Desired Behaviour: pay should reward loyalty, commitment, experience, risk-taking, initiative and other desired behaviours. Where the company fails to reward such behaviour, employee may go in search of greener pastures outside. e) Control costs: The cost of hiring people should not be too high. Effective compensation management ensures that workers are neither overpaid nor underpaid. f) Comply with legal rules: Compensation programs must invariably satisfy governmental rules regarding minimum wages, bonus, allowances, benefits, etc. Ease of operation: The compensation management system should be easy to understand and operate. Then only will it promote understanding regarding pay related matters between employees, unions and managers.


Apex is an ITES service provider Company. It is startup (new) company, which is trying to woo talent from the market. Being a new company it might face difficulty in hiring highly talented candidates. As remuneration plays an important role, what will be the strategic incentives plans organization can offer to persuade talented employees besides providing good salary?


Explain the steps involved in designing a Remuneration Plan.

Designing a remuneration plan involves the followings: 1. Job Analysis: The main purpose of conducting job analysis is to prepare job description and job specification which in turn helps to hire the right quality of workforce into the organization. It helps to understand the qualities needed by employees,defined through behavioral descriptors, to provide optimum work performance. It obtains answers to such questions such as: 1. Why does job exists? 2. What physical and mental activities does the worker undertake? 3. When is the job to be performed? 4. Where is the job to be performed? 5. How does the worker do the job? 6. What qualifications are needed to perform the job? 7. What are the working conditions (such as levels of temperature, noise, offensive fumes, light) 8. What machinery or equipment is used in the job? 9. What constitutes successful performance? There are several ways to conduct a job analysis, including: interviews with incumbents and supervisors, questionnaires (structured, open-ended, or both), observation, critical incident investigations, and gathering background information such as duty statements or classification specifications. In job analysis conducted by HR professionals, it is common to use more than one of these methods. 2. Job Documentation: To evaluate job content, it provide objective criteria for making pay comparison, ensure that jobs are classified according to content as opposed to individual personalities, effectively communicate the job duties to both supervisor and employees and help the organization defend it self against charges and discrimination. 3. Development of a job worth hierarchy: It is a result of job evaluation. There are six major methods which are divided in two groups according to their nature. a) Whole job evaluation and are non-quantitative in nature iRanking iiClassification iiiSlotting b) Factor evaluation and are quantitative in nature iPoint factor iiFactor comparison iiiScored questionnaires 4. Pay survey: Wages and salary surveys ensure external equity. A wage and salary survey provides information as to what other organizations that compete for employees are paying. The survey could cover all jobs within an organization or limited to benchmark jobs. The benchmark jobs have the following basic characteristics iMany workers in other companies have these jobs.

Published sources also provide valuable information. analyzing. performance review. an employee with minimum qualifications should be paid the minimum of the range. This general rule is not true when a new hire has skills which are in great demand or has skills or other expertise substantially above the minimum. Performance appraisal: A performance appraisal. promotion increases. cost of living/ labour increases. Pay rates and Pay Increases: This means deciding how to pay new employees. how and when to give employee increases. ii. The published sources in India include: i. quantity. They represent the full range in term of salary such that some are among the lowest paid in the group of jobs. v. cost. an organization can determine the range minimum and maximum. employee appraisal. Reports published by the Ministry of Labour Pay Commission Reports Reports of wage Bonds appointed by Government Reports of employee and employer’s organization Trade journals of specific Industry 5. step increases (based on longevity) and merit increases. medical leave. 8. cost of labour increases will have on the determination of pay increases for employees. Formal and informal surveys could be undertaken to collect data on benefits like insurance. 7. vacation pay etc. or (career) development discussion[1] is a method by which the job performance of an employee is evaluated (generally in terms of quality. how to determine the pay increase for an employee being promoted from one job to another and what influence. Pricing the Job: Establishment of pay Ranges: In order to actually establish a pay structure. Published sources also provide valuable information regarding industry-wise trends in salary structures in and around the country. Employee Increases: There are several different types of base pay increases: General (across the board) increases. iv. A performance appraisal is a part of guiding and managing career development. It is the process of obtaining.iiiii- They will not be changing in the immediate future in terms of tasks. an organization needs to set rates of pay for the jobs in the job hierarchy. including how to move existing employees from minimum to maximum of their assigned pay grades. if any. iii. and offer a basis on which to take decision regarding employee benefits. The focal point pf the pay range is the midpoint. others are in the middle range and some are at the high end of the pay scale. most employers choose to start new employees closer to the minimum of the pay range. In general. This will depend on the number of different levels of relative job value that are recognized by the organization and the difference in pay between the highest and lowest paid jobs in the pay structure. . and time) typically by the corresponding manager or supervisor[2]. 9. 6. Starting pay for new Employees: In order to avoid paying new employees the same as more experienced employees. responsibilities etc.

10. Part of the challenge in creating a compensation plan is to build in mechanisms that facilitate change when necessary. It is also the judgement of an employee's performance in a job based on considerations other than productivity alone. An audit is an excellent means to ensure that a compensation plan is being properly administered and maintained.Are there procedures or other mechanisms in place to ensure that the compensation plan is being administered in accordance with policy? Documentation adequacy .Is there adequate documentation in place to ensure that the administration of the compensation plan and compliance issues can be audited? Overall results . Maintaining and Auditing a Compensation plan: Changes in the external market or internally within the organization can cause one or more parts of a compensation plan to become outdated. and suitability for promotion or further training. monitoring of compensation levels versus companies with which there is competition for employees.Are there measures that can assess how well the compensation plan is achieving its goals and objectives? . Performance appraisal is an analysis of an employee's recent successes and failures. personal strengths and weaknesses.and recording information about the relative worth of an employee to the organization. When planning to audit a compensation plan. Some actions an organization can take to maintain an updated compensation plan include regular review of job descriptions. and regular review of the pay structure including pay ranges and pay increase budgets. yet maintain control on a regular basis. an organization needs to consider the following: Process measures .Are procedures and practices in place to ensure the compensation plan is being administered smoothly and efficiently? Policy compliance .

MU0007 Performance Management and Appraisal .

4. 10. 12. identifying goals.1. Performance Management is one of the key processes that. when effectively carried out. and evaluating results. 6. To do their best. If formal ratings are included. The formal evaluation period should be long enough to allow for full performance and to establish a history such that evaluations are fair and meaningful. Employee involvement is encouraged in identifying major duties and defining performance standards. setting objectives. The communication process includes clarifying expectations. 3. Performance management is considered a process. Training for supervisors and employees is encouraged and will be provided by University Human Resource Services. Elements for discussion and evaluation should be job specific – not generalized personality traits. staff members need to know that those contributions will be recognized and acknowledged. . 9. Professional development should be an important component of the plan. Performance management is an ongoing process of communication between a supervisor and an employee that occurs throughout the year. they should reflect the incumbent's actual performance in relation to the performance standard for that major duty. Performance standards for each major duty/ responsibility should be defined and communicated. 8. 2. PRINCIPLES OF DEVELOPING A PERFORMANCE MANAGEMENT PLAN Development of a performance management plan should be consistent with the following principles: 1. The supervisor should be evaluated on the successful administration of the plan and ongoing performance management responsibilities. not an event. 7. The Performance Management Plan is primarily a communication tool to ensure mutual understanding of work responsibilities. in support of accomplishing the strategic objectives of the organization.Definition The campus carries out its mission through the individual and collective contributions of its employees. priorities and performance expectations. Performance Management . Define Performance Management? Explain the principles of developing a performance management plan. providing feedback. The Performance Management Plan should be consistent with federal and state laws which address non-discrimination. 5. 11. The major duties and responsibilities of the specific job should be defined and communicated as the first step in the process. One year is a common evaluation period. feedback and communication are integral to success. Documentation of performance will occur as often as needed to record the continuum of dialogue between supervisor and employee. It follows good management practice in which continual coaching. helps employees know that their contributions are recognized and acknowledged.

TCC also includes organizational culture as a component of the assessment since it has a significant impact on each of the above core capacities. TCC labels the growth stages according to the following organizational development elements: • Core Program Development . like people. Questions around the measures/indicators of all five capacity areas were compiled randomly into a survey that is completed by. Nonprofit organizations.development of a set of programs that are central to mission success and have begun achieving a consistent level of desired results for those being served • Infrastructure Development . provide direction and innovate. experience a lifecycle of progressive stages and developmental milestones. inspire. make decisions. assess and improve their effectiveness. D) Technical Capacity: the ability of a nonprofit organization to implement all of the key organizational and programmatic functions. at minimum. These are broadly represented by the outer circles on the previous graphic. management and technical capacity as well as organizational culture depend heavily on additional factors surrounding the organization. These cultural elements all serve as the context through which organizations define.development of an organizational infrastructure necessary for supporting core programs and increasing the number of clients or service recipients . language. B) Adaptive Capacity: the ability of a nonprofit organization to monitor. each organization’s top three organizational leaders. Ryan and Grossman suggested four key capacities for organizational effectiveness. C) Management Capacity: the ability of a nonprofit organization to ensure the effective and efficient use of organizational resources. Each organization has a unique history. model. A few of these are described below. adaptive capacity. ORGANIZATIONAL ASSESSMENT: OTHER FACTORS Ideal leadership. prioritize. assess and respond to internal and external changes. and set of values and beliefs. Let. all in an effort to achieve the organizational mission.2. • Organizational lifecycle: An organization’s phase of its lifecycle will affect its core capacities. organizational structure.-Elucidate Four organizational capacities are critical to overall organizational effectiveness: A) Leadership Capacity: the ability of all organizational leaders to create and sustain the vision.

the executive director. Without these resources.).achieving mission impact through activities bringing together an organization’s programs and leadership with other community resources.). and 7) the strengths and challenges of the nonprofit sector as a whole. and this includes financial resources. • Supporting organizational resources: Each nonprofit organization has a unique set of supporting resources (or assets) at its disposal that all serve to support the key resource(s). the organization could not function. and supplies. management. time. 4) policy changes related to government and nonprofit. and joint policy and advocacy efforts. financial assistance (loans. technology. Key organizational resources most often include the skills. • Financial health: Financial resources are critical to supporting an organization’s entire core capacities. experience and skills of board members. managers. strategic alliances. INTRODUCTION . Each of these factors has a potential affect on each of the core capacities for any given nonprofit. Leadership requires making tough decisions about how to use the finite financial resources available to the organization as well as provides direction for how to raise additional funds. equipment. and other resources like equipment.e.g. partnerships. knowledge.. and experience of those delivering the services. Explain the process of performance management. 6) the availability of non-monetary resources. Lastly. Management capacity is all about making efficient and effective use of resources. • External environment: There are many factors in the external environment that affect how no constituent needs and demands. he or she needs to take the relevant environmental influences into consideration. etc. An organization’s level of resources at a given point in time will greatly affect how leadership. vehicles. as well as the resources provided directly to clients (e. facilities.. These resources include: human resources (i.• Mission impact . 5) the available pool of highly qualified nonprofit professionals. I. adaptive capacity. 3. This often involves engaging in activities like collaboration. and technical capacity will manifest themselves. finances/funding. which are additive. etc. support staff and volunteers). Therefore. in order to create a greater change. This means more sophisticated core program development is required in each of the later stages and more sophisticated infrastructure development is required during Mission Impact. financial stability will affect the ability of an organization to support its technical capacities. Each successive stage requires more growth from the prior stages. Part of an organization’s adaptive capacity function is the need to identify opportunities and challenges in the funding environment that are and will impact upon an organization and its programs and services. housing. when one attempts to discern whether an organization is effective. in-kind resources. The core organizational capacities look different during each of the lifecycle stages. the knowledge. 3) available funding including competition for funds. program support materials. • Key organizational resources: There are certain critically needed resources that most directly support and affect the quality of the delivery of programs and services.

OBJECTIVES Upon completion of the performance management program. increase mutual involvement in goal-setting and definition of performance standards. Each has a role in setting goals. • Conduct the performance review discussion. • Create the appropriate atmosphere and rapport for conducting the performance review discussion. supervisors. PRINCIPLES OF THE PERFORMANCE MANAGEMENT PROCESS Improving appraisal effectiveness will require the following ongoing changes in our "University Culture": • Increase management's time commitment to personnel matters on an ongoing (Versus once-a-year) basis. and evaluation. team-oriented goals that are consistent with continuous improvement of the University as a whole. participants will be able to: • Identify the importance of the performance management process from the viewpoint of the supervisor and employee. A secondary purpose is to provide honest and accurate formal evaluations to support rewards for performance practices. • Improve management skills in communicating and taking responsibility for making the performance improvement process operate effectively. and subordinates have a mutual responsibility for making the process work. • Establish performance requirements for those positions that report to them. • Define coaching and explain the steps for effective coaching. III. coaching. timely dialogue aimed at performance improvement. PERFORMANCE MANAGEMENT PROCESS IV. • Shift performance emphasis from short-term. • Increase employee responsibility for planning their own careers.The performance review process links coaching for performance and careers. ESTABLISHING PERFORMANCE REQUIREMENTS The first element of the performance management process that must be effectively executed is specifying the required levels of performance and identifying goals to be . and performance evaluation as integrated elements in a continuous process. • Communicate with each employee in honest. II. • Specify the steps for completing a performance review. Managers. component specific individual goals to include long-term. The main purpose of the performance management process is to develop people and improve performance by clarifying goals and coaching regularly.

. To the extent possible. the supervisor and the employee must have a common understanding of what constitutes good performance. what will the employee are measured against? Quite often. Every supervisor needs to establish a set of "Performance Requirements" for each subordinate's position. when a goal setting session is not completed. If it is not done. This is the foundation upon which the entire performance management process will be built. • Results Statement. before any attempt can be made to review an individual's performance. These requirements become the basis of the performance review. Studies show that there are sizeable differences between the employee's and supervisor's concept of the responsibilities of the same position. A results statement describes the work results that must be achieved in each area. Performance Requirements include: • Areas of Responsibility. it is important that goal setting is done and done well. Standards are indicators that the desired result is being achieved. It is imperative that the supervisor and the employee agree upon and understand each other's expectations of the job. Therefore. For this reason. the supervisor should strive to clarify their expectations of subordinates. An area of responsibility is a major category or segment of work. employees and supervisors have completely different ideas about job priorities and responsibilities. • Standards. • Behaviors. The supervisor’s expectations will certainly vary from employee to employee and from job to job but must always be job related. The supervisor also should endeavour to describe what differentiates one level of performance from another.achieved. Behavior patterns that is appropriate to the University and the supervisor.

Explain the talent Management imperative.MU0008 Talent Management and Employee Retention 1. Great businesses however are skilled at developing and deploying talent in ways that continuously grow their . Competent businesses are adept at hiring and firing workers.

HR and line managers often lack the tools and information to understand and manage the supply and demand of people and skills dynamically. they moved to a different company. products and markets are in a continuous state of change must learn how to develop and redeploy their talent in an agile manner. Performance obsessed managers are often reluctant to give up the people resources they feel are needed to achieve ever more challengingly goals and performance objectives.” Companies like Cisco that compete in dynamic industries. Some leading edge companies however are beginning to tackle the talent agility challenge. This short sighted behavior is reinforced by management and incentive systems that reward business results but not development of people. Cisco had to learn a different set of skills for attracting and keeping talent. where technologies. They may also be prone to rely on traditional hiring and firing processes as a means of matching skills demand and supply rather than more complex retraining and redeployment of existing resources.html. California Management Review. But when the company’s marketplace and stock price tanked. Thus they are likely to be slow and reactive in responding to shifts in skill requirements and opportunities to grow new competencies. But beneath the surface. it was buying talent through acquisition and keeping it through high-priced equity stakes distributed to employees. According to CEO John Chambers. Creating work environments that promote people agility across jobs and organizational boundaries is the next imperative for companies seeking competitive advantage through their talent. Not much talent management acumen was required. Winter 2005. fire failures and replace leavers – but few seem to know how to provide one of the most important factors in retaining talent – opportunities to achieve.berkeley. It is surprising how few companies develop and move their talent around the organization. Jennifer Chatman. but in our industry.experience. Charles O’Reilly and Victoria Chang describe how this Silicon Valley legend has refocused its approach to talent from external acquisition to internal development and deployment.haas. I want the majority of us not to be in the same job – or even the same function – three to five years from now.edu/News/cmr/contents. or from sales to customer advocacy. For example. “We made progress in developing employees. I want us to create an environment of continuous learning and challenge. There are many organizational and cultural reasons why companies constrain talent. http://www. that will allow us to move from one business unit to another in engineering. For years Cisco was the poster child for how to identify. move and grow – within the company. attract and hire talent. in “Cisco Systems: Developing a Human Capital Strategy”. It also realized that it needed to better utilize the talent it already had. or from financial to IT. stretch their abilities and enable their achievements. They know how to recruit stars. Ever hire a star only to see them leave in frustration 9-18 months later because they felt stuck? Or experience shock when an outstanding performer leaves your company after 5 years because they were ‘too valuable’ in their current job to be allowed to move to a different position or department? So instead. The company recast its Pathfinder software application originally developed to support external recruiting and used it to create an internal job .

Companies can legally use these tests. Describe Pre -Employment testing. The profiles capture employees’ work and educational experience. Online Pre-Employment Tests . medical examinations. We’ve got to learn how to retrain people effectively as a part of our culture. But we’ve got to get dramatically better at moving resources around the company. religion. John Chambers asked in a company meeting prior to starting these initiatives. as long as they don't use to them to discriminate based on race. but as a set of distributed capabilities for everyone to tap across the organization. “How many people think we are good at moving resources (people) and retraining? (No hands were raised). Our top leadership…. Line managers have access to each of their employees’ profiles to assess existing skills on their teams. credit checks. Indeed. Employers often use tests and other selection procedures to screen applicants for hire. color. Employment tests must be validated for the jobs they are being used to hire for and for the purposes for which they are being used. This learning and development capability is built upon the ‘3E Model’: -Experience through assignments. disability. The types of tests and selection procedures utilized include cognitive tests. and technical qualifications and detail their career aspirations for development discussions with their managers. It’s not even in our vocabulary. and traditional learning -Exposure developed through on-line learning. Because companies that find ways to grow and move their talent within their organizational boundaries will not only substantially reduce recruiting and termination costs but will better attract and keep top talent as well. and background checks. allows employees to voluntarily enter their resumes for consideration. How good is your organization at moving and retraining staff to anticipate and respond to changes in your business? Not very good you say? If so. 2. personality tests. Pathfinder’s corresponding online database. those companies that can master talent agility will have a leg up on their competition in both the quality of their people and their performance. sex. skills. mentoring. periodic forums and talent reviews -Education through a series of customized and focused programs that include significant teaching and involvement of senior Cisco executives as well as outside faculty The impetus for shifting Cisco’s talent management strategy came from the top of the organization. But these moves represented only part of the solution. it’s time for a change.I keep moving them around.matching system. I-Profiler.” This is good advice for any company. on-the-job learning. national origin. or age (40 or older). The company also chartered Cisco University to lead a company-wide cross-functional effort to create a ‘development culture’ within the organization. to keep up with the market transitions. The university does not operate as a centralized place to go for learning. shadowing.

and realistic job previews. Emotional Intelligence Testing Emotional intelligence (EI) is the ability of an individual to understand his or her own emotions and the emotions of others. memory. hair drug or alcohol testing. Testing job applicants for their emotional intelligence (in the form of psychological-based tests) is a growing employment trend. Drug Tests There are several types of drugs tests that candidates for employment may be asked to take. English Proficiency Tests English proficiency tests determine the candidate's English fluency. Credit checks provide information on credit and financial history. and skills in arithmetic and reading comprehension. Types of Employment Tests Personality Tests Personality tests assess the degree to which a person has certain traits or dispositions or predict the likelihood that a person will engage in certain conduct. saliva drug screen. employment testing can be conducted online or in the employer's office. assess a candidate's performance and aptitude on particular tasks.Depending on the type of test. Pre-Employment Physical Exams Employers may require a pre-employment physical examination to determine the suitability of an individual for a job. Sample Job Tasks Sample job tasks. are used to help an employer identify candidates that will be a good fit for jobs. and sweat drug screen. including performance tests. Talent Assessment Tests Talent assessments. Online employment tests are often used for pre-employment testing and assessment. work samples. Physical Ability Tests Physical ability tests measure the physical ability of an applicant to perform a particular task or the strength of specific muscle groups. The types of drug tests which show the presence of drugs or alcohol include urine drug screen. also called pre-employment tests or career tests. Cognitive Tests Cognitive tests measure a candidate's reasoning. as well as knowledge of a particular function or job. Background and Credit Checks Criminal background checks provide information on arrest and conviction history. perceptual speed and accuracy. . Talent assessments help predict a new hire’s performance and retainability. as well as strength and stamina in general. Utilizing online testing eliminates the need for the candidate to visit the company's office or for the company to have to administer the test. simulations.

those organizations that measure attrition sometimes do not track it by length of service. Many organizations do not even know what their attrition rates are. but they also increase the likelihood that employees are committed on a long term basis and are performing at their best. the best retention practices are not the same as the standard menu for good organizational management. The tenure patterns of the departing employees can reveal valuable information concerning the potential causes for attrition. underscored by the pressures to fulfill "our obligations to our investors. They are investing on the candidates by training them and after some time employees are leaving the organization. Organizational Retention Systems There are a number of organizational systems and processes that influence retention. For example. Most organizations ask their managers to place productivity as the highest priority. For example. but also focus on how the manager can create a climate so that the employee is retained and committed on a long term basis." This simple segmentation is often a crude one that does not provide the organization the refined information it needs. These systems support the Manager Retention Practices. 3. Therefore. Ravi the HR Manager has . this component ensures that retention becomes an on-going priority. such as the equity of pay scales. The Management is highly concerned about the attrition. This often has little to do with the amount of classroom training they have received. There are costs associated with hiring besides talent crunch. the truth is that these leaders are rare. Additionally. These retention practices represent the manager's actual behaviors on the job. There are a number of manager retention practices which will increase the probability that an employee will remain committed to an organization over time. While enlightened leaders balance the needs of the organization with the needs of the employee. Other systems are less obvious. Manager Retention Practices Our research consistently validated the reality that the manager plays a significant role in influencing the employee's commitment level and retention. they do not control all of the factors that can affect attrition. Apex is a firm facing high attrition rate. 1." Good retention practices focus not only on what the employee is contributing to the company. 3. the second component represents the organization's responsibility in the retention equation. Measurement and Accountability Closely linked to the other components. And those that do often lack enough data to pinpoint where the problem is most severe. Mr. Some of them are evident. and their impact on retention is often unrecognized. Furthermore. Though managers play a very crucial role in retention. 2. many organizations do not track attrition by occupational group other than by "manager" or "no manager. or to uncover the specific causes of attrition. there is evidence that an organization's recruiting systems and processes can significantly impact retention ratios.Lie Detector Tests The Employee Polygraph Protection Act (EPPA) prohibits most private employers from using lie detector tests. either for pre-employment screening or during the course of employment.

 Shorten the feedback loop . Communicate any new company policies or initiatives to all employees to be sure that everyone is on the same page.the highest percentage of information retention occurs when one shares that information with others. Most team members enjoy frequent feedback about how they are performing.  Include employees in decision making . Facilitating knowledge sharing through an employee mentoring program can be equally beneficial for the team member being mentored as well as the mentor. . and responsibilities within the organization. Hiring individuals who are truly fit to succeed in the position for hire will dramatically increase the chances of that employee being satisfied with his or her work and remaining with the company for an extended period of time. The following is a short list of useful tips and hints to help increase levels of employee retention in your organization. Jim Collins talks about the importance of having the right talent on the organizational bus. Be sure to research what other companies and organizations are offering in terms of salary and benefits.any team member wants to feel that he or she is being paid appropriately and fairly for the work he or she does. Suggest few components and strategies to achieve retention. especially when decisions will effect an individual's department or work team. By far. we have found this to be the biggest predictor of future employee retention. Good to Great.  Offer a competitive compensation package . This can help to create a culture of employee involvement and will generate new ideas and perspectives that top management might never have thought of. The implications for employers should be clear.do not wait for an annual performance evaluation to come due to give feedback on how an employee is performing. Having team members share what they have learned at a recent conference or training workshop will not only increase the amount of information they will retain. communication. but also lets a team member know that he is a valuable member of the organization. Nobody wants to feel that they are being left out of the loop.in his book. Put them to work for you!  Get the right people on the bus .communication has become so heavily stressed in the workplace that it almost seems cliche. communication . job description. It is also important to research what the regional and national compensation averages are for that particular position. team members will find this out and look for employers who are willing to offer more competitive compensation packages. You can be sure that if your compensation package is not competitive. However communication couldn't be more important in the effort to retain employees.given the responsibility to design strategies for retention.  Communication. It is now more important than ever to retain the team members an organization currently has and to choose the right team members when hiring decisions are made. Feedback does not necessarily need to be scheduled or highly structured.  Allow team members to share their knowledge with others . Be sure that team members know their roles. simply stopping by a team member's desk and letting them know they are doing a good job on a current project can do wonders for morale and help to increase retention. Shortening the feedback loop will help to keep performance levels high and will reinforce positive behavior.it is incredibly important to include team members in the decision making process.

In a performance driven workplace a lack of clarity regarding job duties and expectations can cause fear and anxiety among employees who are unclear of what is expected of them.this can be one of the single greatest factors affecting employee retention. live up to their word and promises. This culture will only get worse and can create a devastating exodus of valued team members.one of the surest ways to create animosity and resentment in an organization is to allow favoritism and preferential treatment of individual team members. wants to know that their efforts are appreciated and recognized. in all levels of an organization.  Provide opportunities for growth and development . deliver timely feedback on performance. All employees want to have supervisors who are respectful. Nobody wants to feel stuck in their position will no possibility for advancement or new opportunities.offer opportunities for team members to acquire new skills and knowledge useful to the organization. but people leave people. If an employee appears to be bored or burned out in a current position offer to train this individual in another facet of the organization where he or she would be a good fit. and friendly . and provide an environment where the employee can grow and succeed. courteous.it has been said so often that it is almost cliche. Balance work and personal life .family is incredibly important to team members.  The quality of supervision and mentorship . Everybody. . Be sure to treat all employees equally and avoid favoritism at all costs. This can be as simple or as extravagant as a supervisor may desire. not their jobs.  Recognize team members for their hard work and let them know they are appreciated .nothing can be more frustrating or discouraging for an employee than the lack of a clear understanding of what is expected of him on the job.the possibilities are endless. When work begins to put a significant strain on one's family no amount of money will keep an employee around.that is a given. But more importantly team members want supervisors who set clear performance expectations. Other options might include a mention in the company newsletter for outstanding performance or gift certificates to a restaurant or movie theatre . Stress the importance of balancing work and one's personal life. Failure by supervisors and management to provide this can cause an employee to start looking for greener pastures. Small gestures such as allowing a team member to take an extended lunch once a week to watch his son's baseball game will likely be repaid with loyalty and extended employment with an organization. Often time a short e-mail or quickly stopping by a team member's desk and saying "thanks" can do wonder for morale. The so-called "good ole' boys club" can create a noxious organization culture and foster resentment among team members. Supervisors play the largest role in a team member's development and ultimate success within an organization.  Clearly define what is expected of team members .  Fair and equitable treatment of all employees . Even worse outright anger can occur when a team member receives a negative performance evaluation based on expectations and job duties that he or she was unaware of or unclear about.

Discuss culture driven change. .MU0009 Change Management 1.

it may be relatively easy (although costly) to introduce new technology. is a tremendous challenge. New assumptions and values were articulated and systematically communicated through every vehicle and reinforced at every opportunity. we believe that being very clear about what changes are required and being very intentional about building a culture that supports the new mission. one's own behavior is rational. is the organization's culture. This necessarily involves a large cross section of the organization in assessing the current system of norms and beliefs. and the company newspaper along with more subtle forms of communication.e. beliefs. Assumptions about customer expectations in a regulated environment led utilities in general to attend more to being a "good neighbor" than to providing low cost service. "true" or "false". both internally and in relation to its external environment. It can explain much about how an organization functions. values.. however. The Myth of Resistance Understanding why change is frequently difficult for people can help us build in methods for easing the process and increasing the likelihood that it will succeed. This set of widely shared beliefs about what is "right" and "wrong". courtesy to customers. work processes and structures. what is rewarded and what is least approved. They have "learned" the way to behave that will. norms and behaviors that have developed gradually and may have become relatively unconscious. consisting of assumptions. they have absorbed a set of norms and expectations about what is expected.Bringing about significant change in the way an organization works. goals. determining what changes are needed. when people have worked in an organization for very long. it may become necessary to make this implicit set of beliefs explicit as they may no longer be consistent with the actions and behaviors that are now required. In fact. strategies and practices increases the probability of success exponentially. performance reviews. (One would hope that the utility would not throw out the . On the technical side. Experience tells us. These beliefs and resulting behaviors needed to be elevated to a conscious level so that the company could choose how it needed to modify its practices. "good" or "bad". Managing Change Whether or not it is possible to fully "manage change". that getting people to enthusiastically support such change is a more complex and difficult task. Those assumptions often meant that "good neighbor" behavior. at the very least. was rewarded more than efficiency and this value was reinforced by training programs. When there is a need to change the way an organization works. keep them out of trouble. An Example of "Managed" Culture Change A classic example involves a regulated utility for which de-regulation meant a change in how they do business. Generally. What Is Organizational Culture? An organization's culture is multi-layered. it is always the case that. frequently necessary in our current environment of major technological innovation and globalization. and designing an implementation plan. Many people talk about "resistance" as if it were an irrational response to be overcome with rational persuasion. i. from an individual's point of view.

effective change management involves rewarding success. If people use such techniques in a systematic way. The key here is consistency--if a leader points out successes of only certain people. In this way. interpersonal relationships and even financial success. Another resistance management option is to place strong leaders who are accepting of changes as project managers. The effects of change impact morale. employees will end up divided. readiness assessments are one of the primary techniques for managing change effectively. Write the techniques for managing change effectively. Change management thus is a big concern. but only reassign priorities. they also created inventories of all the old ways of thinking and doing that would have to change. They actually developed a humorous system for "catching" each other in the old ways and rewarding the new. especially in the business world. Feedback and Progress Evancarmichael. Success According to Evancarmichael. Simple acknowledgment or thanks for what someone has done well can make a lot of difference in the attitude of employees regarding change.com. 2.original intent to be a good neighbor. Feedback also gives administrators a chance to monitor progress and determine whether action plans related to the change are working properly. productivity. then transitions at home or in the workplace may be much easier because the anxiety or ill feelings change produces are lessened. For example. but they also may include interviews with employees and administrators to analyze what is needed to accommodate the change.) As people at every level of the organization participated in meetings and activities to identify new goals and practices. Resistance Management Resistance management basically means that you prepare yourself for anything anyone might do in order to stop the change. Readiness According to change-management. .com states that feedback and progress are important for change management. These assessments may include evaluations of inventory or other resources. Controlling the effects of change means that a person has to find techniques by which to manage change effectively. Readiness assessments measure how prepared employees and administrators are to handle modifications. People may be more likely to accept change if they have a chance to tell leaders their thoughts and concerns. what might have become the source of serious resistance became a source of comraderie and com mitment to the new way of doing business. Other forms of celebrating success might be announcing positive outcomes on a bulletin board or holding a company picnic if a goal related to the change is met. you might set up a policies and procedures manual that clearly states what the consequences of not following the changes are.com.

when done in an open forum. After allowing some . If they fail to share the information with the rest of the employees. that when change works. in change management. • Even if employees cannot affect the overall decision about change. Training One of the biggest complaints people have about change is that they are not equipped for it. and the goals related to the change. an effective change management technique is to hold formal or informal meetings in which leaders can explain why the change is taking place. Discuss the employee involvement in change management. In any change. the organization has gone out of its way to try employee involvement. If a small group makes the change management plans. Employees who are positively working with the change need rewards and recognition.Explanation People may be more receptive to change or handle it more appropriately if they have a logical understanding of why the change is happening. a small group of employees learns important information about change and change management. as much as possible. Such explanations. a computer programmer might resist a requirement to write code in Java if he has dealt primarily with HTML. the potential impacts of the change. in the change process. • Involve all stakeholders. however. as early as possible. decisions. 3. and hurt. involve each employee in meaningful decisions about their work unit and their work. you open the door in your change management process. it is impossible to involve every employee in each decision. which creates a sense of unity. and adjust to the new ideas. Thus. think about. Employee Involvement for Effective Change Management • Create a plan for involving as many people as possible. and employees who will feel the impact of the changes. process owners. for misunderstanding. • Build measurement systems into the change process that tell people when they are succeeding or failing. For example. and implementation of the change. especially ones that affect a complete organization. resistance. employees affected by the decisions will not have had needed time to analyze. the remaining employees will have trouble catching up with the learning curve. planning. at any stage of the process. Providing adequate training lets individuals meet the challenges the change requires and eliminates the excuse that the change cannot be implemented for lack of knowledge or preparedness. If you leave employees behind. Often. in the learning. This sense of unity may help the group turn toward the change with a common purpose. Respondents to my change management questions over the years suggested. Provide consequences in either case. give the impression that all members of the group are valued equally.

during your change management process. negative consequences for failure to adopt the changes. energy.time for employees to pass through the predictable stages of change. Help employees feel as if they are involved in a change management process that is larger than themselves by taking these actions to effectively involve employees in change management. are needed. . You cannot allow the nay-sayers to continue on their negative path forever. affect the morale of the positive many. The key is to know. enough is enough. they sap your organization of time. and focus. when to say. and eventually.

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