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    | CHAPTER ‘Te survival of mankind will depend... on the ability of people who think differently to act together. Organisational behaviour in global and diverse contexts i ot tt Learning outcomes 1. Explain the dynamics of a four-tier model of forces for change. 2 Explain how the seven forces for change in the global arena may impact the strategic choices of organisations. 3 Explain how the four different management styles in dealing with cultural differences may influence the management of diversity in organisations 4 Identify the forces for charige that are active in the regional arena, and explain how they can affect organisational behavour in multinational organisations 5 Identify the forces for change that are operational in the national arena, and explain their relevance in an organtsational-change context. 6 Identify at least four organisational forces for change, and explain their effect on individual, group and organisational levels. Va va voom Woolworth: The economy may be weak, and the consumer depressed, but Woolworths is showing litle sign of rt as the retailer takes market share in both food and clothing and continues its expansion drive into the rest of Africa and Australia In its quest to be the leading fashion retailer in the Southern Hemisphere, the recent past saw Woolworths initiate the acquisition of David Jones, the oldest department store in Australia (concluded in August), buy back its franchises in Botswana, Namibia and Ghana; and introduce its new brands Witchery and Mimco into the local market Food is an equally important thrust, and in the year to June 2014 the group. invested R1.3 billion in new space, mast of it nto building bigger and more food stores, the fastest growth in Woolworths’ history At the same time, Woolworths managed to deliver strong results Turnover grew 14.4% to R397 billion and adjusted profit before tax rose 20 1% to R4 4 billon Headline earnings per share increased by 90% t0, 365 2 cents per share and adjusted HEPS grew 17 1% to 398 cents per share Adjusted earnings excludes transaction costs of R182 milion relating to the acaui= sition of David Jones and the minonity interest in Country Road, and the net impact f unrealised foreign exchange losses of R139 milion — all stated before tax. Return of equity, while not the highest in history, was very high at 46 7%. The biggest division. Clothing & General Merchandise, grew adjusted profit by 11.7% to R2.0 billion in promotion-driven market Woolworths Food business is fast catching up, and profit by 14.8% to R1 3 billion, following a year of faster-than-the-market growth. If fact, Woolies Food has grown ahead of the market every month since 2011 "My good friend Whitey says the only reason I'm growing is that we are so small quipped CEO lan Moir at the presentation. "Buti'll take that At this rete, small becom big quickly Whitey, we will get there.” The group 1s investing heavily in bigger supe markets, in new distribution systems and in increased promotional actrty in order drive home the point that ts basic food ranges are not expensive. This dnve, and capil expansion continued into the following year -AFPIGettyImagesGallo Images exths' Country Road group ‘The once-troubled Country Road group, which includes Witchery, Mimco, Country Road and Trenery, traded well ahead of expectation, contrjyuting almost R900 milion {0 group profit 50% more than the previous year. Financldl Services stayed the course ina tough credit envronment, growing the book by 13.7%. But impairments (including collection costs) also increased from 3% to 4 8%. As 2 result, profit before tax was flat at R181 milion. Woolworths’ business in Afnca also continues to trade well. The company has lever- ged South African capabilites into Africa and continues to focus on costs, productivity and opportunities for further growth. “These are exiting times for Woolies,” said Mery! Pick, retail analyst at Old Mutual Equities. “Australian sales (Country Road) now count for 20% of profits and are on the rise. And their high-end Australian brands, Witchery and Mimco, will bolster SA clothing sales now that they have been launched in Wool- worths stores,” “These results are extraordinary,” said Shane Watkins, a director of All Weather Capital. “To understand them you need to compare this 52-week result with 52 of last year's 53 weeks. Profits before tax are up by over 20%. They have gained market share in food and clothing, This is @ result that comes from a strong management team that hhas executed well on its strategy.” ‘While the acquisition of David Jones — which transforms Woohworths into a leading Southern hemisphere retailer with combined revenue of R58 billion ~ diverts some of management's attention, it wil not come at the cost of expansion into Africa, or divert attention away from becoming a ‘big’ food business, or any other strategic objective “These objectives are not mutually exclusive,” stressed Moir 4 1 Introduction are coming [driven by online retail and competition from Northern hemisphere retailers) This market and the Australian market will look quite different in five years’ time, and if you don’t think that, then you have your head in the sand,” With the deal now in the bag, Woolworths’ management is now working closely with David Jones in a bid to unlock quick productivity gains. “We must drive towards single sourcing for the South African and Australian businesses. It will make an enor mous difference, enabling us to drive down the cost of goods and increase margins. In this way, we will be able to compete effectively,” he said, Woolies $2 billion acquisition is funded through a mixture of cash, debt and the sale of shares. Details on the rights offer have not yet been distributed. According to management calculations, the key initiatives at David Jones are expected to deliver synergies of at least R1.3 billion per year within five years ‘No one expects that turning around the huge, ailing retailer wil be simple. But, “if | anyone can do it itis lan Moir," said Pick. “He knows Australian retail very well ard he | has proven that he can turn businesses around. Under his leadership, Country Road and Woolworths SA have undergone remarkable transformations. Woolies is defensively | wai: building up scale in the southern hemisphere as international players bring compet- ¢ tion," she says. The share price rose 1.9% to R79.05 on the day. Source: Sasha. Pantng, Moneyweb Tecay_tp:/Redayamoneyweb.co 2lartcl php 2ia7721708cide 2014-08-294 VAALEIO6UK ] | { “The acquisition of David Jones was a defensive position against the changes that | ae How would you describe Woolworths’ strategy for taking its business into Aftica? Why did Woolworths acquire David Jones, the oldest department store in Australia? . ‘And why in Australia if its focus is actually on growing the Aftican market? What ial role does Jan Moir’s leadership play in Woolworths’ globalisation strategy? These are some of the questions you need to confront in order to develop a systematic under- standing of organisational behaviour. “Table 2.1 demonstrates how multinational and South African companies differ in terms of doing business in global and diverse business contexts. Table 2.1 Contrasting global and South African trends in doing business Global trend| Enecacs * Muttinational companies are used to * South African companies have only d tracing on a mult-national and a global | recently entered the global arena, j scale. = Allarge proportion of SA companies | These companies grow and prosper due | isnot ready to engage international =| to their ‘world-ciass' performance. competition effectively : Such companies are used to competition | + Although part of a wider, culturally diverse | ‘and culturally verse contexts. community, some SA companies sil have ‘Most of these companies have diverse largely homogeneous workforces, workforces | * Diversity in the workplace is mainly enforced | + Such companies have fully explored the bby means of employment legsation benefits of cuturaly diverse workforces. institutions are not fully aware of the potential benefits of having a diverse workforce. -Matemenecogmeener | 4 | 44. Explain the dynamics of a four-tier mode! of forces for change. 2 Explain how the seven forces for change 1n the global arena May impact the Strategic choices of organisations. Chapter Organisational behaviour in global and diverse contexts Forces for change Organisations, as in the case of Woolworths above, are constantly subjected to forces {for change to which they have to respond in a strategic way. These forces for change are cither external or internal to the organisation, and they drive change processes in the organisation. The four-tier model presented in Figure 2.1 shows a way of cate~ gorising and grouping these forces for change. Organisations have to deal with these forces strategically, and this will have an impact at various levels (individual, group and structural) of the organisation. Global arena Regional and subregional rena ‘National context Organisation + individual level © Groupheam level Organisational level Figure 2.1 A fourtier model of forces for change “The first level in the model refers to the global arena. Forces for change on this level ‘operate globally, for example, an increase in the oil price by OPEC affects countries all over the world. “The second level refers to the regional and the subregional arena. Forces for change ‘on this level are operative in a specific region (for example, Aftica) or subregion (for ‘example, sub-Saharan A\ica or Southern Aftica), and are characteristic of that region or subregion. Examples of such forces are regional or elvil wars, drought or famine. “The third level refers to the national and the provincial arena of a country. Perti~ nent issues, relevant to the specific country (for example, poverty issues and restrictive labour legislation in South Africa) or province (for example, transport and housing issues in Gauteng) may influence organisations in specific ways. 1ssues on this level may refer to demographic characteristics of the population, such as education and unemployment levels. ‘The fourth level refers to énfernal (organisational) forces for change. These forces come from within the organisation (such as organisational culture) and manifest on the individual, the team, and the organisational levels. The nature of these forces for change will be discussed in more detail in the following sections. Forces for change in the global arena ‘The world is becoming one lange market place, in which boundaries between countries are becoming increasingly vague and permeable. This phenomenon is often referred to 2s globalisation, Owing to developments in the ICT (information and communi- cation technology) sector (such as the electronic media, the Internet and information technology (IT), it has become possible and is becoming common business practice to trade in different time zones around the clock. More and more Southern Affican 1 Introduction trade apreements Countnes center into trade agreements to enhance ‘rade withun or between regions, and to regulate unfair competition in the international markets, International diversity Workforces are no longer homogeneous in nature, but are becoming increasmaly diverse, and managers are frequently sent to establish business ‘operations in countries with customs and cultures different from their own, companies are listing on other stock exchanges to gain better exposure on the inter. national market. Unfortunately, the direct benefits of increased exposure and trade are mainly available to highly skilled people in the upper levels of organisations and, not to the unskilled and the unemployed. Globalisation is driven mainly by technological inventions. The milestones along its development cycle trace the development of technology. Technological inventions, such as GPS-cnabled devices, fuel-efficient hybrid cars, Apps for mobile phones and smart phones, wearable electronic devices, and so on, roll on in ever-shortening waves. Each wave has a vast effect on societal development, and innovations in the fields of bioengineering and biochemistry have already started to make waves. One of the consequences of globalisation is that a country’s economy is opened, up to international competition. Governments find it increasingly difficult to regulate international competition through protective measures. Businesses have to become more competitive and raise their products or services, 2s well as their customer services, to ‘world-class’ standards. Owing to better and wider exposure to international trends and developments, not least through social media platforms, consumers are acutely conscious of quality, and service. As a consequence, they are constantly forcing rising customer expecta stions and demands on manufacturing and service organisations, Countries in specific regions, for instance the European Union or the Southem ‘African region, enter into regional trade agreements to enhance trade within or between regions, and to regulate unfair competition in the international markets. The World Trade Organisation (WTO), the Southern African Development Commu- nity (SADC) and the trading agreement of Brazil, Russia, India, China and South Africa (BRICS) are examples of such agreements. Due to increased international trade and competition, companies’ workforces and the nature of work are also changing. Workforces are no longer homogeneous in nature, but are becoming increasingly diverse. Managers are frequently sent to establish business operations in countries with customs and cultures different from their own, This is referred to as international diversity. Here they have to operate in different business contexts with ‘other’ economic and political realities. Expatriate managers often have to deal with a workforce that is not only different in customs and language, but also in work habits and work values, ‘The nature of work is also changing. Work becomes increasingly technology and information-driven, and reliant on computer and information technology. Work teams function virtually, and it is not uncommon for team members never to have met in person. The profile of the workforce is also changing due to more women having entered the formal work sectot in the last 50 years. The challenges that dual ‘career couples face are well known to many South African couples of which both partners pursue professional careers. South Africa, like many other countries in the world, is also experiencing vast ‘changes in society. Education levels are improving all over the world, and women now represent about 50% of the international student population. Young people are delaying marriage, while a large proportion of marriages are ending in divorce. South Aftica has @ notoriously high divorce rate of about 66%, and single-parent house- holds are a common phenomenon, both in South Africa and internationally. South Africa, like most countries in the developing world, is also experiencing political changes and changes in legislation to which companies have to respond. ‘The future can no longer be predicted merely by extrapolating current trends. ‘Changing patterns in the world economy have major consequences for national economies. The world has seen stock market crashes, the fall of the oil price, turmoil in the Arab world, economic woes in the European Union, a slowdown of Chinese Explain how the four different management styles in dealing with cultural differences may influence the management of diversity in ‘organisations. Chapter ‘Organisational behaviour in global and diverse contexts economic growth, suicide bombings and terrorist attacks, secession attempts by ethnic minorities, earthquakes and tsunamis. A sudden hike or fallin oil prices has drastic effects on industries, from the motor industry to transport and air travel, while the 9/11 attack fundamentally changed the landscape of the sir-travel and ‘tourism industries. “Markets are sensitive to these changes and company executives have to respond to the changing markets either in a reactive or in a proactive way. Companies usually adjust their strategic intent accordingly. These strategic changes may result in changing company objectives, policies and structures that could have cascading effects on groups, teams and individuals in organisations. ‘Veldsman and Roodt,' from U's Centre for Work Performance, found in their research that South Affican companies perceive the following forces for change as most important: sociopolitical transformation, different client service delivery mechanisms, changing regulations/legislation/agreements, technological innovation and changing customer expectations/demands. Apparently, the more successful companies have already addressed these forces for change in their macro-environments,and are currently ‘grappling with changes in their immediate operating environments. The less successful Companies are seemingly stil struggling with forces in their macro-environments Dealing with the global challenge ‘The World Economic Forum (WEF) has developed the Global Competitiveness Index (GCI) and they define competitiveness “as the set of institutions, policies and factors that drive productivity and therefore set the sustainable current and medi~ ‘um-term levels of economic prosperity”? The GCT provides a holistic overview of 12 pillars that are critical to driving productivity and competitiveness, and groups them into three broad categories, as shown in Table 2.1. South Africa's respective ranking out of 148 countries appears in brackets next to each category: Table 2.1 SA's ranking in the WEF's productivity and competitiveness categories Renee ances 1. Basic requirements (95) + Institutions (private and public) (41) + Infrastructure (66) + The macro-economy (95) + Health and primary education (135) 2. Efficiency enhancers (34) Higher education and training (89) Goods market efcency (28) | * Labour market efficiency (116) | Financial market development (3) Technolosical readiness (62) Market size (25) 3. Innovation and sophistication factors | » Business sophistication (35) an innovation 38) Each of the mentioned pillars consist of a number of different indices.* It appears as if South Affica’s health and primary education, higher education and training, as well as infrastructure are flagged as most problematic, some of which are the most important factors for sustainable economic growth. On the other hand, South Africa appears to be performing well in terms of financial market development, goods and market efficiency, as well 2s market size. 1 Introduction parochialism An ‘outlook that managers have, who view the ‘world soley from their own cultural perspective and do not realise that other people have ciferent ways of working and iving ethoacentric views An ‘ethnocentne manager sees ali countres (and ‘their cultures) as being basically the same, polycentric ‘views Managers with polycentvic views tend ‘to acknowledge the advantage of host- country managers for all but the most senior positions ‘geocentric views The ‘geocentric view global ints focus and recognises cultural Gfferences. tao recognises that no single culture or management approach is superior and that both similarities and differences exst between cultures 46 ‘A review of recent Global Competitiveness Report indicates that South Africa is not responding well ro most of the forces for change. South Afvica initially showed progress: the ranking improved from 43rd in 2000 to 39th in 2002, but then fell back ‘to 40th in 2005 and then to 53rd out of 148 countries in 2012. The most ‘problematic factors for doing business in South Africa were identified by respondents as an inad- equately educated workforce, restrictive labour regulations and an inefficient govern sent bureaucracy. These factors pose some clear (private and public) management challenges. Tnrespective of their origins, managers who operate in cultural contexts that are different from their own, adapt their management styles to the cultures in which they operate. These variations in management styles have a profound effect on their success as managers in different cultural contexts. Robbins, Millett, Cacioppe and Waters- Marsh? took a closer look at the variations in management styles that make some expatriate managers more effective and successful than others. “Managers who view the world solely from their own cultural perspective are said to suffer from parochialiem. These managers do not realise that other people have different ways of working and living. We sce this most explicitly in North Ameri- ‘cane’ knowledge of foreign languages. While most Europeans, Asians, Afticans and Latin Americans can speak at east one other language (usually English) beside their ‘own, most Americans are entirely monolingual. Japanese managers also tend to suffer from parochialism.” It seems that protected (or isolated) local economies and trade agreements have entrenched these views. Perlmuttes® developed a framework that distinguishes between three managerial attitudes with respect to diverse contexts. He labelled these: ethnocentric, polycentric and geocentric. * Ethnocentric views: An ethnocentric manager sees all countries (and their cultures) as being basically the same. Foreign operations are considered mnerely as branch offices of the parent organisation. Managers with highly ethnocentric views are more likely to see foreign customs as inferior and unwanted. Compa nies with ethnocentric views tend to reserve management positions for their‘ows! people and effectively bar foreigners from these positions. + Polycentric views: Managers with polycentric views tend to acknowledge the advantage of host-country managers forall but the most senior positions. British companies commonly use this practice when establishing operations in foreign countries. Local managers who ace familiar with local customs and conditions are employed to assist in these operations. This is still the dominant view in most British-dominated companies. © Geocentric views: The geocentric view is global in its focus. Although it recog- nises cultural differences, it also recognises that no single culture or management approach is superior (and as a consequence, dominant) and that both similarities and differences exist between cultures. In companies in which this view domi- nates, any competent manager (regardless of his or her origin) can rise to the ‘most senior positions of the company, even in the home country. Research has shown that expatriate managers who failed in foreign operations ‘were usually those with ethnocentric views. These failures were closely linked to the managers beliefs that the cultural values of the parent organisation's home county were superior to those of the host country. ‘Cultural ignorance cuts both ways. For various reasons, most countries’ popula- | tions have become increasingly diverse. Managerial sensitivity to cultural differences (international diversity) does not only apply to foreign operations across borders, but is equally important in the home country, where managers have to deal with a= 4. identify the forces for change that are active in the regional ‘arena, and explain how they can affect ‘organisational behaviour in ‘multinational organisations. Chapter Organisational behaviour in global and diverse contexts increasingly diverse workforce. This aspect is especially relevant in the South Aftican ‘management context, where we have to deal not only with global challenges, but also with the management of intranational diversity in our own backyard. Forces for change in the regional arena Xf you Took around you, its hard to avoid seeing the influence of multinational (also referred to as ‘transnational organisations. These are organisations that maintain fignificant operations in two or more countries simultaneously The McKinsey Global Institute reports that about three-quarters of today’s 8 000 large companies ve based in developed regions, and they receive 76% of the global consolidated revenue of all latge companies worldwide. While the USA, Canada and Western Europe aceount for 11% of the world’s population, these countries are home to more then 508 of {eres company headquarters and they receive 60% of lage company revenue glob ally? Managers of multinationals face diverse political syrtems, laws and castores Bic, and especially the Southem Alfican region, is confronted with complex and daunting challenges on social, politcal and economic levels that have » deect impact on global economic participation. When Atica is considered as a whole, the many serious challenges it faces become apparent. Abia isa vast continent inhabited by more than 1.166 billion people who speak 200 different languages. Many counties on the continent are not technologically eine countries are ill ruled by dictators, However, several Millennium Development {Goats (MDGs) were set for the word and for specific regions to address these prob lems, According to South Afticas 2013 country report," these MDGs areas follows 1. Eradicate extreme poverty and hunger 2. Promote universal primary education. 3. Promote gender equality and empower women. 4. Reduce child mortality. 5. Improve maternal health. : 6. Combat HIV/AIDS, malaria and other diseases. 7. Ensure environmental sustainability. 8, Develop a global partnership for development. Ti: Accelerated progress and bolder actions sre macmet in many areas An assessment of how the world is Performing in terms of the MDGs is shown as follows, As can be seen, despite certain improvements in some of these goals, there ate stil many areas that need major improvement. Our attention needs to focus on disparities, which often stand in the way of further improvements. * Environmental ‘sustainability is under severe threat: This demands a new leve! Of slobal cooperation. The growth in global emissions of carton dioxide (CO, is accelerating, and ‘emissions today are more than 46% higher than their 1990 levels. Forests continue to be lost at an alarming rate. Overexploitation of marine fish ‘stocks results in diminished yields, More of the earth's land and Marine areas are under protection, but birds, mammals and other species are heading for extinction ‘at an ever-faster rate, with declines in both populations and distribution, 2 1 Introduction * Big gains have been made in child survival: However, more must be done to meet our obligations to the youngest generation. Worldwide, the mortality rate for children under five dropped by 41% - from 87 deaths per 1 000 live births in 1990 to 51 in 2011. Despite this enormous accomplishment, the 2015 target of » ‘wo-thirds reduction in child deaths has not been achieved, and more rapid prog. fess is needed. Increasingly, child deaths are concentrated in the poorest region, and in the first month of life. * Maternal deaths have not been sufficiently reduced: Most matemal deaths are preventable, but progress in this area is falling short. Globally the materng mortality ratio declined by 47% over the last two decades between 1990 and 2010, from 400 maternal deaths per 100 000 live births to 210. Meeting the MDG target Of reducing the ratio by three quarters will require accelerated interventions andl stronger politcal backing for women and children. * There have been improvements in HIV prevention and therapy: Access to antiretroviral therapy and knowledge about HIV prevention must expand, While new HIV infections are declining, an estimated 34 milion people were ving with HIV atthe end of 2011. The MDG target of universal access to antiretroviral therapy forall who need it by 2010 was missed, but further recuctions were reached by 2015. The ultimate goal is preventing the spread of HV, but knowledge ofthe ving and how t6 avoid transmission remain unacceptably low. * +Too many children are still denied their right to primary education; Between 2000 and 2011, the number of children out of school declined by almost half from 102 milion to 57 milion. However, progress in reducing the number of chi dren out of schoo! has slowed considerably over time. Stalled progress meant that ‘the word did not meet the target of universal primary education by 2015, * Gains in sanitation are impressive, but not good enough: From 1990 02011, 1.9 billion people gained access to a latrine, flush toilet or other improved sanita, tion facility. Despite these accomplishments, more rapid progress is needed to mest the MDG target. Stopping open defecation and instituting te right policies ae key * There is less aie! money overall: The poorest countries are most adversely affected by the reduction in aid money since the global economic downturn in 2009. in 2012, net ald dsbursements from developed to developing countries totalled §126 billion, This represents a 4% drop in real terms compared to 2011, which itself was 2% below 2010 levels. This decline affected least developed countries dispropor, tlonatel In 2012, bilateral official development assistance to these countries fell by 13%, to about $26 billion * Ruralurban gaps persist: Acces to reproductive health services and clean drinking water are ony two examples of the vast disparities between rural and urban popu lations. In 2011, only 53% of deliveries in rural areas were attended by skilled health Personnel, versus 84% in urban areas. Eighty-three per cent ofthe population without access to an improved drinking water source live in rural communities * The poorest children are most likely to be out of school: Children and adoles- Cents from the poorest households are atleast three times more likely to be out of school than children from the richest households. Girls are more likely to be out of school than boys among both primary and fower secondary age groups, even for girs living in the richest households. * Gender-based inequalities in decision-making power persist: Whether in the public or private sphere, from the highest levels of government decision-making to households, women continue to be denied equal opportunity with men to partic pate in decisions that affect their lives. ‘Source: The Milennium Development Goals Report 2013, p. 4-5, United Nations Chapter Organisational behaviour in global and diverse contexts Various Aftican leaders have pledged a continued political commitment to work collectively towards political stability in the region. They have put in place various policies, measures and strategies to address this problem. From 1990 tll 2012 South | ‘Afficas growth in GDP per capita showed a sharper growth rate compared to the | rest of sub-Saharan Africa This was a good indicator of South Africa's economic growth, However, since then, the massive strain on the power grid due to insufficient | power generating capacity in South Africa coupled with widespread strike actions, cepecialy in the mining sector, have hampered economic growth. There has also been a general slowdown in economic growth in developing countries, and the worldwide economic prospects were muted according to the UN's World Economic Situation and Prospects Report. i ‘Among the policy frameworks are economic reforms, civil service reforms, processes to broaden democratisation, the promotion of good governance and | increased accountability. The most notable of these policy frameworks have been | formulated and implemented in the Southern African Development Community (SADC) and form part of the New Partnership for Africa's Development (NEPAD). | “The SADC, in part, functions as a subregional trade agreement, while NEPAD is a | regional agreement that covers economic and political issues, among others. These efforts are joined by various institutions of the African Union (AU) and the African ‘Development Bank (AEDB), as well as a number of regional economic communities that are pursuing economic integration of the continent's subregions. The develop ment of Aftica is also a high priority outside the region and has been on the Group of Eight’s (G8) agenda since the Gleneagles Summit in 2005. (On the positive side, ince 1999, enrolment in pre-primary education has nearly doubled in sub-Saharan Africa to around ten million in 2007, On average, however, only 15% of children in the region were ensolled in pre-primary education in 2007, compared with one third across developing countries. In 2007, total primary school enrolment stood at 124 million, which is up by 42 million since 1999. From 1999 to 2007, the average net enrolment ratio (NER) in sub-Saharan Aftica increased from 56% to 73%. But much needs still to be done according to the MDGs. Many ‘companies, such as Sasol, have excellent basic education initiatives in this regard. Sadly, about 76 million people or 40% of Africa’ population live in extreme poverty as reflected in poor social indicators such ahigh levels of malnutrition, illit- racy, unemployment, declining life expectancy, and unsatisfactory access to services and infrastructure needed to sustain basic human capacities. Africa remains the most poverty-stricken continent where a large proportion ofthe poorest of the poor subsist ‘on less than US81 a day. Effort to alleviate this situation are hampered by pockets of civil strife or wars, illegal drug trade, government and/or political corruption and the spread of the HIV/AIDS pandemic. One of the positive consequences of Afficans poor living standards is that business organisations are becoming more involved in social development programmes. “The United Nations Human Development Index (HDI) warns that human development in sub-Saharan Africa has stagnated, while progress in other parts of the world has accelerated, widening the gap between the world’s richest and poorest countries. “In the 31 countries at the bottom of the list, 28 of whicl are in sub- Saharan Africa, a person can hope to live on average only 46 years, or 32 years less than the average life expectancy in countries of advanced human development, with 20 years slashed off life expectancy due to HIV/AIDS,” according to 2 UNDP press release. ‘A study conducted in all SADC member states between 1997 and 1998 revealed that gender inequalities contributed to poverty. It showed, for instance, that the 49 1 Introduction division of labour favours men over women. Moreover, girls are denied equal access to education, training and skills development opportunities. As a result, girls are more likely to get married carly, fill pregnant and become mothers, than to find employment. Under conditions of financial crises, when faced with the hard choice of whether to support a son or a daughter, the support will usually go to the son, Furthermore, many customary and traditional practices allocate capital and assets ts boys and men, and traditional land tenure systems are male-biased, so that inher}. tance of land is through the male member of the family or clan. Gender inequalities are addressed through relevant legislation (such as the SADC Protocol on Gender and Development” and the SADC Gender Monitor; which tracks progress on the aforesaid protocol), but companies also need to develop a culture that addresses inequalities and appreciates diversity. According to Rugubane,”? agriculture in the SADC region accounted for more ‘than 35% of regional GDP and about 13% of export earnings. However, agricul- ‘ture’s contribution to GDP was less than 10%. On the other hand, industry and services employed about 30% of the labour force, but accounted for about 90% of the GDP. Apart from showing the structural distortions and imbalances of the region’ economy, these discrepancies indicate that a large proportion of the labour force is under-employed, and therefore vulnerable to poverty. With such a narrow economic base, the individual economies of most countries in Southern Affica are ‘ot internationally viable and competitive because they are unable to benefit from the required economies of scale, They are also unable to deal effectively with constraints ‘0 intemational economic competitiveness. These constraints include uncompeti- tive industries, emall markets, inadequate infrastructure, undeveloped financial and capital markets, and lack of modern technology and skilled personnel In South Aftica, legislation focusing on a national qualification framework and on skills development was promulgated to address skills shortages at lower levels. But the over-bureaucratised Sectorial Education and Training Authorities (SETTAs) increas ingly attract criticism from different stakeholders, because they fail to deliver the ‘uch-needed skills that constitute some of the critical building blocks for economic growth in sufficient quantities. However, companies can and do also contribute to skills development through accelerated development programmes at supervisory and ‘management levels. Regional and subregional trade agreements National boundaries are being blurred by the creation of regional cooperative arrange- ‘ments. As mentioned above, the most notable are SADC and NEPAD. SADC was established in April 1980 by the governments of nine Southern African countries and transformed in August 1992 to include 13 member states of Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. The objectives of SADC. are to achieve development and economic growth, alleviate poverty, enhance the standard and quality of life of the people of Southern Africa and support the socially disadvantaged through regional integration. A further objective is to promote and ‘maximise productive employment and utilisation of resources in the region.2* SADC also recognises the economic importance of the Southern African region to global ‘trade and development. NEPAD is based on a firm and shared conviction that Aftican leaders have 2 pressing duty to cradicate poverty and to place their countries, both individually and collectively, on a path of sustainable growth and development. South Africa’ former president Mbeki, president Obasanjo of Nigetia and Algeria's president Boutefika, Proposed the Millennium African Plan, and Senega’s president Wade presented his 5 Identify the forces for change that are operational in the national arena, and explain their relevance in an organisational- change context. Chapter Organisational behaviour in global and diverse contexts ‘Omega Plan. The two plans were merged into the New African Initiative, which later ‘volved into NEPAD. It highlights peace, security and good governance as conditions of sustainable development, with emphasis on ‘rade not aid’. It has been estimated that, to fight poverty, Africa needs a high growth rate that is above the currently recorded rates. To sustain this growth, investments of an estimated $64 billion a year will be required. The bulk of this $64 billion will have to come from the private sector. In this regard, the NEPAD business group was established to act as a medium between governments and the private sector.” Private sector companies can ensure the success of the NEPAD initiative by providing financial and project management skills and experience. South Africa's medium-term strategic framework (MTSF) “8 ‘More rapid private sector investment is critical for higher growth, as the private sector ‘accounts for 70% of production ahd employment. The National Development Pian (NDP) indicates that South Africa needs to increase its level of investment to at least 25% of GDP. To achieve this level of investment, the level of savings must also increase, coupled with creating conditions, favourable to foreign direct investment (FD). The MTSF includes actions aimed at achieving an economic environment that encourages business investment and rewards competitiveness, especially in sectors that can catalyse longer-term growth and job creation. Government will increase its engagement with business to unlock a private-sector initiative, build investor confidence, prométe trust, ‘and seek long-term commitments to implementation of the NDP. These engagements willbe led by the Presidential Business Working Group. Some of the targets in the MTSF for growing the economy and creating jobs in South Africa are: increasing the investment rate to 25% of GDP increasing public sector investment to 10% of GDP. adding 10 000 megawatts of electricity increasing employment and reducing unemployment to 14% increasing the share in household income of the poorest 60% of households to 10%. increasing research and development investment to 1.5% of GDP —a 300% increase in the rend value of investment compared to 2013, ‘Source: Retrieved fom http:hwnvesanews.govzasouth-arcanedum-term-stategi-framework-2014-2019 Forces for change in the national context Can the complexities and challenges facing South Aftica be separated from broader international developments, as indicated in the discussion on global and regional forces for change? For South Africa to survive in the global arena, efforts will be required from all its citizens, especially the stakcholders in those organisations that deliver the goods. A major challenge in this segard is the need to balance the inherent intricacies and tensions resulting from our history of unfair discrimination and inequality, with the need to stimulate and develop the economy.” Formal business is conducted fom high-rise office buildings using state-of-the-art technology, while ‘on the pavements below, vegetable hawkers from informal settlements sell their bags of potatoes and onions. Reconciling these two dynamic realities of the informal and formal economies representing inequality and growth respectively, also referred to as the ‘gap between rich and poor’~ is 2 major challenge. We therefore need to understand the nature of the forces for change at the national level and how these will impact the effective running of business organisations. 1 Introduction Demographic profile of the South African population South Africa is a developing country, and therefore demographic trends have critical implications for labour relations and the labour market. All demographic statistics referred to below were extracted from the 2013 report compiled by Statistics South Africa (Stats SA). Stats SA is the official body that, in terms of the Statistics Act, No. 6 of 1999, is authorised to collect and publish census statistics every five years, South Affica’s total population as per the 2013 estimates was 52.982 million. ‘The Northern Cape is geographically the largest province (29.7% of the country’s total), yet its population of 1.163 million is the smallest of all the provinces, In contrast, Gauteng covers the smallest area (only 1.4% of the total), but the second largest population (12.728 million). KwaZulu-Natal is also a densely populated province, with 10.457 million people. Almost 80% (42.284 million) of South Africa's popu- lation are African (black), approximately 4,602 million (8.7%) are white, 4.766 million (9%) are coloured, and 1.329 million (2.5%) are Indian/Asian All natural resources are scarce, and, being mostly semi-desert, South Africa cannot sustain the current population growth rate. Many of the problems currently facing the country are related to population growth. These include housing shortages, limited medical services, relatively slow economic growth, insufficient power-generating capacity, and 80 on. Companies can do more to address the problem of population growth. “The age distribution of the population still shows the traditional pyramid struc- ture found in developing countries. There are slightly more children (5.29 million) in the age category 0-4 years” than in any of the other age categories, which show smaller numbers as the age categories increase. Furthermore, South Africa has a young and expanding black population, where 29.2% of the population is younger than 15 years.* South Africa has eleven official languages. Zulu, the first language of 23.8% of the population, is the most commonly spoken, followed by Xhosa (17.6%) and Afti- kaans (13.39). Despite the fact that English is the mother tongue of only 8.2% of the population, it is widely understood and is the second language of most South Afticans.” It is also the common business language. Nevertheless, businesses should try to accommodate the diverse language profile of their staff and customers. In terms of education levels, the General Household Survey (GHS) 2013 indi- cates that 73,5% of learners between the ages of five and 24 were attending educa- tional institutions. The primary reason for prematurely leaving school remains ‘2 lack of money’ as reported by about 25% of the school leavers.” We have already mentioned that private companies can and do contribute towards eradicating adult illiteracy. At the higher education level, 740 893 students were enrolled for tertiary education. Afticans between the ages of 18 and 29 who make up 66.4% of the total tertiary enrolment, are still relatively underrepresented (3.2%) compared to 9.2% Indians/Asians, 18.7% whites and 3.1% coloureds.** For the purposes of the census, the unemployed were those between the ages of 15 and 65 who said they were unemployed and were available for work, but had not taken active steps to find work in the four weeks prior to the census interview. Employment statistics in the first quarter of 2014, compared to the previous year (QI (0f 2013), showed that employment increased by 496 000 largely due to an increase of ‘538 000 jobs observed in the formal sector. Job losses were observed in the agricul- tural industry (55 000) during the same quarter. The number of unemployed people increased by 205 000 over this period. This brings the total number of unemployed to 5 067 000 million (an unemployment rate of 25.2%) and the total economical inactive population to 15 055 000 million. The labour force participation rate is 2 disturbingly low 57.2% and the employment/population ratio (absorption rate) @ ow 42.8%." The concern here is that a very small portion of the economic active Organisational behaviour in global and diverse contexts population carry the tax busden to maintain government expenditure, which is not sustainable in the long run, Unemployment is a social problem with many undesired outcomes. Itis therefore of the utmost importance that an integrated initiative (private and government) is launched for curbing population growth and for creating employment opportunities (refer to the MTSF above). Social and economic issues We took demographics as our departure point for analysing forces for change on a national level. However, numerous socioeconomic factors play an equally important role, and some of these will now be introduced. South Africa is classified as an upper-middle income country. However, due to past apartheid policies, income distribution is extremely skewed. The number of people living below the food poverty line (FPL — i.e. below R321 per capita per month as at 2011) increased between 2006 and 2009, before dropping in 2011 to 10.2 million people (roughly 20°2% of the population). Most households in South Africa continue to rely on incomes from salaries. Salaries (64.7%) and grants (45.796) remain the main source of income for households on a national level. 78.5% and 74.8% of households in the Western Cape and Gauteng respectively, received salaries as the main source of income, as opposed to 60.8% of households in Limpopo and 58,7% of households in the Eastern Cape that received grants as the main source of income." ‘Challenges that have reached critical levels in South Africa are to create the right climate for economic growth and job creation. Since the 1960s, South Africa’s economic growth has declined, and this trend was exacerbated by politcal oppression and the consequent lack of foreign and national investment, low productivity, strikes, stay-aways and sanctions. Under pressure, the government initially introduced the RDP as an economic growth strategy, followed by a macro-economic strategy for Growth, Employment and Redistribution (GEAR) in 1996, which was then substi- tuted by the Shared Growth Initiative of South Africa (ASGISA) that aimed to maintain a growth rate of 4.5% until 2009. The current annual growth rate is less than 2%, Owing to current problems with the qualiyy and quantity of electricity supply, the inflexibility of the labour market and othe problems mentioned earlier, it seems that these growth targets are becoming more difficult to attain. Ir appears as if the overall living conditions in South Africa are improving. Berween 2002 and 2013, the percentage of households that lived in formal dwellings and whose dwellings were fully owned increased from 52.9% to 54.996. In the same period, the percentage of partially owned dwellings declined from 15.5% to 11.5%. About 12% of households had ‘other’ forms of tenure arrangements in 2012. At the time of the survey, 15.3% of South African households were living in ‘RDP*or state- subsidised dwellings, Some residents have, however, raised concerns about the quality of the roof and wall structures of these subsidised houses. ‘The percentage of households that have access to improved sanitation facilities (cg, flush toilets or pit toilets with ventilation pipes) increased from 62.39% in 2002 t0 77.9% in 2013. The percentage of households who had no access to toilet facilities or who used bucket toilets decreased from 12.3% in 2002 to 5.39% in 2013. Although 89.9% of South African houscholds had access to piped water in 2013, only 77.5% of Limpopo houscholds enjoyed such access. This situation does, however, represent 4 marked improvement compared to 2002 when only 73.9% of households in this province had access to piped water. The percentage of households connected to the electricity supply from the mains has increased consistently from 77.1% in 2002 to 85% in 2013, 53 1 Introduction South Africa is further confronted by a ctisis in primary health care. Despite g reduction in maternal deaths from 189.5 per 100 000 births in 2009 t0 132.9 per 100 000 in 2012/13, we have not met our international commitment to cut maternal ‘mortality to 38 deaths per 100 000 births by 2015 as part of the global Millennium Development Goals (MDGs). ‘Many of the issues mentioned above can be related to a relatively high popula- tion growth, Sustainable economic growth will only be possible if population growth does not exceed economic growth, and therefore also growth in the provision of ‘other facilities and services, such as schools and clinis. Economic growth is only possible under growth conditions mentioned earlier. This is perhaps the biggest chal- Tenge facing South Africa as well 2s sub-Saharan Africa, Intranational diversity In the previous discussion the macro-forces for change on a national level were emphasised. It is also important to to look at some of the micro-issues, referred to ag ‘intranational diversity’. Intranational diversity is synonymous with the term work- force diversity introduced in Chapter 3. In South Africa, diversity often refers to racial diversity. It is understandable that ‘ce is highlighted because it isthe key variable in the diversity equation. However, the South African Constitution’s Bill of Rights goes further: It stipulates that no discrimination is allowed on the grounds of race, sex, gender, sexual orientation, ethnic or social origin, colour, age, disability, pregnancy, zeligion, conscience, belie, cculture, language, marital status and birth. All South Africans must obey this law and, as the process of socioeconomic transformation continues, and diverse groups interact at all levels on an equal basis, the need for greater understanding of differ- ‘ences and similarities will become more evident. For the first time in South Aftica’s history, it has a Constitution that recog- nises the cultural and religious diversity of society, and no religion enjoys privi- lege above all others. South Africans now enjoy freedom of religion, belief and opinion, which means that they are free to follow the dictates of conscience. ‘This state of affaire brings with it sesponsiilites. It means that those who practise their religion or observe their cultural rituals must do so with due regard for the rights of others. In order to do so, they must learn about and come to understand the significance of the religious and cultural lives of their neighbours, for cultural diversity is best prac- ‘ised in an environment where there is tolerance and mutual respect. A further respon- sibility entails being conscious of the fact that all rights and practices must be observed and undertaken in the context of the values in the Constitution of South Africa.,® Major religions of Southern Africa ‘The following discussion of major religions in Southern Affica will give managers some insight into how people of different cultures view the world around them, * African Traditional Religion (ATR): ATR has a strong cultural base. The various ‘goups have diffrent rituals, but there are certain common features. A supreme being is generally recognised, but ancestors, or the deceased elders of the group are of fr greater importance. They are regarded as part of the community. The ancestors are rot gods, but because they playa key part in bringing about either good or il forrune, ‘maintaining good relations with them is vital.” The entire universe is viewed a8 a living system: tres, rocks, rivers and soil are all filled with living spirits. primary comerstones ae the creation of myths (accounts of how natural phenomena and social ‘customs came into existence), rituals (certain prayers are chanted to the ancestors on certain occasions) the meaning of sacred places and respect for life —as demonstrated. through the practice of ubuntu (of which you will earn more in a following chapter). Chapter Organisational behaviour in global and diverse contexts Judaism: Judaism is a way of life regulated by 248 positive commandments and } : 365 negative commandments. The code of conduct is based on the written law | (the five books of Moses) as developed in the oral law over a period of some 1.000 years.’The principle of reward and punishment presupposes free will. Mature j people are considered capable of making moral judgements, and therefore they are responsible for doing so. Comerstones of Judaism are the Brith Milah (a circumcision ceremony eight days after birth), the Bar Mitzvah (takes place when a boy reaches his 13th birthday), the ketuba (a written marriage contract) and kosher dietary laws. © Christianity: Christianity is built on the writings of the Jewish faith, and commenced with the death of Christ approximately 2 000 years ago. The Chris- tian belief bas been fragmented over the centuries resulting in various Christian churches with distinct characteristics. Christianity promises deliverance from the suffering of this world and amends for wrongdoing. Ivis a popular religion. Chris- tianity is very individualistic, with the main emphasis being on the salvation of the individual rather than on groups, families or society at large. Comerstones are the Christian Sabbath (different denominations hold church services at varying times on Sundays), Sunday schoo! instruction for young children, infant baptism. and/or the narning ceremony, confirmation (between the ages of 13 and 16 after attending religious instruction) and the first communion (commemorates the death and resurrection of Jesus Christ, who is believed to be the son of God). « Hinduism: Hinduism originated in India and is considered one of the oldest belief systems in the world. Central to Hinduism is the death and rebirth cycle of life, with its reliance on a strict caste system for the ordering of social life. For those who lead moral and righteous lives, practise situal cleansing and purification, and perform rituals of worship and meditation, each rebirth will be ata higher level in the caste system, ideally leading to a permanent union with the gods.*! * Islam: Islam is an Arabic word meaning ‘surrender, obedience and submission to God’. Islam was defined by the prophet Muhammad in the writings of the Holy Koran. All Muslims pledge total submission to a single God, Allah. ‘Suffering’ and ‘tragedy’ are the lessons from which all Muslims learn submission to the will of God. As such, Islam and the control of society by a selegtfew are often linked. The place of worship is the mosque, and Muslims adhere‘to strict requirements regarding personal cleanliness on 2 Friday by Muslim men, and the custom that the first words that a Muslim baby must hear are the name of Allah and the call to prayer. As soon as a girl reaches puberty, she is expected to dress modestly and cover hee hair: ® Buddhism: Buddhism was first taught in India by Buddha in the sixth century B.C. and recognises that suffering is the natural condition for all creatures. ‘Through good works, meditation and prayer, moral living and service to others, itis possible for the endless cycle of death and rebirth to be broken and Nirvana (oneness with the universe) to be achieved. Buddhism is more a philosophy of Jife than a religion.© ‘The vast majority (85.6%) of South Africans described their religious affiliation as Christian, while a further 5.6% said that they were not affliated to any religion in particular. Five percent of individuals subscribed to religions that were described as ancestral, tribal, animist or other traditional African religions. Muslims, who comprised 2% of the total population, are predominant in the Western Cape, KwaZulu-Natal and Gauteng. Hindus comprise about 19 of the population, but represent 3.9% of the population of KwaZulu-Natal. Whatever the religion, it will have a profound impact on a person's values, customs, structures and culture. Managers need to be aware of this if they want to manage diversity effectively. The variety of South Aftica’s people makes the nation unique. In business, asin life, we should be sensitive towards the role played by differ- ence, and seek common good. when taking your business into Keegan Africa ‘Mr Wilhelm Crous, the CEO of Knowledge Resources (a leading publisher of business ‘books in South Africa) is of the opinion that wherever investors and companies are discussing growth and expansion, Africa is at the centre stage. This large continent in which the US, China and India could fit in with space to spare for a few: European coun- tries; a population in excess of a billion and economic growth around 5.5% in 2014 and beyond, is becoming very attractive to investors, The interest is not only in the resources sector. international and home-grown brands are expanding across the continent, that is, Shoprite, Makro/Massmart, Standard Bank, Econet, MTN and Dangote, to name a few. There are few critical factors to consider before your organisation embarks on expanding into Africa, including marketing barriers, government policies on foreign investment, legislation and, most importantly, human capital developments. In order to conduct business in any country, knowledge about the Tespective coun- ‘tys‘human capital (HC) and labour force is imperative. Present and future HC trends need to be analysed and interpreted, and understood at both a national (macio) level and an organisational level. Here is a checklist of the research and data you need to gather in order to make sound business decisions when doing business in Africa 1. The country profile: Having an overview ofthe history and the geopolitical profile, business and crosscuttura! realities and governance of the country will give you the necessary perspective and will form a foundation for strategic business decisions. 2, Economic indicators: Knowing the GDP and structure of the economy, the largest

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