The Association on Employment Practices

and Principles (AEPP)

Proceedings of the
18th Annual International Conference 2009
ISBN 1-878583-64-6

Conference Theme:
Modern Workforce Challenges, Responsibilities and Rights
in the Global Community

September 29 – Oct. 1, 2010

San Francisco, CA

Edited by:

John P. Keenan, Ph.D

The Institute for Leadership and Global Education (ILGE)

www.aepp.net
© 2010 Association on Employment Practices and Principles (AEPP). All rights Reserved. No
part of this publication may be reproduced, stored in a retrieval system, or transmitted in any
form or by any means without the prior permission of the AEPP.

Published by the Association on Employment Practices and Principles, Orchard Park, NY, USA,
October 2010.

ISBN 1-878583-64-6

2
 AEPP 2010 Conference Proceedings

Table of Contents

Contents Page
i. Acknowledgments 8
ii. Letter from the President 9
iii. The Association On Employment Practices And Principles (AEPP) 10
iv. 18th Annual International Conference Organizers For AEPP 2009 12
v. AEPP 2010 Conference Program 14
vi. Call For Papers – AEPP 2011, 19th Annual International Conference 19

FULL PAPERS

1. Improving Organizational Performance 24

Ali M. Al-Khouri, Emirates Identity Authority, United Arab Emirates

2. Linking Leadership For Reducing Performance Inhibiting 38

Worldplace Dynamics: Implications for Organizational Effectiveness
Brian A. Altman and Mesut Adkere, University of Wisconsin-Milwaukee

3. Leaders and Listening: An Empirical Exploration of Nonprofit 46

Leaders
Jyoti Bachani, St. Mary’s College of California and Mary Vradelis,
Consultant, Second Wind Consulting, Berkeley, CA

4. The Determinants of Trust Among the Turkish Consumers in 53

Online Retail Banking (ROB)
Dababrata Chowdhury, SLM, University of Plymouth Business School,
Vipul Mudgal,,Orange France Telecomms,Plymouth, UK, Lynne Butel,
University of Plymouth Business School Drake Circus, Plymouth, UK,
and Murat Kasimoglu, Canakkale Onsekiz Mart University,Biga,Turkey

5. A Research Devoted to the Perception of University Students on 63

Diversity
Murat Colak and Guler Tozkporan, Dokuz Eylul University, Turkey

6. The Role of Situation Awareness (SA) in Command Decision 72

Making: A Phenomenological Examination of the Statue of
Liberty/Ellis Island Decision Makers on September 11, 2001
Diane H. Dayson and Jean Gordon, Walden University

7. The Incompatibility of the Dual-Concern Model and Conflict 79

Management Styles Scales
Serkan Dolma,Yagizhan Yaza and Oslem Yavas, Istanbul University,
Turkey

3
8. The Black Swans and Retirement Strategies: Is “Buy and Hold 85
Best?
Barry Doyle, Robert Mefford, and Nicholas Tay, University of San
Francisco

9. What Financial Risk Managers Can Learn From Six Sigma 91

Quality Programs
Barry Doyle, Robert Mefford, and Nicholas Tay, University of San
Francisco

10. Labor Reform Through Executive Orders and EFCA: The Impact 99
on Workers Today
Anne M. Fiedler, Barry University, and Mark A. Aeschleman, Caterpillar
Inc.

11. Business Education, Social Responsibility, and Non-Profit 108

Opportunities
Phil Man and Anne Fiedler, Barry University

12. A Hostile Sexual Environment: How Hostile Does it Have to Be? 115
Henry Findley, Eva Dodd-Walker, Lee Vardman, Ping He, and Robert
Wheatley, Troy Univesity

13. The Nature and Purpose of Decision Making 126

James R. Forcier, University of San Francisco

14. Long Term Incentive Plans: Not a Panacea for Executive 134
Compensation
William J. Heisler, Troy University

15. Temporary Staffing Agencies: State-of-the-Art Practices of 144

Personnel Selection
Ghardir Ishqaidef, University of Kansas

16. Modern Workforce Challenges: Leadership and Partnership in 154

Education
Marilyn O. Jenkins, Barry University and Jia Wang, Texas A & M
University

17. Succession Planning: A Modern Workforce Challenge in Public 162

Administration
Marilyn O. Jenkins, Barry University and Kirsten K. Loutzenhiser, Troy
University

4
18. Organizational and Career Expectations of Turkish College 170
Students
Tugba Karabulut, Istanbul Commerce University, Turkey

19. Teachers’ Cultural Values and Conflict Approaches 179

Aylin Kirisci and Ali Ilker Gumuseli, Yildiz Technical University, Istanbul
Turkey

20. Modern Workforce Challenge: Appropriately Evaluation 187

Employees” Job Performance
Jack N. Kondrasuk, Nick Slepnikoff, Justin Gomez, Jessica Peters, and
Danielle Castr, University of Portland

21. Facilitating Workforce Adaptation To Changing Global Work 195

Realities
Mitchell L. Marks, San Francisco State University

22. Is Glass Ceiling In Turkey Thicker Than It Seems? A Study of 203

ISE 100 (Istanbul Stock Exchange)
Zeynep Duren, Istanbul University and S. Ahmet Mentes, European
University of Lefke, Turkey

23 Changing Face of Women Workforce: A Qualitative Study on 210

Women Entrepreneurs in Istanbul
Zeynep Hale Oner, Dogus University, Istanbul, Turkey

24. Transactional and Transformational Leadership and Their 217

Effects on Individual and Organization
Marie-Elene Roberge and Ozge Ucan

25. Managerial Responsibility for Meritocracy – Perspectives on the 225

Pay System in Japan
Tomokazu Sakumoto, Okinawa International University, Japan

26. The Effects of Downsizing: A Case Study of an IT Company in 231

Turkey
Alaeddin Tileylioglu, Çankaya University, Turkey

27. Internalization vs Externalization of Human Capital Strategy: A 240

Trust Climate Perspective
Chih-Yuan Wang and Nien-Chi Liu, National Central University,
Graduate Institute of Human Resource Management, Taiwan

DEVELOPMENTAL PAPERS

5
28. Procedural Justice and Its Effects on Organizational Outcomes 250
Nida H. Afridi and Fatima Junaid, Institute of Management, Pakistan

29. Integrated Workforce Enrichment Solution for Modern 253

Workforce Challenges
Ripple Gupta and Sudhir Rai, Prin L.N. Weleingkar Institute of
Management Development and Research, Mumbai, India

30. The Status of Parking Lot Gun Laws: Annie Get Your Gun 1 258
Marsha Katz, Governors State University, and
Helen LaVan, Yvette Lopez, Wm Marty Martin, Charles Naquin, DePaul
University

31. Volunteerism and Gender in Terms of Ethics of Care 262

Cigdem Kirel and Ilke Oruc, Anadolu University, Turkey

32. Employees in Performing Nonprofits: Workers Adrift in the 266

Ephemeral Arts
Paul Lorton, Jr. University of San Francisco

33. Building Sustainable Capacity Development Through 270

Participatory Governance and Sub-National Capacity Development:
Why Development and International Support Failures in Africa?
Call for Action
Israel Jacob Massuanganhe, Center of Excellence in Public Policies
And Local Governance, University Agostinho Neto, Angola

34. The Impact of the Economic Crisis on Youth Employment in 275

Slovenia
Jasmina Pavlin, Mojca Bernik, and Miha Maric, University of Maribor,
Slovenia

35. ’Being Human’ – The Essence of Being a Successful Human 280

Resource Professional
Ranjan Phadke, Pune India

36. Gender, Organizational Justice, Job Attitudes and Absenteeism 288

Betty Jane Punnett, Priscilla Glidden, and Dion Greenidge, University of Wes
Indies, Barbados

ABSTRACTS

37. Corporate Innovation: Growing New Business Through New 298

6
Business Incubators, Challenges and Solutions
Roger (Rongxin) Chen, University of San Francisco

38. Strategic Management of Corporate Social Responsibility and 299

Workforce Issues in the Global Arena
Michele V. Gee, University of Wisconsin-Parkside

39. San Implementation Road Map for High-Impact, Low-Cost 300

Employee Assistance Strategies for the Bolivar Group Experience
Debra McKinney and Javier Sanchez-Rueda, Seguros Bolivar S.A.,
Bogota, Colombia

40. An Examination of the Information Processing and Emotional 301

Tendencies of Software Entrepreneurs
Larry E. Pate, University of North Dakota

41. New Trends of Human Resource Management in Public and 302

Business Organizations of Pakistan
M. Abuzar Wajidi, University of Karachi, Pakistan

WORKSHOPS/PANELS

42. International Perspectives on Responsible Employment 304

Pracatices and Principels in Times of Economic Uncertainty
John P. Keenan, The Institute for Leadership and Global Education,
Nuria Calvo, University of Coruna, Spain, Ali M. Al-Khouri, Emirates
Identity Authority, United Arab Emirates, Sutada Mekrungruengkul,
National Institute of Development Administratio, Nonthaburi, Thailand,
Tomokazu Sakumot, Kinawa International University, Debra McKinney
Gehman, Seguros Bolivar, S.A., Bogota, Colomba

43. Emerging Trends in Leadership and Management Education and 305

Development
John P. Keenan, Institute for Leadership and Global Education (ILGE),
Sonia Ghumann, University of Hawaii at Manoa, Marilyn Cash Mathews,
Networker, Inc., Saint George, Utah, Raj Parikh, Southern Oregon
University
44. Challenges and Opportunities in American Higher Education 307
Raj Parikh and James Klein, Southern Oregon University, Barry Doyle,
University of San Francisco

45. How Youth Entrepreneurship Fosters Creativity in High School 308

Students and May Help You in Teaching College Undergraduates
Krista Katsantonis, Network for Teaching Entrepreneurship, San
Francisco, CA

7
 ACKNOWLEDGMENTS

The AEPP wishes to acknowledge and thank Dr. Alev Efendioglu, Conference President

and Program Chair, of the University of San Francisco who worked tirelessly for the success of

the Eighteenth Annual International Conference of the Association on Employment Practices and

Principles (AEPP)..

We also owe special recognition to Dean Mike Duffy of the University of San

Francisco’s College’s School of Business and Professional Studies for his grant to help make this

year’s Conference a success. We also owe thanks for the ongoing support of the Institute for

Leadership and Global Education (ILGE) for AEPP.

We also gratefully acknowledge numerous reviewers and/or session chairs, with special

thanks to Tugba Karabulut, Hank Findley, Askin Keser, Eugene Muscat, Anne Walsh, Bill

Heisler, Marilyn Jenkins, Robert Preziosi, Lynne Bennington, Tim Loney, Gleb Nikitenko,

Deniz Kebabci, Ginette Roberge, and all others involved.

The AEPP gratefully acknowledges the assistance of the AEPP 2010 conference

committee. Thank you all.

8
 LETTER FROM THE PRESIDENT
Dear Conferees,

Welcome to the 18th Annual International Meeting of the Association on Employment Practices and
Principles (AEPP) in San Francisco, Sept. 29 – Oct. 1, 2010. This year's conference theme is "Modern
Workforce Challenges, Responsibilities, and Rights in the Global Community”. The Association focuses
on organizational concepts and practices for the effective managing of organizations, people and
performance within the context of the higher levels of ethical principles and practices.

We also sponsor the International Journal for Responsible Employment Practices and Principles
(IJREPP), our official journal that continues in the tradition of our 22 year history of accomplishments
and success in developing and editing the premier journal in this field. Special emphasis this year will
include encouraging “practitioner” engagement in varied track areas in addition to our traditional scholar
emphasis.

AEPP international conferences focus on providing a national and international forum for professional
development, networking and social interaction among academics, consultants, executives and practicing
managers. Our conferences are deliberately limited in number of participants to foster a supportive and
friendly environment. We are very fortunate this year to be sponsored by the University of San Francisco
with special thanks to Mike Duffy, Dean of the Business and Professional Studies at the University of San
Francisco for financial support, and also to his colleague Dr. Alev Efendioglu, Conference President and
Program Chair, who has demonstrated ongoing commitment to AEPP over many years.

Our venue this year is at the beautiful campus of the University of San Francisco, close to downtown. San
Francisco. The University setting is ideal and our location in San Francisco provides ready access to the
culture, arts, fine cuisine, and shopping in one of world’s most beautiful cities and favorite tourist
destination. Attendees will have an excellent selection of hotels to choose from including those close to
the University. Selected papers will be invited to be submitted for review for possible publication in the
official publication arm of CERR and the Association – the International Journal for Responsible
Employment Practices and Principles (IJREPP). For further information on IJREPP, please contact the
Editor-in-Chief Dr John Keenan at cerr@institute-leadership-global.org

I encourage you to participate fully in this year's conference and to note in your diaries the dates for the
2011 conference in Honolulu, Hawaii.. You will find the early call for papers in these proceedings. We
will look forward to meeting you again next year, and would love to hear from you if you wish to support
next year's program planning to help make the 2011 AEPP great again.

I look forward to personally greeting you all and my best wishes to you for a wonderful conference here
in San Francisco, California.

John P. Keenan, Ph.D.

President, Association on Employment Practices and Principles (AEPP)
Executive President, The Council on Employee Responsibilities and Rights (CERR)
Editor-in-Chief, IJREPP

9
 THE ASSOCIATION ON EMPLOYMENT PRACTICES AND PRINCIPLES (AEPP)

How it all started

The Council on Employee Responsibilities and Rights (CERR) is a duly established and
registered non-profit 501(c)(3) organization founded in 1985 by Dr. Chimezie Osigweh, Virginia
Distinguished Professor of Management, School of Business, Norfolk State University. He and a
small group of fellow faculty members felt that the timing was right and the interest level present
to create an association of scholars and practitioners focused on both a scholarly as well as a
pragmatic approach to the changing nature of employer/employee responsibilities and rights.
Some of the top scholars and practitioners in the field who shared an active interest in these
issues were recruited and helped shaped the beginning stages of CERR. The approach adopted
included an appeal to a broad-based and interdisciplinary membership base, the development of a
widely respected top-tier journal - Employee Responsibilities and Rights Journal (ERRJ) -
and holding an annual meeting. After the conclusion of twenty years of publication success,
CERR has replaced it with the newly launched International Journal for Responsible
Employment Practices and Principles (IJREPP). This is now the official top-tier publication.

In 1997, with Dr. Osigweh moving on with other professional activities, Dr. John P. Keenan,
Executive Vice President on the Board of Directors of CERR, and Associate Professor of
Management and Founding Director of Leadership Programs at the University of Wisconsin -
Madison's School of Business, succeeded Dr. Osigweh to become CERR's Executive President.
Dr. Keenan oversees CERR's diverse initiatives in collaboration with CERR's Board of Directors
and holds the position of Editor-in-Chief of the International Journal for Responsible
Employment Practices and Principles (IJREPP) as well as AEPP President.

Birth of AEPP

In 1990, a name change for CERR was proposed to better reflect the purpose, goals, and image
to be projected to the public and business communities. After much discussion and debate, it was
decided in 1992 to maintain the original name of CERR but to create two branches: one branch
would include scholars and practitioners while the other branch would include practicing
executives, managers and professionals at all organizational levels. One of the branches, the
Association on Employment Practices and Principles (AEPP) is an international organization
of scholars and practitioners dedicated to providing a forum which encourages conceptual and
empirical research, evaluates existing and new methods, and promotes concrete problem solving
to bridge the gap between organizational concepts and practices in the effective managing of
organizations, people and performance. The association reinforces the need to include the
integration of an ethical and value-driven dimension in all areas addressed. Areas of specialized
interests vary widely inclusive of ethics and philosophy, entrepreneurship, technology and
innovation management, organizational psychology, human resource management, labor
relations, and advanced leadership and management education and research. Virtually all topics
and issues confronting diverse organizations and businesses are addressed by members.
Thousands of businesses have been assisted by AEPP members in dealing with the many
problems and opportunities that exist in the ever changing realm of today's business and
organizational environments.

10
In 1992, Dr. Keenan became AEPP's Founding President and in 2008 AEPP is celebrating its
sixteenth anniversary. Some of the top scholars and practitioners in the field who shared an
active interest in these issues were recruited and helped shape the beginning stages of the
organization. As the conference arm of CERR, AEPP holds an annual international meeting each
year and currently attracts scholars and practitioners from across the globe. Within the context of
an informal, relaxed, and stimulating environment, the conference encourages: an interchange of
ideas between practitioners and academics, close-knit interaction, in-depth exchange of ideas,
relationship building, and academic and personal growth. Past conferences have been held in
major cities as New York City, San Francisco, New Orleans, Miami Beach, Boston, San Diego,
Baltimore, and Chicago, and Montreal, Canada. Next year’s conference will be held in Honolulu,
Hawaii.

11
 18TH ANNUAL INTERNATIONAL CONFERENCE ORGANIZERS FOR
AEPP 2009

"Modern Workforce Challenges, Responsibilities, and Rights

in the Global Community"

September 29 – Oct 1, 2010, San Francisco, CA

University of San Francisco

Conference Chair
Alev Efendioglu

Conference Host
University of San Francisco, San Francisco, CA

AEPP Executive Committee

Lynne Bennington, RMIT University, Melbourne, Australia
Amalia De Jesus, The Institute for Leadership and Global Education (ILGE), Dubai, UAE
Alev Efendioglu, University of San Francisco, San Francisco, CA
John P Keenan, The Institute for Leadership and Global Education (ILGE), Orchard Park, NY
Richard FitzPatrick, Manhattan College, Riverdale, NY
Ben Lev, University of Michigan – Dearborn, Dearborn, Michigan
Robert Preziosi, Nova Southeastern University, Ft. Lauderdale, FL

AEPP 2010 Proceedings Sponsor

The Institute for Leadership and Global Education (ILGE)

List of Reviewers
Brian Altman
Lynne Bennington
Andy Li-Yueh Chen
Dababrata Chowdhury
Bobbie Dillon
Alev Efendioglu
Ann Fiedler
Hank Findley
Bill Heisler
Marilyn Jenkins
Tugba Karabulut
Jahanvash Karim
Marsha Katz
Deniz Kebabci
Askin Keser
Jack Kondrusak
Tim Loney
Suleyman Ments

12
Eugene Muscat
Gleb Nikitenko
Hale Oner
Ginnette Roberge
Rizwan Saleem
Cathy Taylo
Alaeddin Tileylioglu
Anne Walsh
Michael Whittey

13
 2010 CONFERENCE PROGRAM

DAY I – Wednesday September 29

Room MH 250

Opening Session 1:00am – 1:45

Dean Mike Duffy – USF College of Business and Professional Studies
John Keenan, President of AEPP
Alev Efendioglu , Conference President and Program Chair

Session 1 2:00 pm – 3:30pm

Hale Oner
Betty Punnett, Priscilla
Glidden, Dion Greenidge
Jack N. Kondrasuk, Nick
Slepnikoff, Justin Gomez,
Jessica Peters, and Danielle
Castro
Changing face of women workforce: A qualitative
study on women entrepreneurs in Istanbul (F)
Gender, Organizational Justice, Job Attitudes and
Absenteeism (D)
Modern Workforce Challenge: Appropriately
Evaluating Employees’ Job Performances (F)

Session 2 3:45pm – 5:15pm

Hank Findley, Eva Dodd-

Walker, Lee Vardaman, Ping
He, and Robert Wheatley
S. Ahmet Menteş and Zeynep
Duren
Cathy Taylor and Heather
Zeng
A Hostile Sexual Environment: How hostile does it
have to be? (F)
Is Glass Ceiling in Turkey Thicker Than It Seems?
A Study on ISE 100 (Istanbul Stock Exchange) (F)
A Case Study About Workplace Bullying and
Harassment From a Non-Supervisory
Basis (F)

Welcome Reception/Social – 5:15pm – 7:00pm

Room MC 252

DAY II– Thursday, September 30th

Session 3 8:30am to 10:00 Room: MH 230

New Trends of Human Resource Management in

Abuzar Wajidi Public and Business Organizations of Pakistan (D)

William J. Heisler, Marilyn

14
 Ohlsen Jenkins, Anne Fiedler, Best Practices in Talent Selection and Talent
and Hank Findley Management (PANEL) Duration 1hour

Session 4 8:30am to 10:00 Room: MH 251

Leaders and Listening: An Empirical Exploration of

Jyoti Bachani and Mary Vradelis Nonprofit Leaders (F)

Jasmina Pavlin, Mojca Bernik, and Impact of Economic Crises on Youth Employment in
Miha Marič Slovenia (D)

Marie-Elene Roberge and Ozge

Ucan Transactional and Transformational Leadership And
Their Effects on Individuals and Organizations (D)

Session 5 8:30am to 10:00 Room: UC222

Analysis of the effects of contraction in demand on

Nuria Calvo maintaining knowledge at consulting companies (F)
A Research On Determining The Relations Of
Corporate Governance Between The Corporate
Ebru Karpuzoglu Performance And Reputation (F)
Linking Leadership for Reducing Performance
Brian Altman and Mesut Inhibiting Workplace Dynamics: Implications for
Akdere Organizational Effectiveness (F)

Session 6 10:30am to 12:00 Room: MH 230

Marilyn Ohlsen Jenkins and Modern Workforce Challenges: Leadership and

Jia Wang Partnership in Education (F)
Aylin Kirisci and Ali Ilker Teachers’ Cultural Values and Conflict Approaches
Gumuseli (F)
Monika Hudson and Eden- Intersecting Identities: Impacts on Workplace
Reneé Pruitt Behaviors (A)

Session 7 10:30am to 12:00 Room: MC 251

Donald Lee Vardaman, Jr. and Faculty Recruiting: Do’s and Don’ts in the Search for
Henry Findley Talent (F)
Murat Colak and Guler A Research Devoted to the Perception of University
Tozkoporan Students on Diversity (F)
Long-Term Incentive Plans: Not a Panacea for Executive
William Heisler Compensation (F)

Session 8 10:30am to 12:00 Room: UC222

Barry Doyle, Robert Mefford, Black Swans and Retirement Strategies: Is “Buy
and Nicholas Tay and Hold Best”? (F)

15

Alaeddin Tileylioglu
Israel Jacob Massuanganhe
Lunch – 12:00 – 1:30pm
Room MC 250
Keynote Speaker: Dean Mike Duffy, School of Business and Professional Studies - USF
Session 9 1:30pm – 3:00pm
James R. Forcier (F)
Diane Dayson, Jean Gordon,
and David Milen
Serkan Dolma, Yag zhan
Yazar, and Ozlem Yavas
Session 10 1:30pm – 3:00pm
Michele V. Gee
Yalman Ansari
Marilyn Ohlsen Jenkins and
Kirsten Kim Loutzenhiser
Session 11 3:30pm – 5:00pm
Tugba Karabulut
John Keenan, Raj Parikh,
James Klein, and Barry Doyle
Session 12 3:30pm – 5:00pm
Roger (Rongxin) Chen
Debra McKinney
The Effects of Downsizing: A Case Study in IT
Company in Turkey (F)
Building Sustainable Capacity Development
Through Participatory Governance and Sub-
National Capacity Development: Why development
and international support failure in Africa? (D
Room: MH230
The Nature and Purpose of Firm Decision-Making
The Role Situation Awareness (SA) in Command
Decision Making: A Phenomenological
Examination of Statue of Liberty/Ellis Island
Decision Makers on September 11, 2001 (F)
The Incompatibility of the Dual-Concern Model
and Conflict Management Styles Scales (F)
Room: UC222
Strategic Management of Corporate Social Responsibility
and Workforce Issues in the Global Arena: A
Developmental Paper (D)
Influence of Workplace Religiosity on Transfer of
Training in Banking Sector (F)
Succession Planning: A Modern Workforce Challenge in
Public Administration (F)
Room: MH230
Organizational Expectations and Career
Expectations of Turkish College Students (F)
Challenges and Opportunities in American Higher
Education (PANEL) Durations 1hr
Room: UC222
Corporate Innovation: Growing New Business through
New Business Incubators, Challenges and Solutions (A)
An Implementation Road Map for High-Impact, Low-
Cost
Employee Assistance Strategies. The Bolivar Group
16
 e-Idealized Influence Attributed Leadership Development
Sarwar Chaudhary (A)

Welcome Reception/Social – 5:15pm – 7:00pm

Room MC 251

DAY III– Friday, October 1

Session 13 8:30am – 10am Room: MC251

Modern Workforce Challenges, Responsibilities,
Ripple Gupta and Sudhir Rai and Rights in the Global Community (D)

John Keenan, Nuria Calvo

Babío, Ali M. Al-Khouri,
Sutada Mekrungruengkul, International Perspectives on Modern Workforce
Tomokazu Sakumoto, and Challenges, Responsibilities, and Rights in the
Debra McKinney Gehman Global Community (PANEL) Duration 1hr

Session 14 8:30am – 10am Room: UC222

Temporary Staffing Agencies: State-of-the-Art Practices

Ghadir Ishqaidef of Personnel Selection (F)
Anne M. Fiedler and Mark A. Labor Reform through Executive Orders and EFCA: The
Aeschleman Impact on Workers Today (F)

Facilitating Workforce Adaptation to Changing Global

Mitchell Marks Work Realities (F)

Session 15 10:30am – 12:00 Room: MC251

Phil Mann and Anne M. Business Education, Social Responsibility, and

Fiedler Nonprofit Opportunities (F)
Employees in Performing Nonprofits: Workers
Paul Lorton Adrift in the Ephemeral Arts (D)
Volunteerism and Gender in Terms of Ethics of
Cigdem Kirel and Ilke Oruc Care (D)

Session 16 10:30am – 12:00 Room: UC222

Marsha Katz, Helen LaVan,

Yvette Lopez, Wm Marty, The Status of Parking Lot Gun Laws: Annie Get Your
Martin Charles Naquin Gun (D)

Nida Afridi and Fatima Junaid Procedural Justice and Its Effects on Organizational
Outcomes (D)

17

Ranjan Phadke
Lunch/Conference Awards – 12:00 – 1:30pm
Room MC 250
Session 17 1:30pm – 3pm Room: MC251
Chih-Yuan Wang and Nien-
Chi Liu
Dababrata N. Chowdhury,
Vipul Mudgal, Murat
Kasimoglu, and Lynne Butel
Ali Al-Khouri
Session 18 1:30pm – 3pm Room: UC222
Barry Doyle, Robert Mefford, and
Nicholas Tay
Murat Colak
Tomokazu Sakumoto
Session 19 3:30pm – 5pm Room: MC251
Krista Katsantonis and
Deborah Reinerio
Session 19 3:30pm – 5pm Room: UC222
John Keenan, Amalia De Jesus,
Marilynn Cash Mathews, and Raj
Parikh
ENJOY SAN FRANCISCO RESTAURANTS AND ENTERTAINMENT!!!
‘Being Human’ - The Essence of Being a Successful
Human Resource Professional (D)
Internalization vs. Externalization of Human
Capital Strategy: A Trust Climate Perspective (F)
The Determinants of Trust among the Turkish
Consumers in Online Retail Banking (ORB) (F)
Improving Organisational Performance (D)
“What Financial Risk Managers Can Learn from Six
Sigma Quality Programs” (F)
The Effect of Privatization on Efficiency and
Working Values: Turkey’s Cement Industry
Example (F)
Managerial Responsibility for Meritocracy:
Perspectives on the Japanese Wage System (F)
How Youth Entrepreneurship Fosters Creativity
in High School Students and May Help You in
Teaching College Undergraduates (Workshop)
Duration 1.5hrs
Emerging Trends in Leadership and
Management Education and Development
(PANEL) Duration 1.5hrs
18
 CALL FOR PAPERS/PROPOSALS

The Association on Employment Practices and Principles (AEPP)

Nineteenth Annual International Conference
Oct. 5-7, 2011
University of Hawaii at Manoa, Honolulu, HI
Sponsored By: University of Hawaii at Manoa
Raj Parikh, Ph.D., Conference President and Program Chair,
Southern Oregon University

The Association on Employment Practices and Principles (AEPP) and its parent, the Council
on Employee Responsibilities and Rights (CERR), focus on the quality of life in work
organizations, and promote an awareness of ethics, social responsibility and justice. We host
annual international conferences that are personal, inclusive, supportive and democratic. We
also sponsor the International Journal for Responsible Employment Practices and Principles
(IJREPP), our official journal that continues in the tradition of our 21 year history of
accomplishments and success in developing and editing the premiere journal in this field.
Special emphasis this year will include encouraging “practitioner” engagement in varied track
areas in addition to our traditional scholar emphasis.

Special Paper Awards Highlights From Honolu

Best Paper Award Honolulu, Hawaii Location
Best Practitioner Award Reasonably Priced Room Rates
Best Paper Based On a Dissertation Award Keynote Speaker on Conference Theme
Best Case Studies Paper Award Special Night on the Town

Conference Theme: Global Organization of the Future: New Workforce Challenges and
Opportunities

Modern organizations, faced with increased domestic competition and seeking growth
opportunities, have become more and more global in their focus. This creates human resource
challenges – where to find or how to train a workforce comfortable operating in this global
environment characterized by multiple cultures and economic uncertainty. For managers and
leaders, there is a need to improve organizational efficiency, while protecting the interests and
needs of employees at all levels. Also, changing times include the continuation of technological
advances, government regulation, global economic and competitive issues, and changes in the
makeup of society and the workforce which place additional pressure on all employers to be
more astute in ensuring that they develop management systems and practices, as well as
employment practices that enable them to not only compete but thrive. While submissions in all
areas outlined below are welcome, for 2011, we particularly welcome submissions that deal with
any aspect of modern workforce challenges in the global community. Topics of interest are broad
in nature including global organizations, multi-cultural issues, work-life balance, boundary-less
careers, new regulations on employment, layoffs, unemployment, delocalization of firms,

19
executive compensation, rights to privacy, and other areas. Papers and proposals from both
academics and practitioners are welcomed. Issues might be approached from the internal and
micro point-of-view, such as employee relations and HR practices, to the more external and
macro aspect, such as inter-organizational alliances and relationships, as well as inter-cultural
dynamics.

Content Areas/Tracks

• Management and Organization Studies: Organizational Behavior, Organization

Theory, Organization Change Management, International Comparative Studies, Emotions
at Work.
• Strategic Management: Corporate Social Responsibility, Corporate Governance,
Technology Management, Industry Studies, Alliances and Ventures, Entrepreneurship,
Knowledge Management.
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Resource Planning, Strategic Human Resource Management, Labor and Employee
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• Finance/Accounting/Economics: The traditional disciplines of finance, accounting,
and economics, with respect to relationships to current employment practices and
principles, ethical dimensions, CSR.

20
 • Human Resource Management in the International Context: Contemporary issues
and practices in HRM related to the evolving international context, cross-cultural studies,
and related areas.
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making, formal public and private partnerships, public personnel management leadership,
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rights, access, and related topics.
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implementation strategies, case studies in exemplary customer relations management
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• Violence in the Workplace, Bullying, and Terrorism: The causes and consequences of
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violence, strategic approaches to control, bullying, employee abuse, terrorism and its
causes, strategies to control terrorism, terrorism and its impact on business and
governmental institutions.

SUBMISSIONS (Either complete papers, developmental papers, or proposals)

For Papers. Only full, complete papers (no abstracts) may be submitted and will be double-blind
peer reviewed. Accepted papers will be published in the Conference Proceedings “CD and
website Publication”. Authors of “best papers,” based on audience feedback and response will be
invited to submit their papers for publication consideration in a special issue of the International
Journal for Responsible Employment Practices and Principles (IJREPP). The AEPP website,
www.aepp.net, provides specific details for the proper format for submissions. ALL
SUBMISSIONS MUST CONFORM TO THESE GUIDELINES IN ORDER TO GO FOR
REVIEW.

For Developmental Papers. The purpose of developmental papers is to allow authors to discuss
work that is still in its developmental stage. All developmental papers will be presented together
in the same sessions during the conference. The main focus of the sessions will be on discussion
rather than on a standard presentation. Submissions to the developmental thread should be
extended abstracts of 1000-2000 words (excluding references). A comment should be included at
the end of the extended abstract on how the authors expect to advance the paper between now
and the conference.

For Proposals. In addition to formal page submissions, we invite submission of proposals for
panels, symposium, roundtables, or workshops. Coordinators of such proposals should include a

21
theme or title for the session as well as a one-page description of each participants role and
contribution.

Submissions and Program Inquiries: Please address inquiries to AEPP and include email and
full contact information for each author and email all papers and proposals in MS Word (APA
Format) to BOTH: (1) AEPP Admin - aepp@institute-leadership-global.org; and (2)
Conference President Dr. Raj Parikh at ParikhR@sou.edu. For any questions on specific track
chair area, please copy Dr. Parikh.

For information on accommodations, Honolulu, location - see website (www.aepp.net); for

other questions - contact President and Program Chair, Dr. Raj Parikh at Southern Oregon
University.

Submissions and Inquiries: Please email all papers and proposals in MS Word (APA Format)
to BOTH (1) AEPP Admin at: aepp@institute-leadership-global.org , AND (2) Conference
President Dr. Raj Parikh at ParikhR@sou.edu. The absolute deadline for receipt of full papers
(no abstracts) for review as well as for refereed and non-refereed panels and symposia is 15
April, 2011, although early submission is encouraged and appreciated Authors of accepted
presentations must register for the conference by 22 July, 2011 to ensure inclusion in the
conference Proceedings.

For information on Conference theme, Honolulu, and Conference location: contact

President and Program Chair, Dr. Raj Parikh at Southern Oregon University: ParikhR@sou.edu.

For information on Conference theme, Honolulu, and Conference location: contact

President and Program Chair, Dr. Raj Parikh at Southern Oregon University: ParikhR@sou.edu.

22
 FULL PAPERS*

*These papers were submitted as completed research and were sent out for double-blind review.
Based on reviewers' comments and our independent determination, we have "accepted as full
papers", "rejected", or "accepted as developmental papers".

23
 IMPROVING ORGANISATIONAL PERFORMANCE

Ali M. Al-Khouri,
Emirates Identity Authority,
Abu Dhabi, UAE, ali.alkhouri@emiratesid.ae

ABSTRACT

This article explores some thoughtful considerations for management related to understanding
and improving the overall performance of individuals and teams in organisations. It reflects
thoughts and learnings from several implementations of small and large projects in public sector.
It also sheds light on various theories, tools and frameworks and how they can be used to
improve overall organisational performance.

Keywords: competency development; motivation; performance; team building.

1. INTRODUCTION

In today's dynamic and rapidly changing workplace and globalised economy, development of
organisational performance is associated with the development personal performance, skills,
knowledge and experience [1][2][3]. However, the ability to achieve and maintain high
performance and productivity in organisations is a key challenge facing management today.
Our experience shows that management need to give higher attention towards understanding
individual differences, needs and behaviours, as well as their criticality to enable them to
understand and manage organisational complexity. Such understanding is considered important
in helping individuals develop effective learning styles that is aligned with organisational
objectives and needs.
Our primary learning is touching the subject of perceptions, beliefs and values that motivate our
behaviours and impact the overall learning process we may decide to follow. A variety of
theories regarding human nature and motivation in particular are explored here, to explain the
diversified behaviours, and particularly, what influences people to do what they do. We also
reflect our learnings and make sense of the presented theories in relation to our experiences.

2. LEFT-BRAIN AND RIGHT BRAIN MANAGEMENT

If our life experiences and culture shape our mental models of the world then our
own unique thinking styles and sensory preferences will shape the way we know the
world ..... Our thinking is shaped by our very existence in our world, our thinking
styles and sensory preferences, these styles and preferences are the ones we have
always been comfortable with and familiarity is comforting. [4]

A useful theory for management to always keep in mind is the Right-Brain and Left-Brain
thinking. Most of us have one side of our brains dominant which influence the choice of
thinking and learning styles. Figure 1 illustrates the differences between the two sides of the
brain.

24
 Figure 1: Left and Right Brain thinking model
Numerous management styles can originate from the left or the right side of the brain[5]. The left
side has an exasperating devotion to numerical figures, details, analysis, time-bound logic, and
sequential thinking, etc, concerning itself with cash flow and the dire consequences of
mismanagement of finances. It processes information in an analytical and sequential way,
looking first at the pieces, then putting them together to get the whole.

The right side is often based on intuitive, emotional decisions, synthesis, and holistic thinking
i.e., it processes information in an intuitive way, looking first at the whole picture then filling in
details. While this approach can yield immediate success in the short run, it often comes at the
risk of long-term sustainability and growth.

Our experience in projects also shows that it is important that we follow a 'balanced-thinking'
(i.e., to engage both sides of the brain) to analyse and identify elements that contribute towards
the achievement and maintenance of highest performance and productivity levels see also [6]. It
was found vital that we constantly promote this way of thinking to enhance the overall
performance of projects. Organisations aiming to improve productivity, with rigorous planned
strategies, staff with balanced and mixed thinking skills can produce more efficient and
innovative organisational outcomes [7]. The left-brain and right-brain model goes beyond mere
issues of management style but it reflects organisational thinking and how it approaches problem
solving, and can better addresses the situational uniqueness of projects and conquer the
challenges of contemporary projects.

3. BELIEFS AND PERCEPTIONS

Perhaps, the most significant learning from the different projects was about how things like
beliefs and perceptions can inhibit us from learning and development or in other words; how our

25
beliefs and perceptions may inhibit us from doing any right brain thinking. Figure 2
demonstrates different motivation layers, showing how behaviour can determine our beliefs,
habits, and needs. Motivation is a hidden power that stems from a deep rooted belief that
activates and drives behavior and gives it direction; it is strongest when it comes from our inner
values [8]. Thus, understanding motivation should empower us to better understand ourselves
and others. This should, in turn, enable us to change and/or further improve our behaviours and
performance.

Figure 2: Motivation Factors

To it is also important for management to understand the association between our unconscious
mind and how it may determine particular motivated behaviours i.e., how beliefs may be part of
our unconscious mind and play the role of regulating many of our behaviours and actions we
take in life. We correlate this to Freud's topographical model [9] that represents the
configuration of the mind. The model makes three classifications of the human mind:

• Conscious: awareness of one's environment and one's own existence, sensations, and thoughts
i.e., part of the mind that holds what we are aware of. We can verbalize about our conscious
experience and think about it in a logical fashion.

• Preconscious: memories or feelings that are not part of one's immediate awareness but that
can be recalled through conscious effort

• Unconscious: part of mind containing elements of psychic makeup, such as memories or

repressed desires, that are not subject to conscious perception or control but that often affect
conscious thoughts and behavior.

Figure 3 uses an iceberg metaphor to facilitate the understanding of Freud's topographical theory.
It shows that more than 90% of an iceberg is beneath the water (preconscious and unconscious)
whereas only 10% of it is visible (conscious).

26
 Thoughts
Conscious level Only 10% of an iceberg
Perceptions
is visible ( conscious)

Memories The preconscious is

Preconscious level Stored Knowledge allotted approximately
10% - 15%
Fears Unacceptable
Unconscious level
Sexual Desires
Violent Motives

Immoral Urges Irrational Wishes Unconscious is

allotted
Selfish Needs Shameful
Experiences 75% - 80%

Figure 3: Mental iceberg of Freud's view of the human mind

Using Freud’s topographical model of the mind, we can see that a substance may pass back and
forth between the conscious and preconscious mind. Subsequently, substances from these two
levels can easily slip into the unconscious mind. Rationally, the unconscious substances (e.g.,
unconscious fears and previous experiences) can very much direct our behaviours and
instinctively make several decisions for us. It is our unconscious mind that effects what we can
or cannot accomplish. By challenging and changing some of our beliefs and perceptions, we can
utilise our abilities and potentials towards escalating our talents, achieving our goals and
attaining significant success in almost every dimension of our progressive life. The following
section explores various theories that represent the most common held views as to what
motivates behaviour, and we reflect on each based on our experience.

4. THEORIES AND PRACTICE

"We all have preferred unconscious and conscious habits of thought that influence
how we make decisions, communicate, learn and interact with others…. Our mental
models and maps are 'configured' by the very nature of our experiences; they are
'configured' by our cultures. The western concept of time is very linear, whereas the
Australian Aboriginal notion of time is very holistic! Neither are right or wrong they
are just different". [10]

A survey of global employers in 2005 [11] revealed that:

• More than 50% of employees lack the motivation to keep learning and improving;
• 4 in 10 people cannot work cooperatively;
• Only 19% of entry level-applicants have enough adequate self-discipline for their jobs;
• 70% of all change initiatives fail due to people issues-inability to lead, lack of
teamwork, unwillingness to take initiative, inability to deal with change, etc.; and
• Primary derailleur of top executives: a lack of impulse control.

In today's competitive knowledge-driven organisations, leadership is more important than ever,

and requires more than just possessing the right technical skills. Today's leaders need to

27
recognise their own feelings and those of others to motivate themselves and effectively manage
relationships, increase morale and motivation, improve productivity, promote greater cooperation
and team work and increase retention of top talent.

4.1 Theory X and Theory Y

We have always believed that the main success factor for us in both our own personal life and at
work is the ability to develop a positive environment. The different learning lessons from our
projects indicate that in order to build such an environment, we need first to treat people as
individuals and appreciate their personal differences. All of us are individuals. We have
different personalities. We think differently, we have different needs, wants, values,
expectations, and goals. We each change over time as well. Therefore, we need to recognise
people as individuals and to work with their individual differences.

Figure 4: Theory X & Theory Y

Our personal philosophies often influence the motivational approaches we normally select to
deal with such differences. Such philosophies or attitudes towards others can be mapped to
Theory X and Theory Y [12]. See also Figure 4. People in Theory X have negative perceptions
of other people's potential and attitudes, whereas those in Theory Y have an opposite view, and
assume that other people can be self-directing and seek responsibility. Table 1 provides further
examples of the perceptions of the two theories.

28
 Table 1: Theory X & Theory Y perceptions [3]
Theory X Theory Y

The average employee is lazy, dislikes Employees are not inherently lazy. Given the
work, and will try to do as little as possible chance, employees will do what is good for the
organisation.

To ensure that employees work hard, To allow employees to work in the organisation's
managers should closely supervise interest, managers must create a work setting that
employees provides opportunities for workers to exercise
initiatives and self direction.

Mangers should create strict work rules and Managers should decentralise authority to employees
implement a well defined system of rewards and make sure employees have the resources
and punishments to control employees necessary to achieve organisational goals

Figure 5 also presents a continuum containing positive and negative motivations. Positive
leadership styles encourage development of employees and higher levels of job satisfaction.
Negative leadership styles are based on the manager's ability to withhold items of value from
employees. The result of negative leadership may be an environment of fear, where managers
are viewed with distrust and seen as dictators rather than as leaders or team players.

• Opportunities for advancement

Positive • Responsibility
Motivation • Recognition
• Financial rewards
• Praise
• Threats
Negative • Reprimands
Motivation • Financial penalties
• Suspension
• Termination
Figure 5: Positive vs. Negative Motivation [13]
As we have stated this earlier, our perceptions, attitudes and behaviours are normally driven and
motivated by our needs, beliefs and values. The same applies to others around us. If we want to
understand ourselves and/or others, we need to look at such motivators which would probably
help us modify our perceptions and thereafter our behaviours. Many methods have been
developed to explain why people choose to follow particular behaviours.

Two categories of motivation theories are covered next; content and process theories. Content
theories are concerned with what motivates behaviour. Process theories are concerned with how
the content of motivation influences behaviour. The next section starts the discussion with a
content theory; Maslow's theory.

4.2 Maslow's Hierarchy of Needs Theory (Content Theory)

29
 Self-Actualization
desire for self-fulfillment.. To Become the
best one is capable of becoming.

Esteem
Need for reputation, prestige, & recognition from others.
Also contains need for self-confidence & strength

Love
The desire to be loved & to love. Contains
the needs for affection & belonging

Safety
Consists of the need to be safe from
physical & psychological harm.

Physiological
Most basic need Entails having enough
food, air, and water to survive.

Figure 6: Maslow's Hierarchy of Needs [14]

Maslow's theory is one of the very common tools used to understand human needs. It mainly
identifies five basic levels of needs as illustrated in Figure 6 namely; physical, safety, social,
esteem and self-actualisation needs. The principle argument of the theory is based around the
following four premises:

(1) individual's needs are arranged in a hierarchical order that starts from the most basic
needs (water, food, shelter) to the most complex (esteem and self-actualisation),
(2) only an unsatisfied need can influence behaviour, where a satisfied need is not
considered to be a motivator,
(3) a person will at least minimally satisfy each level of need before feeling the need at
the next level.
(4) the level of satisfaction of needs always fluctuates i.e., if satisfaction is not
maintained for a need, it will become a priority need again. Once a need is satisfied, it
will cease to influence behaviour.

To us, the theory represented a workable motivation framework that we utilised in analysing
specific attitudes and behaviours to identify a particular need level an individual may attempt to
satisfy, which gave us the opportunity in turn to assist and or/guide the individual to satisfy those
needs.

4.3 Herzberg's Two-Factor Theory (Content Theory)

Another relevant needs theory is called the two-factor theory. It principally uncovers two sets of
factors:

(1) motivators: factors that produce satisfaction and motivation

(2) maintenance, or hygiene factors: factors that lead to dissatisfaction.

30
 Motivators
Absence of Presence • Promotion opportunities
factor Motivators of factor • Opportunities for personal growth
Satisfaction • Recognition
More Less
• Responsibility
• Achievement

• Hygiene Factors
Absence of Presence • Pay
factor Hygiene Factors of factor • Organisational policies
Satisfaction • Physical working conditions
More Less
• Relations with others
• Job security

Figure 7: Herzberg's Two-Factor Theory

As illustrated in Figure 7 above, the Hygiene factors range from causing no dissatisfaction, if
they are present in any given environment, to causing high dissatisfaction, if they are not present
in sufficient quality [14][15]. Motivators, if present in, can provide low to high satisfaction,
where if they are not present, no satisfaction can result (ibid.). Figure 8 Shows overlapping
features shared by both Maslow's and Herzber's theories where:

(1) Hygiene factors are predominantly related to lower level needs.

(2) Herzberg’s motivators target higher level needs.

Maslow Herzberg
(need hierarchy) (two-factor theory)

Self-actualization The work itself

• Responsibility
• Advancement
Higher Esteem • Growth Motivators
order
needs Belongingness, Achievement
social, and love Recognition

Quality of inter-
personal relations
Safety and among peers, with
Security supervisors, with
Subordinates
Hygiene
Basic
Job security conditions
needs
Working conditions
Physiological Salary

Figure 8: Maslow vs. Herzberg

31
The theory in our view can be used to focus on ensuring presence and quality of maintenance
factors as a foundation on which to build motivation. For instance, managers have the power to
make subordinates jobs more rewarding by granting them more responsibility, praising their
accomplishments, making them feel that they are succeeding, and so on.

4.4 Vroom's Expectancy Theory (Process Theory)

Figure 9: Expectancy Theory [16]

Vroom's theory also referred to as Valence-Instrumentality- Expectancy Theory, explains why
people choose a particular behaviour to satisfy their needs. See also Figure 9. It states that
before choosing a behaviour, an individual will evaluate various possibilities on the basis of how
much work is involved and what the reward is. Motivation is a function of how badly
individuals want something and how likely they think they are to get it. It occurs in direct
proportion to perceived or expected rewards.

Figure 10: Performance dimensions

The strength of a tendency to act in a certain way depends on the strength of an expectation that
the act will be followed by a given outcome and on the attractiveness of that outcome to the
individual [17]. This is to say that behaviour is heavily influenced by perceptions of possible
outcomes (see also Figure 10). If an individual expects a certain outcome, possesses the
competence to achieve it, and wants it badly enough, he or she will exhibit the required

32
behaviour. If a person expects that a specific behaviour will produce an outcome that he or she
perceives as undesirable, he or she will be less inclined to exhibit that behaviour. In this light, a
person who knows the other person's expectation and desires can tailor outcomes associated with
specific behaviours to produce motivation.

SOME FURTHER REFLECTION

There has been so much debate about the applicability of the presented theories in today's world
specially that some of them have been developed as early as 1920's [3][18][19]. From our own
personal perspectives, we see those theories still valid today as tools and frameworks for
understanding human motivation.

For example, we agree with Maslow that only an unsatisfied need can motivate a person's
behaviour. We are never satisfied with what we have as we always want more; thinking that
what we do not have will seemingly make us happier. This is our nature.

Some of the presented theories also do not believe that human beings are pushed and pulled by
mechanical forces, either of stimuli and reinforcements (behaviorism) or of unconscious
instinctual impulses (psychoanalysis) [20]. It rather promotes the idea of focusing on human
potentials, with the belief that they continuously and characteristically strive for an upper level of
our capabilities (ibid.).

In our opinion, the theories explored here provide sound theoretical frameworks to better analyse
and understand the basis of individuals' perceptions, behaviours, and attitudes. Table 2 shows
some examples of our interpretations and understanding of the presented theories. Such
understanding should enable us to enhance and improve our own thinking styles, motivation, and
overall performance.

Table 2: Theories & Further Reflection

Theory Examples
Theory X &
• perceptions of how people view human behaviour mainly at
Theory Y
work and organisational life
Maslow's • Confirms that human needs are an important part of human
Need Theory nature.
• Identity trial model vs. self-actualisation
Herzberg's
• Provide the foundation to build motivation and influence
Theory
behaviour
Vroom's
Expectancy • A framework to understand why people choose particular
need (behaviour influence by perception of outcome)
Theory

We argue that performance improvement is more of a function of ability and motivation. Ability
depends on education, experience, and training. Motivation is more related to our thoughts i.e.,
we are the product of our own thoughts. The aim of motivation is to improve the quality of our

33
thoughts. Thus motivation, for organisations need to be considered essential to learn best and
maximise effectiveness.

For management, effective performance improvement needs to deal with the performance of the
organisational system as a whole. It requires an analysis of the deeper, underlying systemic
blockages for performance in organisations and/or broader systems by the actors [21]. Such
interventions should involve well managed learning processes which should in turn lead towards
continuous performance-driven competence development.

Leading in successively larger contexts (from individuals to groups to organisation-wide efforts)

requires successively larger sets of competencies in terms of knowledge, skills and abilities. To
create the conditions and space necessary for such an objective, it is important for management
to foster change processes within the organisation to allow competency development.

Figure 11 shows a competency framework that we used to develop core personal competencies.
The framework looks at two prime competencies; personal and social. Personal competencies
are those that determine how we manage ourselves, where social competencies are those that
determine how we handle relationships. It sets out the skills, abilities, and personal qualities that
leaders need to develop. We used this framework to develop leadership competencies and
further identify training and development needs.

Personal Competence Social Competence

Self-Awareness: Knowing one's internal Social Awareness: Awareness of others feelings,

states, preferences, resources, and intuitions needs, and concerns

• Emotional awareness: Recognizing • Empathy: Sensing others' feelings and

Awareness

one's emotions and their effects perspectives, and taking an active

• Accurate self-assessment: Knowing
one's strengths and limits
• Self-confidence: A strong sense of
one's self-worth and capabilities
interest in their concerns
• Organisational awareness: Reading a
group's emotional currents and power
relationships
• Service orientation: Anticipating,
recognizing, and meeting customers'
needs

34
 Self-Management: Managing ones' internal Social Skills: Adeptness at inducing desirable
states, impulses, and resources responses in others

• Self-control: Keeping disruptive • Developing others: Sensing others'

emotions and impulses in check
• Trustworthiness: Maintaining
standards of honesty and integrity
• Conscientiousness: Taking
responsibility for personal
performance
Actions
development needs and bolstering their
abilities
• Leadership: Inspiring and guiding
individuals and groups
• Influence: Wielding effective tactics for
persuasion

• Adaptability: Flexibility in handling • Communication: Listening openly and

change
• Achievement Orientation: Striving
to improve or meeting a standard of
excellence
• Initiative: Readiness to act on
opportunities
sending convincing messages
• Change catalyst: Initiating or managing
change
• Conflict management: Negotiating and
resolving disagreements
• Building Bonds: Nurturing instrumental
relationships
• Teamwork & Collaboration: Working
with others toward shared goals. Creating
group synergy in pursuing collective
goals.

Figure 11: Competency Framework [10]

CONCLUSION

Human nature can be very simple, yet very complex. An understanding and appreciation of this
fact is essential to effective employee motivation and therefore effective management and
leadership of result oriented organisations. The content of this article was prepared to raise
management awareness and provide them with some fundamental pieces of knowledge about
behaviours in organsiations and how much they are determined by perceptions and personalities.

The different learning lessons from the projects and the work we carried out to complete this
paper, played a major role in clearing out what is to be 'set of foundations and pivotal
ingredients' for self motivation, assertive communication [22], personal empowerment,
enhancing personal behaviours [23], and interpersonal relationships. The presented theories are
considered important tools and frameworks for management to understanding human motivation.
The presented lessons, overall, should assist in formulating an effective learning contract for
management to understanding the rudiments for building complementary teams, concerned with
methods, systems, and procedures and at the same time with direction and results.

To acquire a functional balance, management need to exercise the weaker side of the
organisational brain. For example, a team with left-brain skills should include individuals with
right-brain minded, who could participate creatively in problem solving, and facing the
challenges of contemporary projects.

35
Unless they are internally motivated, employees in organisations with superior systems and
procedures and detailed job descriptions, may suffer performance challenges if things are
excessively mechanical and formal. Management role lies in accomplishing organisation wide
shared common vision, purpose, and sense of mission.

ACKNOWLEDGEMENT

The author would like to thank Ray, C., Cliff, E., Thomson, A., and McCarthy, P. from Warwick
University for their feedback and input on the overall content of this paper.

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March 2009].
[14] Herzberg, F. One More Time: How Do You Motivate Employees?, USA: Harvard Business
School Press, 1987.
[15] Herzberg, F., Mausner, B., & Snyderman, B. B. (1959). The motivation to work (2nd ed.).
New York: John Wiley & Sons.
[16] Vroom, V. H. Work and motivation. New York: John Wiley & Sons, 1964.
[17] Blumberg, M. & Pringle, C.D. (1982) 'The Missing Opportunity in Organisational Research:
Some implications for a Theory of Work Performance', Academy of Management Review, 1982,
7, pp. 560-567.
[18] Keuning, D. Management: A contemporary Approach. London: Pitman Publishing, 1998.
[19] Mullins, L.J. Management and Organisational Behaviour (4th ed.). London: Pitman
Publishing, 1996.
[20] Simons, J.A., Irwin, D.B. & Drinnien, B.A Psychology - The Search for Understanding
[Online]. New York: West Publishing Company, 1987. Available from:
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[Accessed 1st May 2009].
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competence development - An approach to develop the facilitation capacity to manage systemic
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2010].
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[Accessed 1 August 2009].
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http://www.extraordinary-jobs.com/V2I42.htm [Accessed 3 March 2009].

ABOUT THE AUTHOR

Dr. Ali M. Al-Khouri is the Managing Director of Emirates Identity Authority, in the United
Arab Emirates. He received his doctorate from Warwick University, UK in Managing Strategic
and Large Scale Government Projects. He has been involved in many strategic government
projects for the past 10 years. His recent research areas focus on developing best practices in
public sector management and the development of information societies.
ali.alkhouri@emiratesid.ae.

37
 LINKING LEADERSHIP FOR REDUCING PERFORMANCE INHIBITING
WORKPLACE DYNAMICS:
IMPLICATIONS FOR ORGANIZATIONAL EFFECTIVENESS 2

Brian A. Altman
University of Wisconsin-Milwaukee
Department of Administrative Leadership
2400 East Hartford Avenue, Enderis Hall, Milwaukee, WI 53211
Tel: (414) 229-5771, Email: baaltman@uwm.edu

Mesut Akdere
University of Wisconsin-Milwaukee
Department of Administrative Leadership
2400 East Hartford Avenue, Enderis Hall, Milwaukee, WI 53211
Tel: (414) 229-6684, Email: akdere@uwm.edu

ABSTRACT

A process of the role of leaders in addressing performance inhibiting workplace dynamics is

presented. Leaders should strive to: understand that workplace dynamics can inhibit
performance, identify such dynamics in their organizational contexts, and implement behavioral
and/or systemic changes to reduce the prevalence of such dynamics. Leaders should also work to
engage followers in this process for addressing performance inhibiting workplace dynamics.
These efforts can lead to improved performance. Working within and influencing organizational
culture, such efforts by leaders can ideally lead to an organizational culture in which there is
awareness of and a reduction in performance inhibiting workplace dynamics.

Keywords: Leadership, performance, performance inhibiting workplace dynamics, Human

Resource Development (HRD)

INTRODUCTION

Noting that there are many definitions of leadership, Northouse incorporates what he sees as the
key aspects of leadership in his definition of leadership as “a process whereby an individual
influences a group of individuals to achieve a common goal” [13, p. 3, italics in original].
Altman and Akdere reviewed literature indicating that interpersonal dynamics in the workplace
can be associated with reduced employee performance, and proposed a theoretical model of
performance inhibiting workplace dynamics in which problematic employee interactions taking
place in the workplace can have a negative influence on the performance of individual
employees, which can adversely impact quality, and the team and the organization levels [1].

2
A prior version of this paper was presented as a Work-in-Progress Paper at the 2009 Academy of Human Resource
Development Annual Research Conference (Asia and MENA Chapters), Manama, Bahrain.

38
The interested reader is referred to Altman and Akdere [1] for a full discussion and examples of
performance inhibiting workplace dynamics. Possible responses by managers and consultants in
addressing such performance inhibiting workplace dynamics have been articulated [2]. Although
there is a role for organizational leadership in reducing workplace dynamics that interfere with
performance [2], in general the wide range of leadership models that have been proposed to
explain and recommend forms of leadership in organizations [13] have not focused on this role,
and the issue does not appear in a recent review of current leadership literature [4]. Exceptions
are Kogler Hill’s model of team leadership which incorporates team leaders addressing team
member conflicts which harm team level performance [10], and Baker, Walsh, and Marjerison’s
suggestion that “to bring out the best performance in the team, the leader teaches the team
to…resolve group conflicts” [5, p. 57]. However, the notion of performance inhibiting workplace
dynamics is broader than the notion of conflicts in teams.

If leaders aim to help their organizations achieve performance goals and improve performance, it
is important for those leaders to address factors that inhibit individual employee performance.
Wilson, Boudreaux, and Edwards describe “eliminates barriers to performance” [19, p. 92] as a
leadership competency with reference to the individual level of performance. There is a need for
models of leadership addressing the leadership phenomenon at all levels and in a broad range of
contexts that incorporate the notion of leaders addressing and ultimately eliminating performance
inhibiting workplace dynamics. It would also be most broadly applicable if such a model is open
to all leaders, without requiring that they possess particular unique traits, skills, or styles (see
[13] for trait, skill, and style-based leadership models). This paper begins this task by outlining
the role leaders should play in reducing performance inhibiting workplace dynamics, and in so
doing extends the prior literature on performance inhibiting workplace dynamics [1] [2].

The intent of this conceptual paper is to work within the framework of Northouse’s definition of
leadership cited above to propose a process through which leaders can play a role in improving
performance by reducing performance inhibiting workplace dynamics. In particular, we intend
for this process to be applicable by leaders who draw from a range of different leadership
approaches and models, rather than integrating the process into only one or several of the host of
leadership models and approaches extant in the literature. Furthermore, we aim to present this
process to have resonance for an international audience and with applicability across national
and global contexts.

A MODEL FOR LEADERS TO REDUCE PERFORMANCE INHIBITING

WORKPLACE DYNAMICS

In Figure 1, we propose a model that illustrates a process through which leaders can play a vital
role in working towards employee and organizational performance by addressing workplace
dynamics which inhibit employee performance.

Leaders and Influence on Organizational Followers

At the top left of Figure 1, the two arrows extending from the “Organizational Leaders” box
represent the two roles that leaders need to play with regard to performance inhibiting workplace
dynamics. First, leaders can reduce performance inhibiting workplace dynamics themselves

39
through their own involvement in the process illustrated in Figure 1, which is explained below.
Second, and crucially, leaders can use the influence aspect of leadership—various forms of
social power (referent, expert, legitimate, reward, and coercive) [French & Raven, as cited in 13]
to influence organizational followers to address performance inhibiting workplace dynamics as
well. In this way, leaders are working to address performance inhibiting workplace dynamics
through a process by engaging in that process themselves and by influencing others to engage in
the same process.

FIGURE 1

The Role of Leaders in Addressing Performance Inhibiting Workplace Dynamics

Organizational Organizational
Leaders Followers

Identify
Change behaviors
performance
Understand and/or systems to
inhibiting
workplace reduce
workplace Improved
dynamics performance
dynamics in performance
can inhibit inhibiting
context (may be
performance workplace
overt, subtle, or
dynamics [2]
inadvertent)

Organizational Culture

Leaders must engage in this influence in an ethical way [13] and with respect to the
organizational and national cultural contexts in which they are operating. This is even more
crucial in today’s global economy where organizations constantly interact and depend on each
other’s work, products, and services. Our proposed process suggests that leaders should ethically
use their influence to bring others in the organization to address performance inhibiting
workplace dynamics, and based on their own personal assessment of what would be most
effective in their context, engage others in addressing performance inhibiting workplace
dynamics. This can take place by encouraging others to address performance inhibiting
workplace dynamics, instructing individuals to address these dynamics in their organizational
units, and fostering dialogue about these dynamics.

Understanding that Workplace Dynamics Can Inhibit Performance

For both leaders and their organizational followers, the process of addressing performance
inhibiting workplace dynamics begins with an understanding that certain workplace dynamics
can inhibit performance. Both leaders and their organizational followers must realize that

40
interpersonal dynamics must be added to their personal conceptualizations of factors that can
potentially inhibit individual work performance within their organizational contexts.

For example, all leaders and organizational followers would likely agree that individual
employees cannot perform at the best of their abilities if they do not have the equipment
necessary to do their jobs, and that this equipment is in good working order. However this
conceptualization of factors that inhibit employee performance, which includes a lack of
necessary functioning equipment, should be extended to include the notion that certain
interpersonal dynamics are additional factors that can inhibit performance at the individual level.
In other words, when we think of factors that inhibit employee performance, we should think
about interpersonal dynamics as well as issues such as a lack of necessary functioning equipment
and other non-interpersonal factors which might more quickly come to mind.

How can leaders gain an understanding that certain workplace dynamics can inhibit
performance? We posit that this is, in essence, an act of learning. Merriam, Caffarella, and
Baumgartner, drawing on work by Coombs, conceptualize adult learning as taking place in
“formal institutional settings, non-formal settings, and informal contexts” [12, p. 29] as well as
online. Using this framework, we suggest that the learning that workplace dynamics can inhibit
performance can occur in any of these settings. For example, graduate courses for leaders could
include this content. Alternatively, leaders might gain this learning through workplace training
and development programs implemented by Human Resource Development (HRD)
professionals. Leaders could also gain awareness of the performance inhibiting aspects of some
workplace dynamics through their own informal reading and discussions. Finally, leaders can
gain awareness of performance inhibiting workplace dynamics simply by observation in their
workplaces. And, it may be that many leaders and organizational followers have already
acquired this learning, and have an understanding that interpersonal dynamics in the workplace
can hurt employee performance.

Identifying Performance Inhibiting Workplace Dynamics in Context

Once leaders and followers gain an understanding that certain workplace dynamics can inhibit
employee performance, the next step is to identify performance inhibiting workplace dynamics
in their unique organizational contexts. It is important for organizational leaders and followers to
analyze their organizations with an eye to dynamics that are reducing performance.

One way to identify performance inhibiting workplace dynamics in the organizational setting is
as follows. Extending a suggestion made for HRD scholars and practitioners [1] and for leaders
with reference to signs of workplace bullying [20], as part of the leadership role, when leaders
encounter examples of performance that is lower than expected, they should carefully examine
the situation to see if negative interpersonal dynamics may be one of the root causes for the
diminished performance. Such dynamics may be causing the reduced performance in and of
themselves, or in combination with other factors such as resource issues and non-interpersonal
employee actions.

The process of identifying performance inhibiting workplace dynamics is not a simple one. The
dynamics that are inhibiting performance may be overt, subtle, or inadvertent [3] [8] [11] [15]

41
[21]. Nevertheless, leaders and those that they influence must identify performance inhibiting
workplace dynamics if they are to address them in their organizations. We are asking leaders and
followers to develop what Hogg calls “outsight,” which he defines as “the social ability to
actually see what is going on between people” [9, p. 64, italics in original]. Hogg contrasts this
with insight, which is an understanding of one’s own mental processes. It is an awareness of
interpersonal dynamics within the workplace that are interfering with employee performance that
is needed by both leaders and followers.

Taking Action to Reduce Performance Inhibiting Workplace Dynamics

The next step is for leaders and other organizational followers to take action to reduce
performance inhibiting workplace dynamics. First, leaders should work to change their own
behaviors to reduce performance inhibiting workplace dynamics and encourage others to do the
same. Leaders must consider whether their own behaviors related to interpersonal dynamics
might be negatively influencing the performance of others, and in so doing have negative
repercussions for the team and organizational systems.

Second, based on Altman and Akdere’s [2] application of Swanson’s [17] Taxonomy of
Performance, leaders should respond to performance inhibiting workplace dynamics when found
in the organization by addressing such dynamics as individual situations, and/or changing
organizational systems to reduce the future prevalence of performance inhibiting workplace
dynamics. In addition, as noted above, leaders should influence other organizational followers to
engage in these processes, to examine their own behavior for dynamics that negatively influence
the performance of others, work to reduce these behaviors in themselves, and act in the
organization to reduce these behaviors in the larger context.

Improved Performance

The final stage of the process illustrated in Figure 1 is the result of these behavioral and systemic
changes. If organizational leaders successfully reduce performance inhibiting workplace
dynamics in their own behaviors, engage in strategies to address performance inhibiting
workplace dynamics in the larger organization by addressing individual situations and/or
improving organizational systems to reduce performance inhibiting workplace dynamics, and
finally, if such leaders also influence others in the organization to take up this effort, then this is
likely to lead to improved employee performance, which will have positive ripple effects at the
team and organizational levels.

Organizational Culture

We depict the entire process in Figure 1 as taking place within organizational culture. Tsui,
Zhang, Wang, Xin, and Wu offer the following definition of organizational culture, “shared
social knowledge about the prevalent rules, norms, or values that shape the preferences or actions
of participants” [18, p. 130]. Leaders can influence organizational culture [6] [16] [18] but are
also in turn influenced by organizational culture themselves [6]. We suggest that organizational
culture influences the process of leaders addressing performance inhibiting workplace dynamics,
but also that this process has the potential for influencing the organizational culture. Ideally, we

42
would hope that such a process over time influences the organizational culture to develop into
one in which “the prevalent rules, norms, or values that shape the preferences or actions of
participants” [18, p. 130] are oriented towards an awareness of and a reduction in performance
inhibiting workplace dynamics.

CHARACTERISTICS OF THIS PROCESS

This process of leadership with regard to reducing performance inhibiting workplace dynamics is
open to all leaders, and is conceptualized based on leaders’ understanding of performance
inhibiting workplace dynamics and then on subsequent leader behaviors. We hypothesize that if
leaders become aware that certain interpersonal dynamics can negatively influence performance
and quality in their organizations, because of their interest in achieving performance and quality,
the leaders will be motivated to search for such dynamics in their own organization, and take
action related to them.

IMPLICATIONS FOR THEORY AND RESEARCH

Researchers who are developing models of leadership should incorporate the notion of
performance inhibiting workplace dynamics into their conceptualizations of leaders’ awareness
and behaviors. Future empirical research should explore the prevalence of leader awareness of
the negative performance implications of certain workplace dynamics. To what degree are
leaders in organizations aware of how performance goals may be thwarted by certain
interpersonal dynamics in the workplace? Further, to what degree are leaders working to
influence others in the organization to address performance inhibiting workplace dynamics, and
to what degree are they engaging in efforts to identify and reduce performance inhibiting
workplace dynamics?

Beyond these issues of prevalence, future research should explore how those leaders who are
aware of performance inhibiting workplace dynamics came to that awareness. Such insights will
be of value to HRD practitioners working to improve performance. Also of benefit to
practitioners, future research should work to identify what obstacles leaders perceive in engaging
in the process outlined in Figure 1, and what strategies they have used to successfully circumvent
those obstacles.

IMPLICATIONS FOR HRD PRACTICE

In general, HRD practitioners should consider how the leadership process for addressing
performance inhibiting workplace dynamics is applicable to their organizational contexts. In
particular, HRD practitioners should consider ways in which they can incorporate these ideas in
training and development programs for leaders. For example, programs designed for high
potential employees being groomed for leadership roles might include discussions of
performance inhibiting workplace dynamics and how leaders can address them. Those
individuals providing mentoring for leaders can draw on the steps in this process as well.

There are also several other ways in which the process of leadership to address performance
inhibiting workplace dynamics has implications for HRD practice. Leaders, as part of their

43
efforts to influence others in the organization to address performance inhibiting workplace
dynamics, can support HRD professionals in incorporating the need to address performance
inhibiting workplace dynamics into training and development programs for organizational
followers. Such an effort would involve HRD practitioners in the formulation, implementation,
and evaluation of such training and development programs. Conversely, we would also
encourage HRD professionals to bring these issues to the attention of organizational leaders and
to incorporate this process into the content of their training and development activities for the
organizational followers.

Employees often perceive training programs as safe places to be open about issues and problems
that have an impact on them. Therefore, such efforts would contribute to the initial reduction and
ultimate elimination of these dynamics in the workplace. Furthermore, HRD practitioners can be
involved in leaders’ efforts to engage in systemic organization development (OD) to reduce
performance inhibiting workplace dynamics. Whether it is an internal or external OD
intervention, the process involves “Consultation with a Behavioral Science Expert” [7, p. 25].
Therefore, the OD process will naturally seek out signs and indications of any performance
inhibiting workplace dynamics during this stage. An OD effort that takes performance inhibiting
workplace dynamics into consideration in a change effort will be more likely to succeed.
Furthermore, as champions of change in the organization, leadership will be instrumental in
addressing the reduction of such dynamics in the entire organization as a result of a successful
OD intervention.

CONCLUSION

As organizational leaders work to help their organizations achieve performance goals and
improve performance, it is important for those leaders to address factors that inhibit employee
performance. We have presented a process of the role of leaders in addressing performance
inhibiting workplace dynamics. Leaders should understand that workplace dynamics can inhibit
performance, identify such dynamics, and implement behavioral and/or systemic changes to
reduce the prevalence of such dynamics. Leaders should also work to engage followers to
implement these steps. We argue that these efforts can lead to improved performance.
Furthermore, working within and influencing the organizational culture, such efforts by leaders
can ideally lead to an organizational culture in which there is awareness of and a reduction in
performance inhibiting workplace dynamics.

REFERENCES

[1] Altman, B.A. & Akdere, M. Towards a Theoretical Model of Performance Inhibiting
Workplace Dynamics. Human Resource Development Review, 2008, 7(4), 408-423.
[2] Altman, B.A. & Akdere, M. Responding to Interpersonal Dynamics Inhibiting Workplace
Performance. International Journal for Responsible Employment Practices and
Principles, 2009, 1(1), 10-21.
[3] Andersson, L.M. & Pearson, C.M. Tit for Tat? The Spiraling Effect of Incivility in the
Workplace. Academy of Management Review, 1999, 24(3), 452-471.
[4] Avolio, B.J., Walumbwa, F.O. & Weber, T.J. Leadership: Current Theories, Research, and
Future Directions. Annual Review of Psychology, 2009, 60, 421-449.

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[5] Baker, D.E., Walsh, M.B. & Marjerison, L. High-performance Leadership at the Process
Level. Advances in Developing Human Resources, 2000, 2(2), 47-72.
[6] Bass, B.M. & Avolio, B.J. Transformational Leadership and Organizational Culture. Public
Administration Quarterly, 1993, 17(1), 112-121.
[7] Cummings, T.G., & Worley, C.G. Organization Development & Change (9th ed.). Mason,
OH: South-Western Cengage Learning, 2009.
[8] Einarsen, S., Hoel, H. & Notelaers, G. Measuring Exposure to Bullying and Harassment at
Work: Validity, Factor Structure and Psychometric Properties of the Negative Acts
Questionnaire-Revised. Work & Stress, 2009, 23(1), 24-44.
[9] Hogg, W. What Barroom Brawls and Marital Disputes Have in Common. American Journal
of Forensic Psychiatry, 2007, 28(4), 45-64.
[10] Kogler Hill, S.E. Team Leadership. In P.G. Northouse, Leadership: Theory and Practice
(5th ed., pp. 241-270), Thousand Oaks, CA: Sage, 2010.
[11] McLeod, J. Cruel Intentions? Nursing Management, 2007, 14(4), 16-18.
[12] Merriam, S.B., Caffarella, R.S. & Baumgartner, L.M. Learning in Adulthood: A
Comprehensive Guide (3rd ed.). San Francisco: Jossey-Bass, 2007.
[13] Northouse, P.G. Leadership: Theory and Practice (5th ed.). Thousand Oaks, CA: Sage,
2010.
[14] Pearson, C.M. & Porath, C.L. On the Nature, Consequences and Remedies of Workplace
Incivility: No Time for "Nice"? Think Again. Academy of Management Executive, 2005,
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[15] Rayner, C. & Keashly, L. Bullying at Work: A Perspective from Britain and North America.
In S. Fox & P.E. Spector (Eds.), Counterproductive Work Behavior: Investigations of
Actors and Targets (pp. 271-296). Washington, DC: American Psychological
Association, 2005.
[16] Ribière, V.M. & Sitar, A.S. Critical Role of Leadership in Nurturing a Knowledge-
Supporting Culture. Knowledge Management Research & Practice, 2003, 1(1), 39-48.
[17] Swanson, R.A. Analysis for Improving Performance: Tools for Diagnosing Organizations
and Documenting Workplace Expertise (2nd ed.). San Francisco: Berrett-Koehler, 2007.
[18] Tsui, A.S., Zhang, Z.-X., Wang, H., Xin, K.R. & Wu, J.B. Unpacking the Relationship
between CEO Leadership Behavior and Organizational Culture. The Leadership
Quarterly, 2006, 17(2), 113-137.
[19] Wilson, L.S., Boudreaux, M.A. & Edwards, M. High-performance Leadership at the
Individual Level. Advances in Developing Human Resources, 2000, 2(2), 73-103.
[20] Yamada, D.C. Workplace Bullying and Ethical Leadership. Journal of Values-Based
Leadership, 2008, 1(2), 48-60. Retrieved from
http://www.valpo.edu/cba/jvbl/onlinejournal.htm
[21] Zapf, D. & Einarsen, S. Mobbing at Work: Escalated Conflicts in Organizations. In S. Fox
& P.E. Spector (Eds.), Counterproductive Work Behavior: Investigations of Actors and
Targets (pp. 237-270). Washington, DC: American Psychological Association, 2005.

45
 LEADERS AND LISTENING: AN EMPIRICAL EXPLORATION OF NONPROFIT
LEADERS

Jyoti Bachani, Assistant Professor, Graduate Business, Saint Mary's College of California,
Rheem Campus, 380 Moraga Road, Moraga, CA 94556
bachani.jyoti@gmail.com, Phone: 650.948-4090

Mary Vradelis, Consultant, Second Wind Consulting

Berkeley, CA 94706
maryv@secondwindconsulting.net, Phone: 510.368-0587

ABSTRACT

In this interview-based study of nonprofit leaders, we find that listening to stakeholders from
within and outside their organizations is an essential behavior or skill. Leadership literature does
not focus on listening. We review the literature and argue that more research is needed in the
combined area of leadership studies and listening. Our data shows that successful nonprofit
leaders use their listening skills to gather input from various stakeholders and then use values,
(their own and their organization’s) to construct a legislative power that engages the support of
their extended community.

Keywords: Leadership, Integrative, Listening, Nonprofit, Values

INTRODUCTION

In this study, we set out to answer the questions, “What do integrative leaders do? And what, if
any, traits and behaviors characterize integrative leaders?” The Center for Integrative
Leadership at the University of Minnesota defined the concept of an integrative leader as a
boundary-spanning leader, proposing that the most intractable problems of society can only be
solved by leaders who can work across the boundaries of their organizations to integrate all key
stakeholders. Since the concept of integrative leadership is relatively new, we thought it would
be useful to test it in the real world. We started this exploratory study with the crucial assumption
that the nonprofit and the government sectors require integrative leadership. This assumption
was based on the anecdotal evidence that these organizations have to work with multiple
constituents more routinely than for-profit organizations. A nonprofit’s success depends on being
able to serve its constituents, keep the trust of its donors, win the commitment of its employees,
and collaborate with other organizations that serve the same constituency.

We interviewed eight leaders of nonprofit organizations to learn first-hand what leadership

means to them, and how they lead. As expected, we found that leading a nonprofit organization
has its own special set of challenges, including balancing increasing service needs with
diminishing resources; and designing a radically different income stream than the average
business model. Leadership also requires a significant amount of boundary-spanning activities.
The most consistent skill for these leaders was the ability to listen. The leaders in this study

46
engaged their constituents in a continuing and coherent dialog that reflected their co-created
visions and values. After reviewing the literature on leadership behaviors, we found there to be a
significant gap in the research and support of listening as a key to successful leadership –
particularly for organizations where input from diverse stakeholders is essential. This study
points to the potential for further work: to include listening literature more actively with
leadership literature and develop specific propositions on how leaders and managers can use
listening to be more effective.

METHOD, PROCESS, AND ANALYSIS

The purpose of this research is to empirically explore the concept of integrative leadership, and
describe the role, activities and skills that integrative leaders may display. This is an exploratory
and descriptive study. The Center for Integrative Leadership (CIL) defines an integrative leader
to be one who has one or more off the following six behaviors (found on the CIL website):
(1) Inclusion of stakeholders who can affect change, (2) Identification of shared purpose
to build sustainable solutions, (3) Systemic thinking to help groups resolve problems
and support the solutions, (4) Questioning all of the stated or unstated assumptions,
(5) Constructive dialogue, and (6) Innovation.

Based on our combined prior work experiences of over four decades, we made a critical
assumption that integrative leaders are more likely to be found in not-for-profit organizations.
We interviewed a total of eight leaders of different nonprofit and government organizations from
all over the United States. The leaders were all referred to us as alumni of the James P. Shannon
Leadership Institute, an institute that is dedicated to the personal and professional renewal of
leaders in community-serving organizations. Until the informants give permission, their
information has been disguised.

In this exploratory study, we wanted to learn from these leaders about what they do and what
leadership meant to them, rather than confirming or disproving any theoretical model of
leadership. To understand their professional experiences in their own language, interviewing
occurred in an open-ended free format that would allow us the flexibility to follow the
conversation where it led us. After that, we set out to collect detailed descriptions of the leader’s
values, day to day activities, what mattered to them, what they were working on. Because the
interviewees had all participated in the Shannon Institute, we asked them for their Myers-Briggs
personality type and their three core values (both components of the institute’s curriculum). We
also asked about the organization where they worked, particularly its values, mission, and
primary programs. Our inquiry included understanding the leader’s personal values in relation to
the organization’s mission, including examples of conflicts of values and their resolutions.

Challenges faced by nonprofit organizations

Based on analyzing the data collected during our interviews, we recognized some of the key
differences between nonprofit and for-profit organizations. We had explicitly asked three of the
informants how they saw these major differences, since they had extensive experience in both
sectors. Identifying these unique challenges can help modify the organizational theories in a
manner that would make these more applicable to this context. The following is a sub-set of the
answers that were present across all of the interviews:

47
 1) Within the nonprofits sector, organizations serve an existing and often growing unmet need. The
challenges of meeting a high level of existing demand with decreasing resources are seldom a
problem in the business world.
2) The role of funding for a nonprofit organization makes it substantially different from a business
organization. In our sample, all but one, reported the challenges of funding their cause and
organizations. Some lamented that they had to devote 50% of their time to fund-raising efforts.
3) Nonprofits tend to attract employees who are loyal to the cause of the organization, and are
therefore usually willing to work for lower compensation than they would expect in the for-profit
world. In return, they often expect a work-life balance that is not common in the highly
competitive corporate world. This means that sometimes businesslike policies adopted by the
nonprofit leaders may end up de-motivating their employees rather than motivating them.
4) The nonprofit leaders were unusually dedicated to their cause or organization’s mission and
showed a high level of commitment. They had long tenures in the job; they were ready to take
personal risks and showed a high degree of self-awareness in championing their cause. They
displayed a lot of empathy for others, but did not feel that anyone, including their closest business
or relationship partners truly understood what they needed to feel supported in their roles.

The nonprofit organizations address huge unmet demand for their services by involving
volunteers, employees, and leaders that are deeply and personally committed to the
organization’s mission. Leaders often made personal sacrifices in salary and life-style choices,
while carrying a constant burden of generating ongoing financial resources needed for their
work. There was a sense amongst a number of them that there was inadequate understanding or
empathy for their roles in the face of these challenges.

Nonprofit leaders’ behaviors: listening and engaging

Apart from the features listed in the previous section, there were no clear patterns in the data that
focused on the values and personality types of all the interviewees. We decided to compare the
definition of an integrative leader with the more traditional definitions of leadership. Existing
literature primarily focuses on the role of the leader as the one to create a vision, communicate it,
and inspire the followers, sometimes with charisma, to achieve collective action for meeting
some goals. We compiled a list of leadership behaviors from a number of definitive articles in
the edited volume of a popular Leadership textbook (Northhouse, 2007). The behaviors were
grouped and listed in Table I.

Table I: Leadership Behaviors

• Establishing goals and timelines.

• Establishing high standard of excellence and methods of evaluation.
• Problem-solving.
• Providing a strong role model
• Defining roles, including what is to be done, how it is to be done, who is responsible to do it.
• Giving directions.
• Motivating subordinates to perform at highest level possible, including demonstrating
confidence in their capabilities and consulting to obtain their ideas and opinions.

48
When we reviewed the typical leadership activities identified in Table I, we found that
depending on the organization and its leader, some of these activities were more salient for some
than for others. Explicit examples of their activities and projects helped us identify which of their
activities was not theoretically represented in the abstract theoretical descriptions. The data
showed that all the leaders spent a lot of their time in various situations that required them to be
actively listening. In describing their day to day activities, the nonprofit leaders we interviewed
explicitly mentioned how a majority of the activities they engaged in were essentially “to listen.”
They needed to find out what their employees, donors, collaborators, customers, policy makers,
boards, and various other stakeholders needed or wanted.

Based on these empirical findings, we propose that listening is a significant activity essential to
the role of a leader. We consider it an important leadership activity that needs to be listed
explicitly in addition to the others in Table I. The last activity listed in Table I, ‘consulting with
subordinates..’ implies a listening role for the leader but often becomes an exercise in ‘selling’
the leader’s ideas or a low level ‘involvement’ by the followers. However, we believe a leader
articulates the aspirations of a collective of followers, who are much greater in strength of sheer
numbers. To be able to do that with any authenticity, a leader needs to be a good listener and an
empathetic one, too. The data shows that listening really well is what allows a leader to capture
the zeitgeist and the collective aspirations of the followers. By listening and paying attention to
the content and emotion of what they hear, the leaders are able to capture the imagination of their
followers and articulate their collective aspirations. Below are two examples of the way the
nonprofit leaders, who we interviewed, were engaging in listening.

In one organization, there were 12 employees who were responsible for the largest advocacy
group in the state on a certain issue, with an annual operating budget of one million dollars. The
process to hire a new executive director for this organization took a total of nine months. A board
member for this small organization, who worked in the corporate world, felt that a similar
position within the business world would have been filled in a fraction of the time. A Board
Search Committee designed a consultative process to solicit input from the organization’s
stakeholders so they could formulate the right job description and find the right person. The
board listened to the employees who would be led by this person. They listened to their donors
who would donate based on the trust in the vision and leadership of the executive director. They
listened to the community they served by including various opinion leaders for their cause. By
listening to all the stakeholders, within and outside the organization, they learned about the key
challenges in terms of the issues and the donations, and about what the leader was expected to
achieve. This helped formulate what was expected from the person taking the position, and thus
was an important part of the hiring process and the final decision. Specifically, by listening, they
learned that a major donor group had become alienated from the organization and had decreased
the amount of their donations. In response, the selection included the ability to re-build
connections with this specific donor group and reintegrate them to serve their shared cause.

Another organization’s purpose was to provide enrichment programs for grade school students.
A Chief Operating Officer (C.O.O.) was hired because he brought over a decade’s experience
from the corporate world. Recognizing how popular and effective the school programs were, he
created a growth strategy for the organization. The strategy was developed by the senior
management team and presented to the employees in a meeting. The goal was to serve a million

49
school students in 20 cities by 2020. Based on the C.O.O.'s corporate experience, he expected a
specific target-oriented strategy to motivate employees and align their actions to help achieve the
corporate objectives. In this nonprofit organization, it had the opposite impact. The staff
members hated it and were de-motivated by it. They told the C.O.O. that he was attempting to
bring the corporate world’s growth-for-growth’s sake mentality to their mission, without
appreciating how they were different. They publicly declared their concerns about how this
growth would impact the quality of the programs and the work-life of the employees. Program
employees would be required travel to schools far away from their home districts, or maybe even
be transferred to new locations. They were not interested in doing that. The C.O.O. listened
intently to their concerns and agreed to reconsider the strategy. He reformulated it to be more
consistent with the organization’s key resource, its people. The revised strategy focused less on
target numbers and more on the impact of the programs on participating youth.

In these examples, the leaders recognized that listening and paying attention to all stakeholders
was critically important for achieving the goals of their organization. The leader’s ability to
listen well affected the vision, the role the leader, the assumptions the leader makes, and how the
leader communicates his/her vision to the employees. It was critical for leaders to listen to the
employees, the donors, the community they serve and to understand how these different needs
and demands can be balanced to achieve the organization’s mission.

While the evidence in the previous section focuses on how the leaders were listening, their
effectiveness really depended on how they engaged their organizations, their employees, donors
and their constituents once they had listened and learned. How does the balancing act with
multiple, and sometimes conflicting, interests play out? The data we collected showed that
effective listening was combined with the ability to engage the different constituents in a manner
that brought a balance to the different interests using the leader’s personal values and/or the
organization’s declared mission as the uniting thread. We want to emphasize that the leaders are
not just listening to build consensus. They are also not just listening to provide what is being
asked for by the various stakeholders. The leaders in our study, were listening-- paying attention
to understand empathetically the real concerns. They then found a way to address concerns,
without compromising on the main goal and vision and values of the organization.

LITERATURE REVIEW: LEADERSHIP AND LISTENING

As mentioned before, the review of leadership behavior included listening as implicit in a

number of these activities, but it is not explicitly mentioned anywhere. We conducted a broader
library and internet based search for articles with the key words: leadership and listening,
communication, and management communication. Communication appears explicitly as an
important leadership activity, but when we looked deeper, none of the communication models in
the literature even mentioned listening. This implicit theoretical treatment of an important
empirical activity is a big gap in theorizing about leadership. The implied skills of
communication do not focus on listening either. The communication models direct the leader to
focus on other areas like coding the message and selecting the appropriate channel for
communicating the message but not on the critical skill of listening. Hence, even the implicit
inclusion of listening in theories is incomplete and completely divorced from the experiential
descriptions of what integrative leaders are really doing.

50
The only studies that explicitly mentioned listening in the context of leadership were these: One
study found that perceptions of leadership were positively correlated with listening effectiveness
(Bechler & Johnson 1995, Johnson & Bechler, 1998). Orrick offers some prescriptions for
leaders on how to be more effective listeners by looking the speaker in the eye, paraphrasing to
ensure understanding the speaker’s message, keeping an open mind and not getting emotional or
defensive, and being respectful by not betraying the confidence of the speaker (Orrick, 2002).
A few other authors have recognized the importance of listening for managers and supervisors
(Ambrose, 1984, Imberman, 1969, and Weinrauch & Swanda 1975). Supervisory listening
impacts subordinate support, trust, intrinsic motivation and performance (Stine, Thompson, et al.
1995) and affects community building efforts (Purdy, 1991). Listening can affect success at work
(Sypher, Bostrom, et al. 1989). One study acknowledged that it is the ‘toughest management
skill” (Brownell, 1987).

We also focused on the research related to listening. The earliest reference that we found was the
1925 work, “Science of listening” authored by W. Tucker. Yet, the ‘father of listening’ was Late
Dr. Ralph G. Nichols, of the University of Minnesota. In 1972, he wrote, “Listening is good
business,” “Listening is a 10-part skill,” (1987a) and “Manipulation versus persuasion” (1987b).
His successor, Lyman K. “Manny” Steil, started the International Listening Association to
promote the practice, teaching and research of listening. This professional organization hosts
annual meetings and publishes the International Journal of Listening.

The most recent review of the listening literature that we could find was by Witkin (Witkin,
1990). Listening as an area of research does not seem to be as active as it is important. This gap
in research is particularly puzzling since business practitioners and academics claim to recognize
listening as one of the most important skills for effective professionals (Smeltzer, 1993).
Listening ability and effectiveness affects the perceptions of individual performance in general
and communicative competence in particular, in the workplace (Haas & Arnold, 1995). Yet,
according to one count, only 1.5% of articles in business journals dealt with listening
effectiveness (Smeltzer, 1993).

There are different ways to practice the art of listening based on general properties of listening
(Duker, 1964, Duker & Petrie 1964, Bigelow, 1976, Barrett-Lennard, 1988), for e.g. active
listening, empathetic listening, etc. Listening in certain contexts can create healing, growth,
relationship enrichment, tension reduction, problem solving, and knowledge advancement
(Barrett-Lennard, 1988). Managers and leaders can use listening for all these.

Based on this survey, we want to emphasize that leadership literature has a huge gap until it
starts to include listening as an important leadership skill. Leaders can be measured on their
listening competence, trained in the behaviors of active listening, based on research already
available. What is urgently needed is research that will focus on how leaders and managers can
use active listening skills to get organizationally beneficial outcomes, like effective relationship
building, problem solving, knowledge creation, and motivated subordinates. Our empirical data
offers an illustration of how these nonprofit managers are using listening to engage with their
stakeholders and communities to do just this. For this group of managers listening is an
important leadership activity. Their effectiveness really depends on their ability to use listening
to truly engage the stakeholders in the collective endeavors of the organization.

51
 LIMITATIONS AND FUTURE RESEARCH

We found evidence to convince us that listening is fundamental and crucial for leadership
studies, and may be a distinguishing characteristic of integrative leaders. We are now most
concerned with how far can we generalize this claim. This study may be based on a small
sample, but for qualitative research, this is not unusual. The data we have collected is describing
the world in the words of the practitioners without theoretical filters creating any biases. Weick
(1999) made a call for ‘feeling theories’ that theorize from the perspective of the people and the
situations they face, so we can see and appreciate the world they live in, not from our own or
some neutral external perspective, but from the same one as them. We feel that by inductively
arriving at our findings from the evidence we collected systematically, we have provided such a
key discriminating feature of integrative leaders – those who want to, and know how to, listen.

Our sample constituted leaders of nonprofit and public sector organizations only, based on our
starting assumption that we are more likely to see integrative behaviors in this context. This
assumption needs to be tested out by further work in other contexts. Although we did find some
research that supports our intuition that this was a good place to start. In his monograph written
for nonprofits Good to Great and the Social Sectors, Jim Collins suggests that for-profit leaders
have executive powers to reward or punish based on being higher up in the pyramidal
hierarchical structure of the business world. While, he conjectures, that because of their diverse
stakeholders, nonprofit leaders must rely on legislative powers. Without use of executive
authority, nonprofit leaders advance their organizational missions by listening to the concerns of
their employees, donors and constituents, and re-framing their message in an empathic manner,
while being guided by their values, to create an engaged community that supported their
mission. When we review the initial comparison of for-profit and nonprofit organizations, we
see that these differences do not preclude the generalizability of these results. However, they
may be less relevant to the more traditional hierarchical organizations where leaders can rely
exclusively on their executive and reward powers, and do not need good listening skills. We feel
that the next logical extension of our results will be to the networked flat organizations in the
corporate world. Leaders in these types of organizational structures deal with similar challenges
of having to satisfy multiple stakeholders and may benefit from better listening skills.

This study points to the potential for further work: to include listening literature more actively
with leadership literature and develop specific propositions for listening strategies that leaders
and managers can use to be more effective. We would like to use a larger sample to better
describe and document how leaders listen and engage their constituents to create effective
organizations. We would also like to conduct a comparative study with leaders of for-profit
businesses. Listening should also be made an explicit part of theoretical communication models.

References available upon request from Mary Vradelis (maryv@secondwindconsulting.net)

52
 THE DETERMINANTS OF TRUST AMONG THE TURKISH CONSUMERS IN
ONLINE RETAIL BANKING (ROB)

Dababrata Chowdhury, Programme Manager for SLM, University of Plymouth Business

School,Drake Circus, PL4 8AA, Devon, UK., Email: daba.chowdhury@plymouth.ac.uk

Vipul Mudgal, Asst. Manager (Operations in Product Support),Orange France Telecomms,

Plymouth, UK, Email: mudgal_vipul@hotmail.co.uk

Lynne Butel, Associate Head of University of Plymouth Business School Drake Circus, Pl4
8AA, Plymouth, Email: lynne.butel@plymouth.ac.uk

Murat Kasimoglu, Head of Business Administration Department, Canakkale Onsekiz Mart

University,Biga,Turkey, Email:mkasimoglu@yahoo.co.uk

ABSTRACT

The online banking has changed to great extent since the introduction of e-commerce,
therefore, the online banking be beneficial to build exchange relationships between bank and the
customers (B-2-C). This exploratory research investigates the effect of e-banking on the
development of retail banking relationships in Turkey. A literature review dealing with the
concept of measuring trust with help of four different antecedents, which are shared value,
opportunistic behavior, attraction and communication. To justify this study, the data of 155
samples of internet users by the means of online questionnaire has been gathered.
Key Words: Trust, Opportunistic Behavior, Shared value, Online Retail Banking (ORB), Turkey

INTRODUCTION

Retail online banking in Turkey has not always been a successful model for the banking industry.
Today, electronic commerce has a great significance in each and every field of business.
Similarly, banking is one sector which has a high degree of value amongst many people. The
increasing usage of the internet in the banking sector has brought considerable changes. For
instance, with the increasing number of online users, banks can easily reduce the cost of serving
customers. Today, the e-commerce models like Business-to-Consumer (B2C) have gained lot of
attention from various market players in the retail banking industry. The findings of Morgan
Stanley internet research concluded that, the web is more important for the retail financial
industry as compared to any other industry (Nath and Mukherjee, 2003). Vast levels of
globalisation have given birth to more competition, as banking industry is considered to be the
biggest industry in the world which covers more than 50% of the overall sector of all the
industries. Therefore, the banks across the world face new challenges and opportunities.
Undoubtedly people in Turkey are getting aware of the importance of the e-commerce in their
day to day life. There may be many reasons for such a low number of internet banking users, but
this study is based on the most important reason or the determinant in the relation of the seller
(here as banks providing internet banking services) and the buyer (consumers using internet
banking services), viz. TRUST. What is trust? There are many definitions on trust by different
authors, as Rempel and Zanna (1985) define trust as “a generalized expectancy held by

53
customer that word, promise or statement of the company can be relied upon”. There are
many definitions on trust which will be discussed in the review of the literature

LITERATURE REVIEW

According to Nath and Mukherjeee, “trust is a cross-disciplinary concept, incorporating

ideas from economics, marketing, sociology, psychology, organisation behaviour, strategy,
information systems and decision sciences”( Nath and Mukherjee, 2003, p.6). Similarly,
according to Moorman et al (1992, p.315) trust is “willingness to relay on the exchange partner
in whom one has confidence”. While researching the literature for the study, it has been noticed
that the most common approach in all of the studies conducted to find the level of trust in the
internet banking till date, is the commitment-trust theory of relationship marketing given by
Morgan and Hunt (1994).The paper links the three components as “trust is the calculation of
the likelihood of future cooperation and is a defining feature of virtual cooperation. As
trust declines, people are increasingly unwilling to take risks and demand greater
protections against the probability of betrayal”, (Ratnasingham, 1998).According to the
researcher the customer’s trust always influenced by the attractive services (Kassim et al 2006).
The author means by this that if the website of the bank is attractive and looks prominent than
the chances of trading through it increases. On looking more in the detail of the theory,
undoubtedly internet banking is the fully customer oriented market; therefore, the customer is the
one who should always be considered. According to Payne, (1995), the relationship commitment
theory comprises of: Focus on Customer retention, Orientation to customers values, Long time-
scale, High customer service emphasis, High customer contact, Quality is the concern of all.In
the process of the literature review many studies on the different trust models in e-tailing of
online banking has been noted. For example, in one of the study the proper implementation of
relationship commitment theory in one of the UK’s largest bank Barclays, has been noticed.
Barclays Bank has made a major commitment to relationship marketing though the
implementation of the Corporate Market Programme (CPM).This is the reason of their high
profits in every year’s balance sheet. In the same literature we have come across the other,
evidence which again points the whole study towards trust viz. “The building of long term, royal,
committed and profitable relationships with potential and existing customers through
communication and the provision of quality good and services” (Irving et al, 1997).

THE THEORETICAL BACKGROUND

There are many research papers who explained various models of measuring trust. In all of the
studies different variables have been taken to measure trust. One of the models is:

54
Source: (Nath and Mukherjee, 2003)
In the above figure, the stated model was proposed in the research paper, ‘Trust model in the
internet banking’. The trust in the research was mainly measured by measuring the different
antecedents of trust. The paper stated that the trust is a bond of three antecedents’ viz. Shared
Value, Communication and Opportunistic Behaviour. Again the communication factor can be
seen in the Barclays Bank Corporate Market Programme (CPM). We will discuss about the
different antecedents of trust in the later part of the literature review. In the similar way on
looking at the other research, then some of the similar and some different antecedents of trust can
be noticed.There are three main antecedents of trust are identified from relationship commitment
and trust theory (Morgan and Hunt, 1994) viz. Social bond, Opportunistic behaviour and
Communication. The other study Trust and its Determinants in Internet Banking, 2004, also
measures trust with same antecedents or determinants like Social bond, Opportunistic
behaviour and Communication. Similar antecedents were taken in one of the other study which
we have already discussed.

THE ANTECEDENTS OF TRUST

Now as we going to see the different antecedents through which we measure the trust. In
our research we have used four antecedents viz. Shared Value, Opportunistic Behaviour,
Attraction ,Communication. The reason for choosing all these four antecedents is their bonding
with trust. We have left the one of antecedent viz. Social bond. And in place of the social bond
the shared value has been chosen. As social bond only reflects the emotional contents and on the

55
other hand shared value comprises more of the common beliefs of the bank and the customers.
Now let’s discuss these antecedents in more detail.

a) Shared Value

Shared value in general means when both the parties has the common beliefs of what
goals, polices and behaviours are important or unimportant, right or wrong or appropriate or
inappropriate (Morgan and Hunt, 1994). As far as the shared value antecedent in context with the
online banking is concern, it exemplifies the degree to which the customers and the banks share
the common beliefs on the values like ethics, security and privacy. In other sense all these three
critical values are nothing but the bond of trust. The critical factors like privacy, ethics and
security are important elements in the internet banking (Nath and Mukherjee, 2003). Ethical
values determine the chances of bank manifesting or selling the customer information to the third
party or providing the customer with the wrong information. This always been the major concern
for the online customers. There are also evidences to suggest that, there are many ethical issues
regarding to financial services, many of which relate to the disclosure of information
(McAlexander and Scammon, 1998). In broad sense ethics and honesty are features of good
business mortality, build trust (Huemer, 1998). Even privacy as concern is the other critical
issue, as customers generally hesitate from providing their information and especially when it
comes to the online transaction. There are lots of vulnerabilities in the information systems due
to which customer never feel safe while online banking or transaction. Even the increasing
amount of phishing, sophistication of spam, semantic attacks increasing users’ uncertainty about
the results of their actions and their distrust towards online parties like banks ( Kumaraguru et al,
2007 ). Therefore, risk of loss privacy is the significant problem for the customers which is also
considers being the important factor for building trust (Nath and Mukherjee, 2003). Similarly,
security is also another critical issue for the online banking customer. The area which gets
affected the most due to the security reasons is the online transaction. Users always think that
making payments via internet are not secure, thus this reduces the customers level of trust in the
online banking or the transactions (Kassim et al, 2006). Now with the change in the time and the
technologies, the security systems of the banks are getting better day by day. Now, security is not
identified as the major factor in distinguishing critical online activity (Nath and Mukherjee,
2003). Therefore, now we can say that the higher is the level of shared value among the
customer, the higher is the level of trust in customer for the online banking, or vice versa.

b) Opportunistic Behaviour

Opportunistic behaviour can be defined as the “Self-interest seeking with guile”

(Williamson (1975), Nath and Mukherjee (2003) p.8). In the easy terms, the opportunistic
behaviour is something which one party knows without informing to the second party. For
instance, when bank informs about the new services say, credit card, but hide some of the key
information’s such as any hidden charges or cost. However, sometimes exaggerate the quality of
the product and services than of what it worth. When the customers believes that the bank is
engaged in opportunistic behaviour, then such impression will affect the trust bonding by taking
it towards negative flow.
As originally suggested by (Clay and Strauss, 2000) and later referred by (Nath and
Mukherjee, 2003), that with the high risk of opportunistic behaviour by the banks sprouting and

56
inadequately developed rules and regulations, customers frequently have low levels of trust in
online banking.Even sometimes, the customer’s perception about the bank taking undue
advantage of the customer lack of knowledge or opportunistic behaviour is due to its limited or
less technical knowledge about the system. As customer trust on an automated system is
dependent on the systems perceived technical competence and performance (Jarvenpaa et al,
2000). Due to this fact the customer always think negatively even if he or she is getting the
accurate information as they sometimes unable to explore the whole database of the bank
website. This certainly will reduce the customer trust in online banking. Lastly, due to the lack of
adequate regulatory control and the presence of substantial information asymmetries (Bejou et al,
1998), could also affect customer’s trust when engaging in online activities such as banking.
Therefore, the higher risk of opportunistic behaviour in online bank may result to low levels of
trust in the internet banking (Kassim et al, 2006).

c) Communications:Communication is a major precursor of trust. It can be defined as the

formal as well as the informal sharing meaningful and timely information between firms
(Anderson and Narus, 1984, 1990). Anderson (1984) also suggested that communication is
positively related to trust in marketing channels. As suggested by Moorman (et al, 1993) and
Etgar (1979), that communication in internet banking refers fostering trust by assisting in
resolving issues like “disputes and ambiguities” and further arranging perceptions and
expectations. Further, Nath and Mukherjee (2003), considered such communication in terms of
speed of responses, openness and quality of information. As these are the parts of social
communication, therefore, displaying high degree of social communication by the bank on their
website, leads to high degree of customer trust and as a result will increase the chances of the
customer engaging themselves in the online banking and transactions. Further, Duncan and
Moriarty (1998), identified the factors like accurate, comprehensive and two-way
communication lead to an increase in trust. To explain this further, they have resembled
computer as a device which allows two-way dialogue that assist in information sharing and
creating acquaintances. In the similar way, the information technology in the form of the banks
website can also prove to be great support in the communication by providing all the information
under one tree. This type of information is both ways (Rogers, 1995). The IT is such tools for
the banking industries that can prove to be very helpful for the communication purpose, which
definitely make the communication bond strong, which again lead it to the high degree of
customer trust. This is because, once the customer realises that he or she is being responded in
the proper way, they automatically starts trusting the bank. This will increase the chances of the
customer engaging themselves in the online banking and transactions. (Kassim et al, 2006),
suggested that favourable communication environment results in the customer attraction towards
internet banking. After analysing the importance of the communication in the online banking, it
can easily be said that this is the one of the most important antecedent in the study, and which
need to be seen very carefully.

d) Attraction :Attraction means that there is something which makes the customer interesting to
a given service provider say bank, or vice versa ([Gronroos, 2001] and [Kassim et al, 2006]).
Attraction can be based on the three factors such as financial, technology and social constructs
([Sathye, 1999] and [Kassim et al, 2006]). Attraction is somewhat very important antecedent in
the customer and bank trust. In this fast growing arena of technology, every service provider
wants to gain the competitive advantage to remain in the race. For instance take the example of

57
the banking industry which is regarded the toughest industry to remain in. Therefore, every bank
wants to take the maximum benefits of the technology to attract most of the customers. This can
only be possible if the appropriate technology is used for example online banking websites. If the
websites are more users friendly and attractive as well, means easy to operate (Wang et al, 2003).
Similarly, in the internet banking relations, comfort of adoption includes aspects such as the
accessibility of information, functionality and navigation (Dabholkar, 1996). As suggested by
Prahalad and Ramaswamy (2000) and later posited by Kassim et al (2006), that if customer find
complicated menus which makes them annoyed then they might judge the company’s product by
the degree to which a product gives them the experience they want. This can also be in terms of
the services for what they are paying, means the customer is fully satisfied with the services of
the banks or not. Similarly, if the reputation of the service provider is stupendous then might be
there are chances when the customer gets attracted towards the respective banks online banking
services. On scrutinizing the importance of the antecedent attraction in the relationship of online
banking and trust, it can be relate that, higher is the level of attraction among the customer
towards the bank, the higher is the level of trust in customer for the online banking, or vice versa.

Hypothesis

Based on the review of the literature, a link between online banking and the level of trust in
the customer for it has been developed. The level of trust in the online banking among the
Turkeyn customers can only be measured by finding out the impact of the antecedents of
customer trust in online banking viz. Shared Value, Opportunistic Behaviour, Attraction and
Communication. For this the hypothesis has been made to measure the impact of the
antecedents of trust in the online banking.

H1 : There is a positive relationship between online shared value provided by the bank and
the customer’s trust in the internet banking.
H2 : There is a positive relationship between online communication and customer’s trust in
the internet banking.
H3 : There is a positive relationship between online attraction and customer’s trust in the
internet banking.
H4 : There is a negative relationship between perceived bank online opportunistic behaviour
and the customer’s trust in the internet banking.

Data collection: As the study has been analysed by the means of primary data, therefore the
questionnaire is designed and used to collect data. In order to analyse the collected data, the
whole questionnaire has been divided in six different sections. Each section represents one
variable. As used earlier in some studies of Kassim et al (2006), Malhotra et al (2007), where the
results are based on the questionnaire data, the same Likert interval scale method (Oakshott,
2006) has been used, where all the items are placed on the five point rating, ranging from 5 to 1,
where ‘1’ refers least or strongly disagree and ‘5’ refers to most or strongly agree.Before
launching the final questionnaire, a pilot survey was done. The pilot surveys with 30 questions
were launched and the sample of 15 respondents was taken. Out of the 30 question, four of the
questions were found to be unrealistic as the respondents hesitated to answer them. The overall
score of these questions were quite low in comparison with the other question. Therefore, to get
appropriate and accurate data, those four questions has been deleted from the final questionnaire.

58
Hence this drafted and then amended questionnaire has been selected for the final administration
on the targeted 200-250 respondents. As Turkey is mentioned to be one of the important market
for the banking industry in the world (Mukherjee and Nath, 2003). Therefore, it is very important
to study the market very carefully, due to its wide range and complexity. To overcome, this type
of problem a different method of collecting data has been adopted. The survey was launched via
source of internet. The final drafted survey was launched though the American based survey site,
Zoomerang (www.zoomerang.com). Then the link to the direct online survey viz.
http://www.zoomerang.com/Survey/?p=WEB227JYDRS4J3 has been sent to the respondents.
Even to make sure that one respondent do the survey only one time, the Internet Protocol (IP)
address conflict was applied to the survey. Under this technique, with the help of the website, the
administrator (website) records each and every respondents IP address and therefore not allow
them to answer the survey twice. In this way, the chance of survey becoming bias reduces to
very extant. The selection method of the respondents is again one of most important job in any
survey (Oakshott, 2006). For this study for very limited sector of people has been targeted. The
targeted group are the computer literate people. To select such kind of people the simple strategy
of selection has been adopted. The professional like teachers, multi-national executives, students
and others has been selected. Finally, the link of survey was sent by the means of social net-
working websites, like Face-book and Google’s Orkut. Further the respondents have been
asked to further distribute the link in their social circle. In this way the questionnaire has been
circulated and responded by the successful respondents.

DATA ANALYSIS AND RESULTS

The total numbers of respondents who have hit or clicked the counter of the survey were 222, but
out of this only 172 have gone through the whole survey and clicked the survey end button. Out
of 172 respondents as well, 17 were such respondents who doesn’t fit to the selection criteria of
online banking user. Out of these 17 respondents, there were some who are the online banking
user but have completed the survey partially. Therefore such respondents have been deleted from
the final included data for the analysis. Finally the total 155 respondent’s data has been taken
into consideration for the further analysis. As the whole study is based on to investigate that
whether there is any relationship or the impact of the trust antecedents on the trust among the
online banking customers. Therefore to find out the relationship, the Regression method of the
quantitative data analyses has been used. As regression has become a powerful tool for
summarising the nature of relationship between variables of both types i.e. dependent and
independent (Alan Bryman et al, 2002), therefore such method has been adopted in this research.
On the basis of the hypothesis the following model of dependent and interdependent variables
has been formed

Shared Value
Attraction
(H1) (H3)

Trust

59
 (H2) (-H4)

Communication Proposed model

Opportunistic
Behaviour

Figure 1: Model for analysis (Dependent and Independent variables)

The above figure shows the dependent and independent variables. The dependent variable
is the TRUST, whereas the independent variables are ATTRACTION, COMMUNICATION,
SHARED VALUE and OPPORTUNISTIC BEHAVIOUR. On the bases of these derived
variables, the further analyses have been conducted. The analyses and the results calculations
have been done on the basis of the various tables generated while doing the regression tests. The
analysis has been done by comparing group or sections of the questionnaire. But as in the
regression test only one dependent variable can be taken, therefore, each section representing
different antecedents of trust is taken for three times to relate with the three aspects of trust i.e.
reliability, integrity and confidence, or with the three different questions based on these aspects
to describe trust.

Results on the basis of correlation and regression test between trust and variables
Antecedents Mean Standard Deviation Β
Shared value 7.89 0.99 0.243
Communication 2.16 0.98 0.357
Opportunistic 7.59 0.99 - 0.294
behaviour
Attraction 8.03 0.99 0.33

RESEARCH RESULTS

Selection of Hypothesis based on the Regression and Correlation test

Further, these regression and correlation analysis from all the calculated values, brought
out these findings in focus, that there is a significant positive influence of online communication
on customer’s trust in online banking (β = 0.357 and p<0.05). Hence, the Null hypothesis (H0)
that ‘there is no relationship between online Communication and the customer’s trust in internet
banking’ proved wrong and rejected. On the other hand, the alternate hypothesis (H2) gets
accepted. Similarly, there is a significant positive influence of shared value (β = 0.243 and p<
0.05) on trust, thus the null hypothesis (H0) that is ‘there is no relationship between online shared
value provided by the bank and the customer trust in internet banking’ stands to be rejected and
the alternate hypothesis (H1) is accepted. Again, online attraction has a significant positive
influence on customer’s trust in the internet banking (β = 0.33 and p<0.05). Therefore, the
alternate hypothesis (H3) is accepted and the null hypothesis (H0) that ‘there is no relationship
between online attraction and the customer trust in internet banking’ is rejected. It has been
found, that there is a significant negative influence of online opportunistic behaviour on

60
customer trust (β = - 0.294 and p<0.05). But still it has a significance level of p < 0.05.Thus, it
can be concluded that for opportunistic behaviour, the null hypothesis that ‘there is no
relationship between perceived bank online opportunistic behaviour and customer’s trust in
internet banking’, has been rejected and the alternate hypothesis (H4) is accepted.

FINDINGS

After the analysis of the results and on that base the selection of the appropriate
hypothesis has been done. As it has already proved that there is significance in both the tested
dependent and independent variables. But, in this chapter the findings and some facts which has
been discovered during our study will be discussed. To start with, let’s put the regression test
results under scan, although the relationship is significantly proved, but on looking the results
more carefully, it has been noticed that there is not a strong relationship between each other. As
all the R-values are not too close to 1, in fact some of the R-values are as low as 65%. On taking
out the average R-value for all of the variables is 60% (approx). Even on being positively related,
this relationship cannot be termed as very strong. This shows that the customer has a trust on the
banks but not to that level which make them feel of doing more risk related work via online
banking such as transactions and all. This will be clearer by looking at the responses of the
online banking customers. Most of the customers responded that their bank offers two way
communications (92%), but the score is low (79%) when they have been asked about the
information of changes via email. The other reason behind the weak positive relationship is that
most of the respondents have chosen to be neutral, which in no doubt has increased the overall
score but made the relationship weak. The highest ‘not sure’ ratio is 35% in question number 25
(survey questionnaire) where the customers have been asked to rate that sometimes their bank
online transactions cannot be trusted fully. But in most of the questions the customers agreed
ratio is higher in comparison of the other value in the question. The other interesting finding of
this study is that there is no respondent who has not answered ‘Yes’, on been asking that whether
there bank offers internet banking. Which is a good sign that suggests, banks have started to
realize the importance of online banking, and efficient it could be in overall cost saving for them.

DISCUSSION

After scrutinizing the entire research and the analysis, lots of recommendations are need
to be given to the banks for establishing higher level of trust in online banking with customers.
As this has been proved that trust plays the vital role in the online banking, therefore banks need
to work on it without delay if they really want to grow the online banking customers and take the
benefits of it. As communication score is low in the study, suggesting that the level of
communication has not reached to the optimum level. In the last findings, it has been seen that
most of the customers still want to bank via face to face communication. This shows that banks
need to make the customers aware of the online banking advantages, such as time saving more
effective, easy etc. But, banks again need to assure the customers about the reliability and
authenticity of the online banking so that the trust level of the customers increases. Further, the
results also shows that the bank managers do not contact the customers regularly, the score for
‘bank managers never contact’ is high up to 25%, which again has been proved (correlation score
of trust and bank managers contact is 0.431). Therefore, bank managers need to provide full
customer satisfaction so that customers realize that they have been taken care of by the bank,

61
which may increase the level of trust and they start to use online services more frequently.
Secondly, shared value can also be increase by assuring the customers about the banks online
transactions are fully secured. As transaction is the most important factor, which increase or
decrease the level of trust in the online banking. Customer always hesitated in doing online
banking due to the security reasons, even due to the possibility of the information being shared.
In this regard, bank can make them aware about the security policies, such as tie ups with the
certain online secure transaction agents, like pay-pal, e-trust and others. As far as the information
sharing is concern, and then generally customers are not aware of the security policies of the
government such as Data Protection and Privacy Law in Turkey. Similarly, the banks even have
to increase the online banking customers by making the websites more attractive and user
friendly. If the bank provide all the information to the customer at one place, then the trust of the
customer is more likely to increase as it shows the authenticity of the website. Lastly, bank
should always encourage customers of using online banking by proper promotions of it, in and
outside the banks, even if needed all the bank customer representatives may also tell the
customer about the reliability of the internet banking and its advantages.

LIMITATIONS AND FUTURE RESEARCH

As the study is conducted by the means of online, therefore it cannot be measured that
whether the information provided by the respondents are best according to them. There is no
proof for it that all the customers have seriously taken the survey. Similarly, as the study is based
on the Turkish customers and the study has been taken from UK, therefore, the researcher has to
relay on whatever information has been gathered from Turkey. Further, even all the analysis is
based on the results from the questionnaire, and the sample size is small (n=155), therefore, the
analysis results have to be accepted and on its bases the recommendation have also been drafted.
As a result of it, sometimes the results came out to be negative when positive result was
expected. The other limitation of the study is the nature of it. As the study is related to the
sentiments of the customer where the questions of reliability and trust are been asked, therefore,
the customers hesitated little bit and for these reasons there is a high ratio of ‘not sure’ answers.
In that case analysing the results is little bit more difficult. Further, all the analysis has been done
by using the SPSS software, therefore, the chances of accurate results reduces, as it performs on
the set pattern, but still the results are authentic. Finally, there are many other factors that can
influence the online banking awareness. Future research can study the impact of other variables
such as on different consumers segment of online banking.

References available on request.

62
 A RESEARCH DEVOTED TO THE PERCEPTION OF UNIVERSITY STUDENTS ON
DIVERSITY

Murat Çolak
Dokuz Eylül University
Faculty of Economics and Administrative Sciences
email: m.colak@deu.edu.tr phone: +902324204180/20298
Izmir, Turkey

Güler Tozkoparan
Dokuz Eylül University
Faculty of Economics and Administrative Sciences
email: g.tozkoparan@deu.edu.tr phone: +902324204180/20610
Izmir, Turkey

ABSTRACT

The objective of this research is to determine the diversity perception of university students. To
this end, a sample of 1460 students, chosen from the department of Economics and
Administration Sciences at Dokuz Eylül University in Izmir, the third biggest city in Turkey, was
used in this research. According to research findings, the diversity perception of university
students was highest for their colleagues. In addition, according to analysis results of whether
perceptions vary in relation to demographic variables or not, diversity perception towards
colleagues was again the highest.

Keywords: Diversity, managing diversity, perception of diversity, diversity dimensions

INTRODUCTION

Due to globalization affecting many countries worldwide with an increasing speed, borders
between countries are gradually being eliminated. In line with these developments, together with
the increase in the number of multi-national businesses, especially collaborations between
different countries and different nations, multi-cultural environments have become inevitable
especially within businesses. The leading actors of such a multi-cultural life are a labor force that
has diversity in language, religion, nationality, race, culture, sex, and ethnic origin. In recent
years, the most important management exercise has become the enabling of the harmony
between workers from different demographics. Managing diversity, which has become inevitable
due to the changes experienced and the importance of which increases day by day, is a
management exercise based on workers with different characteristics, working in unity towards a
common goal.

The objective of this study is to determine the tolerance of university students towards a diverse
range of people since the university students are are thought to be individuals that will have the
opportunity to work with people from different cultures and will be exposed to innovations in

63
today’s rapidly changing world of information and technology. Within this contextwe first define
what we mean by managing diversity and then explain the dimensions of diversity and finally
illustrate a research carried out related to the subject.

DIVERSITY MANAGEMENT

Definition and Importance of Managing Diversity

Interaction with identities in a wider range becomes more critical as organizations

geographically spread and free circulation of labor between countries increases [1] [2].
Researches carried out show that the labor force composition in organizations is undergoing a
drastic change and that this change will continue to increase in the future [3] [4].It is normal for
new management approaches to be put on the agenda as well as encountering some issues due to
the increasing labor force diversity in organizations. For instance motivating workers from
different demographic characteristics, cultural background, adopted values, and acceptances in a
certain manner has become an issue. These new circumstances, have forced new management
styles to be put on the agenda that aim for integration and unity instead of assimilation in
organizations. One of these management styles is managing diversity [5] [6].

The approach of management of diversities offer suitable solutions that maximize potential
advantages of diversity while minimize their disadvantages for organizations [7]. Programs for
management of diversity, if practiced successfully, will result in creation of equal opportunities
for every individual, so that the stabilization of organizational power, participation in making
resolution and organizational competition advantage are ensured [8] [9].

Diversity Dimensions

Notion of “diversity” in literature points at the diversity in personal characteristics between

individuals [10]. Differences exist in the definition of dimensions of diversity also just as in the
definition of it as a concept. For example, Gardenswartz and Rowe (1994) define four
dimensions for diversity. They consist respectively of personality (those, which cannot be
realized/seen at first sight), inherent dimensions (those, which can partially be realized/seen like
age, gender, race, ethnic origin, sexual tendency and physical capacity), external dimensions
(income, marital status, physical appearance, occupational experience, educational status etc) and
organizational dimensions (content of the job, department, work experience, membership to the
union, managerial position etc) [11]. However, Choy defines three dimensions for diversity.
These are demographic diversity, organizational diversity and socio-cognitive diversity [12]. It is
seen in the aforementioned classifications that diversities are mostly handled in two dimensions
as primary and secondary. Primary dimension has a very important effect on personal identity
and shapes an individual’s image and world-view as well as directly affecting his/her
occupational and general behavior and attitude towards other individuals and groups [13] [14]. It
consists of the elements of age, ethnic origin, gender, race, physical capacity and sexual tendency
[15].

The elements that account for secondary dimension of diversity are characteristic features.
People may intentionally choose, adapt, give up or change them making an effective effort

64
(Schermerhorn et al., 2004; Kandola, 1995) [16] [17]. They are listed as education, settlement,
socio-economic status, marital status, status about military obligation, position in family,
political views, faith, competency and work experience [18] [19]. Salomon and Schork compare
dimensions of diversity with an iceberg and they classified them as visible that may be
understood easily and invisible that are not understood at first sight but only realized later [20].
According to the literature review about management of diversity, dimensions of diversity were
mostly studied at primary and secondary levels. Thus, the present study focused on the same
dimensions.

METHODOLOGY

The Objective and Importance of the Research

The essential question of the study is “How diversity is perceived according to students studying
at university”. Thus, the main objective of the study is to determine the diversity perception of
students. Accordingly, diversity perceptions of students were analyzed via three categories. In
the first category, general dimensions perceived by students as diversity were discovered and in
the second category, their diversity perceptions related to their friends in cooperation with them
were discovered. In the third category, it was tried to measure students’ diversity perceptions
about the personnel to be recruited by them in the future if they achieve managerial positions
since most students have the potential for managerial positions due to their educational status.

The Method and Technique of the Research

The determinant (determining status) model was employed in conducting the study. Sampling
method from similar test subjects (survey) and questionnaire method were employed in the
study. Since no scale suitable for the objective of this study was found in the literature, a unique
questionnaire form was prepared based on the most frequently used diversity dimensions in
literature to fit both the qualifications of the sample and the objective of the study. In the form, 5-
option Likert scale was used. The form consists of 62 questions in total. The questions in the first
group measure general diversity perceptions of students while those in the second group measure
the points that a student feels himself diversified from the minority. The questions in the third
group measure students’ diversity perceptions about their colleagues when they start to work.
The questions in the last group measure students’ diversity perceptions while they recruit
personnel if they achieve managerial positions. The form also includes seven questions about
demographic information. The data obtained from the research were loaded to the SPSS program
and the required analyses were conducted in 15.0 version. Descriptive statistics, t-test, t-test
between two matched groups and single-way variance analysis were used in the analyses.

The Target Population and Sample of the Research

Target population of the research is students of Dokuz Eylül University, Faculty of Economic
and Administrative Sciences. The online questionnaire has been sent to the e-mail addresses of

65
the students of the six departments of the faculty. Target population of the research contains
5642 active students. 1460 of the questionnaires were filled and sent back; therefore the reply
ratio was 25.9%.

RESEARCH FINDINGS

Demographical Findings

According to reliability analysis findings, general reliability value of the question form used in
the research (Cronbach Alpha Coefficient) is as follows for three criteria;
Individual’s general perception of diversity α = 0.89
Individual’s perception of diversity regarding colleagues α = 0.90
Individual’s perception of diversity regarding his/her staff when he/she is a manager α = 0.88
As Alpha values are not much lower than 1.00, which is deemed to be full reliability, it may be
concluded that the question form used in the research is reliable.

Demographical findings related to the sample obtained by descriptive statistics and 59% of the
students participating in the research are between the ages of 20 to 22. 52.8% of the sample is
male students. Students participating in the research are mostly students of Business, Labor
Economics & Industrial Relationships, and Economics Departments. 61.4% of the sample is
constituted of first and fourth year students. Whereas 39% of the sample has graduated from
Anatolian/Science High Schools, 35.2% are Regular High School graduates. 43.6% of the
sample lived with his/her friends, and 40% were brought up according to the Aegean Region
culture.

Statistical Findings

Mean and standard deviation values related to students’ perception of diversity in general,
regarding their colleagues and regarding their staff when they are managers are given in the
following table.

Table 1 Mean and Standard Deviation Value of Diversity Perception of the Individual
Variables Mean Standard Deviation
The General Diversity Perception of the Individual 2,8980 ,88713
The diversity perception of the individual regarding
4,1345 ,62735
their work colleagues
The diversity perception of the individual regarding
3,7128 ,70633
their staff when they are managers

As the students participating in the research declared that they could easily work together with a
diverse group of people, it can be concluded that their tolerance for diversity regarding their
colleagues is high. Mean and standard deviation values of the questions analyzing the students’
perception of diversity for the three cases are given below in Table 2.

66
 Table 2 The Mean and Standard Deviations Values based on the Questions Associated
with Diversity Perception Under the Three Situations for the Individual

General Work
Diversity Standard Colleague Standard Management Standard
Mean Mean Perception
Mean
Perception Deviation Perception Deviation Deviation

Q1 2,80 1,372 s29 4,40 ,810 s41 4,14 1,041

Q2 2,59 1,360 s30 4,27 ,840 s42 4,07 ,998
Q3 2,45 1,305 s31 4,31 ,811 s43 4,14 ,929
Q4 3,40 1,211 s32 4,19 ,867 s44 3,09 1,208
Q5 2,64 1,341 s33 4,20 ,848 s45 3,33 1,114
Q6 2,74 1,366 s34 4,30 ,798 s46 4,01 1,003
Q7 2,62 1,419 s35 4,34 ,810 s47 4,17 ,983
Q8 3,40 1,344 s36 3,42 1,304 s48 3,31 1,327
Q9 2,90 1,374 s37 4,22 ,834 s49 3,56 1,161
Q10 2,90 1,289 s38 4,48 ,725 s50 4,10 ,984
Q11 3,45 1,149 s39 3,25 1,087 s51 2,62 1,119
Q12 3,30 1,385 s40 4,25 ,865 s52 4,02 1,042
Q13 2,74 1,382 s41 4,27 ,840 s53 4.07 ,998

1: Strongly Disagree 5: Strongly Agree α=0.05

Questions analyzing students’ perception of diversity comprised the components of gender,

ethnicity, race, age, disability, nationality, religion, sexual preference, physical appearance,
marital status, previous conviction, socioeconomic status and mother tongue.

According to the findings given in Table 2, when values of general perception of diversity are
examined, students assess the others as different in the criteria of age in question 4 (Q4), sexual
preference in question 8 (Q8), previous conviction in question 11 (Q11) and socioeconomic
status in question 12 (Q12). When the questions inquiring the students’ perception of diversity
regarding their colleagues when they started working were analyzed, some students declared that
they could easily work together with individuals of different gender, ethnicity, race, age,
nationality, religion, physical appearance, marital status and socioeconomic status and disabled
people while they were hesitant about working together with individuals of different sexual
preference in question 36 and convicted individuals in question 39. Thus, it may be concluded
that students’ tolerance of diversity against individuals with such differences is relatively low.
Students were asked to find out which criteria of diversity would influence their selection when
employing new personnel if they were managers and the findings showed that criteria of gender,
ethnicity, race, age, nationality, religion, marital status and socioeconomic status would not
affect their employee selection. On the other hand, attitudes against criteria of age in question 44,
disability in question 45, sexual preference in question 48 and previous conviction in question 51
were different. Accordingly, whereas students had an explicit negative attitude against previous
conviction, they were hesitant as for the criteria of age, disability and sexual preference.

In addition to the diversity criteria included in the questionnaire, students indicated education,
intelligence, attitude and manners, point of view and political views as criteria of diversity in

67
their opinions. In another question, students were asked to define the criteria in which they felt
themselves different from the majority, but no distinct differentiation was observed. Only
relative differences related to age, physical appearance and socioeconomic criteria were
observed. Besides, students mainly perceived themselves as different from the majority in their
character and frame of mind.

T-Test and Anova (analysis of variance) Analysis Results

Three basic hypotheses were tested in the research. These hypotheses are;

H1: There is a significant difference between the individual’s general perception of diversity and
perception of diversity regarding colleagues.
H2: There is a significant difference between the individual’s general perception of diversity and
perception of diversity regarding the staff when he/she is a manager.
H3: There is a significant difference between the individual’s perception of diversity regarding
colleagues and the perception of diversity regarding the staff when he/she is a manager.

Table 3 Comparison of Group regarding Diversity Perception

Groups Compared* Diversity Mean t p (Sig.(2-tailed)**
1-2 -1,236 -40,811 0,000
1-3 -0,815 -24,160 0,000
2-3 0,421 26,320 0,000
*1= Individual’s general perception of diversity 2= Perception of diversity regarding colleagues
3= Perception of diversity regarding staff when he/she is a manager
** Sig.(2-tailed) value at 0.05 significance level
“Paired samples test” was used to test the hypotheses, which is a t-test between two matched
groups. As a result of the analysis, significant differences were found between each group,
therefore hypotheses were verified.

As it can be observed in the table, the second group, perception of diversity regarding colleagues
came out to be higher than other groups, and this difference is statistically significant. The
students indicated that they would be more tolerant against the diversity of their colleagues.

In order to determine whether there was a deterministic correlation between the students’
perception of diversity in the three cases and the demographical variables, t-test and single way
variance analysis were made. In the Post Hoc test made to determine from which group the
difference found in the single way variance analysis emanated, a bonferroni test was used.

Findings of the analyses are given below in Table 4.

Table 4 T-Test and Anova Analysis Results for the Diversity Perception of Individuals
Diversity Diversity
General Diversity Perception Perception
Demographic Perception Towards Work Towards Staff for
Variables Colleagues a Manager
t/F p t/F P t/F p
Sex 0,030 0,862 11,393 0,001 8,584 0,003
School year 0,538 0,656 6,388 0,000 1,672 0,171

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 Age 5,683 0,001 3,940 0,008 2,747 0,042
High School Graduated 1,921 0,104 7,056 0,000 1,358 0,246
From
Who they live with 1,266 0,281 5,637 0,000 2,008 0,091

Whereas no significant difference was found between genders regarding general perception of
diversity, significant differences were found between genders regarding students’ perception of
diversity regarding colleagues and perception of diversity regarding staff when they are
managers.

Whereas no significant difference was found between years of instruction regarding general
perception of diversity and perception of diversity regarding staff when the individual is a
manager, a significant correlation was found between the individual’s perception of diversity
regarding colleagues and year of instruction. According to the results of analysis, fourth year
students’ perception of diversity regarding colleagues came out to be higher than that of first
year students.

A significant correlation was found between the individual’s age and general perception of
diversity, perception of diversity regarding colleagues and perception of diversity regarding staff
when the individual is a manager. General perception of diversity in the students of age 26 or
older came out to be higher than students of age 20 to 22. As for perception of diversity
regarding colleagues, results of age group 23-25 are higher than that of age group 20-22.
Whereas perception of diversity regarding staff when the individual is a manager is higher in
students of age 17-19 in comparison to that of students of age 26 or older.

Whereas no significant correlation was found in the individual’s general perception of diversity
and perception of diversity regarding staff when the individual is a manager against the high
school the individual has graduated from, there was a significant correlation between
individual’s perception of diversity regarding colleagues and the high school the individual has
graduated from. Individual’s perception of diversity regarding colleagues is higher in graduates
of Anatolian/Science High Schools compared to graduates of Regular High Schools.

Whereas no significant correlation was found in the individual’s general perception of diversity
and perception of diversity regarding staff when the individual is a manager against with whom
the individual lives, a significant correlation was determined between the the individual’s general
perception of diversity and his/her perception of diversity regarding colleagues. Individuals
living with their families had a higher perception of diversity compared to those living in the
dormitories.

CONCLUSION AND RECOMMENDATIONS

The principle of diversity management based on accepting diversities as they are and not making
any discrimination against anyone is not to separate people but to unite them around common
goals. Hence instead of being outcast due to their differences when seen as a source of richness,
individuals or groups will create an important added value for the companies and thus will play
an important role in helping both the individuals and the organizations reach their goals. Setting
out of this importance, a research on university students has been carried out in this study since

69
being the workers and managers of the future they will be subject to working with a multicultural
and varying workforce.

Within the framework of this research the diversity perception of students towards people
that they think are different from them has been tried to be determined on the basis of
“general”, “when they are work colleagues” and “when they are managers”. To this end, it
has been tested whether there are any significant differences among these three different
situations and among the demographic variables and these three variables.
According to the results obtained from the analyses, it may be stated that within the limits of the
sample group, university students have a high tolerance towards those that are different from
themselves. This result is thought to be obtained due to the fact that there are many students
together in various cities of Turkey and that the city where the research was carried out has a
multicultural structure, a different viewpoint and age. Besides, the diversity perception of the
students change for criteria such as age, physical appearance, sexual orientation, judicial record
and socio-economic criteria according to different cases, for example they have stated that as a
colleague a certain type of manner will not affect them but at other times it can affect him/her. At
this point, since they have not yet started their careers, the students might be suggested to attend
training sessions on building awareness about this topic, respecting those that are different from
us, accepting them as they are and understanding their diversities. Our principle suggestion about
this will be to place courses in their curriculum related to diversity management and giving
training sessions on sensitivity to diversities and empathy both for the students and the teachers
and carrying out projects that encourage more cooperation with people of diversity. Our
suggestion to researchers who will work in this field is to make similar analyses at different cities
in the country and indeed make international studies that will enable international comparisons
keeping in mind the different cultures. Hence interest in this topic will be kept alive and
important contributions can be made to enlighten society and increase awareness about this topic.

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Vol.46.
[19]Lorbiecki, A. (2000). Critical Turns in The Evolution of Diversity Management. British
Journal of Management. 11: 3.
[20]Salomon, M. F. & Schork, J. M. (2003). Turn Diversity to Your Advantage. Research-
Technology Management, 46: 4. 37-44.

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THE ROLE OF SITUATION AWARENESS (SA) IN COMMAND DECISION MAKING:
A PHENOMENOLOGICAL EXAMINATION OF STATUE OF LIBERTY/ELLIS
ISLAND DECISION MAKERS ON SEPTEMBER 11, 2001

Diane H. Dayson*
Walden University
155 5th Avenue South
Minneapolis, Minnesota 55401-2511
diane.dayson@waldenu.edu
dhdayson@gmail.com
602-626-5122

Jean Gordon
Walden University
155 5th Avenue South
Minneapolis, Minnesota 55401-2511
jean.gordon@waldenu.edu
jeanie613@aol.com
954-923-2404

David Milen
Walden University
155 5th Avenue South
Minneapolis, Minnesota 55401-2511
david.milen@waldenu.edu
219-365-0927

ABSTRACT

The World Trade attacks of September 11, 2001 required the immediate analysis of the
command decision making (CDM) for public safety within the New York metropolitan area.
Situation awareness (SA) contributes to how command decisions are made in times of crisis
management. The purpose of this phenomenological study was to address how SA influenced
Statue of Liberty/Ellis Island decision makers and their CDM ability during the World Trade
attacks of September 11, 2001. The conceptual framework for this study was based on the
theories of Endsley, Klein, and Gasaway concerning SA and CDM in times of emergencies and
crisis management.

Keywords: Command Decision Making, Crisis Management, Decision Makers, Situation

Awareness

INTRODUCTION

The Role of Situation Awareness in Command Decision Making: A Phenomenological

Examination of Statue of Liberty/Ellis Island Decision Makers During World Trade Attacks of

72
September 11, 2001 Overview will begin with brief introduction and background, next section
briefly discusses literature review, then research and findings, and final section provides
conclusion.

The World Trade Terrorist attacks of September 11, 2001 created a day of total chaos and
confusion among those who experienced the event firsthand. The attacks were a true test of
strength, courage, the ability to assess the situation and make command decisions. On that day,
this is just what the National Park Service (NPS), STLI/ELLIS National Monuments decision
makers were expected to accomplish. As park managers these decision makers are considered
stewards of the park land. They “bear significant responsibilities for decisions about park
resources that affect how future generations will see this multifaceted natural and cultural
heritage” [11]. These men and women were expected to assess the situation quickly and make
command decisions to insure the safety of the employees, visitors, and the park’s resources.
Like so many others, the STLI/ELLIS decision makers had never experienced an incident of this
magnitude and were placed in a dilemma to make command decisions prior to any assistance
from other agencies.

The purpose of this phenomenological study was to advance the understanding STLI/ELLIS
decision makers ability to make command decisions under high levels of stress. The study
sought to identify, describe, and understand the lived experiences of STLI/ELLIS decision
makers’ ability to develop, form, and maintain SA for CDM in times of crisis management.

Prior research has been conducted by Richard B. Gasaway [4] on command decisions and
situational awareness in stressful environments. This theory and theoretical framework states
“that improving the understanding of SA barriers may enhance CDM under stress” [4, p. 4]. The
theoretical framework draws upon two models: the first theoretical model comes from the
seminal work of Klein [5] [7] [8] [9] and his Recognition Primed Decision (RPD) model [6].
This model was developed following a study to understand how decisions were made on the
fireground. The second theoretical model contributing to the conceptual framework of this study
comes from focusing on the role of one component of RPD model that being Endsley’s [3] work
with SA. The research findings from other environments supported the notion that when
decisions are made under stress, SA was a contributing factor in the decision making. In spite of
this, there was a void in the academic literature in understanding the impact of SA and CDM on
STLI/ELLIS decision makers during the 9/11 attacks. However, there was an opportunity for
scholarly investigation to understand SA, its effects on CDM, and its influences on STLI/ELLIS
decision makers during the 9/11.

BACKGROUND

The STLI/ELLIS National Monuments are a part of the National Park System. This monument
is considered an international icon and management policies are clear as to the mission and
responsibility of the STLI/ELLIS decision makers. The National Park System’s mission is:

Caring for the American Legacy: to promote and regulate the use of the national parks which
purpose is to conserve the scenery and the natural and historic objects and the wild life therein

73
and to provide for the enjoyment of the same in which such manner and by such means as will
leave them unimpaired for the enjoyment of future generations. [11]

STLI/ELLIS decision makers are considered the stewards of these two sites and have a
responsibility for the care and sustainability of the resources. In times of emergencies and crisis
the “National Park Service decision maker must use his or her professional judgment” [11].
National Park Service policies have defined professional judgment as:

A decision or opinion that is shaped by study and analysis and full consideration of all the facts,
and that takes into account the decision maker’s education, training, and experience; advice or
insights offered by subject matter experts and others who have relevant knowledge and
experience; good science, and scholarship; and, whenever appropriate, the results of civic
engagement and public activities relating to the decision. [11].

“This means that decision maker must consider the impacts of the proposed action and determine
that the activity will not lead to an impairment of park resources and values” [11]. STLI/ELLIS
decision makers were well aware of these management policies and had challenges adhering to
them during the events of 9/11.

LITERATURE REVIEW

Naturalistic Decision Making (NDM) Paradigm

CDM is of significant importance in times of crisis management. There are many different
components that contribute to a decision makers’ superiority. “Decision superiority is achieved
not just by acquiring and assessing the right information, but by translating it into actionable
knowledge that can be exploited in the decision making process” [13]. To understand CDM
superiority one must understand the components that create a naturalistic decision making
paradigm. The U.S. Army Research Institute sponsored a conference in Dayton, Ohio, 1989 in
which 30 behavioral scientists attended. The conference provided an opportunity for the
researchers to discover their work shared a common theme, with emphasis on decisions made
under time pressure, with high levels of uncertainty, often with ill-defined goals, and the
presence of high personal stakes [10]. As a result of this conference, the Naturalistic Decision
Making (NDM) paradigm emanated and resulted in a research study focused on how decision
makers functioned in their real-world decision making environments.

One exemplar of an NDM method is the Recognition-Primed Decision model that “attempts to
describe what people actually do under conditions of time pressure, ambiguous information, ill-
defined goals, and changing conditions”[5, p. 287]. The Recognition –Primed Decision (RPD)
model and the role that SA plays in all three variations is essential to CDM and contributes to
how decisions are made. It is important to understand the model and how it applies SA and
CDM.

Recognition-Primed Decision (RPD) Model

74
RPD model was developed by using cognitive task analysis (CTA) methodology to determine
how critical decisions were made under stress. As a result of the study, Klein formulated the
Recognition-Primed Decision (RPD) model to explain how decision makers in naturalistic
environments were able to make decisions in nontraditional ways (i.e., without comparing and
weighing out options to find the optimal solution) [8]. The explanation was “the key is that
people use expertise to evaluate the situations and recognize typical courses of action as the first
ones to be considered” [9, p.55]. It was also stated that the expertise used in NDM centered on
the decision maker’s ability to establish and maintain SA [9].

The RPD model stresses the roles of SA [6] and how decision makers form SA by sizing up the
situation and respond with the first options they identify [10]. The RPD model reveals that if the
situation being evaluated by the decision maker is ambiguous, the experienced decision maker
relies on a process when he or she fits the cues together to build a story in his or her mind about
what is happening. Then the decision maker mentally simulates the events leading up to what is
currently being observed to help form his or her SA [7] [12]. The model provides evidence that
a decision maker can evaluate a single course of action without comparing it to other options. In
addition, it was revealed that the decision maker can mentally simulate a chosen course of action
into the future to see if it will work. If the mental simulation results in an acceptable result, the
decision maker will implement that decision. If not, the decision maker, will, in serial fashion,
evaluate the next course of action in the same way, repeating the process until an acceptable
result is achieved and the decision is implemented [10]. It was stated, the RPD model relies
heavily on the decision maker’s expertise to properly identify and process cues in the formation
of their SA [10]. In support it was observed that “expertise in a particular domain has a
significant role in allowing people to develop and maintain SA in the face of high volumes of
information transfer and system complexity”[1, p.637]. The RPD model was a result of research
conducted to determine how decisions were made in NDM environments. This research finding
uncovered that SA is an essential contributing factor in the process.

RESEARCH

The research using phenomenological approach sought to advance the understanding and
describe through lived experiences STLI/ELLIS decision makers’ abilities to develop and
maintain SA for CDM during the events of September 11, 2001. The research examined five
areas to determine the influences of SA on CDM. First, the study sought to understand the
effects of SA on STLI/ELLIS decision makers. Second this study sought to understand the how
SA influenced CDM of STLI/ELLIS decision makers during 9/11. Third, this study intended to
understand the importance of SA in times of crisis management. Fourth, this study sought to
identify how STLI/ELLIS decision makers can successfully use SA in times of crisis
management. Finally, this study identified lessons learned and best practices for developing and
maintaining SA for CDM barriers in times of crisis.

The components within the data collection procedure entailed a three step process predicated on
research participants’ shared lived experiences and interview protocol. This was significant to
describing, understanding, and capturing the true essences of the lived experiences of
STLI/ELLIS decision makers during the World Trade attacks of September 11, 2001. The

75
researcher instituted the following steps: overview of the research, definitions and key terms, and
interview protocol for the research participants and study.

The procedures for this study involved having STLI/ELLIS decision makers share their lived
experiences of the events of September 11, 2001 and provide answers to semi-probe questions to
enhance the understanding of their lived experiences. The semi probe questions the decision
makers responded to were:

1. Discuss SA and the effects it may have had on your ability to make command
decisions during the events of September 11, 2001.
2. Discuss any challenges that may have occurred with the levels of SA and CDM.
3. Describe how the levels of SA influenced command decisions on September 11,
2001.
4. Describe how you developed and maintained SA.
5. Describe how you overcame the challenges that may have influenced levels of SA
in CDM on September 11, 2001.
6. Share what you learned as a result of developing and maintaining SA to make
command decisions during this crisis.
7. Based on your experience, offer some advice for novice decision makers that
would help them to develop and maintain all three levels of SA for CDM in times
of crisis management.

FINDINGS

The data analysis and findings revealed that the research participants’ responses to SA and
command decisions were similar to those reported in previous research studies. All participants
agreed that effective communication, experience, institutional knowledge and memory, training,
and working as a team were key components for SA and CDM. Like so many on that day,
STLI/ELLIS decision makers were the first responders of their park resources. As a result, these
decision makers had to take action and rely on themselves to protect park lands, employees and
visitors. The attacks were a true test of strength, courage, the ability to assess the situation and
make command decisions during this catastrophic event. In the height of the chaotic events the
STLI/ELLIS decision makers had to quickly develop and maintain SA for CDM. Endsley
revealed in the development of SA , decision makers must grasp incoming cues and clues, make
sense of what those cues and clues mean (in context to other cues and clues that are present and
absent), and use those cues and clues to formulate mental models to forecast subsequent events
[3]. Under high levels of stress the STLI/ELLIS decision makers were able to use cues and clues
to effectively develop and maintain SA to influence CDM for park resources, employees, and
visitors.

The significance of this study was to increase decision makers understanding and ability to
utilize SA to make command decisions in times of crisis. It sought to advance the understanding
of developing and maintaining SA, which is an essential part of Recognition Prime Decision
(RPD) model for making decisions under stress [8]. There was very little information, if any,
available to STLI/ELLIS decision makers for developing and maintaining SA and its influences
on CDM during the events of September 11, 2001.

76
 RECOMMENDATION FOR FURTHER STUDY

This study revealed opportunities for future research. The research focused solely on
STLI/ELLIS decision makers which was a small sample population. There is an opportunity to
further explore other public-private organizations and the influences of SA in CDM in times of
crisis management. In addition, there was a significant finding that can also be further studied.
The significant finding in this study was that institutional knowledge and institutional memory
are of vital importance and plays a significant role in developing and maintaining SA for CDM.
It could be argued that institutional knowledge and institutional memory does influence
developing and maintaining of SA for CDM in times of crisis management. This study did not
seek to define and examine institutional knowledge influence on SA or public-private
organizations and their ability to develop and maintain SA during high levels of stress and crisis
management. These shortcomings provide for future research.

CONCLUSION

The STLI/ELLIS National Monument decision makers played a major role in CDM during the
World Trade attacks of September 11. 2001. These decision makers were responsible for sizing
up the situation and making command decisions for the safety and protection of the park
resources, employees, and visitors. The purpose of this study was to advance the understanding
of STLI/ELLIS decision makers’ ability to develop and maintain SA for command decisions
making under high levels of stress. This was accomplished by examining 5 topics: what are the
effects of situational awareness on CDM, what challenges can impact situational awareness and
CDM in times of crisis management, how can decision makers understand the importance of
situational awareness in times of crisis management, how can situational awareness contribute to
successful CDM in times of crisis management, and what knowledge or best practices can be
transferred to others. This study identified several issues that influenced STLI/ELLIS decision
makers’ SA during the event of 9/11: effective communication, experience, institutional
knowledge and memory, training and working as a team. What unfolded as a result of the study
was that experience, institutional knowledge and memory, communication, training and working
as a team were vital components of SA. And the best practices included planning, reporting
systems, and training for decision makers to understand and have the ability to develop and
maintain SA in times of crisis management. This research study was conducted to generate
further thinking about the three levels of SA and influences on CDM in times of emergencies and
crisis management.

The world continues to experience natural disasters and manmade disasters. To be effective in it
will be important for individuals, public-private organizations, and communities at large to be
prepared for developing and maintaining SA for CDM times of crisis management.

REFERENCES

[1] Endsley, M. R. (2006). Expertise and situation awareness. In K. A. Ericsson, N. Charness, P.

J. Feltovich, & R. R. Hoffman (Eds.), The Cambridge Handbook of Expertise and Expert
Performance (pp. 633-652). New York: Cambridge University Press.

77
[2] Endsley, M. R. (2000). Theoretical underpinnings of situation awareness: A critical review.
In review. In M.R. Endsley & d. J. Garland (Eds.), Situation Awareness Analysis and
Measurement (pp. 3-32). Mahwah, NJL Erlbaum.
.
[3] Endsley, M. R. (1988). Design and evaluation of situation awareness enhancement. In
Proceedings of the Human Factors Society 32nd Annual Meeting (97-101). Santa Monica, CA:
Human Factors Society.

[4] Gasaway, R. B. (2008). Fireground command decision making: Understanding the barriers
challenging command situation awareness. Capella University, 208 pages, AAT 3310697.

[5] Klein, G. (1997). The recognition-primed decision (RPD) model: Looking back, looking
forward. In C. D. Zsambok & G. Klein, Naturalistic Decision Making , 285-292, Mahwah, NJ:
Lawrence Erlbaum Associates.

[6] Klein, G. A. (1989). Recognition-primed decisions. In W. B. Rouse (Ed.) Advances in man-

machine systems research .Vol.5, 47-92, Greenwich, CT: JAI.

[7] Klein, G. A. & Crandall, B. (1995). The role of mental simulation in naturalistic decision
making. In P. Hancock, J. Falck, J. Caird, & K. Vicente (Eds.), Local Applications of the
Ecological Approach to Human Machine Systems, Vol.2, 324-358. Mahwah, NJ: Lawrence
Erlbaum Associates.

[8] Klein, G. A., Calderwood, R. & Clinton-Cirocco, A. (1986). Rapid decision making on the
fire ground. In Proceedings of the 30th Annual Meeting of the Human Factors Society, 576-580,
Santa Monica, CA: Human Factors Society.

[9] Klein, G. & Weick, K. E. ( June 2000). Decisions. Across the Board, 37(6).

[10] Lipshitz, R. Klein, G., Orasanu, J. & Salas, E. (2001). Taking stock of naturalistic decision
making. Journal of Behavioral Decision Making 14:5, 331-352.

[11] National Park Service (2006). Management policies: Decision making requirements to
identify and avoid impairments. http://www.nps.gov/policy/mp/policies.html.

[12] Pennington, N. & Hastie, R. (1988). Explanation-based decision making: Effects on memory
structure on judgment. Journal of Experimental Psychology: Learning Memory, and Cognition,
14:3, 521-533.

[13] Sorenson, B., Madni, A. M., & Madni, C. C. (2008). Decision superiority process model.
Society for Design and Process Science. 12(4), 39-48.

78
 THE INCOMPATIBILITY OF THE DUAL-CONCERN MODEL AND CONFLICT
MANAGEMENT STYLES SCALES

Serkan Dolma
Yagizhan Yazar
Ozlem Yavas
Istanbul University
Email: dolma@istanbul.edu.tr

ABSTRACT

Dual-Concern model of conflict management styles is the main framework that is adopted by
most of the scholars in conflict management field. Although there are several scales designed to
tap individuals’ behavioral intentions in conflict situations, we believe that these scales are not
congruous with the dual-concern model, contrary to the general assumption.

Keywords: Conflict Management Styles, Dual-Concern Model, Factor Analysis

INTRODUCTION

The conflict concept is one of the most important phenomena in organizational behavior
management, due to its association with both individual and organizational performance.
Managers allocate a considerable portion of their time to handle conflicts in their organizations,
whether they are directly involved in these conflicts or, are required to act as a mediator or a
third party. This real world significance of this concept also made conflict a reasonably popular
research topic among organizational behavior and management scholars. Amongst scientific
studies on organizational conflict, those which investigate employees or managers’ “Conflict
Management Styles” outnumber the studies on most of the other conflict-related topics.

Some of these conflict management studies investigate the predictors or the antecedents of
individual’s Conflict Management Styles (CMS), whereas others inquire about the effects or the
outcomes of CMS, and yet others explore the role of CMS in understanding the nature of the
relationship between other two or more organizational variables. To put it differently, CMS may
be one of the (a) dependent variables [1] [9] [7]; (b) independent variables [3] [10] [8] or (c)
mediator/moderator variables [12] [13] [4] [14] in a given conflict management research.

THE DUAL-CONCERN MODEL

The majority of the conflict management research bases their model on the “dual-concern”
framework, which was originally developed by Blake and Mouton [2], reinterpreted and revised
by others, such as Thomas [15] and Rahim [11]. The dual-concern model (although it has several
variations), essentially suggests that there are two dimensions that affect individuals behavioral
intentions on conflict-handling strategies. These dimensions, “concern about self” and “concern
about other (party)”, subsequently define five conflict management styles (see Figure 1), namely,
a) integrating (high concern for self and for other), b) avoiding (low concern for self and for
other), c) dominating (high concern for self and low concern for other), d) obliging (low concern
for self and high concern for other) and finally e) compromising (moderate concern for self and
for other).

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 FIGURE 1

Conflict Management Styles

Dominating Integrating
(Competing) (Collaborating)
(Party’s Desire for Own Concern)

(Forcing) (Problem Solving)

Concern for Self

Compromising

Avoiding Obliging
(Accommodating)
(Yielding)

Concern for Others

(Party’s Desire to Satisfy Others
Concern)

The Model claims that individuals, when facing conflict situations, choose between different
styles when handling the conflict based on these two concerns, and the combination of their level
of concern for these two dimensions determine their conflict management style.

In other words, two axes form a two dimensional coordinate a system which is theoretically
divided into five different areas (although some scholars, such as van de Vliert and Kabanoff
[17] assert that the styles should be viewed as specific points defined by the two dimensions
and not as areas) and one can be positioned in this hypothetical coordinate system, or simply in
one these five areas, according to her level of concern for herself and for the other party.

The theory, also suggests that none of these five conflict management styles should be seen as a
universally best strategy. Instead, it is stressed that the optimum style is likely to vary according
to situational factors and the context of the conflict [5, pp. 333-336].

The Dual-Concern model is also very popular among applied researchers. Manifold scales are
developed, ‘supposedly’ based on this approach to measure individual’s behavioral intentions
toward dealing with conflict, however, only two of these scales (or the modified versions of
them); Rahim’s [11] ROCI-II and Van de Vliert and his colleagues’ DUTCH [6], are utilized by
most of the researchers in this field. The MODE scale [16] had also a wide currency in the past,

80
but due to its ipsative nature and low psychometric properties, its popularity has decreased in the
recent years). It is our assertion that, contrary to their intended purpose, these two measurement
instruments (and their modified versions) are incongruous with the dual-concern model.

THE PROBLEM WITH CMS SCALES

Let us first make it explicit that we do not recommend completely abandoning the Dual-Concern
model in conflict management studies. It would not be a misapplication to use the dual-concern
model as long as the conflict situations of interest are win-win situations (This provision will
shortly be discussed later). On the other hand we claim that these popular CMS scales are
incompatible with the dual-concern framework and should not be used if the research model is
grounded in the dual-concern approach.

One may think that, measurement instruments which are developed based on dual-concern
approach would be designed to assess the respondents’ location (level) on the two dimensions;
i.e. their level of concern for themselves and for the other party in a conflict situation, however,
curiously, they do not. Instead, these scales ignore the two dimensions and try to measure
individual’s location on five management styles as if these styles are independent constructs.

In reality, these so-called five conflict management styles are only the names of the categories,
which are formed according to the combination of the respondents’ positions on two
aforementioned dimensions.

In a typical CMS scale development process, items that are believed to tap respondents’
intentions (or actual behaviors) regarding five styles are generated first, then, the Exploratory
Factor Analysis (or Principal Component Analysis) is applied with the desire to extract five
independent factors (‘independent’, because the default varimax rotation is almost always
preferred). In other times, the confirmatory factory analysis is conducted by letting the factors
correlate (sometimes after conducting an orthogonally rotated exploratory factor analysis for an
additional farcicality).

However common it is, we believe that deeming these so-called styles as constructs, let alone
accepting them as “independent” abstractions, is unreasonable. The constructs that should be of
an interest in a CMS study are the two concern dimension.

It is better to reemphasize that the famous conflict management styles are just the names of the
ends of the two orthogonal continua, (or dimensions) which theoretically represent an
individual’s level of concern for the parties in a given conflict situation (except the
compromising style, which is in the center of the coordinate space). For example, “dominating”
is only the name of the category (style) whose members have a high desire to satisfy their own
concerns, while sustaining a low desire to satisfy the other party’s concern. However, naming a
state of affairs would be enough to neither consider it as a construct, nor include it in a scientific
research as a variable. It should be borne in mind that having two scales to measure the opposite
ends of a continuum, means that one can theoretically encounter respondents that earn high or,
even worse, the maximum scores for both of the scales.

81
The absurdity of accepting conflict management styles as constructs and trying to measure them,
rather than trying to measure the two “concern dimensions” can be best illustrated with
examples.

Suppose that a gym teacher seeks to measure her students’ heights. Would not it be ludicrous if
she devises two different scales to measure the “shortness” and “tallness” of the students, (while
letting a student have a maximum score in both imaginary scales, which means making it
possible for a student be a tall and a short at the same time) instead of developing a scale to
measure the heights of the students?

Another example, would be when a manager, tries to assess the level of her employees’ job
satisfaction, but rather than creating (or using) a single job satisfaction scale, develops (or use)
two different scales, which supposedly measure two distinct phenomena, probably called “high-
satisfaction” and “low-satisfaction”. What is more, an employee can theoretically and practically
have the highest scores on both of these scales, what would be a totally senseless possibility.

The only difference between using CMS scales in a conflict management research and the above
examples is that CMS scales are two dimensional. Other than that, measuring and categorizing a
student as short and tall at the same time is equivalent in nonsensicality to simultaneously
considering a conflict party as for instance, “avoider” and “collaborator”.

CONCLUSION

To conclude, our recommendations for researchers who are interested in conducting a study on
conflict management styles are enumerated below:

There is nothing problematic about using the dual-concern model as a framework for studying
CMS, as long as win-win conflict situations (i.e. non-zero sum situations, where both parties can,
at least theoretically, benefit or win) are of interest. Otherwise it would not be possible to talk
about two separate dimensions since an increase in concern for self automatically means a
decrease in concern for the other party.

If the dual-concern approach is adopted, in lieu of using the existing five-factor CMS scales, one
should determine the concern for self and the concern for others as her constructs of interest and
should develop two distinct unidimensional scales, aiming to measure these two constructs.
Reliability and validity analyses (especially factor analysis) should be conducted separately for
these two constructs. (An even better practice would be using Rasch analysis in place of factor
analysis due to its sounder measurement philosophy and lack of interval scale assumption).

One may still have an interest in including all or some of the renowned five conflict management
styles. This could be justified by the condition that she is conversant with the fact that styles are
not related with the dual-concern model., These styles, however, should be viewed again as
individual constructs, therefore reliability and validity analysis should be conducted separately
for each one of the styles. For example, it is inappropriate to apply a single factor analysis for all
of the items of a given CMS scale as if these items were indicators of a single construct.

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[13] Rahim, A., & Psenicka, C. (2004). Conflict management strategies as moderators or
mediators relationship between intragroup conflict and job performance. Paper presented at the
annual conference of the International Association for Conflict Management, Pittsburgh, PA.

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[14] Shih, H., & Susanto, E. (2010). Conflict management styles, emotional intelligence, and job
performance in public organizations. International Journal of Conflict Management, 21:2, 147-
168.

[15] Thomas, K. (1976). ‘Conflict and conflict management’ In: Dunnette, M.D. (Ed.) Handbook
of Industrial and Organizational Psychology, Rand McNally, Chicago, 889-935.

[16] Thomas, K. W., & Kilmann, R. H. (1974). Thomas-Kilmann Conflict Mode Instrument,
Consulting Psychologists Press, Palo Alto, CA

[17] Van de, Vliert E., & Kabanoff, B. (1990). Toward theory-based measures of conflict
management. Academy of Management Journal. 33:1, 199-209.

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BLACK SWANS AND RETIREMENT STRATEGIES: IS “BUY AND HOLD BEST?

Barry Doyle, University of San Francisco, doyleb@usfca.edu, 415-422-6129

Robert Mefford, University of San Francisco, mefford@usfca.edu, 415-422-6408
Nicholas Tay, University of San Francisco, tay@usfca.edu, 415-422-6100

ABSTRACT

The recent market crash which has led to as much as a 47% drop in the value of the S&P500
index has made some of us wonder if there is a cost effective way for us to hedge our retirement
portfolios against such a drastic loss. Our objective is to investigate empirically the tradeoffs
that will arise from using a protective put strategy for hedging retirement portfolios over an
investment horizon that is long enough to be comparable to the average holding period for
retirement portfolios

Keywords: risk management, VaR, Black Swan event, portfolio design

INTRODUCTION

The recent market crash which has led to as much as a 47% drop in the value of the S&P500
index has made some of us wonder if there is a cost effective way for us to hedge our retirement
portfolios against such a drastic loss. In the case of a portfolio that tracks the S&P500 index, a
straight forward approach to hedge against such downside risk is to simply long a put (protective
put) on the S&P 500 index. Would the losses that could be averted with the protective put
strategy justify the hedging costs for a long term investment strategy? From an efficient market
view point, if the put option is correctly priced, we should not expect the protective strategy to
produce excess returns. However, recent studies [12] [13] have suggested that market
participants tend to underestimate the likelihood of black swan events. If this is true, options
could be underpriced and this may make it worthwhile to pursue the protective put strategy
described above.

Our objective is to investigate empirically the tradeoffs that will arise from using a protective put
strategy for hedging retirement portfolios over an investment horizon that is long enough to be
comparable to the average holding period for retirement portfolios. Since the modern day option
markets were not developed until the 70s, we have a relatively short period of time series of
actual option price data. In a later section we describe how further extensions of this work will
provide more robust justification for our strategy. Our results favor the use of a protective put
strategy for hedging retirement portfolios. Results are presented in Section III.

The conventional wisdom for retirement planning and, indeed, any long-term investment
strategy, has been buy and hold for the equity portion of the portfolio. Numerous people in the
academic and practitioner fields have advocated this, beginning with Burton Malkiel’s academic
classic “A Random Walk down Wall Street”, to the advocacy of Vanguard’s John Bogle, to the
recent advice of popular advisors such as Suze Orman. However, the recent drastic plunge in

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equity value is making some of us wonder if the buy and hold strategy is in fact the best
approach to retirement planning.

Clearly there are good reasons for advocating the buy-and-hold strategy. One well known piece
of evidence from the Vanguard Group shows that on average actively managed equity mutual
funds underperforms the Wilshire 5000 index by about 1.09% annually for the period from 1972
to 2001. Further, Malkiel [11] and others find the performance of most professional money
managers to be inconsistent from one period to the next which suggest that these managers are
not skillful investors and therefore it is useless to invest in actively managed mutual funds.

Most of the advocates of buy and hold have made the implicit assumption of “semi-strong”
market efficiency; that is, current market prices reflect all available public information. Absent
access to inside information, attempts to time the market will ultimately prove fruitless. There is
ample empirical evidence in the literature that show that on average active professional money
managers are unable to outperform a passive index (see [10], for example) . Fund managers that
have superior performance over one time period do not , on average, exhibit superior
performance over subsequent time periods

Portfolio theory has generally focused on achieving an efficient portfolio: one that achieves the
minimum amount of risk for a given level of expected return. In the popular business press,
attacks on the value of portfolio theory often center on comments such as “….Or you could have
just bought the gold ETF and made 17%. That’s the difference figuring out which way the wind
is blowing can make” [4]. Of course, generating superior returns is easy if one knows how the
market will move next month or next year, or even tomorrow.

The value of market timing should not be underestimated, though. In the period from 1978 until
2005 the S&P500 earned a mean annual return of 9.6%. If you could avoid the worst fifty days,
your mean annual return would have been 18.7%. Conversely, if you missed the best 50 days,
your mean annual return would have been a mere 2.2%. Analyses of other time periods yield
similar results; in the period from January 1960 through December 2008, a buy and hold strategy
will generate ending wealth of $15.07 from an initial $1 investment. However, missing the ten
best days over this time period would have reduced your ending wealth to $8.90. This result
emphasizes the danger of attempting to time the market (and “missing”). Conversely, avoiding
the ten worst days would generate ending wealth of $28.25 [6] [8]. From a practical
perspective, the question arises: absent market timing skills, can an investor avoid some of the
losses associated with the worst performing days without sacrificing the gains associated with
the best days? Does one need a crystal ball to achieve superior performance?

In an efficient long-term investment market, the answer to the preceding question should be
“no”. In such a market, the cost of any type of portfolio insurance should offset any gains
associated with avoiding the impact of the worst performing days. If this condition did not exist,
portfolio managers would exploit any existing inefficiencies and drive insurance prices into
equilibrium.

However, we show evidence that a strategy exists that will outperform basic buy and hold
investing over the long term by taking advantage of potential inefficiencies in the pricing of

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S&P 500 index put options. We show that a strategy of consistently “rolling over” a long
position in one year put options yielded a long-term return that exceeds the return associated
with a simple buy and hold strategy. We further demonstrate that the value of our strategy arises
from the existence of “Black Swan” events: rare events that have a large impact on outcomes.

STRATEGY DESCRIPTION AND MOTIVATION

Motivation

For our strategy to provide superior performance, consistent long-term mispricing of long put
options must exist. Why might one expect to observe systematic mispricing of a widely traded
financial instrument? Estimated option prices derived via the Black-Scholes (B-S) model are
highly sensitive to volatility; other model inputs are generally known with a fair degree of
certainty. Since the model volatility input is forward-looking--- the volatility that will occur over
the time to expiration--- it is implicitly unknown. Of course, one may estimate volatility from
historical data. Whenever historical data is used to predict future events, though, two major
factors influence the reliability of the estimate: first, this process assumes that the future
distribution of events will approximate past distributions. Second, one must choose an
appropriate historical time period over which to make estimates.

Both of the factors influencing model reliability form the core of our motivation to develop the
theory, as well as providing a possible explanation for our observed results. First, the B-S model
assumes that volatility has a normal distribution. Several articles [1] [7] have questioned the
reliability of underlying distributional assumption of B-S. We observe large price swings, both
positive and negative, in the markets than are inconsistent with underlying distributional
assumptions of B-S. Research has shown that large daily returns occur more frequently than are
consistent with a normal distribution; this return characteristic is often described as being “fat-
tailed” relative to the normal. Casual observation, as noted in the introduction, suggests that a
substantial portion of returns to the S&P 500 (as well as any well-diversified equity portfolio) are
contained in a relatively few number of days, confirming the fat-tailed nature of observed return
distributions. We characterize these influential events as “Black Swans” (henceforth “swans”).

The existence of swans by itself should not provide an adequate explanation for the availability
of a strategy to generate long term returns in excess of a buy-and-hold strategy. The impact of a
few days of unusual returns on long term returns, discussed earlier, is well known. The existence
of this apparent opportunity for excess long term returns must have another motivation. The
motivation is likely to be found by examining the time horizon over which the strategy operates.

Our strategy requires the annual purchase of put options on the S&P 500. As a consequence,
substantial monthly cash outflows are required to follow it. The value comes from the long-term
application of this strategy. The very nature of it takes advantage of the large gain associated
with the swan events against the relatively small outflows required to maintain the position. As
swans are, by definition, rare, this implies that returns to this strategy will underperform a buy-
and-hold for most periods, and substantially outperform it on an infrequent basis. As such,
following the strategy requires considerable discipline, as it will underperform the benchmark

87
during most time periods. The implications of this will be explored further in the Results section
following.

Description

To implement our strategy, a portfolio consisting of the S&P 500 index is formed. During each
year that the portfolio is in existence, we purchase at-the-money put options (or, more precisely,
the put option that is closest to at the money); the number of index put options is equal to the
value of the portfolio. As the option expires in the following year, new options are purchased
in the same fashion, thus generating the “roll-over” strategy.

These “near-the-money” options are used for this strategy to take advantage of the relatively well
known characteristic of the put option “smile”. In practice, the implied volatility of put options
is lowest for at the money options. Implied volatility is the volatility consistent with the current
market price of the option according to the B-S pricing model. Further, at-the-money options are
generally more liquid than other options, thus reducing the spread associated with the
transaction. These long near-the-money puts provide a form of portfolio insurance; specifically,
the option position pays off in the event of a drop in the underlying portfolio. As noted in the
Introduction, one would expect, a priori, this strategy to not provide higher ending wealth than a
basic buy-and-hold, as the option premiums should offset any gains associated with the insurance
payoff.

DATA AND RESULTS

We use data from VFINX (Vanguard Index Trust 500 Index), a tradable index security, as the
base equity portfolio. We construct the protective put portfolio by purchasing long positions on
365 day index put options such that there are just enough puts to cover the amount invested in
the portfolio at the beginning of the time period. Consequently, the number of puts purchased
will rise as the portfolio accumulates value. We also use two treasury investments as a
benchmark. In one, we simulate a 1-year constant maturity treasury portfolio that
invests/rollovers the entire contribution annually in treasury bonds with one year remaining to
maturity. In the other we simulate an investment in one year treasury strips.

We provide results only for the rather simple strategy of buying one year put options on the S&P
500 index for a very pragmatic reason. The intended market for this strategy is not sophisticated
investors; rather, this is appropriate for the average investor with a 401-k type retirement asset
that wishes to provide some insurance against a dramatic decline in asset values. Certainly, other
forms of insurance may well provide better results, and are a potentially fruitful avenue for future
research.

The results of our analysis are shown in Figure 1. We have made the following assumptions in
constructing the graphs:

• Contribute $10,000 annually in each of the portfolios from Dec 96 to Dec 2008
• The buy and hold portfolio invests the entire contribution in SP500 index or VFINX

88
 • The protective put portfolio invests the entire contribution in a mixture of SP500 shares
and long positions in put in such a manner that there are just enough puts to cover the
investment in the SP500 (VFINX) shares that are held in the protective put portfolio; the
puts purchased are at-the-money or nearest to the money 365-day puts.
• The 1-year constant maturity treasury portfolio invests/rollovers the entire contribution
annually in treasury bonds with one year remaining to maturity
• The 365-day zero coupon portfolio invests the entire contribution in 365-day zero
coupon STRIPS.

The results over the specified time period of 1996 to 2008 show that the protective put portfolio
is superior to the buy and hold strategy. The results are, of course, specific to this particular time
period, but are suggestive of the value of such a strategy in a volatile market.

IMPLICATIONS/FUTURE RESEARCH POTENTIAL

The current results obtain only from late 1996 as index options were not widely available prior to
that time. The results presented here, while showing the superiority of the protective put versus a
buy and hold strategy, do not provide compelling evidence of such a strategy providing superior
performance in future. A more robust argument may be made by estimating option prices in
earlier years based upon historical volatility. In effect, one can argue that if index options existed
in the earlier parts of the twentieth century, then the prices of such options would be consistent
with the inputs of current options pricing models, notably B-S. However, such an analysis, while
providing more evidence than the restricted sample that we provide, would still not provide a
rigorous justification for following this retirement strategy.

A proposed approach to providing a more robust justification is to use a bootstrapping technique

to evaluate our proposed strategy. In brief, as applied to this paper, the bootstrapping
methodology would assume that observed market returns over the past decades represent
samples from a larger underlying population. By analyzing multiple simulations, using samples
from the observed returns distribution, one may make robust inferences of the value of the
proposed strategy versus a buy and hold one. Chernick, [3], and Davison & Hinkley [5] provide
a comprehensive overview of bootstrapping technique.

Our results indicate that the protective put strategy may well be superior to a buy and hold,
which begs a rather obvious question: since this strategy, by design, is uncomplicated, why isn’t
it widely used? A possible explanation lies with the manner in which portfolios are measured .
Virtually all portfolios, retirement or not, provide quarter, 1-year, 5-year, and perhaps 10-year
performance measures. During “normal” return years, the protective put portfolio will
underperform a buy and hold one. The business literature, both academic and popular, is filled
with stories about how managers focus on short term performance. Investors look at these
returns as well, and often base investment decisions based upon them. A challenge for managers
of a portfolio based upon these results would be as follows: how to convince investors that
underperformance for substantial periods of time (a likely occurrence) is in their best interests.

89
 CONCLUSION
We have proposed an alternative equity investment strategy: purchase one year index put
options to provide protection against sharp downturns in the market (black swans). Such a
portfolio will often underperform a similar buy and hold strategy over many shorter holding
periods. We argue that this strategy is particularly well suited for retirement portfolios. This
type of portfolio is designed to be held long term, and we have purposely constructed in to be
simple and easily replicated by a typical investor with a 401-k type of retirement holding.
Results suggest that such a strategy may be superior to a buy and hold strategy.

REFERENCES

[1] Abbas, S., S.H. Poon and J Tawn, Hedging the Black Swan: Conditional Heteroskedasticity and
Tail Dependence in S&P 500 and VIX, Working Paper, 2009.
[2] Bouye, E., Portfolio Insurance: A Short Introduction, Working Paper, SSRN #1416790,
2009.
[3] Chernick, M.R. Bootstrap Methods, A practitioner's guide, Wiley Series in Probability and
Statistics, 1999.
[4] Considine, G., , Black Swans, Portfolio Theory and Market Timing: 12 comments, Seeking
Alpha, 2008, Article 64111
[5] Davison, A. C.; Hinkley, D. Bootstrap Methods and their Application. (8th ed.). Cambridge:
Cambridge Series in Statistical and Probabilistic Mathematics. 2006.
[6] Estrada, J., Black Swans, Market Timing, and the Dow. Working Paper, SSRN #1086300,
2007.
[7] Goldstein, D. and N. Taleb, We Don’t Quite Know What We Are Talking About When We Talk
About Volatility, Working Paper, SSRN# 970480, 2007.
[8] Harris, E., Investing: In Search of Better Odds in Retirement Planning, NY Times, 2002.
[9] Leland, H. and M. Rubinstein. The evolution of portfolio insurance in Dynamic Hedging: A
Guide to Portfolio Insurance, edited by Don Luskin, John Wiley and Sons, 1988
[10] Ibbotson, R. and A. Patel, Do Winners Repeat With Style? Summary of Findings, Ibbotson
Associates, 2002
[11] Malkiel, B., Returns from Investing in Equity Mutual Funds 1971-1991, Journal of Finance,
1995, 50.
[12] Mallinaris, S. and H. Yan, Nickels versus Black Swans: Reputation, Trading Strategies, and
Asset Prices, Yale ICF Working Paper No. 08-26, 2009.
[13] Taleb, Nassim, , The Black Swan: The Impact of the Highly Improbable, Random House, 2007

90
 WHAT FINANCIAL RISK MANAGERS CAN LEARN FROM SIX SIGMA QUALITY
PROGRAMS

Barry Doyle, University of San Francisco, doyleb@usfca.edu, 415-422-6129

Robert Mefford, University of San Francisco, mefford@usfca.edu, 415-422-6408
Nicholas Tay, University of San Francisco, tay@usfca.edu, 415-422-6100

ABSTRACT

As the financial crisis of 2008 has revealed, there are some flaws in the models used by financial
firms to assess risk. Credit, volatility, and liquidity risk were all inadequately modeled by
supposedly sophisticated financial institutions employing dozens of financial engineers with
advanced degrees. It is now clear that some of the underlying assumptions of the statistical
models utilized were seriously flawed, and interactive and systemic effects were improperly
modeled. Correcting these modeling flaws is one approach to preventing a reoccurrence.
However, another approach is suggested by Six Sigma quality programs used in manufacturing
and service industries. Some basic tenets of the Six Sigma programs are directly applicable to
improving risk management in financial firms and in portfolio design. These include the features
of over-engineering, robust design, and reliability engineering

Keywords: risk management, VaR, Black Swan event, Six Sigma, portfolio design

INTRODUCTION

In March of 2008 Bear Stearns was acquired by JP Morgan Chase after becoming insolvent.
Bear Stearns had been considered one the best Wall Street firms in managing risk. Within a few
months Lehmann Brothers had gone bankrupt, Merrill Lynch had been acquired by Bank of
America, Wachovia merged with Wells Fargo, and Washington Mutual with JP Morgan Chase.
American International Group (AIG) was bailed out by the federal government and many hedge
funds have failed. What had caused so many prominent financial institutions to succumb in such
a short time? The common explanation is sub-prime mortgages defaulting, but the real problem
is much more fundamental—a failure of risk management.

The no down-payment, no income verification mortgages issued by many reputable financial

institutions may have started the problems, but they would not have spread worldwide without
the explosive advance in securitization of these assets (Collateralized Debt Obligations or
CDO’s) by financial firms and the high credit ratings assigned to them by the rating agencies
Standard & Poor’s and Moody’s. The problems would probably not have grown to be a global
financial crisis if so many other financial institutions had not purchased these risky assets
including many banks in Europe and hedge funds around the world. Once the dominos began
falling, liquidity dried up, and equity markets plummeted. The outcome became a financial
crisis leading to a global recession which still continues.

How could these sophisticated financial institutions have been so wrong in their assessment of
credit and market risk? After all, many had invested millions of dollars in risk modeling and
believed that they had a good handle on risk management. With increasing power of computer

91
hardware and software, firms were able to build complicated models using advanced statistical
techniques and Monte Carlo simulations. To develop these models they hired dozens of
mathematicians, statisticians, physicists, and computer scientists, and a new profession was
created—the financial engineer. Very few top executives responsible for risk management likely
understood these models, but they confidently used them to take ever-riskier positions to increase
profitability, often driven by competitive pressures. Short-term oriented compensation schemes
fostered excess risk-taking in many of these financial firms. Few believed that there were any
flaws in the model.

Clearly there were some critical elements in the risk models that caused them to fail when they
were most needed. In the next section we will examine some of the deficiencies of these models.
In subsequent sections Six Sigma quality programs will be explained and it will be shown how
the process and methods of Six Sigma can be applied to financial instrument and portfolio
design. The case will be made for robust portfolio design and reliability engineering used as the
way to achieve robustness. The last section draws some conclusions.

FLAWS IN RISK MODELING

The most commonly used model to measure risk is the VaR or Value-at-Risk. It is based on the
Gaussian or normal probability distribution widely used for many applications in business,
science, education and other fields. By specifying an acceptable confidence level for unlikely
occurrences (such as a 20% chance of a fall in the price of a stock), risk managers could feel
comfortable that these rare events had such a low probability they could be neglected. A three
sigma confidence level indicates a 0.3 percent chance (3 in 1000) of the event occurring. The
probabilities were based on historic price and volatility data for various types of assets. This
stochastic approach to risk management seemed safe and reasonable as long as the underlying
assumptions of the statistical model are valid. However, as recent events have dramatically
illustrated some of the underlying assumptions are clearly not valid.

The most serious flaw in the VaR models is the assumption that the underlying distribution is
Gaussian when in fact it is often Cauchian. The Cauchy curve is leptokurtic, meaning it has
much more area in the tails (i.e. a fat-tailed distribution) than the normal distribution. There is
much evidence that many asset prices follow a distributive pattern that is closer to a Cauchy than
a Gaussian distribution [10], [5], [8]. This means that rare events such as a sharp fall in a
market occur much more frequently than a normal distribution would predict. With the Gaussian
model an event like the September 29, 2008, drop in the DJIA of 777 points or 7% had a
probability of 1 in a billion, a probability so small that it can be neglected and is essentially
unpredictable with conventional forecasting models [16]. These Black Swan events happen
much more often than any Gaussian model can predict. Taleb [14] defines a Black Swan event
as one that is rare, has an extreme impact, and is retrospectively (though not prospectively)
predictable. The 2008 crash can be seen as a Black Swan event that the models did not predict,
even with a low probability (which would make it a Grey Swan event). Since a Black Swan
event cannot be predicted, what can a risk modeler do? Suggestions will be offered below on
how to mitigate the consequences of such events.

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 SIX SIGMA QUALITY PROGRAMS

Beginning in the 1980’s at Motorola Corporation, Six Sigma quality programs have slowly
spread through American manufacturing and recently have been applied in service businesses
like banking, hospitals, and even government. The basic idea behind Six Sigma is to reduce
variability in processes to improve quality and increase efficiency. The name Six Sigma refers to
six standard deviations from the mean. This signifies a level of quality equal to three defects per
billion opportunities based on the normal distribution. To many observers this seems like an
unnecessarily high level of quality that is not only unattainable but too expensive. However,
when one considers several characteristics of products and processes as well as how Six Sigma
programs are carried out, these objections are not valid. The cost criticism can be rejected based
on the experience of companies like GE that have found that the savings from reduction in
defects (i.e. scrap, rework, warranties, etc) and improved process efficiency far outweigh the
costs of implementing the program [4].

For a product with multiple parts, the reliability of the product is a multiplicative function of the
reliability of its component parts. For example, in a product with a thousand parts, each one
having a reliability of six sigma, the overall reliability of the product is about three sigma (3
defects per thousand). Many products have more than one thousand parts—a car has about
2000-3000 parts and a jetliner 200,000-300,000 parts and components. Therefore, designing in
very high levels of individual component performance is essential to reliability of the finished
product. This suggests one fundamental aspect of Six Sigma that has direct applicability to
financial modeling—what we might call over-engineering.

Rather than assume that we are correctly modeling the underlying distribution with the Gaussian,
Six Sigma builds in a margin or error for fat tails. Although Six Sigma statistical processes are
also based on the normal distribution, the high levels of sigma applied provide a much greater
safety margin than the normal three sigma assumption of VaR. Mean shifts, another weakness of
financial models, is allowed for explicitly in Six Sigma by targeting a high level of standard
deviations. Even if the mean does shift, as it is assumed likely to do, in Six Sigma the
confidence level is still very high. This again illustrates the concept of over-engineering the
process to account for rare but expected or unexpected occurrences.

A further weakness of traditional financial models is the interactive effects between financial
instruments and markets. Six Sigma quality programs face a similar problem in complex
processes with many interacting variables. An example is a metal plating process where
temperature, humidity, fluidity, and other factors all affect process results. Six Sigma has
developed ways to analyze these interactive effects and determine the best combination of
variables to maximize process efficiency.

Another element of Six Sigma that has applicability to financial risk modeling is reliability
engineering. This concept is used in product design where failure of one component can lead to
failure of others and even complete product failure. Especially when components operate in
series it is essential to build in high levels of reliability and use redundant systems as backup.
An example is an auxiliary power or hydraulic system on a airplane that kicks in if the main
system fails. Design of financial products can also take account of the interactive effects of the

93
instruments and markets and attempt to build in reliability. It would involve extensive stress
testing and simulation of performance under a variety of conditions. This concept will be
considered in the next section along with other suggestions and a process for applying Six Sigma
to the design of financial products.

Applying a Six Sigma Approach to Risk Management

Six Sigma quality programs emphasize a process approach to improving system reliability and
performance. A process approach stresses the sequencing and interactive effects in a system
rather than compartmentalizing the steps and activities. As was discussed above, the failure of
risk managers to account for systemic risks in investment portfolios contributed to the financial
crisis. The most widely used framework is the DMAIC process developed at General Electric
which includes the following steps: Define Measure, Analyze, Improve, and Control (DMAIC).
This same approach is applicable to portfolio design for financial instruments and risk
management systems for these portfolios. In this section we will discuss how the DMAIC
process can be used by financial firms to better design investment products and control for risk.

The first stage in applying the DMAIC process to portfolio design is to Define the types of
financial products to be considered in terms of the desired return to risk profile, the types of
instruments that can be considered, and the investment horizon. These of course should be
determined by top management of the firm, not by the quant’s developing the products. Without
these parameters clearly defined, financial engineers will not have clear guidance in terms of the
products they should develop. As the recent financial crisis illustrates, this failure to have clear
goals and constraints led to some products being offered that were not well thought out and
introduced a high level of unexpected and undesired risk.

The second step in the DMAIC process is to Measure. In a manufacturing process this would
normally involve collecting statistical data and finding process capabilities. The analogue in
financial product design would be to perform statistical tests and simulations using historical
data to determine the density distributions of the instruments. The goal of these tests would be to
ascertain how the instruments perform independently and together in a portfolio. More advanced
measurements would attempt to find the systemic effects on the portfolio of liquidity and credit
crises. This was a deficiency in the design of many of the financial products that imploded in
2007 and 2008 such as CDO’s. A process capability study determines the distribution of results
of a machine or process in terms of a density function (usually the normal distribution) to see if it
can meet design specifications. For a financial instrument this would involve finding the
distribution of returns over a period.

The third stage of the DMAIC process is to Analyze. For financial products this could involve
the technique called Design of Experiments (DOE). This method has been used in
manufacturing for many years to determine interactive effects in processes. As noted above,
interactive effects between financial instruments such as varying and asymmetric correlations
were poorly understood and modeled. DOE provides a tool to analyze these kinds of influences
on an investment portfolio. For financial instruments this could be done by simulation methods.
For example, various asset categories could be combined in a systematic way in hypothetical
portfolios to see how they perform under differing market scenarios. These interactive effects

94
are a key element in another portion of analysis of portfolios called stress testing. The systemic
effects of disappearing market liquidity and rapidly changing credit-worthiness on portfolios
were poorly modeled in the recent crisis. Stress testing using DOE and simulations can provide
valuable insight into how investment portfolios will respond under different economic and
market scenarios.

To Improve is the next step in designing financial products by the DMAIC process. Here a
couple of techniques from the Six Sigma tool box can be useful. The first of these is reliability
engineering. Reliability engineering involves designing products to be robust under difficult
operating conditions. This is accomplished through several techniques including standardization
and redundant systems as well as the previously discussed DOE. Standardization tends to make
physical products more robust because of fewer number of parts reducing complexity and
interactive effects and the streamlining of assembly and testing improving quality and reliability.
Applied to financial products the analogue would be to use established financial instruments that
have a track record of performance under different market conditions rather than new and
customized instruments.

Redundancy is an essential element in complex products to assure reliability. This can take the
form of parallel systems that backup the primary system in case of failure. In the case of
financial products this could be achieved by the use of financial hedges that will offset any
opposite movement in the underlying instrument. The concept of portfolio insurance is relevant
here. There are various ways to achieve this in an investment portfolio by taking offsetting long
and short positions and the use of options. A common hedge is to take out-the-money puts to
hedge against a large market drop. For hedging against counterpart risk, Credit Default Swaps
(CDF) can be used. CDF’s contributed to the recent financial crisis because of the huge volume
outstanding and their lack of transparency. They were undoubtedly being used as a speculative
instrument rather than a hedge by many of the participants, but can be an effective hedge against
credit risk if used properly.

The last stage of the DMAIC process is to Control. Although risk management issues should be
considered throughout all five steps in the process, they are the main focus of the last stage for
financial products. The most important part of the control process is assigning clear-cut
responsibility for this activity. It should be at a high enough level in the firm to have real control
which was a problem with some of the financial firms most impacted by the recent crisis where
control responsibility was diffuse and ineffective. Control also involves frequent reporting of
essential information and separation of the trading, sales, and reporting roles. Compensation
systems should not encourage excessive risk taking.

The overall process for designing and controlling financial products following the DMAIC
model will allow for a more systematic and thorough process that has the potential to prevent
some of the problems which surfaced in the recent financial crisis. The ad hoc and diffuse nature
of risk management in many financial firms was revealed during this crisis, and a more
integrated and rational process is clearly called for. In the next section we will discuss the case
for robust portfolio design.

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The Case for Robust Portfolio Design

The financial crisis that began in 2007 affected many financial firms in commercial and
investment banking, hedge funds, private equity funds, and insurance companies. But one major
category of financial institution escaped the havoc. These are the derivatives exchanges
throughout the world. Not one derivates exchange experienced distress in the crisis [15]. The
reason for this is that derivative exchanges apply, and have applied for years, over-margining of
positions. The margins that counterparties must maintain with the exchange are very
conservative. The primary approach to establishing margin requirements at most derivative
exchanges is the SPAN (Standard Portfolio Analysis of Risk) developed by the Chicago
Mercantile Exchange (CME) in 1988. SPAN calculates the potential worst-case asset loss based
on several price and volatility scenarios to set the margin. This conservative approach worked
well with the chaos in the global asset and credit markets in the face of a sudden increase in
volatility and correlation breakdowns. It is a financial equivalent of over-engineering.

In contrast Basel-II did not provide the necessary protection to banks that it was designed for.
Basel-II was based on a belief that banks had sophisticated risk modeling and could establish the
levels of capital needed to assure solvency. However, these risk models were mainly VaR types
of models and proved clearly inadequate to the task. Varma [15] calls Basel-II a “sophisticated
but fragile” system in contrast to the derivatives exchanges risk management approach which is
“crude but robust”. The need for a conservative approach and a margin of safety is revealed
here. As was mentioned previously, asymmetrical and non-normal distributions cannot be
modeled adequately using VaR techniques. Attempts have been made to improve upon VaR
which have some potential. Goh, et al [7] recently developed PVaR for Partitioned Value-at-
Risk. Their method divides the asset return distribution into positive (gains) and negative
(losses) half-spaces. This generates better risk-return tradeoffs for portfolio optimization than
the Markowitz model and is useable when asset return distributions are skewed or abnormal.

In the next section we will discuss some new approached to stress testing and reliability
engineering methods that can contribute to robust portfolio design.

Reliability Engineering for Robust Financial Products

The obvious failure of risk management models based on VaR has triggered a search for new
approaches that improve upon VaR or replace it. Several methods that adjust VaR for
asymmetries and non-normality were discussed in the previous section. Increasingly there is
interest in Expected Shortfall (ES) models that focus on the area in the tails of the distribution
rather than the cutoff at 95% or 99% confidence levels as VaR does. The ES models are
specifically designed to measure the potential for large losses and the amount of capital required
to be prepared. ES allows losses to be calculated in the tail of a fat-tailed distribution whereas
VaR does not. This can be accomplished by using a power law as described in Varma [15].

Pang’s [12] approach models the stock or option prices as a simple, deterministic non-linear
transformation of a log-normal hidden process. He does not assume stationarity nor normality
and thus his approach can deal with asymmetric and leptokurtic distributions. His model is able
to explain some anomalies in financial markets such as negative volatility skewing and realized

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volatility being lower than implied volatility. This has application for options pricing and
determining hedge ratios as well as giving indications of rich-cheap stocks or options.

Diversification across asset categories and countries can provide some degree of risk mitigation
in a portfolio, but this can break down as markets become more correlated in times of market
stress. Building portfolios to maximize returns and minimize volatility using historical data and
sophisticated models is essential in portfolio design. But to be truly robust, the portfolio must be
over-engineered. This can be accomplished through several hedging methods that provide
portfolio insurance.

There are several persuasive reasons to insure an investment portfolio against large and
unexpected losses. The most obvious is the revealed weaknesses of VaR models to protect
against large losses. The flaws in the VaR models were discussed above and include non-normal
distributions with fat-tails and skewness and non-stationarity. This leads to poor performance of
these models, particularly in the short-run [2]. It has proven extremely difficult to “time the
market” and foresee changes in direction. Estrada [3] found that if an investor had been able to
avoid the 10 worst days on the NYSE from 1900 to 2006, they would have had a portfolio 206%
more valuable than a passive investor in the Dow Jones Industrial Average (DJIA). Conversely,
an investor who missed the 10 best days during this same period would have a portfolio 65% less
valuable than a passive investor. Predicting these market booms and busts is practically
impossible, and the investor is much better off to insure the portfolio against extreme events.

Portfolio insurance methods include the use of offsetting long and short positions for price and
market risk. These positions can be costly in terms of return that is sacrificed to reduce risk.
Another hedging method is to use options. Far out-of-the-money options can be used to insure
against extreme price moves at a modest cost of the premium which is low for such options. To
reduce the premium cost further one can write an offsetting option but, of course, must assume
some risk to do so. Simulations [6] find that out-of-the-money put options reduce ES and
coincident extreme losses.

To insure against counterparty risk one instrument that can be used is the Credit Default Swap
(CDS). For a series of premium payments counterparty risk can be transferred to someone else.
This of course assumes that the CDS counterparty does not themselves default which has turned
out to be a problem in the recent credit crisis. Other methods of portfolio insurance will
probably be developed in reaction to recent events allowing for further refinement of reliability
engineering for investment portfolios.

CONCLUSIONS

Fractal models can mimic what happens in market crises [11]. They are able to represent
graphically “wild randomness” after the fact but are not useful for prediction [2]. By definition
Black Swan events are unpredictable and thus cannot be mathematically modeled [14]. Since
these events can have devastating effects on an investment portfolio, how can an investor or a
firm prepare for them? There is no way to completely prepare for an unpredictable event but one
can certainly mitigate its effects. In an investment portfolio this can be accomplished through
the Six Sigma methods outlined in this paper.

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First, the Six Sigma process can be applied to the design of risk management systems. It
provides a structured approach to collect data, analyze it, and develop financial products with an
integrative plan-achieve-control structure as part of the process. Three key concepts of Six
Sigma quality programs have direct applicability to design of investment portfolios. These are
the principles of over-engineering, robust design, and reliability engineering. Over-engineering
of a financial product involves combining different instruments that provide an optimal return-
risk tradeoff that is immune to extreme tail events. If well done, the result is a robust design for
the portfolio that will be able to respond in predictable ways to both expected and unexpected
market shocks and survive Grey and Black Swan events. Reliability engineering provides an
extra layer of protection using portfolio insurance methods to hedge for extreme events using
options, Credit Default Swaps, and other instruments and requires stress testing and simulation to
build in reliability and robustness.

REFERENCES

[1] Black, F. & M. Scholes, 1973, The Pricing of Options and Corporate Liabilities, Journal of
Political Economy, 81(3), 637-654
[2] Considine, G., , Black Swans, Portfolio Theory and Market Timing: 12 comments, Seeking
Alpha, 2008, Article, 64111
[3] Estrada, J., Black Swans, Market Timing, and the Dow, 2007, SSRN 1086300
[4] Evans, James R. and William M. Lindsay, Managing for Quality and Performance
Excellence, Thomson/South-Western, Mason, OH, 2008.
[5] Fama, Eugene, The Behavior of Stock Prices, Journal of Business, 1965, 47, 244-280
[6] Goldberg, L., M.Y. Hayes, J. Menchero, and I. Mitra, Extreme Risk Analysi”,
MSCI Barra Research Insights, 2009,1-29
[7] Goh, J., K. Lim, M. Sim, and W. Zhang, , Portfolio Value-at-Risk
Optimization for Asymmetrically Distributed Asset Return, 2009, SSRN 1394922
[8] Kon, S.J., Models of Stock Returns—A Comparison, Journal of Finance, 1984, 39,
147-165
[9] Markowitz, H.M., “Portfolio Selection”, Journal of Finance, 1952, 7, 77-91
[10] Mandelbrot, B., The Variation of Certain Speculative Prices, Journal of Business, 1963, 36,
394-419
[11] Mandelbrot, B. and R. Hudson, The (mis)Behavior of Markets,New York: Basic Books,
2004.
[12] Pang, H., A Novel Simple but Empirically Consistent Model for Stock Price and Option
Pricing, 2009, SSRN 1374688
[23] Sharpe, W.F., Capital Asset Prices: A Theory of Market Equilibrium, Journal of
Finance, September 1964.
[14] Taleb, N., , The Black Swan, New York: Random House, 2007
[15] Varma, J., Risk Management Lessons from the Global Financial Crisis For Derivative
Exchanges, Indian Institute of Management, Ahmedabad W.P. No. 2009-02-06, 2009,

98
 LABOR REFORM THROUGH EXECUTIVE ORDERS AND EFCA:
THE IMPACT ON WORKERS TODAY

Anne M. Fiedler
Andreas School of Business
Barry University
Miami Shores, FL 33161
afiedler@mail.barry.edu
305-899-3545

Mark A. Aeschleman
Caterpillar Inc.
aescham@ymail.com

ABSTRACT

The Obama administration has begun to issue executive orders and is pushing pieces of
legislation such as the Employee Free Choice which will have the greatest impact on labor since
the passage of the National Labor Relations Act in 1935. The pro-labor executive orders tend to
encourage unionization or make it harder for employers to fight unionization in their companies.
In the case of the Employee Free Choice Act, it will be easier for workers to unionize. While
much has been written on the direct impact of these laws and unionization in general on
companies, this paper presents some of these recent initiatives and discusses the positive and
negative impact that these measures could have on American workers.

INTRODUCTION

Employees operated at the whims of employers until the mid-1930s when the National Labor
Relations Act was passed. Since then labor has had the right to organize and bargain collectively
with their employers free from restraint and coercion. These rights are enforced by the NLRB.
The AFL-CIO spent $53 million in 2008 to help elect Barack Obama to the Presidency of the
United States [1]. This ushered in what some describe as the most pro-labor administration since
Lyndon B. Johnson [2]. At the start of his term in office, Obama signed into law numerous pro-
labor executive orders. The labor agenda was temporarily put on the hold so that the President
could focus on healthcare reform and deal with the economic crisis. Now, backed by a
Democratic Congress, President Obama plans to push through the Employee Free Choice Act,
the strongest pro-labor legislation since the National Labor Relations Act.

Many question whether enabling employees to limit or avoid managerial intervention in union
campaigns is an appropriate goal for federal law [3]. A recent study published by Cornell
University provides a data-driven look at the claims in the EFCA controversy. Based on a survey
of employees involved in National Labor Relations Board (NLRB) union representation
elections and card-check campaigns, the study found that management pressure on employees to
oppose unionization is greater than pressure from co-workers of union organizers to support the
union. However, an overwhelming majority of the respondents (elections, 82.5%; card check,

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89.4%) said that they felt free to decide whether or not to support the union [4]. Pro-labor
groups such the AFL-CIO promise better benefits, wages and working conditions as a result of
the passage of EFCA [5]. However, they fail to recognize the negative impact that this law could
have on American workers. This paper reviews the pro-labor executive orders issued under the
Obama administration and the pending Employee Free Choice Act. The authors then discuss the
impact that the executive orders and the pending legislation could have on today’s workers.

NATIONAL LABOR RELATIONS ACT (WAGNER ACT)

The 1930s saw the United States go from a time of great prosperity of one of severe economic
troubles with a high unemployment rate and a rapidly declining standard of living for the
American worker. Workers labored in factories and mines often under deplorable conditions.
To remedy this, workers sought the right to organize so that they could bargain collectively on
more equal terms with their employers. Owners fought these attempts to form unions.
Organizers were fired, and some owners even hired thugs to beat them up. Distressed by anti-
union violence the Congress passed the National Labor Relations Act (also known as the Wagner
Act) in 1935 [6]. The purpose of the NLRA was to encourage a healthy relationship between
private-sector workers and their employers, which policy makers viewed as vital to the national
interest. The Act also established the National Labor Relations Board to administer and enforce
this law. [7]

LABOR RELATED EXECUTIVE ORDERS UNDER THE OBAMA ADMINISTRATION

Within 10 days of being sworn in as President, Barack Obama issued three executive orders on
labor issues [2]. EO 13494, “Economy in Government Contracting,” EO 13495,
“Nondisplacement of Qualified Workers Under Service Contracts” and EO 13496 "Notification
of Employee Rights Under Federal Labor Laws," were signed on January 30, 2009. EO 13495
and 13496 actually overturned previous executive orders issued by President George W. Bush.

Executive Order 13494

The purpose of Executive Order 13494 is to promote economy and efficiency in Government
contracting. It prohibits federal contractors from passing on to contracting agencies the costs of
attempting to persuade employees to exercise – or to refrain from exercising – their rights to
organize or engage in collective bargaining. The order specifically disallows costs associated
with the following activities when they are undertaken to persuade employees to exercise or not
exercise their rights to organize and bargain collectively: (1) preparing and distributing materials;
(2) hiring or consulting legal counsel or consultants; (3) holding meetings (including paying the
salaries of attendees); and (4) planning or conducting activities by managers, supervisors or
union representatives during work hours. The order does allow for costs associated with
"maintaining satisfactory relations between the contractor and its employees. Such costs include
'costs of labor-management committees, employee publications (other than those undertaken to
persuade employees to exercise or not to exercise, or concerning the manner of exercising, the
right to organize and bargain collectively), and other related activities'.”

Executive Order 13495

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Executive Order 13495 revokes Executive Order 13204, which was issued by President Bush in
2001. Executive Order 13495 applies to successor federal contractors who obtain a federal
service contract of $100,000 or more ‘that succeeds a contract for performance of the same or
similar services at the same location, or federal contractors who are awarded a contract for the
same services and location as an expiring service contract.’ [9] Successor federal contractors are
now required to offer qualified non-managerial employees of the predecessor employer a right of
first refusal for open positions they are qualified to perform for at least ten days; until then no
employment openings under the contract exist. Additionally, subcontractors are contractually
obligated to these hiring requirements as well.

The successor contractor has following rights: (1) to employ fewer employees than the
predecessor contractor; (2) to employ any employee who has worked for the successor contractor
for at least three months immediately preceding the commencement of the federal service; (3)
not to offer a right of first refusal to any employee of the predecessor employer who is not a
service employee within the meaning of the Service Contract Act of 1965; and (4) not to offer a
right of first refusal to any employee of the predecessor contractor who has failed to perform
suitably on the job based on the employee's past performance. [9]

As a result of Executive Order 13495, many successor contractors will probably have to
recognize and bargain with the labor unions that represented their employees when they were
employed by the predecessor contractor. Noncompliance with Executive Order 13495 may
result in orders requiring hiring of the employees not offered right of refusal and payment of
wages lost. The contractor may also face federal-contract ineligibility for up to three years. [10]

Executive Order 13496

Executive Order 13496 repeals a Bush order which had stated that government contracts and
subcontracts must include a clause requiring government contractors and subcontractors to post
notices informing their employees that they have the right to refuse to join a union. The new
order requires government contractors to post notices informing employees of their right to
organize under the National Labor Relations Act and to designate representatives of their own
choosing for the purpose of negotiating the terms and conditions of their employment.

Failure to comply may result in possible cancellation, termination, or suspension of the contract
and being declared ineligible for future government contracts. In addition, this includes every
subcontract entered into in connection with its federal contracts. [11]

Impact of Executive Orders 13494, 13085, and 13496

These executive orders are expected to have a profound effect on federal contractors relative to
their labor costs, status, and activities. The requirement of Executive Order 13496 to notify
employees of their rights under federal labor law will likely result in more union organizing
campaigns as well as increased litigation. As a result employers will participate in more anti-
union communication and legal proceedings. However, for federal contractors the costs of these
communications will no longer be due to the issuance of executive order 13494.

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The requirement that successor contractors offer employment to predecessor employees under
EO 13495 means that many federal contractors that are presently union-free will be forced to
assume their predecessors' collective-bargaining obligations.

EMPLOYEE FREE CHOICE ACT

EFCA is the No. 1 legislative priority for labor leaders who hope to boost union membership.
Today, just 7.5% of U.S. private sector workers are in unions, vs. more than 20% in the mid-'70s.
Union leaders also believe that the current union election system favors employers. This is
because employers have access to workers on the job while unions can only contact them off-
site. A study conducted by the University of Illinois at Chicago found that 91% of employers
require employees to attend one-on-one anti-union meetings with their supervisors during union
organizing drives. Further, the respondents indicated that when faced with organizing efforts,
30% of employers fire pro-union workers, 49% threaten to close the worksite, and 51% of
employers coerce workers into opposing unions with bribery or favoritism. [12]

The Employee Free Choice Act of 2007 was passed on March 1, 2007, by the House of
Representatives with a vote of 241 to 185 as an amendment to the National Labor Relations Act.
Subsequently, the Senate version was introduced by Senator Edward Kennedy on March 30,
2007, but it did not have enough votes to pass. The main provisions of the 2007 version were as
follows:

• Employees could still hold a secret ballot election if 30% of the bargaining unit signs
authorization cards. However, a union would have the right to be recognized as the
exclusive bargaining representative of your employees without a secret ballot election if a
majority of those employees sign authorization cards.
• If a majority of employees sign cards, an employer must begin bargaining within 10 days
after the union is certified.
• If the union and the employer cannot agree upon the terms of a first collective-bargaining
contract within 90 days, a federal mediator steps in.
• If, after 30 days of mediation, the union and employer still have not agreed on a contract,
a federal arbitrator would be empowered to determine the terms of the agreement, and
your employees would lose their current right to ratify the terms of the agreement.
• If an employer is found to have unlawfully terminated pro-union employees, the law
would provide for liquidated damages of three times back pay. In addition, you’d be hit
with a $20,000 penalty per occurrence if the National Labor Relations Board or a
court finds against you.

On March 10, 2009, EFCA was reintroduced by Democrats in Congress indicating that it would
help the troubled economy. Businesses stepped up their opposition to the bill saying that it
would add to their costs while hurting their ability to boost productivity and to keep their work
forces flexible enough to respond to changing markets [13]. Members of the Society for Human
Resource Management (SHRM) lobbied against the bill stating that “the organization [SHRM] is
not anti-union, but the so-called card check bill would potentially subject workers to strong-arm
tactics [which] could lead to illegitimate collective representation because of that coercion.” [14].

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Also, some Democratic senators, such as Sen. Arlen Specter (PA-D), stated that they could not
vote for the bill in its present form.

A new Employee Free Choice Act is still being hammered out with the hope of getting it through
Congress before the next election. [15]

THE IMPACT OF LABOR REFORM ON EMPLOYEES

The labor-related executive orders already issued by the Obama administration and the
Employee Free Choice Act that is pending in Congress may have some positive as well as
negative impacts on American workers. This section will discuss how these laws will impact
workers now and in the near future.

Positive Impact of the Pro-Labor Laws

The most obvious benefit of the EFCA is the limiting of opportunity for coercion by employers.
The previously discussed Cornell University study on employees involved in National Labor
Relations Board union representation elections, found that 46% of the employees felt that
management pressured them to oppose the unions during the election process, while 23.4% felt
that they were pressured by management during the card check process [4]. This coercion comes
from two aspects of the current election system: the one-sided distribution of information within
the company and the prolonged time before the election.
The one-sided distribution of information arises from the fact that under current labor law, the
employer has the right to call mandatory meetings regarding the union election as long as they do
not threaten or coerce the employees or call the meetings within 24 of the election. The
distribution of information by the employer may be slightly reduce by Executive Order 13494
which prohibits using funds from a federal contract to prepare and distribute materials or to hold
meetings regarding. Some of the possible provisions of EFCA such as granting union organizers
equal access to company property or possibly banning mandatory employee meetings held by the
company would could help to equalize the situation.

Another, less obvious form of coercion involves delaying the election date, during which time
management can apply various types of pressure on their employees such as repeatedly requiring
employees to sit through anti-union meetings. The proposed EFCA “rapid” election provision
(suggested in place of the card-check provision) that mandates no more than a 10-day period
between the time a union petitions for a vote and an actual election would eliminate this.

Though already illegal under the NLRA, an additional form of coercion involves unfair labor
practices such as threatening or even firing employees involved in organizing efforts. The
NLRB reports that in 2008, 20,000 unfair-labor-practice charges were filed. They found merit in
40% of these cases [4]. The provision that fines of up to $20,000 per violation be levied if an
employer is found to have willfully or repeatedly violated employees’ rights during an
organizing campaign or while bargaining for a first contract might curb these types of violations.

The most obvious benefit of the pro-labor legislation is that not only is information on
organizing more readily available as a result of EO 13496 which requires government

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contractors to post notices informing employees of their right to organize under the National
Labor Relations Act, but also the increased ease of organizing that resulting from EFCA’s
proposed card-check or rapid election provisions. According to the AFL-CIO website [5], this
would reduce the slide in union membership thereby turning around the economy and rebuilding
the middle class. The AFL-CIO states that, “union members are 52 percent more likely to have
job-provided health care, nearly three times more likely to have guaranteed pensions and earn 28
percent more than nonunion workers.” Also, because union members believe that union’s have
“voice face”, even if they are dissatisfied with their job, union workers will exhibit a lower intent
to leave then non-union workers [16]. However, as discussed in the next section, this does not
mean that union members are more satisfied with their jobs than non-union members.

Negative Impact of the Pro-Labor Laws

While proponents of the pro-labor initiatives, such as the AFL-CIO extol the benefits reaped by
workers now and in the future, opponents of this movement point out the downside for
employers as well as workers. It is widely accepted that if EFCA becomes law it will not pass in
its current form. For example, the card check provision has all but been removed from the bill.
However, there are many EFCA proponents that vow to make card check a reality; therefore, it
will be included in this discussion. The pro-labor executive orders will encourage unionization
while the passage of EFCA (whether with the card check provision or the rapid election
provision) will make unionization easier. What follows is a discussion of the negative impact
unionization has on employee job satisfaction and employment levels as well as the threat to
freedom of choice. Further, the impact of binding arbitration on worker decision-making will
also be examined.

Job Satisfaction. Proponents of EFCA state that employees will benefit from this law because
obstacles to union certification will be eliminated. For many employees the illusion of better pay
and benefits is a significant motivator for organizing and, in many cases, after unionization their
illusions become a reality. Nevertheless, better pay and benefits do not necessarily translate into
improved job satisfaction. Studies have shown that job satisfaction of union members is high
during the early stages of their membership; however, their level of job satisfaction diminishes
over time. More importantly, once employees have left their union jobs, job satisfaction
increases in relationship to the extent of time they are removed from their unionized job. [17]
The reason for this is that there are five facets of work experience that impacts an employee’s
overall job satisfaction: pay; promotion; supervision; the work itself; and co-workers [16].
Initially, union workers are excited about the prospects of better pay and benefits, but over time,
they begin to realize that pay and promotion opportunities are limited as a result of union
seniority rules. Also, relationships between management and union employees become less
business-like and often develop into an “Us vs. Them” relationship. This relationship restricts
employee participation in workplace decisions, which further diminishes job satisfaction.

Research indicates there are approximately 60 million nonunion workers that would prefer some
form of collective representation [18]. However, Abraham, Friedman, and Thomas ([16] report
that nonunion employees have a significantly higher level of job satisfaction than their union
counterparts. This is because nonunion employees are more satisfied in the areas of
communications, working conditions, the immediate supervisor, and senior leadership while

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union members place greater significance on the relationship between job satisfaction and
benefits. Despite this differential in satisfaction, union employees are less likely to leave their
jobs than nonunion employees when dissatisfied [16] because employee dissatisfaction with pay,
benefits, and working conditions are voiced though the union. This increased voice results in a
reduction in the intent to leave their job on the part of the union member.

Job satisfaction can also be impacted when an employee experiences a strike, or work stoppage.
Surveys found that following a strike, union employees had negative attitudes towards the union
and their employer. The reasons behind this are three-fold: economic impact, organizational
changes, and employment relationship [19].

Impact on Employment. Proponents of EFCA and the pro-labor executive orders believe that
these measures will increase union membership without creating any negative impact on the
economy. Andy Stern, former president of Service Employees International Union (SEIU),
predicts that the passage of EFCA will increase union membership by as much as 1.5 million
annually for the next 10 years [20]. Without question, union membership will increase
substantially due to the less-restrictive organizing structure afforded by the EFCA bill and the
pro-union environment created by the executive orders. While it may be true that the decline in
union membership will be reversed, an unintended impact of this bill will be in the area of
overall unemployment rates.

It is estimated that the implementation of EFCA would translate into a loss of more than 600,000
jobs [2]. An analysis by Layne-Farrar [20] indicates that a 3% growth in union membership will
result in a 1% increase in unemployment. In addition, it is predicted that job creation will
decrease by nearly 1.5 million jobs. Bronars, Deere and Tracy [21], in a study determined that a
10 percent increase in union growth would translate into a decrease in employment by as much
as 1.1%. Yet another study found that a one percentage point increase in bargaining coverage
will increase unemployment rates by 7.5% [22].

There are various reasons behind the projected rise in unemployment rates due to increased
unionization. As employees unionize, employers are required to dedicate more resources to
wages and benefits, which have a negative impact on capital investments. Decreased
investments in capital will ultimately slow the growth of the company and, in many cases, may
cause a decline [22]. Additionally, as the cost of supporting the union membership increases,
employers will reduce union positions [20]. As employer’s profit margins begin to shrink, they
will begin to seek other alternatives in the area of labor such as sending jobs offshore [22].
Freedom of Choice and Threat of Coercion. Even though EFCA has been coined as the most
significant legislation on labor since the enactment of the National Labor Relations Act,
legislative acts often result in unintended outcomes, and opponents see the passage of EFCA as a
significant attack on employee’s freedom of choice.

The Card Check component of EFCA is designed to allow for immediate certification of the
union and does not provide an opportunity for employers to develop a campaign against the
unionizing effort. The card check procedure would replace the current procedure whereby
employees sign an authorization card expressing their interest in collective bargaining. This is
not, however, a vote in favor of unionization. The same procedure would apply with the card

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check process except instead of the employee expressing merely an interest in holding an
election, if the majority sign the card, that card would suddenly become a vote in favor of
unionization. Furthermore, employers may be completely unaware that an organizing attempt is
being made which disallows employees from being presented both sides of the unionization
story. An argument can be made that this would violate the employee’s freedom of choice.
There is much talk about how EFCA will eliminate employer’s ability to use coercive actions to
prevent unionization. EFCA does not, however, address or prevent coercive action by union
bosses or coworkers during the authorization process. Employees may be intimidated and
harassed by co-workers in an attempt to have them sign authorization card. This action creates
turmoil for the employee often resulting in giving up their resolve and signing the card. This
form of coercion and one-sided communication does not afford employees the opportunity to
make an educated decision [23].

Compulsory Arbitration. A portion of the EFCA bill that is often overshadowed by the card
check option is compulsory arbitration which would take place 120 days after certification if the
company and union cannot come to an agreement on a contract. Knowing that both sides feel the
other is asking for too much, compulsory arbitration is a real likelihood in many instances.
Currently, employers and the union negotiate a contract. Although they are required to bargain
in “good faith,” an agreement is not always reached. If that happens, the union can call a strike.
However, strikes are costly to both sides and a compromise is typically reached. Through
arbitration, a government-appointed lawyer determines what is fair for both sides. The decision
of the lawyer is final. Currently, once a contract is negotiated by union officials and
management, it has to be ratified through a vote of rank-and-file members. Under compulsory
arbitration, workers do not get this vote. As a result workers have lost their right to vote twice:
first, to certify the union and then to ratify the contract [24]. George Meany, president of the
AFL-CIO for nearly 30 years, refers to the lack of voice resulting from mandatory arbitration as
"an abrogation of freedom." [25]

There are numerous instances where arbitration has not served the people well. For example,
Compulsory arbitration nudged some Michigan cities into bankruptcy. This was costly not only
to the taxpayers, but to the workers whose jobs were subsequently cut. Compulsory arbitration is
now being rejected in Michigan and other states as an alternative to negotiation. Recently,
Michigan voters rejected a union-sponsored ballot proposition that would have extended
compulsory arbitration to all state employees. [24].

CONCLUSIONS

With all the focus on the economy and healthcare reform, little attention has been paid to the
current labor movement. The Employee Free Choice bill has been around since Barak Obama
co-sponsored it as a junior senior in 2003, and it has come up in Congress on more than one
occasion. Because it is the darling of labor leaders who helped to put the President as well as
many Democratic Congressmen in office, it is destined to rise again, probably before the next
election. However, if you ask the average citizen about EFCA, they are likely to give you a
blank stare (unless they read the AFL-CIO website). Many workers as well as small business
persons are not even aware of the bill’s existence. This is even more the case with the pro-labor
executive orders which quietly crept in becoming rules that affect many businesses without any

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accompanying fan fair. Yet, they can have far reaching effects for employers as well employees.
Many sources document the cost of unionization to the organization. However, these executive
orders and laws can also have far reaching positive and negative effects on the worker. It is
important that law makers, labor leaders, voters, and workers examine not only the short term,
but also the long term consequences of these rulings before determining the whether or not this is
the direction we need to go.

References available upon request from Anne Fiedler at afiedler@mail.barry.edu

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 BUSINESS EDUCATION, SOCIAL RESPONSIBILITY, AND NONPROFIT
OPPORTUNITIES

Phil Mann
Andreas School of Business
Barry University
Miami Shores, FL 33161
pmann@mail.barry.edu
305-899-3523

Anne M. Fiedler
Andreas School of Business
Barry University
Miami Shores, FL 33161
afiedler@mail.barry.edu
305-899-3545

ABSTRACT

This paper deals with a need for the inclusion of information regarding nonprofit organizations
and social responsibility into business school curriculum. Support for this recommendation is
based on several factors that include the state of nonprofit organizations nationally, the present
content in courses in business, and discussions with students in entrepreneurship classes.
Seventeen texts in business-related areas such as entrepreneurship, management, marketing, and
leadership were analyzed. It was noted that areas of content related to nonprofit businesses and
social responsibility were given little if any attention. Recommendations made regarding
curriculum modifications and possible new inclusions are discussed that would cover social
responsibility and also enable students to gain a better understanding of the world of nonprofit
business. Nonprofits can be big business with profit-related components that offer a variety of
opportunities for our graduates.

INTRODUCTION

In an article published by the Wall Street Journal [1] entitled “Dean’s Set Priorities for Tough
Times” several Deans (University of California, Duke University, and Georgetown University)
were interviewed regarding challenges that face their students after graduation. Dean George
Daly of Georgetown University’s McDonough School of Business discussed the idea of
“weaning students off traditional MBA careers.” He further stated that the “biggest challenge
might be, re-setting student expectations and getting them to consider careers at nonprofit, and
government-related companies, or at small or mid-sized firms around the region.”

The study of nonprofit organizations is as a whole sparse or often given cursory attention in
many courses. A number of correlates can be extrapolated:

1. The size and needs of nonprofit organizations locally, regionally, and nationally is
underestimated.

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 2. Areas of study related to nonprofit organizations and needs are not usually an
important part of regular business school curriculum.
3. The area of nonprofit organization study and response to needs of this sector in terms
of business continuing education and community involvement is neglected.

There are a number of attitudes that seem to be prevalent among some faculty and some students
questioned in classes that need to be considered. These attitudes often vitiate acceptance of this
area of business as important and include:

• There is little opportunity for entrepreneurial activity in nonprofit endeavors.

• Nonprofits are sustained through donations.
• Nonprofits do not engage in for-profit activities.
• Business education is the same for nonprofits as it is for for-profit firms so why “tamper
with” existing courses.
• There are only a few nonprofit organizations and most of them deal with religion, education,
some aspect of health or poverty and probably would be better served under the purview of
social work.
• Nonprofits do not play a significant role in the economy of the United States.

Further research is needed in the areas of the perception of nonprofit organizations by various
groups.

In the area of social responsibility it is becoming evident that a growing number of companies
are looking to business schools for assistance in redefining the concept of social responsibility
with respect to strategic planning and the delineation of leadership responsibilities of key
company employees. These plans also include specific initiatives that pertain to global
expansion. Issues related to social concerns in identified countries are deemed important. If you
are doing business in India, for example, it cannot be avoided. Companies have also expressed
concern over the type of branding that highlights their social effect on communities and the
efforts made to shape community perception of their public image.

A Wall Street Journal article [2] stated that “fifty-seven percent of consumers say a company or
brand has earned their business because it supports good causes,” (Edelman SA, a large
financial-service company). The Bridgespan Group, a nonprofit-advisory firm projects long-
term shortages of up to 640,000 managers by 2016 as workers retire and organizations grow
larger [3]. “Nearly three fourths of the nonprofits surveyed by Bridgespan indicated that they
value for-profit experience. Skills most in demand include project management, stretching
scarce resources, flexibility, and adaptability.”

BACKGROUND

Nonprofits, also known as not for profit entities, play a significant role in providing accessible
health, cultural, and social services. Nonprofit organizations are involved in endeavors that
significantly enhance the quality of life of the community and address issues such as
homelessness, substance abuse, AIDS awareness and treatment, and economic concerns that deal
with developing pathways out of poverty. Nonprofits depend mainly upon grants and donations

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to maintain their operations. After expenses, funds remaining are used to support their goals and
objectives. Many nonprofits have for profit components. They have a special legal designation
that distinguishes them from for profit businesses which enables them to receive tax exempt
status. This structure requires certain accountability and auditing provisions. In the United
States, nonprofits incorporate in the state in which they exist and are governed by a board of
directors. These purpose driven companies have been able to apply business practices to solving
societal problems. The combining of business and social responsibility as an intrinsic concept
has been gaining recognition in recent years, but still remains a neglected area of study. Some
colleges and universities have begun to include social entrepreneurship and nonprofit business
organization content into their curriculum.

Under Estimated

In the United States as well as in Europe and in Latin America where nonprofits are known as
civil society sector programs, not for profit organizations contribute as much to gross domestic
product as such major industries as construction and finance. According to Lester Salamon,
director of the Johns Hopkins Center for Civil Society Studies, “We now have an officially
sanctioned method for capturing the economic scale and importance of civil society and
volunteering around the world, and what is revealing is that this set of organizations is far more
important than we have realized.” [4]

According to the National Center for Charitable Statistics (NCCS) [5], the following information
was published in a report dated 1/14/2010:

• Total number of registered nonprofit organizations in the United States in 2009 was
1,515,629.
• Total number of nonprofit organizations in Florida in 2009 was 69,804.
• Total number of nonprofit organizations in Miami-Dade County (the location of Barry
University) was 9,591.
• Florida’s nonprofit sector is the fourth largest employer among Florida industries with nearly
630,000 workers including 380,000 paid workers and an additional 250,000 full-time
equivalent volunteer workers [6].
• This same report stated that nonprofit enterprises account for 7% of the GDP capital of the
United States.
• The workforce of Florida’s nonprofits alone represents a significant 4.9% of the total
workforce (1 out of every 20 workers). This represents more than the state’s banking and
insurance industry.

Under Studied

Nonprofit organizations function quietly without fanfare and their importance is rarely
understood by the general public. Most colleges and universities tend to offer little substantive
information dealing with nonprofit organizations in their business school curriculum. A survey
of seventeen selected texts used nationally in courses dealing with entrepreneurship,
management, marketing, and leadership indicated the following:
• All seventeen texts did not include the word nonprofit in their index.

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• None of the texts defined the terms nonprofit or not for profit.
• It was also noted that sixteen of the texts made no reference to social responsibility, but some
did deal briefly with the concept of ethics and business. One of the texts did deal with social
responsibility in a more comprehensive manner.

Some of the concerns indicated by nonprofits that have important implications for higher
education were uncovered in a survey conducted by a C-One Survey dealing with the effects of
the economy on nonprofits serving Miami-Dade County published in March 2009 [7]. They
found that the main concerns for these organizations centers around three themes: quality of
services, operational inefficiencies, and staff burnout.

The findings indicated that there is a paucity of donors and the fact that private funds continue to
be cut back in our present economy. It is predicted that this will continue for some time in the
future. Conversely given the decrease in funding, the demand for services is up having
important implication for future jobs for our graduates. This appears to be both a national and
international trend. The demand for services has become “a key driver” in terms of adding new
programs or expanding the scope of existing programs. With respect to educational needs
related to identified strategies, five major areas have been identified that need to be considered in
terms of continued business education.

1. Information regarding the role of boards in fund raising

2. Marketing information that would provide greater visibility to organizations and their
programs
3. Programs addressing internal operations, planning and adjustments
4. Suggestions regarding board roles in strategic planning
5. Suggested strategies for collaboration and partnering with others to jointly raise funds

Methods or types of support in five major areas were selected as top priority:

1. Funding alternatives for general operating support

2. Funding information associated with organizational capacity building programs
3. Information regarding access to volunteer experts to provide technical assistance
4. Information dealing with board recruitment and engagement
5. Suggestions for accessing and utilizing management consultants to provide technical
assistance

Under Served

Most universities have as part of their mission to provide service and technical assistance both to
for-profit firms as well as to underserved organizations found in the nonprofit sector. Giving
students an understanding of the value of community service and social responsibility through
teaching, internships, and other “hands on” experiences in the nonprofit sector should be an
important ingredient of the program.

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Students should understand the effects nonprofits have on communities and their role in bringing
vitality to local economies. The needs of nonprofit organizations have generated a list of
community service areas that with student involvement could be improved and expanded. In a
larger sense providing services to nonprofit organizations has been shown to have a positive
effect onsite in strategic areas in neighborhood revitalization.

The C-One Survey of nonprofit organizations [7] generated a list of community service areas that
could be improved or expanded with additional training and support. Many of the topics
identified as integral relate to the utilization of business model practices that focus on
management, accounting, marketing, and fund raising as well as governance issues. Nonprofit
organizations need assistance in the development of business plans. One goal is to broaden
exposure and identify sources of potential assistance for the community. Another major
application of workshops and seminars is to assist nonprofit firms in securing grants and
contracts as well as to be in a better position to offer more comprehensive services in meeting
community needs.

IMPLICATIONS FOR MANAGEMENT EDUCATION

Since there is a paucity of information about nonprofits in many business texts, it cannot be
expected that students will become focused on this area as relevant to their studies in business.
Therefore, it becomes a matter of including supplementary materials and developing activities
that would introduce students to this area.

There are several activities that have been successfully implemented that resulted in a better
understanding of the area of nonprofit organizations with concomitants in social responsibility.

The following suggestions are meant to be practical and doable.

Simulation activities are good that involve reenacting problem solving situations designed to
stimulate a mindset for thinking about responsible behavior. Examples such as analyzing mining
accidents or oil spills as well as other corporate catastrophes are informative.

There are a variety of moral quandaries that can be introduced into courses through case studies
involving nonprofit organizations. Case studies that provide for a differentiation between for-
profit and nonprofit firms are useful.

Case studies involving nonprofit organizations and situations dealing with social responsibility
should be a part of the requirements of every management, marketing, and entrepreneurship
course. The SWOT Analysis technique has been introduced and found to be very useful in these
situations.

An example of how a simple nonprofit case study requirement for an MBA Course in
Entrepreneurship can have far-reaching implications is a study done by a student of the Florida
Department of Juvenile Justice, a governmental nonprofit organization. What began as a limited
SWOT Analysis of a local correctional institution became a comprehensive survey of six circuits

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(institutions) in Florida. In collaboration with the Chief Probation Officer/Superintendent, the
student accomplished a very useful basis for offering possibilities for better coordination of
South Region correctional services.

Additional recommendations include the following:

• A section of an existing course in entrepreneurship, for example, can be geared to benefit the
students interested in nonprofit business employment.
• Students can do business plans developed around a nonprofit start up or expansion.
• Case studies can be presented dealing with nonprofit enterprises.
• SWOT Analysis assignments centered on nonprofit enterprises offer experiential
opportunities.
• Internship in nonprofit situations can be provided for students.
• Voluntary services in nonprofit organization can be made available.
• “Shadowing” experiences where the student spends a number of hours (days) following the
daily routine of a CEO or CFO of a nonprofit firm. This activity has been an excellent
learning experience for students who shadowed (followed) the CEO of a local hospital.

The following is a list of topics that could be covered in seminars, workshops, and courses that
would complement standard business information offered [8]:
Measuring/Assessing Performance Managing the Nonprofit Organization
Community Needs Assessment How to Start a Nonprofit Enterprise
Website Auditing Techniques Developing and Managing Volunteers
Developing Service Programs Sustainability Issues
Basics of Grants and Other Funding Project Development and Management
Grant Writing Fundraising Methods
Budgeting Essentials Community Demographics
The Strategic Planning Process Use of Social Enterprises
Board Governance Roles of Foundations
Doing a SWOT analysis Use of Social Networking Tools
Board Selection and Development Organizational Assessment Techniques
Creating Visions and Missions Supply Chain Management Issues
Finance and Accounting for Nonprofits Branding the Organization
Role of the Executive Director Tax (990) Considerations
Economic Indicators Affecting the Legal Requirements
Organization

SUMMARY AND CONCLUSION

Our research indicates that the nonprofit sector is an economic powerhouse with the possibility
of employing thousands of our graduates. It also provides a variety of small nonprofit business
opportunities. This industry generates and expends billions of dollars, and does in fact employ a
significant portion of our workforce. In viewing recent trends in nonprofit organizations growth
and capabilities, it becomes evident that programs are needed that will respond to the present and
future educational needs of these organizations. It is also apparent that students in both

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undergraduate and graduate programs need more information regarding this aspect of business
and its implications for future employment as well as for interaction within the world of
commerce. Many of the topics associated with nonprofits can be integrated within the current
curriculum through projects and modules of study. New courses can also be created in nonprofit
stewardship that would contain a variety of cogent topics.

REFERENCES

[1] Middleton, D. (June 2010). Deans Set Priorities for Tough Times. The Wall Street Journal.

[2] Dizik, A. (2009) Networking for Social Responsibility. The Wall Street Journal, November
19, 2009, 88.

[3] Smith, A.K. (2010). How to switch careers. Kiplinger’s, Fall 2010.

[4 ] Johns Hopkins Economic Data Project based on ES-202 data. Retrieved on January 14,
2010.

[5] National Center for Charitable Statistics (2009). Number of Nonprofit Organizations by
State.
Retrieved on January 14, 2010.

[6 ] Joint report of the Johns Hopkins center for civil society studies and the Florida
Philanthropic network (2008). Florida’s Nonprofit Sector: An Economic Force. Retrieved
January 14, 2010.

[7] C-One Survey (March, 2009) The Effects of the Economy on Nonprofits Serving Miami-
Dade County. Retreived January 14, 2010.

[8] Kleban, J. (2010). Topics for Nonprofit Seminars and Workshops. Barry Institute for
Community and Economic Development (BICED).

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 A HOSTILE SEXUAL ENVIRONMENT: HOW HOSTILE DOES IT HAVE TO BE?

Henry Findley,TROY University,Troy, AL,hfindley@troy.edu,334-670-3271

Eva Dodd-Walker,TROY University,Troy, AL,edwalker@troy.edu,334-670-3976
Lee Vardaman,TROY University,Troy, AL,,lvardaman@troy.edu,,334-670-3151
Ping He, TROY University, Troy, AL, pinghe@troy.edu, 334-670-3709
Robert Wheatley, TROY University, Troy, AL, rwheat@troy.edu, 334-670-3459

ABSTRACT

Hostile sexual environment continues to be an important issue in the workplace. Few studies
have examined the courts’ interpretation of the sexual harassment guidelines based on the rules
set forth by the Supreme Court in 1998. This article reviews over 200 cases and provides guiding
principles and recommendations for practitioners.

Keywords: Sexual Harassment; harassment; hostile environment.

INTRODUCTION

Sexual harassment has been recognized as a violation of the Civil Rights Act under Title VII
since the late 1970’s [Twomey, 2007]. In 1980 the Equal Employment Opportunity Commission
[EEOC] propagated guidelines regulating sexual harassment in the workplace [29CFR1604.11].
Since then, charges have steadily risen until they peaked in 2001 at 15,475 [EEOC]. Complaints
slowly declined until 2008, when they suddenly displayed a 10.8% increase [EEOC]. Currently,
sexual harassment cases comprise 14.5% of all claims filed with the agency.

There has been comparatively little recent research on court interpretation of the sexual
harassment guidelines [Shoenfelt, Maue & Nelson, 2002; Miller, 2001]. Given that sexual
harassment litigation represents a significant amount of the EEOC caseload, is rising again, is
very costly to organizations, and is such a controversial and complex issue, it would be helpful to
review the recent case law interpreting the EEOC regulations on the subject. In particular, the
review should focus on the area where there is the most confusion and litigation--sexual hostile
environment.

To that end, a LEXIS-NEXIS key word search was conducted that yielded over 400 cases at the
appeals court level [chosen because the legal principles are more settled and accepted than at the
district level] since the Supreme Court set forth its hostile environment guidelines in Faragher v.
City of Boca Raton [Faragher v. City of Boca Raton, 1998]. Over 200 usable cases were identified and
examined for guiding principles as to the circumstances that constitute an illegal sexual hostile
environment. Cases cited are representative or highlight special issues/circumstances that assist
in determining the hostile environment threshold. Female on male and same-sex harassment
cases were not included because some research has suggested there are differences among the
sexes as to their perceptions/reactions to sexual harassment [Shoenfelt, Maue & Nelson, 2002].
Recommendations for administrators and legislators are provided.

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 HOSTILE SEXUAL ENVIRONMENT

Sexual harassment is defined under the EEOC guidelines as

“unwelcome sexual advances, requests for sexual favors, and other verbal or physical
conduct of a sexual nature…when [1] submission to such conduct is made either
explicitly or implicitly a term or condition of an individual’s employment, [2] submission
to or rejection of such conduct by an individual is used as the basis for employment
decisions affecting such individual, or [3] such conduct has the purpose or effect of
unreasonably interfering with an individual’s work performance or creating an
intimidating, hostile, or offensive working environment” [29CFR1604.11].

The Supreme Court upheld the EEOC guidelines in Meritor Savings v. Vinson and distinguished
between quid pro quo and hostile environment claims [Meritor Savings v. Vinson, 1986]. It is the
third definition that deals with hostile environment cases and is the subject of this article.

In Faragher v. City of Boca Raton, the Supreme Court clearly enunciated the factors to be
considered in determining hostile environment claims filed under Title VII [Faragher v. City of
Boca Raton, 1998]. First, it must “be both objectively and subjectively offensive, one that a
reasonable person would find hostile or abusive” [Faragher v. City of Boca Raton, at 286]. Second,
all circumstances must be examined, including the “frequency of the discriminatory conduct; its
severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and
whether it unreasonably interferes with an employee’s work performance” [Faragher v. City of
Boca Raton, at 286].

The Supreme Court pointed out that “Title VII does not prohibit genuine but innocuous
differences in the ways men and women routinely interact with members of the same sex and the
opposite sex. Simple teasing, offhand comments, and isolated incidents [unless extremely
serious] will not amount to discriminatory changes in the terms and conditions of employment”
[Faragher v. City of Boca Raton, at 286]. In fact, the Supreme Court had previously made clear in
Meritor Savings v. Vinson that no one is guaranteed a pristine work environment [Meritor Savings v.
Vinson, 1986]. The Faragher Court underscored this point when it said that the guidelines when
properly applied would filter out “the ordinary tribulations of the work place, such as the
sporadic use of abusive language, gender-related jokes, and occasional teasing [Faragher v. City of
Boca Raton, at 286]. It should go without saying that nonsexual behavior is not covered by the
guidelines. However, these cases do occur.

NONSEXUAL CONDUCT

Even though nonsexual behavior may be boorish and unprofessional, it is unprotected activity.
For example, in Dianne Tatt v. Atlanta Gas, about once a week, an office assistant would present
her supervisor with paperwork to sign, he would pretend to unzip his pants and urinate all over
the paperwork. Nearly everyday, while others were present, he would yell across the office at her
saying why don’t you take off early and go on down to the American Legion and pull on some
long necks [Dianne Tatt v. Atlanta Gas, 2005]. The Eleventh Circuit found no proof these actions

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were sexual in nature and the court noted even if they were, they were not severe or pervasive
enough to create a hostile work environment [Dianne Tatt v. Atlanta Gas, 2005].

SEXUALLY RELATED CONDUCT

A hostile sexual environment can generally be classified into three main categories: physical,
verbal, or visual. Cases usually, however, involve a combination of these types of conduct. We
will examine each in turn. While it is not the focus of this article, it should be noted that in all of
the cases reviewed the offending conduct had been made known to be clearly unwelcome.

PHYSICAL CONTACT

Physical touching of another person is generally the most serious form of conduct according to
the Supreme Court. For example, in Lapka v. Chertoff, a female adjudication officer with the
Bureau of Customs and Immigration Services was assaulted by a fellow employee on a business
trip [Lapka v. Chertoff, 2008]. While the agency tried to argue that a single isolated event of
assault was not pervasive, the Seventh Circuit disagreed. It noted that sexual assault alone can be
sufficient to create an objectively hostile work environment because such an act by its very
nature is considered severe [Lapka v. Chertoff, 2008]. It further explained that the continued
presence of the perpetrator exacerbates and reinforces the fear and anxiety suffered by the victim
[Lapka v. Chertoff, 2008].

The nature of the job does not necessarily ameliorate the conduct of the perpetrator[s] [Randolph
v. Ohio Depart. of Youth Services, 2006]. A female prison guard was subjected to multiple physical
attacks, in addition to verbal harassment and threats. The court found that these actions, even
though in a prison setting, were severe and breached prevailing social norms and would be
traumatic and humiliating to anyone in that situation [Randolph v. Ohio Depart. of Youth Services,
2006].

In a case involving customers physically harassing a waitress, the victim was able to prove a
hostile environment existed with only one incident of physical touching [Lockard v. Pizza Hut,
1998]. A male customer at a Pizza Hut pulled the waitress’s hair, along with other verbal
comments. Following this incident, she asked to be reassigned to another customer, but the
manager refused. Upon returning to the customer, he pulled her to him by her hair, grabbed her
breast, and then placed his mouth on her breast. Pizza Hut argued that this was just one isolated
incident and as such did not qualify as a hostile environment. However, the Tenth Circuit Court
of Appeals found the offending conduct was both physically threatening and humiliating;
therefore, it was sufficiently severe and pervasive to be declared illegal [Lockard v. Pizza Hut,
1998].

Nevertheless, less extreme forms of physical conduct do not always result in a hostile
environment. In an often cited case, Gupta v. Florida Board of Regents, a male supervisor at a
college touched a female subordinate’s ring and bracelet, the hem of her dress [moving it a few
inches], and her knee [briefly] over a 6 to 7 month period [Gupta v. Florida Board of Regents, 2000].
Additionally, he repeatedly called her at her home [though of personal nature, the calls were not
sexual, intimidating or threatening], complimented her on her looks, and invited her to lunch

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several times; once when she walked into his office, he was putting on his dress shirt and tucking
it in his pants, which were partially opened. The Eleventh Circuit Court of Appeals denied the
claim because much of this conduct occurs in normal workplace interactions. The dress shirt
incident was found to be nonsexual. The touching of the hem and knee, though more serious,
were ruled to be isolated, infrequent momentary events, and his actions were neither physically
threatening nor humiliating [Gupta v. Florida Board of Regents, 2000].

In another Eleventh Circuit case, a sales associate filed a hostile environment claim after she had
been touched twice on the buttocks by two different co-workers and asked by another if she had
seen or worn panties with a “built in butt” [Dar Dar v. Associated Outdoor Club, Inc. at 85]. Another
worker once told her that he had seen a “whale of a d--k” in the restroom [Dar Dar v. Associated
Outdoor Club, Inc. at 85]. Given that the incidents occurred over a 22-month period, the appeals
court found the conduct fell in the realm of simple teasing, offhand remarks, and isolated
incidents [not extremely serious][Dar Dar v. Associated Outdoor Club, Inc., 2007].

The Seventh Circuit has gone so far as to say that some physical contact that is relatively minor
and infrequent may be considered insufficiently abusive to be described as severe or pervasive
[Hosteletler v. Quality Dining, Inc., 2000]. This includes a hand on the shoulder, a brief hug, a peck
on the cheek, an attempted kiss on the lips, a hand on the thigh, or pinch on the buttocks as long
as these incidents occur infrequently [Hosteletler v. Quality Dining, Inc., 2000]. For example, there
was no hostile environment in Adusumilli v. City of Chicago when in four separated incidents a co-
worker briefly touched a female employee’s arm, fingers, and buttocks over a 10-month period
[Adusumilli v. City of Chicago, 1998]. The same result occurred in Quinn v. Green Tree, where a male
supervisor deliberately touched a subordinate’s breasts with some papers he was holding and on
another occasion told her she had been voted the sleekest ass in the office [Quinn v. Green Tree,
1998].

In Bussell v. Motorola, a temporary employee was subjected to a co-worker rubbing up against her
back as he passed her in cramped quarters some 10 to15 times over a two-month period [Bussell v.
Motorola, 2005]. He also made various sexually related comments; on one occasion, he lifted her
shirt up and pulled her pants down slightly to view her tattoo. While the behavior was crass,
inappropriate, and unprofessional, the appeals court did not find the conduct to be sufficiently
severe, pervasive, or repetitive enough to create a hostile work environment [Bussell v. Motorola,
2005].

Even a supervisor pulling back a lady’s shirt to see the type of bra she was wearing has been
ruled to be insufficient due to the isolated/infrequent nature of the action [McPherson v. City of
Waukegan, 2004]. However, in the same case, the work environment became hostile when the
supervisor later put his hands inside her blouse and felt her breasts and then a few days later did
it again along with running his hand down inside her pants and touching her private areas. At this
point, even though it was only two actions, they were very serious and both were physically
threatening and humiliating [McPherson v. City of Waukegan, 2004].

Nevertheless, more frequent but “less serious” physical acts can create a sexually hostile work
environment. For example, in Harvil v. Westward Communications, over a seven month period, a

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male co-worker, not only grabbed and kissed a new female employee on the cheek, but
repeatedly made comments about her sex life, popped rubber bands at her breasts, fondled her
breasts, patted her on the buttocks [at least once a week], and came and rubbed his body parts
against her [from behind]. Although not as serious as the actions in McPherson v. City of Waukegan
[2004], these acts occurred frequently enough to create a hostile work environment [Harvil v.
Westward Communications, 2005].

In Schiano v. Quality Payroll, the Second Circuit reversed a summary judgment for the employer
stating that the jury could find the harasser’s actions repetitive enough as to change the
conditions of the victim’s work environment to one that was hostile [Schiano v. Quality Payroll,
2006]. In this case, a corporate financial assistant was subjected to a co-worker putting his hand
on her thigh at a company party; he then pulled her skirt up a few inches and took a picture of his
hand on her thigh. When leaving the party he suggested that he join her in her hotel room. Over
the next 3 to 4 months, he came from behind her on 5 to 6 occasions and placed his hands on her
back or neck and leaned into her while she worked. During this time, he made various verbal
comments to her: He told her that she was sleeping with the wrong employee, remarked she was
really hot, and asked what type of underwear she wore. Even after complaining about his
behavior several times, he would pass by her cubical and leer at her [Schiano v. Quality Payroll,
2006].

VERBAL CONDUCT

The vast majority of hostile environment charges involve verbal comments of a sexual nature. In
general, verbal comments are considered less serious by the courts than physical contact. As a
result, verbal comments must be more frequent in order to reach the hostile environment
threshold.

In Reeves v. Robinson Worldwide, a transportation sales representative was subjected to nearly three
years of co-workers using sex specific language in her presence and playing sexually offensive
radio programs every morning [Reeves v. Robinson Worldwide, 2008]. Comments included referring
to women as “c--ts” or “whores” as well as vulgar references to sexual acts such as “f--- your
sister,” conversations concerning ejaculation, men’s erotic dreams, female sexual anatomy, and
sources and indications of female sexual arousal [Reeves v. Robinson Worldwide at 1145]. She was
also once exposed to a pornographic image on a co-worker’s computer.

None of the conduct was physically threatening, but the language and radio programs could be
found to be a humiliating work environment, particularly because she was the only female in the
work group. Taken together, the comments could be considered severe in that the words or
phrases used fell within the spectrum of language that is particularly offensive to most women
[Reeves v. Robinson Worldwide, 2008]. Clearly, the conduct was pervasive throughout the work
environment. The court pointed out that her performance could have also been adversely affected
because she testified that all of the conduct made it difficult for her to concentrate and caused her
to often leave her workstation and stand in the hallway [Reeves v. Robinson Worldwide, 2008]. She
also claimed that she started to shake when she was exposed to the pornographic image. The
court noted that while no single episode crossed the Title VII threshold, it was the repeated
exposure over three years to the verbal comments and the pervasive nature of all the actions that

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created the hostile environment. As a result, the Eleventh Circuit Court of Appeals reversed a
summary judgment for the company and remanded the case.

However, many charges involving sexually-related comments that are less repetitive and over a
relatively short period of time do not lead to a hostile environment. For example, isolated sexual
advances such as indicating one wants to have relations with the opposite sex while grabbing
one’s private parts does not create a hostile work environment [Pomales v. Celulares Telefonica,
2006], nor does five phone calls at night over several weeks asking for dates [Nurse “BE” v.
Columbia Palms, 2007].

In Lockett v. Choice Hotels, a co-worker made sexually-related comments to a female reservations

clerk when she visited the company café during her breaks [Lockett v. Choice Hotels, 2009]. Over a
four month period, he talked about sexual positions and indicated that “he would lick her p---y,”
that “he would go down on her good,” that “her boyfriend ain’t f---ing her right,” and that she
needed “to get with a real guy” [Lockett v. Choice Hotels, at 867]. She stopped going to the café for
three weeks, but when she returned he indicated that he wanted to hug her; she refused, however.
On another occasion, he touched her bottom quickly, but it did not affect her performance. The
Eleventh Circuit Court of Appeals concluded that based on the totality of the circumstances the
offending behavior did not meet the threshold of a hostile work environment because it was
infrequent, insufficiently severe or pervasive [Lockett v. Choice Hotels, 2009].

In another case that failed to meet the conditions of a hostile work environment, a supervisor of a
female deputy sheriff, over a three month period, made comments [about once or twice a week]
to her about wearing tighter clothes, that she looked hot, and that he wished his wife wore hot
clothes; once he also made a comment to her husband over her cell phone that he was “eating
her” [Webb-Edwards v. Orange County Sheriff’s, at 1019]. In Patt v. Family Health Systems, eight
gender-based comments over several years, which included hearing “the only valuable thing to a
woman is that she has breasts and a vagina,” were not pervasive enough to support a hostile
environment claim [Patt v. Family Health Systems, 2002].

Similarly, in Rhonda L. Moser v. Indiana Department of Corrections, a co-worker talked down to a

secretary and other females, made a reference to her “tits,” told several new male employees to
“watch out because she likes good-looking men,” asked her “if she had gotten a new set of legs,”
used profanity in her presence, “told a joke about a boy’s anatomy,” commented on physical
appearance of female job applicants, and “made an innuendo about his penis size when a
dimension was mentioned by a female co-worker”[Rhonda L. Moser v. Indiana Department of
Corrections at 904]. He also made sexually related comments to others outside her presence, but
the courts generally do not allow these comments into evidence [that is, offensive statements
must occur in the victim’s presence]. The Seventh Circuit concluded that “sporadic use of
abusive language, gender-related jokes, and occasional teasing are fairly commonplace in some
employment settings and do not amount to actionable harassment” [Rhonda L. Moser v. Indiana
Department of Corrections at 905]. In a recent Wal-Mart case, the Seventh Circuit went so far as to
state that using vulgar language [such as calling an employee “a f---ing bitch” or cursing],
yelling at the victim, and making isolated comments about older women in the workplace over a
five month period was not actionable, although crass [Anne B. Raciot v. Wal-Mart, 2005].

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Nevertheless, given enough repetition and seriousness of the comments a hostile environment
will occur. In Parker v. General Extrusions, a “loose” atmosphere pervaded the night shift of a
fabrication department where there was a tremendous amount of horseplay in the work area
replete with shop/locker room talk that included the use of profanity as well as crude and vulgar
terms [Parker v. General Extrusions, 2007]. Male employees routinely made sexual comments about
and to female employees. The victim, over about a three year period, was referred to as a “f---ing
whore” and endured vulgar comments about her possible sexual activities, implying that she was
promiscuous [Parker v. General Extrusions at 600]. When she reported the problems to her
supervisor, he told her that she should consider it a compliment. She was repeatedly referred to
as “whore,” “bitch,” “slut,” and “crybaby,” sometimes in front of the foreman [Parker v. General
Extrusions at 600]. Although she complained a number of times, little or nothing was done and
the comments continued. Eventually, all of the inappropriate conduct caused her to take two
separate medical leaves of absence. The Sixth Circuit found that the harassment was sufficiently
continuous and serious enough and that given her performance was adversely affected by the
leaves of absence were sufficient grounds to create a hostile work environment [Parker v. General
Extrusions, 2007].

In Boumehdi v. Plastag Holdings, the supervisor of a female production worker, over a period of 10
months made at least 18 sex-based comments to her [Boumehdi v. Plastag Holdings, 2007]. These
included on at least five or more occasions telling her that women do not belong in the
production area and that women think they know everything [Boumehdi v. Plastag Holdings, 2007].
He once commented when she was bending over that she should remain in that position as it was
perfect. He also told her that women should work in flower shops and that she should wear a low
cut blouse and shorter shorts. When she was pregnant, he asked her if she had gotten a breast
enlargement over the weekend; upon finding out that she had miscarried, he asked her what
business she had getting pregnant at her age [Boumehdi v. Plastag Holdings, 2007]. On another
occasion, he told her that her gender did not exempt her from taking out the trash, and he also
told her to clean the production room, noting that he did not ask men to do the cleaning because
that’s what women were supposed to do [Boumehdi v. Plastag Holdings, 2007]. Additionally, he
once told her that he had to leave work to get a lap dance down the street [Boumehdi v. Plastag
Holdings, 2007]. The Seventh Circuit concluded that the sexist comments were pervasive and
frequent enough to reverse a summary judgment for the company [Boumehdi v. Plastag Holdings,
2007].

However, it doesn’t have to take nearly a year or more to obtain a hostile environment ruling. In
Fairbrother v. Pamela Morrison, a female forensic treatment specialist at a maximum-security
facility for the criminally insane was called the “b” word almost daily for several months; she
was also called a whore approximately 10 to15 times [Fairbrother v. Pamela Morrison, 2005]. Also,
“she was asked why she wasn’t wearing a French maid outfit” [Fairbrother v. Pamela Morrison at
52]. Over about a six-month period, male employees routinely talked about their sexual activities
and asked her about hers, pornography was left in bathrooms and the staff office where meetings
were held. Co-workers would yell to one another with comments about their private parts. At any
given time, there were at least two or three sexually offensive jokes posted on the staff office
bulletin boards [Fairbrother v. Pamela Morrison, 2005]. The Second Circuit found “these

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circumstances are egregious enough to permit a reasonable juror to conclude that the conditions
of Fairbrother’s employment were altered because of the hostile work environment she faced
undermined her ability to perform her job” [Fairbrother v. Pamela Morrison at 53].

VISUAL CONDUCT

Conduct of a visual nature can lead to a legitimate hostile environment claim as well. Visual
conduct includes gestures, staring, displaying pornography, and revealing or directing attention
to body parts. In Valentine v. City of Chicago, a co-worker in the City’s Department of
Transportation rubbed his crotch in front of the victim nearly every day for about six months
[Valentine v. City of Chicago, 2006]. He repeatedly asked her for dates [30 to 40 times] and made
repeated comments about her “tits” and “ass”; he also asked her on at least 20 occasions to leave
her fiancé [Valentine v. City of Chicago at 681]. On at least 6 occasions, he rubbed her arm or
shoulder. He also humiliated her in front of her co-workers with an unwelcome sexual prank that
involved him mimicking masturbating. Even though she continually made him aware that his
behavior was unwelcome, it continued, causing her to experience anxiety, inability to
concentrate, and depression. The Seventh Circuit reversed a summary judgment for the employer
and allowed the case to go to trial because of the frequency, severity, and the pervasiveness of
the conduct.

In Ocheltree v. Scollon Productions [2003], a new female shoe production worker began to be
increasingly subjected to male sexual antics that went on for about a year. Almost daily, the male
employees would make sexually explicit comments, talk about intimate sexual activities with
their wives or girlfriends, and use sexually-related gestures, involving a female-form mannequin
[Ocheltree v. Scollon Productions, 2003]. These actions included fondling the mannequin and
demonstrating various sexual techniques on it. The harassment was so offensive at times that it
would drive the victim from the workroom. The courts found the actions to be pervasive,
repetitive, and humiliating enough as to create a hostile work environment [Ocheltree v. Scollon
Productions, 2003].

The context, however, can mitigate the severity of the conduct. In Duguie v. City of Burlington,
janitorial staff would be cleaning men’s bathrooms in a police department, and the male police
officers would come in and undress or urinate while the janitorial staff cleaned [Duguie v. City of
Burlington, 2006]. However, there were only a few such isolated incidents and they were not
considered sufficiently severe or pervasive to create a hostile work environment.

Although usually innocuous, staring can rise to the level of actionable hostile environment as it
did in Billings v. Town of Grafton. A secretary to the town administrator began to notice after a few
months that her supervisor was looking at her chest during conversations with her. He would
make eye contact then his eyes would shift to her breasts and he would stare at them for
approximately five seconds or longer. She started avoiding being alone with him and would hold
a piece of paper in front of her chest while walking through the office. He once stared at her so
many times in the first half hour of the day that she went home to change the sweater she was
wearing [Billings v. Town of Grafton, 2008]. Even after complaining, the conduct did not stop. This
lasted for some two and a half years. In reversing a summary judgment for the city, the First

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Circuit stated that the conduct was not isolated and could be found by a jury to be satisfactorily
severe and pervasive [Billings v. Town of Grafton, 2008].

Exposure to pornographic pictures in just a handful of incidents can lead to a hostile environment
verdict. In Criswell v. Intellirisk, the Eleventh Circuit Court of Appeals ruled that exposure to
explicit pornographic pictures on three separate occasions were so extreme and severe that a
hostile environment ruling was appropriate [Criswell v.Intellirisk, 2008]. In Bright v. Hill’s Pet
Nutrition, male production workers would try to make women view pornographic material on the
men’s computers while they were training them [Bright v. Hill’s Pet Nutrition, 2007]. When the
women refused to view the pictures, the men would not conduct any further training. In addition,
the workplace was replete with unwelcome sexual overtures by males, and they would make
streams of misogynistic invective remarks [Bright v. Hill’s Pet Nutrition, 2007]. This lasted for
over two years and was ruled to constitute a hostile environment.

However, in Lucero v. Nettle Creek School, on one occasion a student held up a picture of a student's
naked buttocks, and on another occasion 20 playboys were placed in the same teacher’s
classroom by some of her students [Lucero v. Nettle Creek School, 2009]. While the courts found
these incidents to be deplorable behavior that no teacher should be subjected to, the incidents
were nevertheless “isolated and were neither sufficiently severe nor pervasive as to rise to the
level of actionable harassing conduct” [Lucero v. Nettle Creek School at 730]. Likewise, in Coolidge v.
Consolidated City of Indianapolis and Marion County, a female crime lab worker discovered two
pornographic videotapes left by a man who had retired. Given that the exposure was brief, the
nature of her job was such that she was used to seeing nudity as part of her job, and due to the
accidental nature of the discovery, the courts found no violation [Lucero v. Nettle Creek School,
2007].

CONCLUSION

Determination of a hostile environment is not a simple process because each case must be
considered in its own context with varying circumstances requiring interpretation of the conduct
involved, which is inherently complex; therefore, it is difficult to present precise directions as to
determining an exact hostile environment legal threshold. However, some general guidelines can
be provided. Usually, it takes a significant amount of frequent unwelcome sexually-related
behavior over a considerable period of time to cross the hostile environment demarcation point
unless it is clearly humiliating and involves touching of private parts and/or is threatening. Often,
less severe forms of physical touching that are nonthreatening when isolated and occur over a
number of months are not usually deemed illegal. In general, based on the appeals court
decisions reviewed, sexually related comments by themselves must generally be more frequent
and often take 6 to 10 months or more to become hostile [though not always]. Visually related
behavior that is severe only takes a few instances to create a hostile workplace, but less severe
incidents may take many occurrences and months to create a hostile environment. Teasing,
joking, or vulgar language is not commonly protected activity.

There were no systematic discernable differences among the various circuit courts. However, this
may be due to the comparative lack of usable cases for a number of the circuits.

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Administrators are under no legal obligation to withhold corrective action until the hostile
environment limit is reached. Nor are they required to tolerate teasing, vulgar, crass, or
unprofessional [sexually-related or not] behavior in the workplace. In fact, sexually-related
behavior and any unprofessional or vulgar behavior could affect workplace productivity and
morale long before legal stipulations are breached. Even though workers are not guaranteed a
pristine environment, organizations are well within their legal rights to formulate policies and
procedures that go so far as to have virtually zero tolerance for such conduct.

This would be particularly important for high profile managerial and media positions as well as
government, education, religion, and child care institutions which are often held to higher social
standards due to the nature of their work. It would also be important in other work environments
as well, such as hazardous occupations where “horse play” of any type can result in serious
injury. In fact, legislators at both the federal and state level should at the very least consider
tightening the sexual harassment rules governing these types of occupations and work
environments.

In any event, it makes much more sense for organizations to propagate policies that are intolerant
of such behavior. These policies may be in addition to or incorporated into the organization’s
current sexual harassment policy. This accomplishes two important purposes. First, it will
minimize legal exposure to sexual harassment litigation. Second, and perhaps more important, it
creates a work environment free from unprofessional and sexually-related conduct, however
benign, which can only detract from workplace productivity and ultimately affect worker
motivation, morale, well-being, and performance.

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 REFERENCES
[1] Adusumilli v. City of Chicago, 164 F.3d 353 [7th Cir.1998].
[2] Ann M. Hostetler v. Quality Dining, Inc., 218 f.3d 798 [7th Cir. 2000].
[3] Anne B. Raciot v. Wal-Mart Stores, Inc., 414 F.3d 675 [7th Cir. 2005].
[4] Code of Federal Regulations, [2006] 29CFR1604.11.
[5] Donna Randolph v. Ohio Department of Youth Services, 2006, No. 04-3468 [6th Cir. 2006].
[6] Donna Valentine v. City of Chicago, 452 F.3d 670 [7th Cir. 2006].
[7] EEOC, [2009] http://archive.eeoc.gov/stats/harass.html.
[8] Elaine Webb-Edwards v. Orange County Sheriff’s Office, 525 F.3d 1013 [11th Cir. 2008].
[9] Elizabeth A. Bright v. Hill’s Pet Nutrition, Inc. 510 F.3d 766 [7th Cir. 2007].
[10] Fairbrother v. Pamela Morrison, 412 F.3d 39 [2nd Cir. 2005].
[11] Faragher v. City of Boca Raton, 524 U.S. 775 [1998].
[12] Geraldine Dar Dar v. Associated Outdoor Club, Inc., 248 fed. Appx. 82 [11th Cir., 2007].
[13] Harvil v. Westward Communications, 433 F.3d 428 [5th Cir. 2005].
[14] Ingrid Reeves v. C.H. Robinson Worldwide, Inc., 525 F.3d 1139 [11th Cir. 2008].
[15] Julie Boumehdi v. Plastag Holdings, LLC., 489 F.3d 781 [7th Cir. 2007].
[16] Kelly S. Coolidge v. Consolidated City of Indianapolis and Marion County, 505 F.3d 731 [7th Cir.
2007].
[17] Latrece Lockett v. Choice Hotels International, Inc. 315 Fed. Appx. 862 [11th Cir. 2009].
[18] Leah A. Lapka v. Michael Chertoff, 517 F.3d 974 [7th Cir. 2008].
[19] Lisa L. Ocheltree v. Scollon Productions, 335 F.3d 325, [4th Cir. 2003].
[20] Magalena Pomales v. Celulares Telefonica, 447 F.3d 79 [1st Cir. 2006].
[21] Mary Dianne Tatt v. Atlanta Gas Light Company, 138 Fed. Appx. 145 [11Cir. 2005].
[22] Meghan Bussel v. Motorola, Inc. 141 Fed. Appx. 819 [11th Cir., 2005].
[23] Meritor Savings Bank v. Vinson, 477 U.S. 57, 1986.
[24] McPherson v. City of Waukegan, 379 F.3d 430 [7th Cir. 2004].
[25] Miller, G.L. [2001]. What the general practitioner needs to know to recognize sexual
harassment claims. The Alabama Lawyer, 62, July, 246.
[26] Nancy M. Billings v. Town of Grafton, 515 F.3d 39 [1st Cir. 2008].
[27] Nancy Parker v. General Extrusions, 491 F.3d 596 [6th Cir. 2007].
[28] Nicole Schiano v. Quality Payroll Systems, Inc., 445 F.3d 597 [2nd Cir. 2006].
[29] Nurse “BE” v. Columbia Palms West Hospital, 490 F.3d 1302 [11th Cir. 2007].
[30] Patricia Duguie v. City of Burlington, 161 Fed. Appx. [2nd Cir. 2006].
[31] Patt v. Family Health Systems, Inc. 280 F.3d 749 [7th Cir. 2002].
[32] Quinn v. Green Tree Credit Corp., 159 f.3d 759 [2th Cir. 1998].
[33] Rena Lockard v. Pizza Hut, Inc., 162 F.3d 1062 [10th Circuit, 1998].
[34] Rhonda L. Moser v. Indiana Department of Corrections, 406 F.3d 895 [7th Cir. 2005].
[35] Sharon A. Lucero v. Nettle Creek School Corporation, 566 F.3d 720 [7th Cir. 2009].
[36] Shoenfelt L., Maue A., & Nelson J. [2002]. Reasonable person versus reasonable
woman, American University Journal of Gender Social Policy & Law, 10, 633.
[37] Srabana Gupta v. Florida Board of Regents, 212 F.3d 571 [11th Cir. 2000].
[38] Twomey, D. P [2007] Labor & Employment Law Text and Cases Thompson/West;
Australia.
[39] Vicki Criswell v. Intellirisk Management Corporation, 286 Fed. Appx. 660 [11th Cir. 2008].

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 THE NATURE AND PURPOSE OF FIRM DECISION-MAKING

James R. Forcier
School of Business & Professional Studies
University of San Francisco
2130 Fulton Street
San Francisco, California, USA 94117
415-422-2127 (O), 415-422-5036 (F), forcier@usfca.edu.

ABSTRACT

Using economic data from companies in multiple industries, the paper suggests that costs and
competitive pressures have flattened firm hierarchies and pushed greater responsibility to
operating managers who function within environments of increased decision complexity. Growth
in the number of such decisions has transformed the former labor production factor into
intellectual capital which is now the firm’s predominant competitive differentiator. However, the
management of intellectual capital has not kept pace with changes in the decision environment,
and firms often fail to generate the innovation essential for success in the competitive
marketplace. Suggestions for fostering firm innovation are offered.

Key Words: Decision-making, human capital, innovation

THE NATURE AND PURPOSE OF FIRM DECISION-MAKING

Over a fifteen-year period, research and direct observations were undertaken at 37 firms in
conjunction with business strategy and microeconomic analysis consultations [1]. The research
concludes that:
• Flattened firm hierarchies have pushed greater responsibility to managers at the operating
level who must function within environments that are characterized by increasing market
sophistication and decision complexity.
• Greater decision volume/complexity and competitive market pressures have transformed the
former “labor” factor of production into “intellectual capital” which is now the firm’s
predominant competitive differentiator.
• The management of intellectual capital has not kept pace with the changes in decision-
making and economic production, and firms are at risk of failing to generate the innovation
needed for success in the competitive marketplace.

1. DECISION-MAKING EVOLUTION

Advanced markets, new organizational designs, and changed means of production – as well as
growing technological sophistication – are transferring business decision-making responsibility
to the individual. As the American economy transitions to a post-industrial model in which
knowledge- and information-based goods and services are predominant, the locus of business
decision-making is moving closer to the consumer through disintermediation of the production
chain. As a result, management choices that were once the domain of officers and chief

126
executives increasingly fall to a wide-array of informally tethered mid- and low-level managers,
and are carried-out through a process of what might be called “collaborative determination.” This
process vests individual managers with greater authority to make decisions under the implicit
understanding that they will do so in collaboration with their colleagues.

In addition to the greater volume of decisions that is being handled at lower organizational
levels, decision difficulty has increased as responsibility is pushed downward and subject matter
complexity grows in conjunction with technological advancement. The challenges of decision-
making are also heightened as a result of the evolved environment in which today’s choices are
made: the growing sophistication of economic participants, the internationalization of markets,
the increased velocity of capital flows, the diminished time-frames in which transactions are
carried out. As a result, today’s business decisions demand that managers function on a higher
plane – by making use of better tools, more accurate and targeted data, and choice-making
processes appropriate to both the subject matter and the decision context.

Most economic needs are met in developed nations through market transactions using a form of
“bounded” maximizing behavior [2][3] and a process that might be called a “free market
transactional model.” The model captures the components needed to achieve a transfer of
property rights perceived as beneficial by the contracting parties, and provides a baseline against
which real-world transactions may be evaluated. The ease with which such a theoretical ideal
may be achieved diminishes with the complexity of a given transaction and the evolutionary state
of the environment in which it is made. The burden such decisions impose on business managers
is significant. Particularly vulnerable are managers working in high technology, pharmaceuticals,
and financial services, for their decisions are disproportionately characterized by transaction
complexity and market sophistication. In other words, the realm in which decisions are made
varies.

2. DECISION-MAKING INFLUENCES

It falls to the decision-maker to function effectively within this daunting milieu. Software
applications available as decision aides may help in aggregating, organizing, and comparing
data, but not in identifying which applications and data to use for a given decision, nor in
determining whether specific analytical findings are decision-relevant. In the latter cases,
managers exhibit less reliance on programmed or academic/research-type tools than on what they
have learned in school and in the workplace, shaped by societal and cultural influences.

Research carried out over fifteen years across multiple sector industries suggests that individual
managers’ approaches to handling market and decision complexity are driven by “educational”,
“experiential”, and “intuitive” decision-making influences.

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 TABLE 1. DECISION-MAKING INFLUENCES

Educational Experiential Intuitive

Business Administration (MBA)
• Business case study orientation
• Emphasis on prevailing B-
school approaches
• Tool du jour influence common
Accounting & Finance (MA,
MBA)
• Numerical/analytical
orientation
• Emphasis on statistics/
operations research
• “Quantifying the un-
quantifiable” common
Legal/Regulatory (JD)
• Legal case study orientation
• Emphasis on contracts/
confrontation
• “Winner vs. loser” mentality
common
Engineering (EE)
• Technical/product orientation
• Emphasis on the physical and
functional
• Technique misapplication
common
Organizational Planning &
Development (MA)
• Human resources orientation
• Emphasis on organizational
design
• Paternalism/humanism
common
Department-Specific
Approaches:
• Supervisor-preferred
• Prevailing/accepted in
department
• Prevailing/accepted in function
or discipline
Firm-Specific Approaches:
• Top management-preferred
• Prevailing/accepted in firm
Firm Culture-Influenced
Approaches:
• (Use and rank depends on
market share and prestige of
firm)
Industry-Specific Approaches:
• Prevailing/accepted in industry
• Industry-leading firm-preferred
Industry Culture-Influenced
Approaches:
• (Use and rank depends on
public attention to and prestige
of industry)
Socio-Economic:
• Market-based economy
• Peer affiliations
• High quality schooling
• Available information
• Emphasis on trade & travel
Cultural:
• “Western” v. “eastern”
orientation
• Strong v. weak work ethic
• Prevalence of literacy (esp.
English)
• Emphasis on knowledge-based
decision-making
Geographical:
• Climate
• Hemispherical location
• Abundance of natural
resources
• Proximity to cultural &
commercial centers
Religious/Political:
• Authoritarianism v. democracy
• Self-sufficiency v. community
• Preordination v. empowerment
• Politico/military viability &
stability
• Strength of religious and
political institutions
Market/Technology
Developmental:
• State of economic and
institutional evolution
• Technological status

The implications of the above influences are profound. For despite the free market’s reliance on
the use of a rational decision process by its participants, the reality is a process that is limited,
molded, and re-directed by: the methods and orientation learned in one’s school, profession, and
workplace; ephemeral, popularly publicized techniques (“excellence,” “benchmarking,”
“Kaizen”); firm and industry “ways of doing business”; and cultural, social, religious, and
political norms, biases, and predilections.

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In addition to the above-mentioned limitations to maximizing decision-making outcomes may be
added decision-makers’ inability to achieve the theoretical ideal of “perfect information”: there
are limits to one’s ability to identify and gather relevant information, analyze it effectively, and
employ it accurately. Even in marshalling our best efforts under the best of conditions (sufficient
information, clear choices, comprehensible market environments, cooperative peers guided by
“the good of the organization”), our rationality is still “bounded”, and our noblest attempts
doomed to achieve satisfactory rather than optimum results.

3. TRANSFORMATION OF THE ECONOMIC FACTORS OF PRODUCTION

The U.S. economy has undergone enormous evolutionary changes since the industrial revolution.
For example, two hundred years ago, over 90 percent of the U.S. workforce was dedicated to
agriculture. Today, only about 1.5 percent of America's employed work on farms and ranches, as
shown in Figure 2. Manufacturing employed 38 percent of the workforce in the 1950s.
Traditional industry now employs just 16 percent of American workers, while the percentage in
service jobs has grown steadily and employs 82 percent of our workforce today [3].

FIGURE 1. PRODUCTION FACTOR TRANSFORMATION

Factors of Production:
Economic Significance

1907 2007

Land Capital Technology Labor Land Capital Technology Labor

Another change has taken place in the economic “factors of production” – the major inputs that
businesses need to function. Today we make use of relatively little land and traditional labor, but
a lot of technology and capital. Because service production is labor intensive, our ability to
provide more services with a smaller percentage of workers lies in changed production factors.
Where we once required land for a factory or farm, sold stock to raise capital, and employed
workers in repetitive tasks using basic skills, we now use predominately intellectual inputs to
provide services from just about any location on the globe and employ technologies ranging from

129
micro circuitry to super colliders. These changes have implications for decision-making.

Because firms today demand “knowledge workers” rather than physical laborers, create fewer
physical products in favor of services, and use increasingly sophisticated technologies in more
challenging markets, they have greater need for “intellectual capital” as a factor input. As used
here, intellectual capital refers to the information, knowledge, and capabilities that enable a firm
to compete in its markets. It includes intellectual property; the firm’s approach to developing,
producing, and supporting products and services; its unique means of providing value to
stakeholders; and all of its value-creating internal and external relationships. Intellectual capital
doesn’t only reside in the longstanding enterprise and capital factors, as once was the case. It is
also housed in the relatively small labor factor (see Figure 5). The workforce is the firm’s stock
of productive skills and technical knowledge, its primary means of achieving competitive
differentiation, and the catalyst that enables and strengthens the contributions of other production
factors through multi-factor productivity.

FIGURE 2. FROM LABOR TO INTELLECTUAL CAPITAL

Intellectual Capital as
Production Factor

Intellectual Capital
Land Capital Technology Labor

100%

80%

60%

40%

20%

0%

Labor Capital Technology

As the key competitive differentiator, it is imperative that businesses acquire intellectual capital
and put it to the best possible competitive uses. The manner in which the value of intellectual
capital may be maximized relates specifically to the firm’s situation, business model, and
strategic objectives.

4. THE ENDS OF DECISION-MAKING

As a result of the “flattening” of corporate structures and the dispersion of decision-making

authority, the workforce – through its decisions and actions – has become the major source of

130
competitive advantage and the primary determinant of success in today’s business environment.
For example, a primary driver of business value – productivity – is determined by the
effectiveness with which human capital transforms a firm’s inputs into outputs. But the greatest
contribution made by human capital is innovation.

Given the growing sophistication of goods and services, the disintermediation of production
chains and transactions, the internationalization of markets, and the ascendancy of global
competition, the firm must be dedicated to the pursuit of innovation in support of not only its
products and services, but to achieve efficiency in production and effectiveness in meeting
customer needs. As Charles Hill and Gareth Jones have noted, innovation is “the most important
building block of competitive advantage” [4]. Innovation allows a business to charge a premium
for the uniqueness of its products, or maintain its costs below those of competitors. It is the
predominant driver of superior profitability and value creation.

Four aspects of a culture of innovation were observed in this research:

1) Ensure a company-wide awareness of need to change to the point where managers know
they must step outside their pre-existing comfort zones.
2) Encourage innovative ways of thinking – to not only assess what is and isn’t working, but
to continually promote improvement. “How can we do this better, faster, less
expensively?” “What entirely new things should we be doing to delight our customers
and enter new or grow existing markets?”
3) Implement processes and tools to support new ways of thinking, company-wide
awareness of the need to change, and to reinforce the change process.
4) Adopt attitudes and mechanisms to minimize risk, but most importantly embrace – and be
willing to tolerate and pay for – failures that the firm will experience.

Staffing with Innovators

The seminal step in maximizing intellectual capital’s value through the pursuit of innovation is
acquiring superior human assets. A firm’s workforce, its officers, managers, salespeople and
customer service representatives must have the requisite knowledge and skills for their roles, and
the ability to upgrade them as the changing marketplace requires. Yet firms perform cursory
candidate assessments, emphasize resumes versus capabilities, and increasingly rely on internet
searches and automated tools to identify, sort and track candidates – rather than assess their
ability to function effectively in given positions.

Inordinate attention is paid to educational qualifications (which are easy to verify) , at the
expense of the competencies that are essential for achieving strategic objectives. Given time and
resource constraints, candidate-provided work histories, augmented by an interview of 1 to 3 of
the leading candidates, continue to provide the bulk of the evidentiary support for external hiring.

Work Group Blends

Scholars such as Cohen, March and Olsen demonstrate convincingly that work group are human
capital blends from which any addition or withdrawal results in a unique decision reflecting the

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participants who contributed to it [5]. Further, these participant mixtures have influence not only
at the margins of decision-making, but can – and frequently do – alter the slate of decision
alternatives, how the alternatives are analyzed, and the manner in which choices are
implemented.

This is an important consideration not only in the general hiring process, but in the use of cross-
functional integration to maximize the likelihood of innovation success. Cross functional
integration can the firm ensure that new products reflect customer needs and are designed for
ease of manufacture; that development costs and time-to-market are minimized; and that
innovation-related decisions are aligned with the firm’s prevailing business model and strategic
objectives [4].

The Development Funnel & Open Innovation

In their explicit pursuit of an innovative culture, some firms have adopted a process for
identifying and selecting among promising ideas at an early stage of their development. One way
in which this process is formalized is by means of a “development funnel” that isolates and
routinizes [6] the major components of the assessment process, and ensures that ideas are not
subject to personal or departmental interests that might obstruct an objective evaluation of them.

Another means of building innovation competency is what is referred to as “open innovation.”

Rather than set up an internal “skunk works” or R&D group, open innovation is outer-directed:
The firm collaborates with and enlists the support of customers, universities, suppliers, inventors,
think tanks, and makers of complementary goods who then contribute to the development of
products, services or processes. Over time, innovation leads to new products, processes, and
strategies that create competitive advantage.

5. SUMMARY AND CONCLUSION

Advances in markets, organizations, technology, and the economic means of production are
transferring business decision-making responsibility to the individual manager. The complexity
and resolution difficulty of decisions have also increased due to more sophisticated economic
participants, the growth and internationalization of markets, the increased velocity of
transactional flows, and the diminished time-frames in which decisions are carried out.

As a result, decision-makers demand a wider array of tools, data, and processes. While decision-
making aides are available, managers rely greatly on what they have learned in school and in the
workplace and are constrained by “educational”, “experiential”, and “intuitive” decision-making
influences and the limitations of rationality and cognition.

As a result of this evolution in decision-making, firms require “intellectual capital” rather than
“labor” as a factor input. Intellectual capital is the key competitive differentiator for businesses
which must deploy innovation as the predominant driver of superior profitability. Doing so
requires an innovation culture fostered through such means as effective staffing, work group
configurations, development funnels, and open innovation.

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 REFERENCES

[1] Businesses at which decision-making research and observations were performed 1995 - 2010:
AirTouch Communications, Amaranth Advisors, Apple Computer, ARTISTdirect, Ashram
Networks, AT&T, Avolent, Berkeley City Ballet, BigTribe, BMC Software, Charles Schwab,
Cisco Systems, Comcast, CPRi, Deloitte Consulting, Digital Island, DocuStop, HandTrade, IC
Growth, Ivus, Liquidity Partners, Market Answers, Mjuice, Optimal Technologies, Pacific
Telesis, Pacific Rim Transport, Pathology Consultants of New Mexico, PCTel, PG&E, Play Inc.,
ProConscience Funds, Round 1 Corporation, Santa Fe Pacific Pipelines, Sun Microsystems,
TechPartners International, Televoke, VISA USA, ZYZZYVA.
[2] Simon, H. A. Administrative Behavior: A Study of Decision-Making Processes in
Administrative Organization, 3rd ed. New York, NY: The Free Press, 1976.
[3] Schiller, B. R. The Economy Today, 12th ed. New York: McGraw-Hill/Irwin, 2010.
[4] Hill, C. W., Jones, G. R. Strategic Management: An Integrated Approach, 9th ed. Mason,
Ohio: South-Western, 2010.
[5] Cohen, M., March, J., Olsen, J. "A Garbage Can Model of Organizational Choice,"
Administrative Science Quarterly, 1972, 17, 1-25.
[6] Weber, M. (1947). Theory of Social and Economic Organization. New York: Oxford
University Press.

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 LONG-TERM INCENTIVE PLANS: NOT A
PANACEA FOR EXECUTIVE COMPENSATION

William J. Heisler
Sorrell College of Business
Troy University
Troy, Alabama
Email: wheisler@troy.edu

ABSTRACT

Recently, executive pay – particularly short-term incentive awards – has come under a great deal
of public scrutiny and criticism. The use of these annual incentives in the financial services
industry over the past several years has been cited as one of the causes leading to the recession of
2008-2009. But other industries face similar concerns. As a result, many researchers and
business practitioners are advocating the increased use of long-term incentive plans in hopes of
mitigating the undesirable effects of annual incentive awards. However, there are many features
of long-term incentive plans that can also lead to unfair and excessive executive compensation.
This paper examines the concerns associated with short-term annual incentive awards, discusses
the alleged advantages of long-term incentive awards, identifies features of long-term incentive
plans that can lead to unfair monetary compensation for executives, and offers suggestions for
improving the design of long-term incentive plans to minimize these dysfunctional effects.

Key words: executive compensation, incentives, bonus, LTIP

INTRODUCTION

In recent years, executive pay, and annual incentive bonuses in particular, has come under a
barrage of criticism [8] [12] [14] [21] [26]. Most of the criticism has been directed at the alleged
excess of executive pay packages. This so-called abuse has been heightened by two factors: (1)
the award of large bonuses to executives by banks who received TARP funds to help them
survive the economic meltdown that occurred in the fall of 2008 as a result of the mortgage crisis
and (2) the recession which followed the meltdown that has resulted in the loss of approximately
four million jobs and produced an unemployment rate just shy of 10% [6] [23].
To blunt criticism over bonus pay, many companies have taken unprecedented steps with regard
to their executive compensation programs. Morgan Stanley, the second-largest securities firm in
the U.S. plans to defer at least a portion of its executive bonuses for 2009 for their top 30
executives; Goldman Sachs Group has stated it will pay bonuses for 30 top executives in stock
that can’t be sold for five years [9]. Some company executives have forgone bonuses all
together [25]. Other companies are taking yet a different tact. Rather than placing as much
money in bonus opportunities, these companies are directing more money into supplemental
executive retirement plans, or SERPS [22]; others are raising executive salaries instead [19].
These moves have been largely overlooked amid the backlash surrounding executive pay –
particularly at banks and other companies receiving taxpayer bailouts.

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Governments worldwide are also responding to the criticism surrounding excessive executive
bonuses. France, for one, proposes to sooth public outcry by enacting a one-time tax of 50% on
bonuses awarded to bank employees that exceed $40,000 [10]. The United Kingdom has
proposed a special windfall profits tax of up to 50% on the bonus pools of banks that have
received government assistance [27]. In Germany, banking regulators are initiating regulatory
actions to curb bonuses in financial firms by voiding or reducing bonuses if the regulators felt
that the performance of the individual or job did not warrant it [2]. The U.S. government is also
considering ways to curb what it considers executive excess by restricting pay practices in
companies that have received TARP funds and by undertaking other reforms of executive pay
practices to bring greater accountability to the U.S. financial system [14].

ANNUAL INCENTIVE AWARDS

In most of the media-related discussion of executive compensation, criticism is raised regarding

executive bonuses. However, this term is erroneous in most instances. Typically, a “bonus” is a
discretionary payment awarded after-the-fact for performance that occurred during a previous
time period. Most annual executive compensation payouts are in fact “incentive awards” in that
they are based on meeting or exceeding preset performance targets. Bonuses are discretionary
and more subject to abuse because they tend to be based on subjective decision making
processes. Incentive awards are determined more objectively because they are based on
measured performance against target. This paper discusses the problems associated with annual
incentive awards, those awards that are performance-based rather than discretionary. This is the
form of annual award that is used by most large business organizations as part of the executive
compensation package.

Even prior to the recent economic meltdown, annual incentive awards (also referred to as short-
term incentive plans or STI plans) were viewed skeptically by many. First, they are typically
directed at a relatively small percentage of the workforce. Thus, within any organization,
individual incentives will create haves and have not’s. Second, these incentives are purported to
be based on performance, but performance is not always easy to measure and often bonuses are
paid to executives even when the organization’s performance has declined.

An excellent discourse on the dysfunctional aspects of executive bonuses appeared recently in an

op-ed piece in the Wall Street Journal [17]. Written by the noted management expert Henry
Mintzberg, the problems cited with incentive pay include the following. First, bonuses are
typically based on financial measures alone, which Mintzberg contends is ineffective because
companies are more complicated than that. Further, he notes, and quite correctly, that measures
of financial performance encourage abuse from impatient CEOs who may manipulate their
outcomes by delaying maintenance and capital investment, reducing R&D, or eliminating
various forms of customer service. Another concern he cites is the assumption that the CEO and
a few other top executives are primarily responsible for the success of the organization. He
argues that the success of an organization depends on the contributions of all the players, not just
the select few at the top who receive massive bonus payouts. Many at the top, he contends, have
merely happened to be in the right place at the right time.

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Others have also raised issues with individual annual incentives. In addition to the criticisms
cited by Mintzberg [17], Gebhart & Milkovich [11] note that (1) individual incentives often lead
to motivating employees to do only what they get rewarded for, and little else, and (2) individual
incentives do not foster a collaborative approach. Further, in an article in Director’s Monthly,
Heisler [13] identifies additional areas in which annual executive incentive awards can be
manipulated. First is the process for setting performance targets. If performance targets are set
too low, executives can reap maximum rewards for “average” performance or, depending on
plan design, even some level of payout for subpar performance. Incentive plans work effectively
only if targets are set realistically with “stretch goals” for maximum payout opportunity.
Second, and related to the first, is the determination of the range of company performance that
will qualify for bonus consideration. Companies may propose that executives qualify for a
partial payout at certain performance levels below target (e.g., threshold payout of perhaps 50%
at 80% of target). Similarly, they may propose payouts of up to 200% for performance at 120%
of target. The appropriate level of payout at various levels of performance depends primarily on
the rigor embedded in the target performance level. The third area is the level of
interdependence between executive and director compensation. The relationship between
executives and the board of directors is relatively cozy when it comes to compensation. It is the
board of directors that approves executive compensation plans, but in many instances the
company CEO often is the one who recommends increases in the compensation of directors –
often at the same meeting. Many CEOs also serve as Chairman of the board of directors. Thus,
the objectivity and independence of the compensation-setting process is itself questionable.
For Mintzberg, the bottom line is that “the system can’t be fixed” and, therefore, executive
bonuses should be eliminated. While some companies and Wall Street analysts may agree with
this perspective, most will not. There is widespread belief and ample supporting theory (see, for
example, Vroom [24]) that incentives do motivate performance. However, in an effort to curb
some of the abuse and the criticism surrounding annual incentive awards, there is growing
interest among researchers and some organizations to place less emphasis on short-term, annual
incentive awards and place greater emphasis on long-term incentive plans to encourage a longer-
term strategic executive focus [7].

LONG-TERM INCENTIVE AWARDS

According to Milkovich and Newman [16], long-term incentives (LTI) are “inducements offered
in advance to influence longer-rate (multi-year) results.” Their intent is to get executives to focus
on long-term organizational objectives. Both the diversity and use of long-term incentive plans
have grown considerably [4]. The proportion of executive pay that is comprised of long-term
incentives has also increased and is now approximately one-half the total value of the executive’s
pay [18].

Long-term incentives now take several forms. Most long-term incentive plans can be
categorized as either appreciation-based or performance-based. Among the most popular
appreciation-based LTI plans are stock options and stock appreciation rights. Full-share
programs are typified by restricted stock. Performance-based plans can include any of the stock
plans identified previously except that they incorporate vesting conditions based on company
performance against pre-set performance standards. Typically, these plans are performance

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share plans or performance unit plans. Under both of these plans, the company normally retains
the option to pay the executive the equivalent cash value in lieu of stock.

In a recent study [1] conducted by Deloitte, a major international accounting and consulting firm,
sixty-seven percent of companies participating in a compensation survey stated that they offered
long-term incentives to motivate and compensate high-performing employees and executives.
Sixty-four percent of these companies offered granted stock options, sixty-seven percent
awarded restricted stock, and forty-five percent used multi-year performance plans payable in
stock or cash.

While this article will focus on the use of performance share/unit plans because these are the
most performance-driven types of plans, several observations are necessary regarding changes in
the use of other types of stock plans by companies. Prior to the recent recession which began in
2008, executive compensation plans were heavily stock-based, primarily in the form of stock
options. However, due to the volatility of stock prices and the prospect of depressed stock prices
for the near term, many companies have suggested the need to turn from stock options to
restricted stock in their executive compensation plans. Often, the change to restricted stock is
being reported as a responsible move by companies to reduce the criticism associated with the
wealth built up by executive stock option grants during the last bull market. However, the
change to restricted stock may also be viewed as an action by company executives to move to a
form of compensation that has greater potential to provide a guarantee of value to executives.
Stock options have the potential for unlimited gain, but they also have the ability to drop to a
value of zero. In fact, they can even become “underwater.” That means that the current value of
the company’s stock is less than the exercise value or grant price of the option. When this
occurs, a company’s stock price must appreciate back to the original grant price before the option
can again achieve positive value. Restricted stock, however, retains a positive value as long as
the company does not enter bankruptcy. Hence, it is a more secure form of compensation.
While its value will rise and fall with the company’s stock price, it is unlikely to be worth
nothing. Options have value only if the price of the underlying stock appreciates. Restricted
stock retains the value of the underlying stock. While the change to the use of restricted stock on
the part of companies may appear to be more “sensitive” to the current economic climate, it may
simply be a move to ensure that executives have a greater guarantee of receiving the value
originally conveyed by the stock grant.

Performance share and performance unit plans provide executives with an opportunity to earn
cash or stock payouts when specific organizational goals are achieved or exceeded over a multi-
year period, typically three years. Under performance share plans, executives are awarded
contingent grants of stock annually that can be earned over a multi-year period. Each year,
company performance is compared to that year’s goals and shares are earned based on the terms
of the plan. At the end of the full period, earned shares are paid out in company stock.

For example, in a given year an executive could be awarded 3,000 performance shares which
could be earned over a three-year period at a rate of 1,000 shares per year. Depending on the
terms of the LTI plan, the executive could earn the 1,000 shares in year 1 for meeting the
company’s objective (e.g., EPS target). However, the executive could earn less than 1,000
shares if the objective is not met or more than 1,000 shares if the objective is exceeded. For

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example, many plans call for executives to earn 50% of the share award if 80% of the
performance target is attained; similarly, executives could earn up to 150% or even 200% of the
share award if actual results are 120% of the performance target. The same opportunity would
be afforded the executive in years 2 and 3. Thus, at the end of the three-year term of the grant,
the executive may have earned the full 3,000 shares of the original grant, less than the 3,000
shares, or more than the 3,000 shares. Each year, another three-year grant may be awarded to the
executive. Thus, at any given time, the executive is earning stock from three separate annual
performance share grants with overlapping performance periods. At the end of the performance
period, earned shares are paid out in the form of restricted stock. Many plans also permit a cash
payout in case sufficient shares of stock are not available for issue.

An illustration of an annual grant schedule with a three-year maturity is shown below:

Year 1 Year 2 Year 3 Year 4 Year 5

Grant 1 XXXXXXX XXXXXXX XXXXXXX
Grant 2 XXXXXXX XXXXXXX XXXXXXX
Grant 3 XXXXXXX XXXXXXX XXXXXXX
Performance unit plans (PUPs) are very similar to performance share plans. In this type of plan,
an executive is given a number of performance units, which have no value when issued. If the
executive achieves the stated goals over a defined period (e.g., 3 – 5 years), each unit earns a
cash award based on the percentage of attainment of specified goals. While performance goals
or targets can also be based on increases stock price or earnings per share, companies also use
performance units to focus on goals they want to achieve other than stock price performance
(e.g., increasing market share, achieving a greater number of new products).

Long-term incentive plans are being advocated as an alternative to annual incentive awards or
bonuses for several reasons. Primarily, they are seen as a way to reduce the likelihood of
executives focusing on short-term gains at the expense of a company’s longer-term strategic
perspective. Performance share plans are particularly attractive because they typically pay out in
restricted stock which provides executives with an ownership interest in the company. If desired,
in addition to the overlapping performance periods, the terms of the plan may include additional
vesting requirements for restricted stock payouts that can serve as a vehicle for executive
retention. And since both performance share plans and performance unit plans involve
performance targets, they communicate to executives the financial measures and levels that drive
company value and create a greater link between executive and shareholder rewards.

CONCERNS WITH LONG-TERM INCENTIVE AWARDS

While there is much that is appealing about long-term incentive awards when contrasted with
annual incentives or bonuses, LTI plans bear a marked similarity to STI plans in terms of the
problems that may be encountered. Hence, they may not resolve the multitude of concerns that
have been raised about executive pay. To understand the concerns, it is first necessary to explain
more about how performance share/unit plans are developed.

As noted previously, these plans are performance target plans. They involve setting performance
targets (e.g., EPS goals) for the performance period (e.g., three years). In most companies these

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three-year grants are made annually to executives based on the value of compensation that the
company desires to award to the executive. For example, if the company, as part of its pay
package, wants to provide an executive with $120,000 of compensation in the form of
performance shares, and if the value of the company’s stock at the time of the grant is $20.00 per
share, it would award the executive 6,000 performance shares.

If the performance period is three years, the executive would be eligible to earn 2,000
performance shares per year if the performance targets for each of the three years are met. As
with similar annual incentive programs, the LTI plan often includes the opportunity to earn a
percentage of the shares even if the target is not met since achieving the target involves a level of
“risk” if the targets involve “stretch goals.” Also, these plans typically afford the executive the
opportunity to earn more than the awarded number of shares in a given year if the performance
target is exceeded. For example, if actual performance reaches 80% of the performance target,
the plan may specify that the executive may earn 50% of the shares awarded; similarly, if the
performance target is exceeded, the executive may earn up to 150% or even 200% of the shares
awarded, depending on the terms of the plan.

In the grant year, the award to the executive will identify the targets for each of the three years
comprising the performance period. For example, if earnings per share (EPS) is the metric, the
grant award will identify the target EPS values for year 1, year 2, and year 3 of the grant. Thus,
using the example cited above, a grant of 6000 performance shares may have EPS targets of
$2.00 in year 1, $2.20 in year 2, and $2.30 in year 3. These targets should be set in conjunction
with expected company earnings as determined by the company’s finance department and the
finance committee of the board of directors. Earned shares are based on a comparison of actual
EPS vs. the EPS target each year according to the terms of the LTI plan.

The following year, the executive may receive another LTI grant with new EPS targets for year
1, year 2, and year 3 of the new grant. However, since new data regarding company EPS
performance is now available, the EPS targets for Grant #2 in years 1 and 2 will not necessarily
be the same as the EPS targets of Grant #1 for years 2 and 3 (refer back to previous annual grant
schedule illustration). Below is a grant schedule (Table 1) using fictitious data for the EPS
targets and projecting an EPS growth rate of 10% per year. For each grant year, the initial EPS
targets will be based on actual earnings from the previous year as well as future earnings
expectations.

Table 1. Typical LTIP Grant Schedule

Year 1 Year 2 Year 3 Year 4 Year 5
Grant #1 $2.00 $2.20 $2.42
Grant #2 $2.25 $2.47 $2.72
Grant #3 $2.50 $2.75 $3.02

Having described how performance share LTIPs work, the concerns associated with LTI plans
can be better understood, as can issues involving their use to remedy problems associated with
excessive executive compensation. First, as with annual bonuses, performance targets
established in the grant are recommended by the company and approved by the board of

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directors. The establishment of performance targets remains key to the likely success of the LTI
plan in equitably rewarding performance. For example, in the table shown above, if the EPS
targets for years 1 – 3 are set unrealistically low, the executive is likely to receive maximum
share awards for what is, in effect, average performance. And this windfall will be cumulative
since grant targets for a given year’s performance share award do not change with the award of
the next grant. The targets in the annual grant are fixed for the entire term of the performance
period.

This concern over the setting of performance targets is reinforced by the results of a recent study
by Yang and Kim [28]. In a sample of S&P 500 firms over a three year period, they found that
EPS targets established by companies were lower than analyst consensus, and that EPS growth
targets (annual earnings increases projected in the plan) were lower than historical EPS growth
for the firm and its industry. In addition, they discovered that the annual payouts, on average,
were 114% of the established targets. This evidence strongly suggests that the performance
targets established in LTI plans may be understated and that actual performance may consistently
exceed established targets, except perhaps in the case of extraordinary, unforeseen events.

While performance targets can be manipulated, so can actual performance outcomes.

Holthausen, Larcker, and Sloan [15], while examining confidential annual bonus plans, found
evidence that executives manipulate annual earnings downward when their bonuses are at the
maximum. This can occur for several reasons. Primarily, executives may not want the board of
directors to begin to question the level of performance targets. Additionally, if executives are
already likely to achieve the maximum payout, or even payouts that are just substantially above
target, restraining earnings in a given year will make it more likely to achieve higher payouts in
the following year as these earnings are carried forward, providing a hedge against future
earnings weakness that could adversely affect bonus payouts. While the Yang and Holthausen
studies cited previously relate to annual incentive awards, performance-based LTI plans are
subject to the same earnings issues and concerns.

SUGGESTIONS FOR IMPROVING LTIPS

It is apparent from the preceding discussion that the key to improved LTI design involving
performance-based plans is to ensure accurate setting of performance targets. As it currently
stands, LTI performance targets, whether EPS or otherwise, are established by company
executives in coordination with the compensation committee of the board of directors. While the
compensation committee must be made up of independent, outside directors, they are still
heavily influenced by what the company’s CEO and CFO say is feasible in terms of future
performance. Thus, it is incumbent upon the board of directors to scrutinize the proposed
performance targets to ensure that they appropriately reflect a realistic outlook for the firm’s
performance. The onus is on the compensation committee to select the right performance
measure and the appropriate performance conditions. As currently structured, most LTI plans
appear to provide motivation for executives to understate performance targets rather than
motivate them to improve performance.

Second, the board of directors should insist that performance targets be developed in terms
relative to the industry. That is, rather than basing award payouts on the attainment of absolute

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targets proposed by the company, payouts should be based on how much better or worse the
company performs than its industry peers. For example, shares can be earned only if the
company’s performance exceeds the median of a peer group on the performance measure used in
the plan. For example, in absolute terms, a company could establish performance goals that
increase EPS by 10% per year. However, in relative terms, a company could establish
performance goals that match the median EPS growth for a peer group. That could be more or
less than 10% per year. A relative approach also protects executives from unexpected factors
that may affect their company and the industry as they can still outperform their peers even in a
down market. Conversely, the plan will not reward executives for simply improving with
everyone else in an up market; they must still meet or exceed the performance of their peer group
to qualify for share vesting. In a survey of 82 companies, Bickford [3] found that 65 of the
companies used absolute measures, 14 used relative measures, and 3 used both. This distribution
most certainly reflects the fact that executives prefer absolute performance measures over which
they have more control -- all the more reason to move toward relative measures.

LTI plans could also be designed to incorporate a clause permitting the board of directors to
amend or revise the EPS targets in outlying years of a grant based on actual performance during
the preceding year. For example, in a given grant, if the EPS target was stated as $2.20 for year
2 and $2.42 for year 3, but actual performance in year 1 resulted in an EPS of $2.45, the EPS
targets for year 2 and year 3 could be increased to better reflect the realities of the company’s
performance. However, to ensure that the LTI plan doesn’t become merely a series of annual
incentives and retains its risk-based characteristics, downward adjustment in targets would be
prohibited. After all, the purpose of LTI is to improve the company’s performance in the long-
term.

Alternatively, LTI plan designs could simply incorporate a single performance target as of the
end of the total performance period (e.g., a year 3 performance target for a three-year
performance period). Executive payouts could be based on how well this target is attained at the
end of the entire performance period. This approach would remove the “annual” characteristics
of a LTI plan with shares earned each year. The annual nature of LTIP vesting leads many
executives to view them as a series of annual awards rather than as an incentive to improve long-
term performance. LTI has become, but is not intended to be, a guaranteed amount of
compensation for executives. Rather, it is intended to be “at-risk” pay. Company boards of
directors must demand greater performance accountability in LTI plans to put the risk back into
this form of compensation. This approach would require the company to attempt better long-
range forecasting and, because a higher level of risk would be associated with a target three years
out, the payout range for performance above and below target that is typically associated with a
LTIP (e.g., 50% for achieving 80% of target and up to 150% for attaining 120% of target or
higher) would be better justified.

Another suggestion is for the compensation committee of the board of directors to retain its own
outside consultant to advise it in the development of LTI plan parameters (e.g., award ranges at
various levels of performance, length of performance period). The consultants should report to
and be paid by the board of directors. A number of companies currently rely on
recommendations by consultants that work with and are paid by executive management.

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Independence is an absolute necessity to ensure that the LTI plan structure and features are
comparable with other plans within the industry and are also most appropriate for the company.
Others have also suggested that stock awarded under performance share plans be put into a trust
for the executive [5]. The trust would only pay out at the time of retirement or a set period after
leaving the organization (e.g., three years), should the executive depart the company prior to
retirement. The intent of this approach is to make the future value of compensation earned by
executives under these plans dependent upon the continued success of the company.

CONCLUSION

Although companies are turning more toward the use of LTI compensation to defray the
criticism of annual bonus plans, because of the design characteristics of most LTI plans there is
no assurance that executive compensation abuses or excesses will be remedied. Most LTI plans
share many of the characteristics of annual bonus plans that lead to concern and public outrage.
Action is definitely needed as other company employees struggle with the fear of job loss,
reduction or elimination of 401(k) plans, or annual merit increases of 2-3%. In a study by Rich
and Larson [20], the findings indicated that companies with long-term incentive plans provide
returns no better than those from firms without such incentives. They note that selecting the
wrong measures of performance and failure to set targets properly are the greatest shortcomings
of these plans. Boards of directors, in concert with company executives, can attempt to improve
the likelihood of LTI success and reduce public outrage by implementing the suggestions
outlined previously in this paper. However, such action is unlikely as the proposals run counter
to executives’ motivation to maximize personal gain. After all, it’s easier to set performance
targets that are unrealistically low than it is to actually improve company performance.
Adopting the proposals made in this paper requires ethics and integrity on the part of executives
and the board of directors. In today’s environment, one has to wonder if Henry Mintzberg just
might be correct: “Scrap the whole thing. The system simply can’t be fixed.”

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 TEMPORARY STAFFING AGENCIES: STATE-OF –THE ART PRACTICES OF

PERSONNEL SELECTION

Ghardir Ishqaidef
School of Business
University of Kansas
1300 Sunnyside Ave.
Lawrence, Kansas 66045
Telephone: (484) 686-4777
Fax: (785)864-5328
E-mail: ghadir@ku.edu

ABSTRACT

The expansion of temporary staffing business and its impact on economy warrants a better
understanding than the current status of research provides on staffing personnel selection
practices. This paper attempts to adopt the staffing agency perspective to better understand the
staffing practices that enhance its performance. Models explaining the staffing agency-client
organization relationship are reviewed. The shift in the staffing paradigm from traditional to
strategic and the implications of selection practices are addressed by discussion leading
questions: Who is involved? Why has the use of staffing agencies expanded among companies?
Why do employees choose to take temporary positions via staffing companies? What makes
staffing agencies more successful at what they do? What are staffing agencies’ state-of-the-art
selection practices?

Keywords: Employee screening; personnel selection; temporary staffing companies.

The intermediary staffing business has grown for decades as work force and businesses alike
appreciate flexibility and choice that temporary staffing provides. Now, America’s staffing
companies place millions of people in jobs every day. Statistics by the American Staffing
Association show that 2007 annual average daily employment for temporary staffing companies
exceeded 2.9 million workers, up from almost 1 million in 1990. Over the course of 2007,
staffing companies in the US placed more than 11 million in job assignments. Temporary
staffing sales totaled $73.5 billion in 2007, up from $63.8 billion in 2000 and $17 billion in year
1990. Furthermore, the staffing industry generated $17.5 billion in sales from search and
permanent placement services in 2007 (ASA, 2008). Contrary to widely held misconceptions,
the temporary staffing industry employs workers from occupations including office-clerical,
industrial, professional accounting and finance, health care, legal, IT/technical, executive and
management. The strong effect of this industry on the economy is not unique to the United
States. Literature has considered the market mediated labor trend in other countries as well such
as Germany (Mitlacher, 2006 & 2008), Australia (Hall, 2006), UK (Forde & Slater, 2005;

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Stanworth & Drucker, 2006; Drucker & Stanworth, 2004; Ward et al, 2001; Purcell et al, 2004)
and the Netherlands (Torka & Schyns, 2007).

Despite the significant economic impact of temporary agency work, academic research on this
topic is still in the initial stage. There is strong reason to lament the scarcity of theoretical and
empirical research on personnel selection methods used by staffing agencies. The fact that
staffing agencies major services offered to client organizations are the search, screening,
selection and placement of talent warrants the need to understand such practices and how they
influence performance. This paper attempts to fill the gap in literature on staffing agency
practices.
Although some portion of this paper will describe the current nature of the temporary staffing
business, I will focus the majority of the paper on the agency’s perspective. Qualitative and
quantitative literature on this arena has considered the subject from the perspectives of temporary
workers (e.g. Torka & Schyns, 2007; Moorman & Harland, 2002; Bauer & Truxillo, 2000), and
client organization (e.g. Mitlacher, 2004; Feldman et al, 2001; Houseman, 2001; Davis-Blake &
Uzzi, 1993). Rarely has this subject been studied from the staffing agency’s perspective (e.g.
Mitlacher, 2006; Cai & Kleiner, 2004).

The staffing paradigm has witnessed a shift from traditional to strategic involvement with client
firms. In an attempt to understand this shift and its implications of selection practices are
addressed by discussion-leading questions: Who is involved? Why has the use of staffing
agencies’ services expanded among firms? Why do employees choose to take temporary
positions via staffing companies? What makes staffing agencies more successful at what they
do? What are staffing agencies’ state-of-the-art selection practices?

Who is Involved in the Temporary Staffing Process?

Staffing firm, also known as temporary help agency, is one part of this labor intermediary
relationship. Those firms recruit, screen, select, train, compensate and manage workers’
performance in client companies (Heneman & Judge, 2009). Legally, the staffing company is
considered the employer and responsible for required insurance (e.g. social security, workers
compensation). For these services, client organizations pay the staffing company fees plus
markup to cover labor costs. If the client decides to hire the temp on permanent basis, a fee
based on employee annual salary is then due to the staffing firm.

The key member involved in this relationship is the temporary worker. Business between the
agency and client organizations will not be done without the labor performed by employees.
Traditionally, temporary workers used to pay the agency to place them in one of the openings at
client sites. Things look differently now for all parties involved. The agency, usually, does not
get any money till the temp is placed on client primes and the latter is satisfied with the service.
The staffing agency has to cater to two different customers, the client companies and candidates
who will become temps. Between attending to sales calls for new business and keeping a
sufficient flow of temporary workers in line and ready to fill incoming positions, a careful
balance of effort within the temporary staffing agency is required. In order to better understand
this “triangular” employment relationship, we must understand the reasons beneath this
relationship.

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Why has the Use of Staffing Agencies Expanded Among Companies? And Why Do
Employees Choose to Take Temporary Positions Via Staffing Companies?

Answering these two questions in combination would potentially explain the thriving staffing
business and the implications on personnel selection procedures. Several research papers have
been dedicated entirely to address these questions. I will begin by summarizing the literature
addressing the employers’ perspective followed by employees’.

Companies first started to use the temporary staffing option to fill in for core employees’ sick
and vacation leaves. Having noticed the strategic potential of temporary work, employers, with
the help from staffing agencies, have altered the traditional view. Companies now have positions
that are staffed only by temporary workers (Von Hippel et al, 1997).

The noticeable flexibility became an attractive solution to solve several interlocking issues.
Employers found haven with staffing agencies as they secured a solution for the internal labor
shortage. Some companies frequently deal with unsteady business through the year as demand
might pick up around particular events or seasons. Temp workers can also assist in special or
new projects that companies implement every now and then. Whether the interim need is for
unique skills or simply massive effort in such projects (Paul & Townsend, 1998), temporary
worker could fill in if internal labor falls short. Another flexibility venue that employers
appreciate is the ability to reassign tasks. Some of the core employees in client companies are
overworked (Cuyper et al, 2008), so managers can use temporary employees to take over simpler
tasks while core workers free up to more important tasks. Some researchers argue that permanent
workers might end up with the most socially and cognitively demanding tasks (Connelly &
Gallagher, 2004; Davis-Blake & Uzzi, 1993). No matter how employers perceive flexibility, a
2004 poll conducted by the American Staffing Association shows that 9 out of 10 businesses
appreciated the flexibility offered by the staffing agencies.

In addition to flexibility, employers prefer temporary employment as a way to drive labor costs
down. This goal can be achieved in several ways. One obvious way is the shift of “employer”
responsibility to the staffing agency as the latter is responsible for the costs of recruitment and
testing, training, paying for benefits and administration of payroll. During an interview
conducted for research purposes, workplace managers asserted that despite the hourly rate and
agency fees they had to pay, they still saved money from avoiding paid vacation and sick leaves
had the temporary employees been on their payroll (Ward et al, 2001).

Since organizations spend a significant amount of time and money on the recruitment and
selection steps. Doing business with staffing agencies saves the company a lot of time as
staffing agencies enjoy economies of scale that allow them to screen and place more candidates
faster (Byham & Riddle, 1999). In addition, companies would have to pay considerable amount
of money on developing and acquiring the best recruitment and testing methods that agencies can
provide as part of their service (Byham & Riddle, 1999). In particular, use of flexible staffing
arrangements was found to be positively related to intensity and cost of screening core
employees. Intensity and cost of screening was measured by number of screening methods
(Gramm & Schnell, 2001) or by a scale of selecting methods including intelligence tests, skill

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tests, letters of reference, physical exams, and drug tests (Roger Ko, 2003). That is, employers
find it reasonable to use temporary staffing arrangements as a buffer of their core employees
when they use more extensive selection methods as turnover costs will be higher for companies
that use more intensive selection procedures. Employers believe this kind of flexibility allows
them, even in tough economic times, to warrant job security for their core employees.

Another reason to use temporary staffing arrangements is to screen temps for potential
permanent positions in the organization. Employers may increase productivity and
simultaneously reduce costs of screening (Houseman, 2001). Hedger recommends that managers
“think temp to hire” as a way to strengthen the quality of their staff (2008). Hiring temporary
workers with the intention to screen them for future permanent position is welcomed by both
temps and managers. Both of them get a chance to assess the situation and actual job conditions
without long-term commitment (Paul & Townsend, 1998). Employers are comforted with the
“try out” option and the fact that they do not have to deal with the unpleasant experience of firing
those who do not fit (Houseman, 2001). They can closely observe workers’ behaviors and assess
their value to the organization (Hall, 2006). At the same token, workers are paid to get a realistic
perspective of the job and preview the company as a potential employer (Von Hippel et al,
1997). Other temps might find in temporary work a way to get their foot at the door especially in
highly competitive industries or in prestigious companies (Smith & Neuwirth, 2008).

Temporary workers too have their reasons to actually seeking employment through temporary
staffing agencies. The commonly cited reasons for that are as follows. First, the typical profile
of a temporary worker used to be a mother with children or a student who looked for a few hours
a day for work. That kind of demand for flexibility allowed staffing companies to seek more and
different talent. Beside flexibility and ability to preview the company without commitment,
employees work as temps because they need to earn business experience, get trained, and learn
new skills (Von Hippel et al, 1997) that would make them more marketable and eventually get
them full-time permanent positions. Others registered with agencies with the hope of finding a
permanent position (Hall, 2006) especially if they were unable to get a job on their own due to
competitive industry or highly sought after corporations (Smith & Neuwirth, 2008). It is not
surprising to assume that candidates approach temporary agencies with a specific choice of
company to work for as they might learn from other temp workers who are registered in the
agency about the various client companies. Interestingly, in their survey of one thousand
temporary workers, Von Hippel and her colleagues (1997) found that respondents worked as
temps because of the quality of job assignments and the variety in temporary jobs.

These research findings displaying reasons from both sides refute the stereotypical view of
temporary workers that probably still exist today but in a lesser magnitude. This stereotype
depicts temps as lazy workers, who are not productive, unable to find jobs or maintain full-time
status, lack experience or loyalty to organizations. Even if some of such facts do exist (e.g. lack
of experience), the focus should be on the intention of temporary workers to eventually land
permanent positions. Employers did not escape the criticism for using temporary work as they
were accused of lacking commitment to their core employees. With the use of temporary work,
employers are sometimes viewed as breakers of the psychological contract. However, there is
ample evidence that businesses now use staffing agencies and temporary workers for strategic
reasons that allow them to hold on to their core employees and at the same time remain

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competitive. Forde and Slater (2006) found firms that have a formal strategic plan covering the
staffing requirements were more likely to use agency workers. Jeffery Pfeffer (1998) would
argue that use of temporary work is not the best message to send core employees on job security.
However, this universalistic view does not make sense to employers anymore as they are moving
into partnership with agencies that do hire temps. In fact, companies using innovative work
systems were not more or less likely to use flexible staffing options (Forde & Slater, 2006).

With this said, staffing agencies have found solid grounds to offering more services to client
firms which go beyond recruiting, screening and placing temps. They moved towards strategic
partnerships offering on-site management, consulting, forecasting, and hiring for that partner
companies on continuous basis. But how are staffing agencies are managing this triangular
employment relationship? What makes them fulfill their complex and dynamic role successfully?
Before I attempt to answer this question, exposure to previously suggested models might be
helpful.

Models of Staffing Agency – Client Company Relationship

Some previous research that was not concerned with developing models of the staffing agency-
client company relationship at least addressed the fact that staffing companies ought to adopt the
new paradigm. This new model imposes a supply relationship in which the staffing company
learns the skill needs for the client company and continuously attracts and the appropriate labor
to register (Purcell, Purcell, & Tailby, 2004). From a human capital and transaction cost
economics perspectives, Lepak and Snell (1999) suggest that not all jobs are appropriate for
outsourcing. In fact, they identify two types of jobs that are appropriate for outsourcing to
staffing companies: (1) jobs that can be performed by workers with low levels of human capital
and do not require training to better understand internal operations and (2) jobs that are
performed by workers with high human capital but do not need firm-specific skills to perform
satisfactorily. The main criticism to Lepak and Snell’s model is that there are not many jobs that
do not require firm-specific skills or training on internal operations. The expanding role of
staffing companies certainly does not follow the footsteps of this model.

Different models of the agency-client relationship management and strategic partnership have
been suggested in the literature. For example, Byham and Riddle (1999) suggest five different
levels of outsourcing relationship between staffing companies and hiring organizations. Types of
services offered and expected from staffing agencies vary and increase in sophistication as the
level increases. These five levels are: (1) vendor-customer, (2) supplier-customer, (3) strategic
supplier-customer, (4) partners, and (5) strategic partners. At a minimum, clients retain full
responsibility for staffing and recruiting and staffing companies might conduct or assist in few of
the following: analyzing key job requirements, design selection and assessment procedures,
select testing batteries and other selection methods, administer the selection process and validate
the selection system. At a higher level of this relationship, the staffing company usually
provides all of the services previously mentioned in addition to on-site management services to
all business units on a permanent basis. Staffing company at this level has a lot of discretion in
the client company’s staffing and recruitment functions.

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 Von Hippel and her colleagues advise organizations to establish policies on staffing, training and
orientation, career development paths, and rewards if they want to attract and motivate
temporary workers (1997). Their advice is not generic to all organizations as dedication to
temporary workers would range based on company’s philosophy towards them: strategic
partners, necessary evil, or avoid if possible.

What Makes Staffing Agencies More Successful at What they Do?

A quick answer to this question is that they strive to understand and acquire strategic long-term
relationships with both their client companies and employees. Staffing firms came to realize if
they offer cutting edge and creative solutions to emerging labor problems, and guarantee their
service, their clients will become more dependent on them and eventually take them as strategic
partners.

The nature of the triangular relationship causes communication issues especially when strategic
agency-client relationship does not exist. Such issues are resembled in the lack of understanding
the culture of the client organization, jobs and assignments to be staffed by the agency. As a
result, temps would quickly become dissatisfied because they were not informed of what to
expect. With this kind of operating environment, agency recruiters cannot explain the nature of
the job (e.g. if it is temp-to-hire) and will not be able to manage their workers’ expectations.
Frustration, dissatisfaction, lower productivity and loyalty, absenteeism, and possibly early
project turnover are expected outcomes of temp-client mismatch. However, with a stronger
agency-client relationship, the client gets to be involved in the selection process while the agency
is involved with managing its own employees on the client’s premises, a win-win-win situation.

Moreover, better understanding of what constitutes temporary workers’ performance in clients’

companies helps staffing companies become more successful at what they do. The
staffing agency business generally suffers from a criterion problem. Criteria on the basis
of which employees are being screened are not always clear to the staffing agency. This
is frequently overcome by agency when they do site visits and ask specific questions on
clients’ expectations. The in depth understanding of this triangular performance is
essential to the advancement of temporary staffing business. Temporary workers’
performance influences both the client and the staffing companies. Thus, an
understanding of how are these interlocking relationships are cycling is important. Figure
1 proposes a preliminary model of testable relationships.

Figure I: Proposed model of testable relationships

- Specific skills training - Repeat business

- Intensive selection process Staffing - Repeat staffing
- Benefits Agency techniques in case of
---------------------------------
- Manage expectations Performance strategic Partnership
Insert
- Perception Figure I about here
of Agency
fairness ---------------------------------

Employee Client Org.

Performance Satisfaction
Success in
Placement
and Matching 149
There is not much consensus in the research on performance in the staffing context. In fact
additional research in this arena is needed (Connelly & Gallagher, 2004). In a study that was
concerned with agency compliance with EEO requirements in a staffing agency performance was
considered as the criterion. The scale was based on client supervisor ratings of temporary
workers on measures such as accuracy, cooperation, production, grooming, punctuality, and
attendance (Ryan & Schmit, 1996). (Bauer & Truxillo, 2000) is another empirical study that
looked into temp-to-perm employees’ progression overtime used client organization objective
and subjective ratings of performance as proxies for temporary selection success.

In addition to understanding what constitutes performance, temporary staffing agencies must

guarantee their service if they want to build strong relationships with their clients. With service
guarantee, they assure their clients that they care about their needs and that they do not have to
pay for what does not satisfy them. Having this policy forces the agency to tease out the reasons
for service failure and quickly remedy and avoid them in the future. Manpower, one of the
largest players in the staffing industry, has long adopted this practice. They did not necessarily
pay more for their screening procedures, they just made them better over time. Their skills-
testing methods and customer-needs diagnosis cost them less overtime (Hart, 1988) because they
have implemented 100% customer satisfaction strategy via service guarantee.

Successful staffing agencies have developed a deeper understanding of their workers’ needs.
They learned to listen to them in order to better manage their expectations and communicate to
them the opportunities they have in a realistic manner that would hopefully close up the gap
between the agency’s opportunities and the temps’ expectations. Smith and Neuwirth (2008) call
this “aligning aspirations with opportunities.” I have pointed out previously that one of the
reasons individuals register with staffing companies is to locate permanent positions, but such
opportunities are not always available. Other employees enter the market with the anticipation to
earn experience and learn new skills. Such employees might have more developed career
aspirations that might affect their performance on site. Moorman Harland (2002) suggest that in
this case, Moorman and Harland (2002) suggest that in this case, pre-employment screening that
focuses on employees’ reasons for joining the temporary agency might positively influence
organizational citizenship behavior.

Furthermore, successful agencies manage their image very carefully. They care to be perceived
as capable with strong practices and market specialization. They also know their clients watch
for financial stability and market share position. On the other hand, they manage their image in
front of their candidates. Successful agencies show professional and respectful treatment of their
candidates. They want to be perceived as fair and generous in their benefits and training
opportunities.

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What are Staffing Agencies’ State-of-the-Art Selection Practices?

As mentioned before, research on this issue is rather scarce. Antecedents show that staffing
industry practice is based on a systematic approach to eliminating guesswork and client service
dissatisfaction. Staffing agencies managers understand the “benefits of scientific analysis, the
power to control outcomes and the industry’s concern with its high quality product” (Smith &
Neuwirth, pp. 41: 2008) which can be achieved by testing (technical skills, aptitude, personality,
and behaviors) and by offering service guarantee.

In addition to being successful with establishing a strong market for their services, they seek out
good talent that accepts the reality of temporary work. Successful staffing agency selection is
based on both the ability and the willingness of workers to perform in a temporary environment
detecting the candidates with the good temp profile. From an agency’s perspective, they must
strive to have the most valid selection techniques that allow the agency flexibility to tailor testing
to fit clients’ needs. Manpower, for example, uses a job-related testing approach. It selects
assignments that are most suited for workers based on their skills, abilities, work preferences and
availability to work (Wiley, 1995). After they select their employees, they test them further on
work skills, abilities and tasks preferences. Staffing companies, successful like Manpower, want
to make sure they know who is motivated and able to perform what so they can insure a highly
successful matching rate.

One of the most critical characteristics of testing and screening procedures in staffing companies
is their flexibility to fit in the need of the client companies (Mitlacher, 2006). The fact that
staffing agencies have to continuously screen candidates for temporary and temp-to-hire
positions even though they do not have vacant positions at the time of assessment makes it
harder on them to determine prematurely the types of questions they ought to interview their
candidates for. However, generic questions that can be applied to a wide array of settings cannot
be difficult. Note taking and record keeping are important steps in the interview. In case they
locate good employment opportunity for temps, some agencies review the interview notes, and
call back the temp for another interview during which they ask more specific questions targeting
that particular position and client organization. Many organizations use the structured interview
as an attempt to understand the temporary worker, their skills, needs, interests, specific
knowledge and work-related behaviors. Campbell et al (1993) suggest 8 components to job
performance. Three of which are present in any job and three others are present in almost all
jobs. The three present in any job are: Job specific task proficiency, demonstrating effort,
maintaining personal discipline. The three present in most jobs are: non-job specific task
proficiency, written and oral communication task proficiency, and facilitating peer and team
performance. Therefore, in the condition of lack of knowledge on nature of position, staffing
agencies could be relying, at the least, on those criteria for future temp performance prediction.

A qualitative study of the temporary staffing business in Chicago, Peck and Theodore (1998)
state that structured interviews and techniques of employee of assessments are more common in
the highly unstable daily-based temporary staffing. They suggest that intensive preliminary
screening gives staffing firms functioning in this segment a competitive edge to cut further
screening costs (e.g. drug tests and criminal background checks) and to provide the best quality
of daily temporary workers.

151
Staffing agencies use various tests and inventories to become more familiar with the “good
temp” profile. They are able to better their understanding through systematic techniques of
employee ability and trait assessment. Cognitive ability, personality and vocational interest
batteries in addition to initial telephone interviews help agencies build an initial picture of
workers’ interests. Structured and behavioral interviews, reference checks and more special skill
testing would follow. Unfortunately, research is behind in understanding current practice and its
role in explaining staffing agency success. This kind of research is still in its infancy. Below I
attempt to review some relevant yet perplexing research.

Lancaster and her colleagues found that job applicants at an employment agency who had similar
cognitive ability and vocational interests chose similar jobs. However, they were not able to
show that applicants with similar personality characteristics chose similar jobs (Lancaster et al,
1994). Another research studied the personality and cognitive differences between the employed
and unemployed staffing company workers and found that the sensing-perceiving type of
personality was associated with lack of employment for some temps. It also found that a mixed
or no clear thinking style was more prevalent among the unemployed temps (40.3 percent)
compared to employed temps (23.6 percent) (McTurk & Shakespeare-Finch, 2006).
Furthermore, research supports that employees who are sensation seekers and show a higher
degree of occupational self-efficacy will be more satisfied with agency work (Torka & Schyns,
2007).

In a less glamorous picture of staffing testing practice, some agencies rely on basic requirements.
They test such requirements by general cognitive ability batteries. In a study attempting to
measure Equal Employment Opportunity statistics in a temporary staffing agency located in the
Midwest, researchers considered the employment tests as predictors of performance (Ryan &
Schmit, 1996). They reported that the agency used three short ability tests in their screening for
all jobs. Those tests were measuring math skills, proofreading, and vocabulary and were
supposed to predict job performance.

Evidence from the only survey-based research, that I am aware of, contradicts this general belief
of the staffing market practice. The survey which addresses predictors of performance shows
that executive recruitment consultancies in the UK employ selection methods with low validity
and higher reliance on subjective judgment (Clark, 1992). The survey interestingly points out
that 840 consultancies base their choice of selection methods is restrained by expectations of
clients who in turn prefer predictors of low validity (e.g. astrology and graphology). This finding
is not generalizeable as the use of graphology and astrology is much less prevalent in the US.
Unstructured interview and references were widely used by recruitment consultancies while less
than 45 percent of them used psychological tests. An alarming finding shows that over 70
percent of those executive consultancies never used cognitive ability tests and over 64 percent
never used personality tests.

When recruiting and selection practices are considered strategic and competitive tools of a client
organization, the expectations of accuracy and efficiency go way up (Byham & Riddle, 1999).
Staffing companies partnering with clients with such profile must upgrade their skill search and
screening techniques. What worked for agencies a few years ago did certainly change in today’s

152
practice. For example, Adecco uses Xpert assessment and training system that evaluates
candidates on proven skills, motivation and attitude, work style, and experience. In Express,
office services workers are assessed on ability to perform basic computer skills (Word, Excel,
etc.), 10-key, spelling, math, and basic office skills. Express brags its hands-on and computerized
test system which includes analyses of manual dexterity, workplace safety, inventory, general
maintenance, industrial math, assembly, warehouse, electronics, industrial skills, and
manufacturing skills. Furthermore, Express, through behavioral assessments, can evaluate an
applicant's likelihood of success in a particular position and find out if it is something they will
enjoy doing. They also offer applicants to complete integrity testing to determine the probability
of violent, dishonest, fraudulent or unreliable behavior to avoid placing applicants with those
tendencies. Snelling evaluates candidates based on the clients’ unique culture, personality and
requirements of the business in need, ensuring the right fit both clients and employees in areas
such as clerical, sales, payroll, light manufacturing and many others.

Future research should systematically assess current recruiting, selection, and placement methods
implemented by temporary staffing firms. In addition, understanding the effectiveness of
employment agency-client firm relationship can be an interesting venue for future research.

References available on request.

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 MODERN WORKFORCE CHALLENGES:
LEADERSHIP AND PARTNERSHIP IN EDUCATION

Marilyn Ohlsen Jenkins

Barry University
11300 NE Second Avenue
Miami Shores, FL 33161-6695
mjenkins@mail.barry.edu
Phone: 239-278-3041, Ext 16

Jia Wang
Texas A&M University
College Station, TX 77843
jiawang@tamu.edu
Phone: 979-862-7808

ABSTRACT

Leaders of educational organizations are being challenged to offer more diverse programs and
better respond to their community, while facing competition from many educational institutions.
One strategy to meet these challenges was to develop a university partnership center (UPC).
Managing a UPC has proven to be challenging due to the complexity and diversity of
organizational cultures. This case study explored leadership and organizational culture with a
specific focus on two lines of inquiry: (a) the practice of leaders in creating a shared culture in
the UPC, and (b) leadership qualities that contribute to the positive culture in the UPC.

Key Words: Leadership, Partnership, Culture

INTRODUCTION

Leaders of today’s educational institutions are facing intense challenges worldwide. Technology
has ushered in a new modern type of learning institution which has no geographic boundaries.
For-profit and non-profit institutions have risen drastically in number, and have moved rapidly
into territories that traditionally were occupied by local colleges and universities. What was
once Leaders also face a global demand for a high quality workforce. These factors have
propelled educational institutions to actively seek strategies that enable them to reach more
students, create innovative programs and learning options that satisfy the students’ needs, and
better prepare graduates for the changing workplace. Many institutions struggle with their
identity, mission, and purpose in light of these challenges. Partnering with other academic
institutions is one strategy to meet students’ needs and survive the market competition. This
paper examines one shared university partnership center (UPC), as well as the leadership traits
and characteristics that contribute to the success of that UPC.

LEADERSHIP IN EDUCATION

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Most educational leaders now operate in performance-driven cultures. Academia has had to
transition to a more corporate entity while facing increasing challenges and threats (Yorke,
2000). These ever-changing educational environments have not only made organization
management more complex, but also prompted the need for leaders with more qualifications.
The leaders of educational institutions today must manage their workforce, fundraise, please the
board of trustees, be active in the community, maintain political relationships, ensure
accreditation, deal with legal issues, facilitate student interaction, resolve problems, expand
enrollment, manage budgets, display high moral and ethical standards, maintain and expand the
physical campus, ensure new curriculum is developed, and deal with increasing competition.

What characterizes an effective leader that can handle these diverse responsibilities? Some
institutions seek self-confident transformational leaders who bring charisma, motivational and
intellectual stimulation to the organization; while others seek transactional leadership where
there is a bargaining exchange process between leaders and followers (Bass & Avoli, 1993).
McLaurin and Al Amri (2008) suggest that charismatic and transformational leadership styles
have evolved from a change-oriented perspective of leadership. In contrast, laissez-fare
leadership, where leaders allow the organization to essentially run itself, does not attempt to help
organizations grow.

Leaders are the conduit for communicating and clarifying shared organizational meaning and
vision in educational institutions (Bennis, 2000). According to Ensby (2005), there are four
general styles of leadership namely, coaching, directing, participating, and delegating. Northouse
(2007) presents a trait approach to leadership. First developed as “great man” theories aimed at
identifying the innate qualities that differentiate leaders from followers, this approach focuses on
the influence of trait on leadership. While personal factors related to leadership, such as
intelligence, self-confidence, determination, integrity, sociability (e.g., Kirkpatrick & Locke,
1991; Lord, DeVader, & Alliger 1986; Mann 1959; Northouse 2007; Stogdill 1948, 1974)
continue to be important, they need to be put in a specific context for consideration.

Lewis et al. (2006) explores the use of Appreciative Inquiry in effective leadership where it was
noted that effective leaders facilitate, collaborate, and participate in the organization. Schein
(1992) considers leadership and organizational culture as “two sides of the same coin with a
constant interplay between these two constructs” (Bass & Avolio 1993, p. 115). Gupta (2000)
proposes six major categories of organizational culture: information systems, people, process,
leadership, reward system, and organizational structure. Al-Alawi (2007) describes
organizational culture as knowledge sharing (critical for an organization’s success), which is
created through trust, communication, information systems, rewards and organization structure.
Obviously, many factors contribute to creating culture; however, this study focuses on one
factor, leadership for there is constant interplay between culture and leadership (Bass et al.
1993).

PARTNERSHIP IN EDUCATION

As educational leaders become increasingly concerned with competition, they seek alternative
solutions for growth and expansion of curriculum. One means to accomplishing this growth is
through partnerships (Idsvoog, 2007). There is a long history of educational institutions

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partnering with local businesses and high schools to expand enrollment bases and offer
internships for students. A relatively new partnership model is the establishment of a UPC where
a variety of different education institutions are invited by one college to conduct their business
side-by-side under one roof in one community. This type of partnership is a strategic choice to
enhance communities where there is little access to specific programs in higher education.
Students, who might have left their home community for particular degree programs, may now
remain in their own communities. Communities, which had little access to diversified growth in
sectors associated with professional programs and technology, are able to tap these resources
through UPCs.

LEADERSHIP OF UNIVERSITY PARTNERSHIP CENTERS

Leadership of UPCs varies by person, title, responsibilities, and qualifications. Managing a UPC
is a challenging task due to the complexity and diversity of the partners. Partners from private
institutions may be more bottom-line focused because they are tuition driven (Risher, 2007).
Partners from public institutions may have very different beliefs and ideas about organizational
goals and standards of behavior to achieve these goals (Risher, 2007). Leaders of UPC’s must
have the ability to create a collaborative and cohesive organizational culture; this is critical to a
UPC’s success.

In a UPC, the partners work within the rules and norms of the host college (reducing their
autonomy) and accept the authority of the leader of the partnership in exchange for rewards and
benefits that the leader might bring to them. The rewards and benefits in a UPC might include
exclusive use of preferred classrooms or assigning larger or additional office space,
complimentary advertising, or personal invitations to join external or internal college groups. In
the case studied, the Director of the UPC had no direct control of the employees of partner
colleges and universities; however the partners were willing to abide by the UPC’s policies and
procedures in exchange for a positive relationship with the UPC director and staff.

THEORETICAL FRAMEWORK

This study explores leadership in one UPC located in southern US with two specific foci: (1)
what did UPC leaders do to help build a collaborative culture in the UPC; and (2) what
leadership qualities contribute to the development of a collaborative culture in the UPC?
The leadership theory that guided this study is the social exchange theory. According to
Birnbaum (1988), social exchange theory is best suited for academic organizations. It posits that
“there is a reciprocal relationship whereby leaders provide needed services to a group in
exchange for the group’s approval and compliance with leader’s demands… the group agrees to
collectively reduce its own autonomy and to accept the authority of the leader in exchange for
the rewards and benefits the leader can bring to them” (Birnbaum, 1988, p. 23).

METHOD

A qualitative case study approach was adopted for this study. A case study is “the study of the
particularity and complexity of a single case, coming to understand its activity within important
circumstances” (Stake, 1996, p. xi). It is an “inquiry that investigates a contemporary

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phenomenon within its real-life context, especially when the boundaries between phenomenon
and context are not clearly evident” (Yin, 2003, p. 13). The case study method was selected
because it is unique, bounded, and it may reveal information about a phenomenon that might not
be revealed otherwise (Merriman1988). The case selected for this study was a UPC located in
southern United States. This center was purposely chosen because this UPC was known for its
success as a viable growing partnership center.

Data was collected from multiple resources, including individual face-to-face interviews,
participant observations, and review of organizational archival data. An open-ended, semi-
structured interview was conducted with 13 employee participants who represented three distinct
groups within the UPC: one group worked for the community college at the partnership center
location, but were not associated with the management of the university center; another group
worked for the partner colleges and universities that have face-to-face classes (not on-line); the
final group worked for the community college and were associated with the management of the
university center. All the participants were fully informed of the purpose of the study and their
right as study participants prior to the actual interviewing. Each interview was tape recorded and
lasted approximately one hour and was conducted with an interview guide consisting of seven
pre-developed open-ended questions.

Interview data was transcribed verbatim by the first author and sent to the participants to check
for accuracy. In this case, the unit of analysis included two levels—the UPC as a whole and the
13 interviewees. The entire data was sorted and segmented prior to analysis. The constant
comparative analytical method was employed to analyze each data set and across different sets.
Open coding was used to identify major themes. Findings were organized and reported around
the two research questions. The credibility issue was addressed using multiple sources for data
collection and checking with the participants for verification.

FINDINGS

The following major themes were elicited from our data analysis. They are organized around
two research questions: leadership practices and leadership qualities.

Leadership Practices in the UPC

When participants were asked to describe the culture of the UPC and to explain what they
thought created this culture, two issues became apparent. First, they unanimously described the
UPC culture in a very positive manner. Second, they emphasized that the welcoming culture was
created by the leadership. Table I summarizes findings in these respects.

Table I Leadership and Culture in the UPC

Theme Supporting Evidence
The organizational culture was created by the • Respect and loyalty is important here.
leadership • The leadership & culture is wholesome.
• We have many welcoming rituals.
• Logistics are important
• The leadership & culture stress values.

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 • The leadership & culture stress collaboration
and cohesion.
• The leadership & culture is inviting.
• The leadership & culture is friendly.
• The leadership & culture makes me
appreciate my job.
• Leadership and conflict.
• Diversity is important.

Supporting the theme that organizational culture was created by the leadership were statements
such as the leadership and culture is “wholesome,” “stress values,” “is inviting,” “is friendly,”
“makes me appreciate my job,” and “stress collaboration and cohesion.”Of the 13 participants in
this study, all validated the actions and choices of the leaders in some manner. This is consistent
with French et al.’s (2000) argument that in an ideal setting, an organizational culture is
composed of employees who internalize their commitment to the actions and choices made by
the organization.

Branson (2007) argues that people want leaders with moral codes. Emery (2007) suggests that
the effects of transactional and transformational leadership styles have a correlation to
organizational commitment and job satisfaction. Leaders with transformational factors such as
charisma, intellectual stimulation, and individual consideration typically had employees who
indicated high levels of job satisfaction and organizational commitment (Emery 2007). In
addition, the fact that the leaders in the UPC encouraged cooperation and collaboration reflects a
partnership leadership style (Evink, 2000).

Key Qualities for Leadership of the UPC

The 13 participants identified 29 different key leadership qualities when asked about what
leadership qualities might have contributed to the successful organizational culture of the UPC.
Among these, communication, interpersonal skills, flexibility, knowledge, and integrity were
highlighted by most of the participants as the top five traits that led to this success. Six other
elements were identified by half of the interviewees as equally important, including problem
solving skills, being open minded, enthusiasm, being caring and visionary. The frequency of
these comments is noted in Table II below. Communication was noted by almost all the
participants as a critical factor for successful leadership in the UPC. They indicated that positive
communication (both informal and formal) and the ability to communicate regularly with their
leaders were crucial for them to do their jobs. In describing the center director specifically,
participants perceived him as a good problem solver who made thoughtful decisions, and was
good at building relationships.

Table II Key Leadership Qualities in the UPC

Theme Top Qualities Frequency of Occurrence
Leadership qualities • Communication 11/13
contribute to the positive • Interpersonal skills 9/13
culture in the UPC. • Flexibility 8/13

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 • Knowledge 8/13
• Integrity & Honesty 7/13
• Problem solving 6/13
• Open mindedness 6/13
• Enthusiasm 6/13
• Community orientation 6/13
• Caring 6/13
• Vision 6/13

In addition to good communication, the participants highlighted other qualities such as

flexibility. One participant indicated: “(The leader) is very protective of the UPC and flexible
with all of us. If he was rigid, it would never work…we are all loyal to him, even though we are
like lottery balls—all different.” Noticeably absent was the importance of the leader’s
experience, which was not identified by the participants as an important attribute.

DISCUSSION

Within the context of higher education, this study examined the notions of leadership and culture
in a successful university partnership center. Findings from the constant comparative analysis of
the 13 participants as well as well as observation and archival data revealed that the cooperative
and cohesive culture of the partnership center (in terms such as positive, friendly and ethical)
was primarily the direct result of effective leadership. The finding that leadership can create a
positive, caring, and cohesive organizational culture through good communication and
inclusiveness is consistent with the current literature (Bennis 2000).

Bennis (2000) tell us that people who are able to change the focus of an organization are not just
leaders, but innovators. Findings of this study also illuminated several innovative leadership
qualities that were significant to the success of the partnership. This finding is consistent with
other studies of leadership traits and characteristics (e.g., Kirkpatrick & Locke 1991; Lord et al.
1986; Mann 1959; Northouse 2007; Stogdil 1948, 1974). Armandi (2003) argues that leaders
create a vision of an emotional image that is inspirational and value centered. The UPC
leadership under study could be understood from the visionary leadership perspective where
power, responsibility, purpose and respect are all shared by the employees in the partnership.

IMPLICATIONS AND NEED FOR FURTHER RESEARCH

This study contributes to education and leadership by examining the important connection
between leadership and partnership. Specifically, the qualitative information on leadership
practice as revealed by this study (i.e., the patterns, styles, values, and qualities of a successful
leader) provides valuable insights. Since educational partnerships are an emerging phenomenon
on which little research has been done, this study is a necessary and timely effort. It is
particularly significant for educational leaders and institutions that might be entering into a
partnership relationship. Continued research on similar partnerships is necessary to provide
reliability of the findings of this study.

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Methodologically, this study presented one approach, qualitative case study. There is a need for
studies using different methods, such as quantitative methods to examine a larger sample pool.
Other qualitative approaches such as ethnography and phenomenology will also be useful in
generate deeper insights into the culture of a UPC and lived experiences of members within this
partnership could look more closely at the individual experience with partnership. A
longitudinal approach could also be used to trace the developmental process of specific UPCs or
other types of partnerships. Last but not the least, this study focused on one case of success.
While we can learn much from the success stories, we are likely to learn from the cases of
failures. In that sense, it is worth studying partnerships that have failed to create a shared vision
and culture.

REFERENCES

[1] Al-Alawi, A., Al-Marzooqi, Y., & Mohammed, Y. (2007). Organizational culture and
knowledge sharing: critical success factors. Journal of Knowledge Management 11(2), 22-39.
[2] Armandi, B., Oppedisano, J., & Sherman, H. (2003). Leadership theory and practice: A
“case” in point. Management Decision 41(10), 1076-1080.
[3] Avolio, B. & Bass, B. (1999). Re-examining the components of transformational and
transactional leadership using the multifactor leadership questionnaire. Journal of Occupational
& Organizational Psychology 72(4),441-463.
[4] Bass, B. & Avolio, B. (1993). Transformational leadership and organizational culture. Public
Administration Quarterly 17(1),112-122.
[5] Bennis, W. (2000). Managing the Dream: Reflections on Leadership and Change. Perseus
Publications, Cambridge, MA.
[6] Birnbaum, R. (1988). How colleges work. San Francisco, CA: Jossey-Bass.
[7] Branson, C. (2007). Improving leadership by nurturing moral consciousness through
structured self-reflection. Journal of Educational Administration 45(4), 471-495.
[8] Emery, C. & Barker, K. (2007). The effect of transactional and transformational leadership
styles on the organizational commitment and job satisfaction of customer contact personnel.
Journal of Organizational Culture, Communication, and Conflict 11(1), 77-95.
[9] Ensby, M. (2005). Quality leadership situational style. American Society for Quality ASQ
World Conference on Quality and Improvement 59, 341-347.
[10] Evink, J. (2000). Leadership & spirit: breathing new vitality and energy into individuals
and organizations. The Academy of Management Executive 14(2), 128-131.
[11] French, W., Bell, C. & Zawacki, R. (2000). Organization development and transformation,
managing effective change. Boston, MA: Irwin McGraw-Hill.
[12] Gupta, B., Ilyer, L. & Aronson, J. (2000). Knowledge management practices and challenges,
Industrial & Data Systems 100(1), 17-21.
[13] Kirkpatrick, S. & Locke, E. (1991). Leadership: Do traits matter? The Executive 5, 48-60.
[14] Idsvoog, K. (2007). Adapt or die of irrelevance, Nieman Reports 61(3), 63-66.
[15] Lewis, D., Medland, J., Malone, S., Murphy, M, et al. (2006). Appreciative leadership:
defining effective leadership models. Organization Development Journal 24(1), p. 87-100.
[16] Lord, R., DeVader, C. & Alliger, G. (1986). A meta-analysis of the relation between
personality traits and leadership perceptions: An application of validity generalization
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[17] Mann, R. D. (1959). A review of the relationship between personality and performance in
small groups. Psychological Bulletin 56, 241-270.
[18]McLaurin, J. R. & Al Amri, M. B. (2008). Developing an understanding of charismatic and
transformational leadership. Allied Academies International Conference, Academy of
Organizational Culture, Communication and Conflict. 13(2), 15-19.
[19] Merriman, S. B. (1998). Qualitative research and case study applications in education. San
Francisco, CA: Jossey-Bass.
[20] Northouse, P. G. (2007). Leadership theory and practice. 4th ed. Thousand Oaks, CA: Sage.
[21] Risher, H. (2007). Fostering a performance-driven culture in the public sector, Public
Manager 36(3), 51-57.
[22] Schein, E. H. (1992). Organizational culture and leadership. San Francisco, CA: Jossey-
Bass.
[23]Stake, R. E. (1995). The art of case study research. Thousand Oaks, CA: Sage.
[24] Stogdill, R. M. (1948). Personal factors associated with leadership: A survey of the
literature. Journal of Psychology 25, 35-71.
[25]Stogdill, R. M. (1974). Handbook of leadership: A survey of theory and research. New York,
Free Press.
[26]Yin, R. K. (2003). Case study research design and methods. 3rd ed. Thousand Oaks, CA:
Sage.
[27]Yorke, M. (2000). Developing a quality culture in higher education. Tertiary Education and
Management 6, 19-36.

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 SUCCESSIION PLANNING: A MODERN WORKFORCE CHALLENGE IN PUBLIC
ADMINISTRATION

Marilyn Ohlsen Jenkins.

Barry University
11300 NE Second Avenue
Miami Shores, FL 33161-6695
mjenkins@mail.barry.edu
Phone: 239-278-3041, Ext 16

Kirsten Kim Loutzenhiser

Troy University
5201 West Kennedy Blvd., Suite 110
Tampa, Florida 33609
dr.kirsten.kim@gmail.com
786-246-6932

ABSTRACT

This paper looks at the definition, challenges, and benefits of succession planning in government.
The federal government is the largest single employer in the United States, an employer who has
the potential to lose much of its workforce due to retirements of the Baby Boomer generation.
The federal government has created an extensive guide for succession planning, however the
success of these plans both depends on the ability of personnel and an appropriate budget.
Linking and aligning succession management and other human resource strategies with
organizational mission and goals is critical to the success of succession management programs.

Key Words: succession, planning, government

INTRODUCTION

All organizations must understand that to ensure their future vitality and meet their strategic
mission and goals, they must have prepared adequate succession planning. Succession planning
is important for every organization, public and private. This paper will examine succession
planning in the public sector. The competency of a public organization depends on the diversity
of talent at all levels. This includes front line workers, public managers and leaders. Leaders
will be the most difficult vacancies to replace, therefore special emphasis should be placed on
developing and attracting leaders whose values and goals mirror the public organization.
Succession planning has come to the forefront of many government agendas because of rapidly
changing demographics of talent in the work force. It is well known that the Baby Boomer
generation is preparing for retirement. Baby Boomers are the largest generation in the history of
the United States. According to the U.S. Census (2006), this generation has a population of
77,980,296, the equivalent of one fourth of the U.S. population. This generation is perceived to
be the result of increased birth rates between the years 1946 to 1964. In 2006, 74.1% of all Baby
Boomers were employed, making them the largest segment in the employed U.S. population,
compared to 71% employed age 18-41 and 21.6% employed age 61and older. In 2030 it is

162
estimated that when the Baby Boomers retire, there will be a loss of over 20,000,000 working
people. The Baby Boomers represent the most highly educated segment of the U.S. population
(U.S. Census Bureau, 2008), bringing a new challenge for organizations to hire educated
employees for the future workforce.

According to Liebowitz (2004), a 2002 survey to 100,000 respondents found that one in every
three federal employees was considering leaving their job. In 2004, 53% of federal civil servants
and 71% of federal senior executives were eligible to retire. Along these aging demographics,
fewer persons are in the talent pipeline and less people are going into government service.
Reester (2006) claims that more than 46 percent of existing state and local governments are
comprised of Baby Boomers age 45 and older. Baby Boomers that retire leave behind vacancies
without available workers with experience and skills to fill their jobs. Without targeted planning
there will be no way to maintain a viable pool of civil servants or ensure that organizational
knowledge is maintained through transitions of talent. Schall (1997) argues that succession
planning and change management must be on the agendas of all public organizations, not only
for the organization’s future leadership plan, but for the public good.

DEFINING SUCCESSION PLANNING

The terminology “succession planning” is not commonly used by public administrators; it’s more
often associated with the “private sector” (Schall, 1997). There has been a lack of attention on
public sector transitions of Baby Boomers retiring until recently (Schall, 1997). Some have
called succession planning in government two dirty words when it clashes with merit system
principles and traditional hiring practices of filling one position at a time after it becomes vacant
(Green, 2000). Today’s public agencies and organizations must prepare, plan, and multi-task to
ensure smooth transitions between retiring and hiring.

Succession planning has many definitions, although there is an underlying theme of recruitment
and selection. Succession planning is defined by Rothwell (2005) as the way to “identify and
ensure leadership continuity in key positions, retain and develop intellectual capital and
knowledge for the future, and encourage individual advancement.” Crumpacker (2007) portrays
succession planning as the way an organization identifies and strategically develops a
methodology to reduce or eliminate gaps in human capital that take into account skills and
leadership. Kim (2003) identifies succession planning as an ongoing process to identify, assess,
and develop leadership to enhance performance.

According to Helton & Jackson (2007) succession planning (or workforce planning) is usually
considered to be a broad plan that impacts an organization’s entire workforce. The International
Public Management Association for HR (2010) defines workforce planning as strategic
alignment of an organization’s human capital with a focus on business that includes a methodical
process of analyzing the current workforce, determining future workforce needs, identifying the
gap between the present and future and implementing solutions so the organization can
accomplish its mission, goals and objectives.

Anderson (2008) defines succession planning as a future-oriented procedure where knowledge,

skills and abilities are identified that are necessary to a job, then a plan is developed to prepare

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multiple individuals to perform those jobs. Herra (2002) portrays succession planning as the
“who” and the “how” in staffing; who takes the place of an employee after the position becomes
vacant; and how the position is filled after the employee is gone.

SUCCESSION PLANNING IN THE FEDERAL GOVERNMENT

The federal government employs more than 1.9 million persons and represents the largest single
employer in the United States. More than half of these employees are scheduled to retire in the
next 20 years. Many of these employees hold management positions in government. 90 percent
of our nation’s federal managers run some of the largest public programs (Bilms, 2009).
Congress has recognized that there is a succession planning crisis in the United States. To that
effect they mandated the creation of a succession planning model for federal agencies.

In response to Congress, the United States Office of Personnel Management (OPM) created a
comprehensive 165 page document titled A Guide to the Strategic Leadership Succession
Management Model (2009). The OPM provides a very detailed step-by-step guide to succession
planning. Congress established (5 U.S.C. 4121) mandating that the head of each federal agency
shall establish a comprehensive management succession program to provide training to
employees to develop managers. Furthermore, the Federal Workplace Flexibility Act of 2004
requires all federal agency leaders to establish a succession program to develop future leaders in
consultation with the OPM. “OPM recognizes the need for a strategic succession planning
system for strengthening current and future organizational leadership capacity rather than just
replacing individuals” (U.S. Office of Personnel Management, 2009).

OPM reports that there will be “large deficits in leadership” in the 21st century, and they
designed this model to “build leadership capacity and shape Federal agency leadership.” OPM
developed the Strategic Leadership Succession Management Model (SLSM Model) in
conjunction with the Human Capital Assessment and Accountability Framework (HCAAF) for
federal employees. The Chief Human Capital Officers (CHCO) Act of 2002 sets up expectations
for human capital management in government. The HCAAF, in conjunction with the OPM, and
in accordance with all of these federal laws and mandates, developed the following five human
capital systems as the core of the SLSM Model:

1. Strategic Alignment Planning and Goal Setting

2. Leadership and Knowledge Management Implementation

3. Results-Oriented Performance Culture Implementation

4. Talent Management Implementation

5. Accountability Evaluating Results

Defining and understanding each of the five human capital systems of the SLSM Model is
crucial to implementation. The strategic alignment system is led by the upper level management
team to ensure the initiative is aligned with the “the agency mission, goals, objectives through
analysis, planning, investment, measurement, and management of human capital programs.”
Some of this language carries many similarities with strategic planning literature which offers a

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streamlined succession planning that does more than seeking continuity from one leader to the
next. Key to the success of this system is change management, integrity and inspiring employee
commitment, continuous learning, and knowledge management. The Results-Oriented
Performance Center system enables performance management and awards systems and programs
to be enacted and maintained. The Talent Management system identifies “competency gaps,
particularly in mission-critical occupations” and ensures recruitment for these positions. The
Accountability system is the monitoring, assessment, and evaluation arm of the HCAAF. By
addressing benchmark strength, accountability gaps and talent needs, it is possible to make
succession planning an urgent priority.

The OPM (2009) established five phases of implementation for the SLSM Model: 1) establish
strategic alignment (analyze requirements, develop business plan); 2) identify succession targets
& analyze talent pool; 3) develop succession management plan (analyze current policies,
programs, practices, identify strategies, develop implementation plan, develop evaluation and
accountability plan); 4) implement succession plan (and accompanying strategies for
recruitment, selection, development and retention including collection of metrics data); and 5)
evaluate succession strategies by analyzing results and recommending improvements.

STRATEGIC SUCCESSION PLANNING PROCESS

Linking and aligning succession management and other strategies with organizational mission
and goals is critical to the success of any succession program. Succession planning is not
strategic unless it includes a systematic way to comply with merit systems and representative
bureaucracies. Strategic succession planning includes a defined process and an understanding of
the benefits and barriers.

Strategic Succession Planning Process

Many types of strategic succession planning instruments and processes are available in the
private sector that could be modified to accommodate public agencies. We will examine one
model presented by Bohlander & Snell (2010) who purport succession planning as a strategic
planning process with six distinct steps: Step 1: Understand the mission, strategic vision and
core values of an organization; Step 2: Conduct an external analysis of the environment. This
involves a continuous scanning of the external environment and the major forces that influence
the organization; Step 3: Develop the strategic succession plan through an internal analysis of
environmental opportunities, threats, strengths and weaknesses, also known as a SWOT analysis
with emphasis on culture, capabilities and composition. To accomplish step three, governments
must know the composition of their workforce (strategic knowledge workers, core employees,
supporting labor, alliance partners) and how they interact. Step 4: Forecast into the future for
organizational threats, opportunities, weaknesses and strengths. This forecast must include
corporate strategy, strategic alliances, and business strategy. Forecasting the demand for future
employees can be accomplished quantitatively (through statistical analysis) and qualitatively
(through interviews, opinions and judgments), or through a combination of both methods.
Human capital readiness will be determined by applying this internal analysis to the key
processes of the organization. Step five: Implement the strategic plan. This is the time when
the new strategic plan is put into place. During this step, strategies are evaluated and the

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organizational capability to change and be flexible will be evident. Adjustments to current
employees working conditions and terms of employment may be deployed in this step. Step 6:
Evaluation and assessment, a continual process that ensures a strategic focus on succession
planning. Assessment activities must be continual to meet the needs of the agency in the future.

Benefits to Strategic Succession Planning

Helton & Jackson (2007) present the following benefits of succession planning, they (a) enable
organizations to assess its talent needs by establishing competency models; (b) allow leaders to
identify and tap key people who are available to fill critical work functions; (c) provide avenues
for present and future succession planning and discussions about how to develop talent; (d)
define career pathways for employees to increase the breadth and depth of their organizational
knowledge; (e) provide for a higher return on investment from employees and (f) lead to the
appropriate promotion of people to meet organizational goals.

Roddy (2004) indicates that succession planning is a critical component of human capital
management that must take a strategic look at the organization 10 years into the future. Plans
must evaluate technical skills, leadership skills, and management skills necessary to meet future
demands and expectations. Management skills involve hard skills (budgeting, problem solving,
time management, ability to develop business proposals) and soft skills (administration,
diversity, finance and reporting requirements). Roddy (2004) adds that mentoring and coaching
are a key component in succession planning, not just to build leadership capacity but to
strengthen organizational loyalty which will enhance the transfer of knowledge.

Another benefit of succession planning is the ability of organizations to hire strategically to

develop a diverse workforce. Diversity in culture, gender, age, and ethnic heritage enhances a
public organization’s ability to serve their diverse community. Diverse employees will also
bring new ideas to the organization and new ways to solve problems. To ensure the ability of the
agency to meet the public need, talent pools should be developed with a strategic emphasis on
diversity.

Barriers To Succession Planning

Succession planning may face many barriers in public agencies. First there may be a reluctance
of leaders to take on succession tasks. In addition there is the notion that the scope of a leader
does not mean providing for a smooth transition. There is also a lack of understanding on how to
frame succession. Should it be strategic positioning or replacing leaders? There is also a lack of
information on how to do strategic succession planning. These barriers exist in a context of a
political environment that has constant shifts and changes. According to the literature, many of
these barriers can be overcome by addressing organizational change and organizational culture
simultaneously.

The detailed OPM succession plan, and any succession plan, is not likely to succeed without
commitment by the leadership, constant communication, and alignment with the strategic plan of
each department. The OPM plan is very detailed will require motivated leaders to shepherd the
plan through an organization. Another problem is that the OPM mandate for federal agencies to

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do succession planning does not offer a budgetary incentive to commit each agency is set with
the task of budgeting for their succession planning. This means that there is likely to be a huge
variation in budgets depending on the level of commitment. Without specific federal dollars
budgeted, it is difficult to sell the importance and timeliness of succession planning in the public
sector.

Ongoing budgeting for succession management must not be an oversight. Conversely, the
budget crisis provides additional reasons to do succession planning. Succession plans must
become an integral part of government budgets. According to the Society for Human Resource
Management (Logan, 2008) “implementing a succession plan is one of the key strategies for
organizations to reduce turnover costs, and ensure for smooth transition.” Every hiring decision
must be a strategic hire that aligns with the succession plan. According to Bohlander (2010, p.
254) “the cost of hiring someone wrong for an intermediate position is approximately $20,000,
the cost of hiring someone for a wrong for a senior management position is $100,000.”

PROPOSAL

Significant to succession planning is the projected demographics of future workforces. We

propose that all public organizations take an immediate in depth look at their employee
demographics and determine employees who will be eligible to retire over the upcoming decade,
similar to the federal government’s OPM model. Friendly individual conversations with these
employees might establish a more accurate timeline of when they intend to retire, or determine if
they might be willing to remain in a full time or part time status after retirement age. Many
agencies may have to become more flexible to encourage these employees to remain.
Organizations may want to consider offering retirees partial benefits, more time off, and flexible
work schedules to retain older employees past their retirement threshold. Strategic succession
plans must be developed to determine if there are employees in the pipeline to promote, and if
there are potential employees in the external environment whose values and goals would match
the organization. The true costs of replacing retirees will need to be established, along with an
accurate budget and timeline using one or more of the existing succession planning instruments
developed for private or public organizations.

Organizations must also take a close look at the younger employees in their existing workforce
and determine which younger employees might be candidates for future promotion. If there is a
shortage of candidates with potential, the organization should focus on hiring. Organizations will
want to develop mentoring, coaching, training, and education programs to fast track all
individuals who have been identified as potential candidates for promotion. Organizations must
also consider the generational trends of the younger employees that will eventually become
future leaders. According to Green (2004) several generational characteristics of younger
employees must be considered when creating succession plans: (1) younger employees hired
today have shorter career cycles, they typically will not stay in same job in 20 years; (2) younger
employees not only accept but demand technology; (3) employees want to continually learn in
the workplace; and (4) there is renewed focus on lifestyle as a condition of employment.

These generational characteristics bring the realization that organizations will have to continually
develop and enhance the workplace with specific strategies and benefits to attract and retain

167
younger employees, while at the same time becoming more flexible and creative to retain both
older and younger employees. While flexibility and government are not often found in the same
context, governments will have to adapt to a more flexible workplace to attract and retain
employees of all ages.
CONCLUSION

Succession planning cannot be an afterthought. Without a focus on succession planning and a

willingness to implement one, the public service loses knowledge, skills and abilities on a daily
basis. While much emphasis has been placed on the transition of leaders, today’s succession
planning requires an organization wide effort of all talent in an organization. Succession
planning provides a proactive and future focused step-by-step methodology for organizational
leaders to assess, evaluate, and develop a pool of talented individuals who are willing to fill
positions when needed. Effective succession plans consider the quantity of available candidates
and focus on the quality of the candidates. Effective plans provide leaders with a strategy to tap
the institutional knowledge that would be lost due to retirement, promotion, and attrition.
Succession planning is a critical component of management at the every level of government.
Succession management is not only about leadership but also about representative government
talent and diversity. Talent pools should not just happen. There must be a deliberate effort by
government agencies to bring new talent and new diversity into the workplace. This does not
happen without strategic systematic methods such as succession planning.

IMPLICATIONS AND NEED FOR FURTHER RESEARCH.

Understanding the importance of succession planning would be of interest to all government

agency leaders. Although succession planning is common in the private sector, there is a gap in
research in public management succession planning. There is little empirical research on
succession planning in the public sector (Boyne and Dahya 2002). The next phase of this
research might be a quantitative study of age demographics of select government agencies and a
study of their individual succession plans. A qualitative study of agencies that have
implemented succession planning might include the degree of success they have managed. This
research would be of special interest to all public organizations, their leaders, their human
resource professionals, and the younger generation of potential leaders.

REFERENCES

[1] Anderson, C. (2008). How low should succession plans go? Society for Human Resource
Management Online.
[2] Bilmes, L. (2009, April 15). Help wanted in public service. The Boston Globe.
[3] Bohlander, G. & Snell, S. (2010) Managing Human Resources, (15 ed) South-Western
Cenage Learning.
[3] Boyne G. & Dahya J. (2002). Executive succession and the performance of public
organizations. Public Administration, 80(1), 179-200.
[4] Crumpacker M. & Crumpacker J. M. (2007) Succession planning and generational
stereotypes: should HR consider age-based values and attitudes a relevant factor or a passing
fad? Public Personnel Management 36(4), 349-369.

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[5] Green, M. E. (2000) Beware and prepare: the government workforce of the future. Public
Personnel Management 29 (4), p 435-444.
[6] Helton, K. A. & Jackson, R.D. (2007) Navigating Pennsylvania’s dynamic workforce:
succession planning in a complex environment, Public Personnel Management, 36:4, 335-347.
[7] Herrera, F. (2002) Demystifying succession planning. Employment Relations Today, 29:2; p.
25-31,
[8] Kim, S. (2003). Linking employee assessments to succession planning. Public Personnel
Management, 32(4), 533-547.
[9] Lavigna, R. J. & Hays, S. W. (2004) Recruitment and selection of public workers: an
international compendium of modern trends and practices. Public Personnel Management 33(3),
237-253.
[10] Liebowitz, J. (2004). Bridging the knowledge and skills gap: tapping federal retirees.
Public Personnel Management , 22(4), p. 421-448.
[11] Logan, K. (2008). Percentage of Employees Involved in Succession Plans. Society for
Human Resource Management, http://www.shrm.org/Research.
[12] Reester, K. & Braaten, M. (2008). Succession planning NOW, say Colorado municipal
executives. American Society for Public Administrators, May, page 3-4.
[13] Roddy, N. (2004) Leadership capacity building model: developing tomorrow’s leadership in
science and technology, an example in succession planning management. Public Personnel
Management 33(4), 487-496.
[14] Rothwell, W. J. (2005) Effective succession planning: ensuring leadership continuity and
building talent from within (3rd ed.) New York: Amacom.
[15] Schall, E. (1997). Public-sector succession: a strategic approach to sustaining innovation.
Public Administration Review, 57(1), 4-10.
[16] United States Census Bureau, Age and Special Populations Branch of the U.S. Census
(2008). Selected characteristics of baby boomers 42-60 years old in 2006. Retrieved November
18, 2009 from www.census.gov
[17] United States Office of Personnel Management (2009). A guide to the strategic leadership.
Retrieved November 18, 2009 from www.opm.gov/hrd/lead/index.asp

169
 ORGANIZATIONAL AND CAREER EXPECTATIONS OF TURKISH COLLEGE
STUDENTS

Tuğba Karabulut
İstanbul Commerce University, Faculty of Commercial Sciences, Dept. of Management
Selman-i Pak Cad. 34672 Üsküdar İstanbul Turkey
E-mail: tkarabulut@iticu.edu.tr
Phone: +90-216-5539422/2278 ext.

ABSTRACT

The purposes of this study are to explore the organizational and career expectations of Turkish
college students from companies which they will work for when they graduate. The study also
tries to find out the associations between sex and organizational characteristics, sex and career
offerings, work experience and organizational characteristics, and work experience and career
offerings. The study was conducted on 131 senior college students in the faculty commercial
sciences in a foundation university in Turkey. The frequency distribution analyses, mean
analyses and chi-square analyses were conducted to the data.

Keywords: Organizational Expectations, Career Expectations, Turkish College Students, Turkey

ORGANIZATIONAL CHARACTERISTICS AND CAREER OFFERINGS OF

COMPANIES

College students are aware of changes in organizational characteristics to figure out the
appropriate organization to work for. They prefer to work for modern, decentralized and team-
oriented companies which they can manage themselves and play leadership roles.

The characteristics of traditional organizations are centralization, hierarchy, formalization,

bureaucracy, labour sharing, work specialization, clearly expressed tasks, formation of structural
skills, authority, functional divisions, stability, coordination, top to bottom and written
communication [1][2]. Large, bureaucratic, and hierarchical structures can not respond to
environmental changes. Thus, companies have to restructure their organizations continuously to
adapt internal and external changes. Modern organizations have the following characteristics:
staff participation, the delegation of tasks and responsibilities, development of the
communication system, etc. [1]. The characteristics of entrepreneurial organizations are
autonomy, team oriented, minimum job description, innovation supportive, creative, horizontal,
bottom. Nowadays, functional, linear, linear-staff-organizations are criticized whereas matrix,
tensor, divisional, Likert’s organizational structures with communicating groups, network and
virtual organizations have become popular [2].

College students who are aware of global changes in career offerings can have high expectations
from companies. They prefer to work for companies which make long term career planning,

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provide safe working environment, personal development opportunities, comprehensive and
tailored compensation packages. The job market needs to know the characteristics and
expectations of students to tailor conditions to hire, retain and motivate them. Performance
appraisals are critical to determine the appropriate compensation strategy.

Companies can use 360 degree feedback evaluation method, rating scales, critical incident
method, essay method, work standards method, ranking method, forced distribution method,
behaviorally anchored rating scales method, and results based system as performance appraisal
methods [3, pp. 252-259]. Base pay, merit pay, incentive pays, sales incentives, bonuses, group-
based incentive plans, managerial and executive incentive pay are widely used pay system
methods [4, pp. 255-297]. Major objectives of companies in human resource management are
attracting, retaining, recognizing and motivating employees. Rewards can be categorized as
follows: individual rewards (base pay, contingent pay, incentives, bonuses, profit sharing,
shares), transactional rewards (pensions, healthcare, holidays, other perks, flexibility), relational
rewards (training, career development, learning and development) and communal rewards
(leadership, recognition, values, job design, achievement, work-life balance) [5, pp. 635-641].
Companies focus on flexible work arrangements such as flextime, telecommuting, permanent
part-time work, job sharing, compressed work weeks, more work/fewer hours to provide work-
life balance and adapt the needs of the business environment and workforce. Companies can
provide paid vacations, sick pay and paid time off, sabbaticals as payment for time not worked.
Employee services can include relocation, food services/subsidized cafeterias, financial services,
legal services, scholarships for dependents. Companies also focus on managing stress, repetitive
stress injuries, ergonomics, burnout, and physical fitness programs [3, pp. 317-377]. Employers
have to get precautions for employee safety, create a safety culture and provide training to
employees to understand nature hazards of the workplace, and safety rules [5, pp. 540-542].

STUDIES ON CAREER EXPECTATIONS OF STUDENTS

The needs of students from work can be determined as salary, work conditions, work guarantees,
good work atmosphere, understanding supervisor, good interpersonal relations, wish to belong a
social group, possibility to use skills and knowledge, quick career, prestige, possibilities of
promotion. A study conducted in Lithuania and Estonia shows that students have positive
attitudes to work. They want to work to have financial independence and continue their
education in lifelong learning concept. Most of the students want to perform as better as possible
regardless their salaries [6]. Job satisfaction, positive job attitudes, work ethics, social and
economic work motivations can determine positive work attitude [7]. A study conducted on
undergraduate business students in US shows that male students expect higher starting salaries
than female students [8]. According to a study conducted on Turkish college students, money
attitudes of college students relating to past and future were linked to some demographics
especially gender and age variables. Money in the past indicated that when families’ economic
situation change during childhood and the perception of importance of money for their family
members and themselves vary according to age and gender. It was found that happiness with a
financial situation during the past 6 months vary depending on age. On the other hand,
perceptions about their families’ financial position varied according to family type. Money in the

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future indicated that changes in expectations about their economic situation in the next 5 years
varied according to gender and age. However, expectations related to their country’s economic
situation in the next 5 years varied according to gender [9]. Novack & Novack (1996), Thorn &
Gilbert (1998), Sanders, Lengnick-Hall, Lengnick-Hall, & Steele-Clapp (1998), Stone & McKee
(2000), Peake & Harris (2002) conducted studies in the literature about the future expectations of
work and family activities of students [10]. A study shows that family leave, sick leave and
vacation leave are more important to women than to men. Women also believe that maternity
leave and paternity leave are more important than men. Family leave is the most important
benefit for both women and men [11].

METHODOLOGY

This study is a leading study to determine organizational and career expectations of Turkish
college students. The purposes of this study are to explore the organizational and career
expectations of Turkish college students from companies which they will work for when they
graduate. The study also tries to find out the associations between sex and organizational
characteristics, sex and career offerings, work experience and organizational characteristics,
work experience and career offerings. The study was conducted on 131 senior college students in
the faculty of commercial sciences in a foundation university in Turkey. These students took
courses in the fields of management and human resource management. The data was collected
via questionnaire which had questions in three sections. The first section consists of questions
about sex, age, major and work experiences of students. The second section has 19 questions
about organizational expectations of students. The third section has 29 questions about career
expections of students. The 5 point Likert scale was used to learn expectations of students for the
second and the third sections. The questionnaires were filled by students before their courses in
their classrooms. The frequency distribution analyses, mean analyses and chi-square analyses
were conducted to the data. The 5% significance level is used for chi square analyses. The
observed frequencies were merged to conduct chi-square analyses (very important and important
were merged as one of the observed frequency whereas very unimportant, unimportant, neither
important, nor unimportant were merged as another observed frequency in a crosstab).

FINDINGS OF THE STUDY

The findings of the study show that 55% of respondents are males whereas 45% of them are
females. When the ages of the respondents are analyzed, 32% of respondents are 23 years old,
30% of them are 22 years old, 13% of them are 24 years old, 13% of them are 21 years old, 9%
of them are 25 years old and 3% of them are more than 25 years old. The findings show that 34%
of respondents are international trade major, 25% them are business administration major, 21%
of them are banking and finance major and 20% of them are tourism major. Most of the students
(59%) worked in any business whereas few of them (41%) did not have any job experience
except internships. Most of the respondents (64%) have less than a year job experience. On the
other hand, 26% of respondents have more than 2 years and 10% of respondents have 1-2 years
job experiences. The Cronbach´s Alpha for organizational characteristics is 0,748 whereas the
Cronbach´s Alpha for career offerings is 0,866.

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Table I. Importance of Organizational Characteristics of The Company

Neither
Very Important, Nor Very
ORGANIZATIONAL CHARACTERISTICS OF Important Important Unimportant Unimportant Unimportant Total Missing Total Std.
THE COMPANY n (%) n (%) n (%) n (%) n (%) n (%) n (%) n (%) Mean Dev.
1. The company is institutionalized 61 (46,6) 59 (45,0) 7 (5,3) 3 (2,3) 0 (0) 130 (99,2) 1 (0,8) 131(100,0) 4,369 0,695
2. The general manager and key managers of the
company are professional managers 52 (39,7) 69 (52,7) 8 (6,1) 0 (0) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,341 0,593
3. Job descriptions of employees are written 61 (46,6) 49 (37,4) 15 (11,5) 6 (4,6) 0 (0) 131 (100,0) 4,260 0,838
4. Authorities of employees are written 49 (37,4) 54 (41,2) 20 (15,3) 7 (5,3) 1 (0,8) 131 (100,0) 4,092 0,898
5. Responsibilities of employees are written 43 (32,8) 51 (38,9) 24 (18,3) 4 (3,1) 3 (2,3) 125 (95,4) 6 (4,6) 131(100,0) 4,016 0,942
6. Relations of employees with people inside and
outside of organization are written & determined 17 (13,0) 51 (38,9) 37 (28,2) 15 (11,5) 11 (8,4) 131 (100,0) 3,366 1,111
7. Performance appraisals of employees are
conducted based on their job descriptions,
systematically & regularly 35 (26,7) 71 (54,2) 19 (14,5) 2 (1,5) 0 (0) 127 (96,9) 4 (3,1) 131(100,0) 4,095 0,695
8. Awards of employees are based on their
performance appraisals 57 (43,5) 54 (41,2) 17 (13,0) 0 (0) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,313 0,696
9. The organizational structure of the company is
hierarchical 19 (14,5) 53 (40,5) 40 (30,5) 13 (9,9) 6 (4,6) 131 (100,0) 3,504 1,011
10. The manager-subordinate relations are based
on giving commands & sending reports 13 (9,9) 47 (35,9) 36 (27,5) 23 (17,6) 10 (7,6) 129 (98,5) 2 (1,5) 131(100,0) 3,233 1,101
11. The decisions are made centrally by top
management 25 (19,1) 57 (43,5) 30 (22,9) 13 (9,9) 3 (2,3) 128 (97,7) 3 (2,3) 131(100,0) 3,688 0,978
12. The manager makes decisions by himself
without the participation of subordinates 18 (13,7) 33 (25,2) 23 (17,6) 29 (22,1) 24 (18,3) 127 (96,9) 4 (3,1) 131(100,0) 2,937 1,350
13. Employees are tied (bound) to one manager 14 (10,7) 37 (28,2) 43 (32,8) 23 (17,6) 9 (6,9) 126 (96,2) 5 (3,8) 131(100,0) 3,191 1,086
14. Employees can work in teams with their
colleagues 47 (35,9) 58 (44,3) 22 (16,8) 1 (0,8) 2 (1,5) 130 (99,2) 1 (0,8) 131(100,0) 4,131 0,830
15. Employees can manage themselves (being
autonomous) 57 (43,5) 55 (42,0) 14 (10,7) 2 (1,5) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,305 0,727
16. Giving authority to employees to use
organizational resources 67 (51,1) 50 (38,2) 12 (9,2) 1 (0,8) 0 (0) 130 (99,2) 1 (0,8) 131(100,0) 4,408 0,690
17. Forming innovative/creative organization
climate 73 (55,7) 45 (34,4) 11 (8,4) 2 (1,5) 0 (0) 131 (100,0) 4,443 0,714
18. The organization has a leader 49 (37,4) 61 (46,6) 16 (12,2) 4 (3,1) 0 (0) 130 (99,2) 1 (0,8) 131(100,0) 4,192 0,769
19. Developing leadership characteristics of
employees 56 (42,7) 60 (45,8) 12 (9,2) 2 (1,5) 1 (0,8) 131 (100,0) 4,282 0,757

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The findings about the importance of organizational characteristics of the company show that
students prefer to work in modern, decentralized organizations which support
innovation/creativity (Table I). They would like to manage themselves and have authorities to
use organizational resources. On the other hand, students are aware of the importance of
institutionalization and prefer to work institutional organizations where they can work with
professional managers and be awarded based on their performance appraisals.

Maslow define five needs of people. They are physiological needs, safety/security needs,
love/belonging needs, esteem needs and self-actualization needs. Herzberg distinguishes two
factors which companies need to provide for their employees: hygiene factors and motivation
factors. Work itself, responsibility, achievement, recognition, advancement and growth are
hygiene factors whereas working conditions, job security, company’s policies and
administration, salary, supervision, interpersonal relations and status are motivation factors
[12, p. 53-702]. Providing legal social security insurance, clean and modern working place,
meal coupons/meals, and shuttle service for employees satisfy physiological and security
needs of employees. They can also be considered as hygiene factors. However, promoting
employees satisfy self-actualization needs of employees. It can be considered as motivation
factor. Hygiene and motivation factors can vary depending upon the development level of a
country. Providing flexible working hours, distance working opportunities, nursery, gym,
maternal/paternal leave and family leave can be considered as hygiene factors for employees
in developed countries such as US. However, these factors can be motivation factors for
employees in developing countries such as Turkey. Promoting, providing long term career
planning, good business relations, prestige, career opportunities abroad and in the country,
nonmonetary rewards, training and personal development can be considered as motivation
factors in Turkey. Although there are laws and regulations in Turkey, there are also several
companies which work off-the book. The GNP per capita is around 10.000 USD. Although
respondent students attend to a foundation university and pay tuitions around 8.000 USD
every year, they seem that they are aware of the real working conditions in Turkey. They
don’t have very high expectations from companies which they will work in the future. When
the findings about the importance of career offerings of the company are analyzed (Table II),
it is found out that students would like to satisfy their physiological and safety/security needs.
They focus on finding hygiene factors more than motivation factors in their workplaces. They
want to be promoted to satisfy their self-actualization needs.

It is also tried to determine the associations between sex and organizational characteristics,
sex and career offerings, work experience and organizational characteristics, work experience
and career offerings in this paper. The rejected hypotheses are shown in Table III. It can be
concluded that employers in Turkey need to consider sexes and work experiences of their
employees to determine organizational characteristics and career offerings of their
companies. Female students give more importance to work for organizations where they can
work independently, have authority to use organizational resources and behave according to
work ethics than male students. They also give more importance to work for organizations
which will provide shuttle service, good business relations, career opportunities abroad,
nonmonetary rewards, maternal/paternal leave and nursery, gym etc. than male students.
Students who have work experiences give more importance to work in organizations which
have leaders than students who don’t have work experiences. Female students prefer to work
in decentralized and ethical organizations which will help them to improve themselves and
ease their lives more than male students. On the other hand, students who have work
experiences want to work with leaders more than students who don’t have work experiences.

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Table II. Importance of Career Offerings of the Company
Neither
Very Important, Nor Very
Important Important Unimportant Unimportant Unimportant Total Missing Total Std.
CAREER OFFERINGS OF THE COMPANY n (%) n (%) n (%) n (%) n (%) n (%) n (%) n (%) Mean Dev.
1. Providing long term career planning for employees 63 (48,1) 57 (43,5) 8 (6,1) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,411 0,645
2. Providing sector average salaries to employees 64 (48,9) 58 (44,3) 6 (4,6) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,434 0,623
3. Providing legal social security insurance to employees 91 (69,5) 29 (22,1) 8 (6,1) 1 (0,8) 0 (0) 129 (98,5) 2 (1,5) 131(100,0) 4,628 0,638
4. Providing private health insurance to employees 71 (54,2) 45 (34,4) 10 (7,6) 2 (1,5) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,445 0,708
5. Providing private retirement insurance (pension) for
employees 63 (48,1) 50 (38,2) 15 (11,5) 0 (0) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,375 0,687
6. Providing meal coupons/meals to employees 88 (67,2) 30 (22,9) 10 (7,6) 0 (0) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,609 0,631
7. Providing shuttle service for employees 81 (61,8) 35 (26,7) 8 (6,1) 4 (3,1) 0 (0) 128 (97,7) 3 (2,3) 131(100,0) 4,508 0,753
8. The working place is clean and modern 88 (67,2) 33 (25,2) 4 (3,1) 2 (1,5) 1 (0,8) 128 (97,7) 2 (2,3) 131(100,0) 4,602 0,703
9. The job requires travel in the country 22 (16,8) 28 (21,4) 61 (46,6) 15 (11,5) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,395 0,980
10. The job requires travel abroad 22 (16,8) 36 (27,5) 51 (38,9) 17 (13,0) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,442 0,999
11. Providing good business relations (network) 47 (35,9) 63 (48,1) 16 (12,2) 3 (2,3) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,194 0,740
12. Providing career opportunities in the country 52 (39,7) 60 (45,8) 15 (11,5) 1 (0,8) 0 (0) 128 (97,7) 3 (2,3) 131 (100,0) 4,266 0,726
13. Providing prestige to careers and personal lives of employees 56 (42,7) 54 (41,2) 14 (10,7) 2 (1,5) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 4,250 0,832
14. Providing career opportunities abroad 48 (36,6) 52 (39,7) 23 (17,6) 3 (2,3) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 4,078 0,924
15. Providing company cars to employees 39 (29,8) 49 (37,4) 28 (21,4) 8 (6,1) 5 (3,8) 129 (98,5) 2 (1,5) 131 (100,0) 3,845 1,049
16. Providing company cell phones, laptop etc. to employees 47 (35,9) 52 (39,7) 21 (16,0) 7 (5,3) 2 (1,5) 129 (98,5) 2 (1,5) 131 (100,0) 4,047 0,943
17. Providing monetary rewards to employees 73 (55,7) 43 (32,8) 8 (6,1) 3 (2,3) 0 (0) 127 (96,9) 4 (3,1) 131 (100,0) 4,465 0,722
18. Providing company stocks to employees as monetary rewards 36 (27,5) 53 (40,5) 34 (26,0) 3 (2,3) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 3,922 0,884
19. Providing nonmonetary rewards to employees 69 (52,7) 38 (29,0) 18 (13,7) 4 (3,1) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,333 0,832
20. Promoting employees 91 (69,5) 32 (24,4) 6 (4,6) 0 (0) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,659 0,566
21. Providing precautions for work safety of employees in the
workplace 77 (58,8) 43 (32,8) 8 (6,1) 0 (0) 0 (0) 128 (97,7) 3 (2,3) 131 (100,0) 4,539 0,614
22. Providing arrrangements in machineries & tools for
employees to work comfortably & appropriately 65 (49,6) 55 (42,0) 7 (5,3) 1 (0,8) 0 (0) 128 (97,7) 3 (2,3) 131 (100,0) 4,438 0,637
23. Providing training & personal development opportunities to 0 (0)
employees 69 (52,7) 52 (39,7) 7 (5,3) 1 (0,8) 129 (98,5) 2 (1,5) 131 (100,0) 4,458 0,673
24. Behaving according to work ethics in the organization 67 (51,1) 51 (38,9) 9 (6,9) 2 (1,5) 0 (0) 129 (98,5) 2 (1,5) 131 (100,0) 4,419 0,693
25. Providing flexible working hours to employees 42 (32,1) 58 (44,3) 24 (18,3) 3 (2,3) 2 (1,5) 129 (98,5) 2 (1,5) 131 (100,0) 4,047 0,865
26. Providing distance working opportunities to employees 36 (27,5) 42 (32,1) 38 (29,0) 10 (7,6) 3 (2,3) 129 (98,5) 2 (1,5) 131 (100,0) 3,760 1,042
27. Providing nursery, gym etc. to employees 45 (34,4) 42 (32,1) 30 (22,9) 9 (6,9) 2 (1,5) 128 (97,7) 3 (2,3) 131 (100,0) 3,930 1,005
28. Providing maternal/paternal leave to employees 71 (54,2) 34 (26,0) 9 (6,9) 5 (3,8) 5 (3,8) 124 (94,7) 7 (5,3) 131 (100,0) 4,298 1,040
29. Providing family leave for employees for their sick relatives 69 (52,7) 49 (37,4) 8 (6,1) 2 (1,5) 1 (0,8) 129 (98,5) 2 (1,5) 131 (100,0) 4,419 0,747

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Table III. The Rejected Hypotheses of The Study & Results of The Chi Square Analyses
Hypotheses df X2 P Table Results
value
H1: There is no association 1 5,206 0,023 3,84 The null hypothesis is rejected at the 5%
between sex and being level. There is an evidence in the data
autonomous (employees can against the hypothesis.
manage themselves)
H2: There is no association between sex 1 5,245 0,022 3,84 The null hypothesis is rejected at the 5%
and giving authority to employees to use level. There is an evidence in the data
organizational resources against the hypothesis.
H3: There is no association between sex 1 7,307 0,007 3,84 The null hypothesis is rejected at the 5%
and providing shuttle service for level. There is an evidence in the data
employees against the hypothesis.
H4: There is no association between sex 1 8,052 0,005 3,84 The null hypothesis is rejected at the 5%
and providing good business relations level. There is an evidence in the data
against the hypothesis.
H5: There is no association between sex 1 4,966 0,026 3,84 The null hypothesis is rejected at the 5%
and providing career opportunities abroad level. There is an evidence in the data
against the hypothesis.
H6: There is no association between sex 1 8,114 0,004 3,84 The null hypothesis is rejected at the 5%
and providing nonmonetary rewards to level. There is an evidence in the data
employees against the hypothesis.
H7: There is no association between sex 1 6,507 0,011 3,84 The null hypothesis is rejected at the 5%
and behaving according to work ethics in level. There is an evidence in the data
the organization against the hypothesis.
H8: There is no association between sex 1 6,873 0,009 3,84 The null hypothesis is rejected at the 5%
and providing nursery, gym etc. to level. There is an evidence in the data
employees against the hypothesis.
H9: There is no association between sex 1 15,530 0 3,84 The null hypothesis is rejected at the 5%
and providing maternal/paternal leave to level. There is an evidence in the data
employees against the hypothesis.
H10: There is no association between 1 8,527 0,003 3,84 The null hypothesis is rejected at the 5%
having work experience and having a level. There is an evidence in the data
leader in the organization against the hypothesis.

CONCLUSION

Turkey is a developing country. Almost 99% of companies are SMEs in Turkey. Most of
them are noninstitutionalized family businesses. Functional organizational structure is widely
used by companies. Several public and private companies use bureaucratic management
style. Students in this study have learned modern organizational structures but they have not
experienced them. They prefer to work in modern, decentralized organizations which offer
creative/innovative organizational climate, being autonomous and having authority to use
organizational resources. On the other hand, they give importance to institutionalization, and
being awarded based on performance appraisals. Turkish students have low career
expectations. First, they focus on satisfying their physiological and safety/security needs by
having sector average salaries, legal social security, meals, safe, clean, modern, comfortable
working place. They give importance to work ethics and family leave. They focus on hygiene
factors more than motivation factors. However, they also focus on promotion and training
and personal development to satisfy their self-actualization needs. Having nonmonetary
rewards, network, prestige, national and international career opportunities are not their
priorities. They do not demand comprehensive compensation packets. They don’t care alot
about travel requirements of their jobs. Their major focus is not having company cars,
176
laptops, etc. Since, respondent students have not experienced real worklife, they can not
judge its difficulties and opportunities. On the other hand, there are differences between
female and male students for their organizational and career expectations. Female students
give more importance to work for modern, decentralized, and ethical organizations where
they can be appreciated, satisfy their self-actualization needs and work easily than male
students. Students who have work experiences understand the importance of working with
leaders more than students who do not have work experiences. This study is a leading study
to determine organizational and career expectations of Turkish college students. Cross-
cultural studies can be conducted to find out the differences in the expectations of students in
developed and developing countries. Conducting this study in only one foundation university
in Turkey and its sample size are major limitations of this study. If this study is conducted on
larger sample of students, other differences can be observed between male and female
students, and students who have work experiences and students who don’t have work
experiences. However, it is a leading study in Turkey to figure out organizational and career
expectations of college students. As it is observed that Turkish college students are not very
demanding about organizational characteristics and career offerings of companies. It is
believed that when the development level of Turkey increases, students will be more
demanding about their organizations and careers. Companies can use the findings of this
study to make organizational changes and customize their offerings to new graduates.

* This paper is financially supported by Istanbul Commerce University.

REFERENCES

[1] Kubrak, A., Koval, K., Kavaliauskas, V., & Sakalas, A. Organizational Structure
Forming Problems in Modern Industrial Enterprise. Engineering Economics, 2007, 1(51),
103-109.
[2] Sakalas, A., & Venskus, R. Interaction of Learning Organization and Organizational
Structure. Engineering Economics, 2007, 3(53), 65-70.
[3] Mondy, R.W. Human Resource Management. Upper Saddle River, N.J.: Pearson Prentice
Hall, 2008.
[4] Bernardin, H.J. Human Resource Management: An Experiential Approach. International
Fourth Edition, Boston: McGraw Hill, 2007.
[5] Torrington, D., Hall, L. & Taylor, S. Human Resource Management. 7th Edition, Harlow:
FT Prentice Hall, 2008.
[6] Kumpikaite V., & Alas, R. Students’ Attitudes to Work and Studies: Practical Case.
Economics and Management, 2009, 14, 582-588.
[7] Josiam, B.M., Crutsinger, C., Reynolds, J.S., Dotter, T-V., Thozhur, S., Baum, T., &
Devine, F.G. An Empirical Study of the Work Attitudes of Generation Y College Students in
the USA: The Case of Hospitality and Merchandising Undergraduate Majors. Journal of
Services Research, 2009, 9(1), 15-30.
[8] Black, G.S., & Benavides, A. Socioeconomic Factors and Business Student Plans and
Expectations. Atlantic Economic Journal, 2008, 36, 365-366.
[9] Özgen Ö. & Bayoğlu, A.S. Turkish College Students’ Attitudes Towards Money.
International Journal of Consumer Studies, 2005, 29(6), 493-501.

177
[10] Weer, C.H., Greenhouse, J.H., Colakoglu, S.N., & Foley, S. The Role of Maternal
Employment, Role-Altering Strategies, and Gender in College Students’ Expectatitions of
Work-Family Conflict. Sex Roles, 2006, 55, 535-544.
[11] Waner, K.K., Winter, J.K., & Mansfield, J.C. Family Benefits-What are Students’
Attitudes and Expectations by Gender? Journal of Education for Business, 2007, 82(5), 291-
294.
[12] Daft, R.L. The New Era of Management. Mason, Ohio: Thomson-South Western, 2006.

178
 TEACHERS’ CULTURAL VALUES AND CONFLICT APPROACHES

Aylin Kirisci Ali Ilker Gumuseli

Yildiz Technical University Yildiz Technical University
Faculty of Education Faculty of Education
Istanbul-Turkey Istanbul-Turkey
aylinkirisci@gmail.com aligumuseli@gmail.com
Phone: +90 0505 887 71 68 Phone: +90 212 383 48 20
Fax: +90 212 383 48 08

ABSTRACT

This study aims to figure out whether there are statistically significant relationships between
teachers’ value preferences and approaches to conflict. Among value groups, teachers prefer
mostly self-transcendence, secondly conservation, thirdly openness to change, and lastly,
self-enhancement. The mean of the traditional approach statements of teachers to conflict is
higher than the mean of their modern approach statements. There is a positive correlation
between the modern approaches to conflict and the value placed on openness to change value
group. There are positive correlations between the traditional approaches to conflict and the
value placed on openness to change, conservatism, self-enhancement and self-transcendence.

Keywords: value, culture, conflict, teachers

CULTURE AND VALUES

The concept of culture is a widely analyzed social subject, and it gains different meanings as
various disciplines define it in their own boundaries. Therefore there is no consensus on its
definition. In support, in the words of Hofstede [7, p.25]: “Culture is to a human collectivity
what personality is to an individual”. In the present study, the following definition is utilized,
based on Hofstede [7] [9], Kluckhohn & Strodtbeck [13], Triandis [26], Bodur & Kabasakal
[3] and Harcar [6]’s work: “Culture distinguishes the members of one human group from
another; has been developed throughout the history; consists of traditional (i.e. historically
derived and selected) ideas, values, attitudes and common behaviors.”

Schwartz [23] has pointed out that values are considered the most appropriate means for
measuring and comparing two cultures. Schwartz and Bilsky [21] define values as people’s
conceptions of goals that serve as guiding principles in their lives. They classify the value
types into ten and then divide these ten value types into two dimensions. The first dimension
represents “openness to change” (combining value types of self-direction and stimulation)
versus “conservation” (combining security, conformity and tradition). The second dimension
represents “self-transcendence” (combining benevolence and universalism) versus “self-
enhancement” (combining power and achievement)”. Hedonism value type is related to both
openness to change and self-enhancement value groups [22, p.90] [25]:

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 CULTURAL VALUES AND CONFLICT MANAGEMENT

Conflict is inevitable among humans. When two or more social entities (i.e. individuals,
groups, organizations and nations) come into contact with one another, there may be
inconsistent relationships due to different attitudes, values, beliefs and skills. Conflict is a
crucial concept for organizations as well as social issues. As Baron [2, p.198] indicates,
“Organizational conflict is an important topic for both managers and for scientists interested
in understanding the nature of organizational processes”. There are three views about
organizational conflict [19, pp.7-15]: According to the classical organization theorists such as
Fayol, Gulick and Urwick, Taylor, Weber conflict was detrimental to organizational
efficiency and should be minimized. Organizational effectiveness could only be possible via
harmony, cooperation and the absence of conflict. Again neo-classical organization theorists
such as Mayo, Lewin, and Whyte viewed conflict as an evil, a symptom of the lack of social
skills. So they tried to eliminate it by improving the social system of the organization.
However the modern view of conflict emphasizes the necessity of conflict, and states that
“healthy” organizations should have intra-organizational conflict to a certain extent. A
moderate amount of conflict is not necessarily dysfunctional for organizations.

OBJECTIVES OF THE STUDY

The main aim of this study is to verify the personal value preferences of teachers having
various socio-economic and ethnic backgrounds, at different maturity levels, having different
interests and abilities, different needs and points of view, and their perceptions of conflicts.

In order to attain the objectives, the following research questions were asked:
1. What are the cultural value preferences of teachers?
2. What are the teachers’ approaches to conflict?
3. Are there any statistically significant relationships between teachers’ cultural value
preferences and approaches to conflict?

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 METHOD

Sample

The universe participants of this study are the teachers working at 81 public schools in the
counties of Sisli and Esenler in Istanbul, Turkey. There is a total of 3674 teachers working in
these schools. By random sampling, data were collected from 367 teachers; 201 from Sisli
and 165 from Esenler (the two counties of Istanbul having different socio-economic
background) during the 2008-2009 education year.

Measures

Data were collected by means of a questionnaire containing closed-ended questions. The

questionnaire has got three sections: 7 multiple choice questions of demographic information,
followed by Schwartz’s Value Survey consisting of 57 values, and the Survey of Approaches
to Conflict [12] consisting of 22 items. Data were analyzed by percentage, arithmetical mean,
standard deviation, and series of t-tests, ANOVA and LSD tests and Pearson product –
correlation.

RESULTS AND DISCUSSION

Results about the Cultural Values of Teachers

The value preferences of teachers according to the Schwartz’s two dimensions are given in
Table I:
Table I: Mean and Standard Deviation of Teachers’ Value Preferences

Values N S
Openness to Change 367 4.045 1.014
Conservation 367 4.432 0.875
Self-Enhancement 367 3.808 1.062
Self-Transcendence 367 4.977 0.871

As it is seen from the table, Turkish teachers value self-transcendence ( =4,977) more than
others. To prioritize, conservatism ( =4,432) is the second, openness to change ( =4,045) is
the third, and self-enhancement ( = 3,808) is the last value.
It is very favorable and positive that teachers chose self transcendence as the first value group
in ranking. Because self transcendence value group consists of the values supporting the
refusal of selfishness for the benefit of the people and the nature. In this regard, the results are
in consistent with the expectations and coherent with the values that are desired to be
internalized by teachers. Teachers chose conservation as the second value group in ranking.
Conservation consists of conformity and security value types, is very much in line with the
social structure of Turkish people. Furthermore Schwartz [23] put conservation and self
transcendence value groups under the umbrella of collectivism. Therefore it can be inferred
that teachers are in consistent with the collectivist structure of Turkish society [1] [9] [18]
[20]. The third value group chosen by teachers was found as openness to change. Turkish
culture highlights the importance of the maintenance of custom and usage and finds change
as a malign thing [4]. On the other hand, Turkish society has a new structure adopting the
western technology, institutions and approaches over the traditional values [15]. Therefore
we can say that quite naturally teachers discount the value type of openness to change. The
181
last value group in the rank was found as self enhancement which includes the value types of
power, achievement and hedonism. We can say that this is reasonably appropriate to the
requirements of being a teacher and appropriate to the expectations.

Results about the Conflict Approaches of Teachers

The teachers’ approaches to conflict are given in Table II:

Table II: Mean and Standard Deviation of Teachers’ Approaches to Conflict

Values N S
Modern Approach 367 2.965 0.805
Traditional Approach 367 3.304 0.750

As seen from the table, Turkish teachers’ approaches to conflict are respectively
= 2,965 and = 3,304 on a scale of 5 point Likert. Just looking at the means, we can say
that although traditional approach has a higher mean, teachers said “neither agree nor
disagree” for both traditional and modern approaches. This can be interpreted as Kongar [14]
indicated: “Turkish society has lost its traditional values though lots of reforms placed with
the republican era and it hasn’t possessed the “modern” characteristics yet. Moreover the
relationship among people hasn’t taken shape of a stabilized capitalist relation as it is in
Western societies and so Turkish society is not a real industrialized society.” Kozan and
Ergin [17, p. 406] think similarly: “Turkey is a country in transition to mature industrialized
society, and its culture reflects a duality created by the coexistence of Western institutions
and traditional values […..] This is reflected in a high power distance score indicating low
participation and reluctance to disagree with superiors [7].”

On the other hand this result can mean that teachers don’t find conflict as a chance for
revolution or change, but rather, as a violation of order and a problem that should
immediately be solved. This can be a result of bureaucratic structure and being a civil
servant. Because government agencies and state-owned companies are subject to by-laws and
regulations so as Kozan and Ergin [16, p. 255] claims, formal mechanisms may substitute for
the traditional methods of conflict resolution used in the society.

Results about the Relationship between the Cultural Values and Conflict Approaches of
Teachers

As it is seen from the table III, a positive relationship between the modern approach to
conflict and the openness to change value group is observed:

Table III: Regression Analysis between the Modern Approach and Openness to Change
Value Group
Dependent Variable: Modern Approach
Independent Variables Coefficients Standard Error t-statistic P
Constant 2.61927 0.17222 15.20922 0.00000
Openness To Change 0.08556 0.04130 2.07140 0.03902*
*p<.05
Modern approach sees conflict as an inevitable occurrence and accepts it to a certain extent as
a prerequisite for efficiency. On the other hand unmanaged or uncontrolled conflicts are
dysfunctional [11, p.9]. Openness to change value group combines value types of self-

182
direction and stimulation. Self-direction means independent thought and action-choosing,
creating and exploring; stimulation means excitement, novelty, and challenge in life [24].
In the light of these definitions, it is very reasonable to say that teachers who prefer openness
to change value group are brave and open to take risks so they don’t hesitate in taking part in
conflicts, and even they can start conflict when necessary.
There is a positive relationship between the traditional approach to conflict and openness to
change value group. The table below shows this:

Table IV: Regression Analysis between the Traditional Approach and Openness to
Change
Dependent Variable: Traditional Approach
Independent Variables Coefficients Standard Error t-statistic P
Constant 2.99044 0.24431 18.63602 0.00000
Openness to Change 0.07751 0.04835 2.01398 0.04475*
*p<.05
This is an unexpected result, because traditional approach advocates conflict as an evil and
dysfunctional whereas people standing in the openness to change value group are brave and
take risks, they are independent and they favor change to passive self-restriction. Teachers
adopting such values are expected to prefer modern approach.
However statistical results show that teachers in openness to change value group prefer
traditional approach during conflict. This may be the reflection of being a civil servant and
working in a government school. Because as Kozan and Ergin [16, p. 255] states: “Compared
to private companies, government agencies and state owned companies are subject to a
myriad of laws, by-laws, and regulations. These place restrictions on the conflict
management choices available to members. Formal mechanisms may substitute for the
traditional methods of conflict resolution used in the society. The whim of personality and the
role of personal values in administrative decisions are comparatively more limited in state
bureaucracies.”
From a different point of view, teachers who are situated in the openness to change value
group are self indulgent, challenging, and independent, they choose their own goals, so
during conflicts their being self assertive, obstinate and oppressive, in other words their
adoption of traditional approach to conflict is not an unsurprising thing. We can say that the
government organizations choose traditional approach to conflict according to their
administration strategies. Because of this, it may not be an inconsistent situation that self
indulgent and brave teachers favoring the change adopt traditional approach in order not to
submit the suppressive structure of conflict in government schools.
There is a statistically significant positive relationship between the traditional approach and
conservatism value group. Table V shows this relationship:

Table V: Regression Analysis between the Traditional Approach and Conservatism

Value Group
Dependent Variable: Traditional Approach
Independent Variables Coefficients Standard Errors t-statistic P
Constant 2.21858 0.19412 11.42879 0.00000
Conservatism 0.24491 0.04298 5.69876 0.00000*
*p<.05
This is an expected result, because teachers who have traditional approach to conflict most
probably adopt traditional value group combining tradition, conformity and security value
types. So we can say that, teachers favoring harmony and stability of society and
relationships; restraint of actions, inclinations likely to upset or harm others and violate social

183
expectations or norms; being moderate, humble, devout and respectful for tradition, see
conflict as an undesirable occurrence and do their best to suppress it.
There is a statistically significant positive relationship between the traditional approach and
self enhancement value group. The table below shows this:

Table VI: Regression Analysis between the Traditional Approach and Self-
Enhancement Value Group
Dependent Variable: Traditional Approach
Independent Variables Coefficients Standard Errors t-statistic P
Constant 2.91886 0.14457 20.18963 0.00000
Self Enhancement 0.10113 0.03657 2.76488 0.00598*
*p<.05

The self enhancement value group is an orientation toward self-interest which means priority
of individual interest. It includes the value types of power, achievement and hedonism.
Therefore, it is not a surprising result that teachers who adopt these values see conflict from
the traditional viewpoint and try to suppress it by using force and dominance. As a value type
power stresses “social status and prestige, control or dominance over people and resources”
[23, p.3] Similarly, Kozan and Ergin [16, p.253] expected a relationship between forcing (i.e.
competing, dominating) style in conflict and values of power and achievement.

There is a statistically significant positive relationship between the traditional approach and
self transcendence value group. Table VII shows this relationship:

Table VII: Regression Analysis between the Traditional Approach and Self
Transcendence Value Group
Dependent Variable: Traditional Approach
Independent Variables Coefficients Standard Errors t-statistic P
Constant 2.48397 0.22346 11.11600 0.00000
Self Enhancement 0.16475 0.04423 3.72503 0.00023*
*p<.05
Teachers situating in self transcendence value group have given up their selfish purposes,
think the benefit of the people and the nature, they are benevolent and universal people. For
this reason we can say that their adoption of traditional approach is not an unexpected result.
Most probably they don’t want any conflict to occur. So they may choose avoidance or
accommodation in order to prevent or suppress conflict. Accommodation places high concern
for others and low concern for self. Schwartz [23] [16, p.253] also provides empirical
evidence for this relationship; in the prisoner dilemma experiment, benevolence and
universalism were the best predictors of concern for others’ gains.
CONCLUSION

Conflict is a very natural phenomenon in democratic societies. From this perspective it could
be said that the existence of conflict in schools, between headteachers and teachers or among
teachers is also very natural and healthy. Even the promotion of conflict in order to enhance
the efficiency and productivity of the organization could be the case.

Gumuseli [5, p.2] finds conflict because of cultural differences very usual and common and
says that conflicts are more evident in schools since the main input, process and output of
schools are humans. The school environment is appropriate to conflicts between and among
teachers, students, parents, administrators and other stakeholders from society.

184
One of the keys of conflict management is to detect the exact source of the conflict and to
clear out the approaches to conflict. Therefore it is very important to display the conflict
approaches and the reasons of these approaches of teachers. To sum up, the results of the
research are below:

1. Teachers prefer mostly self-transcendence, secondly conservation, thirdly openness to

change and lastly self-enhancement as a value group.

2. Teachers prefer traditional approach to conflict more than modern approach.

3. There is a positive relationship between the modern approach to conflict and the
openness to change value group. In other words teachers who are open to change
choose modern approach during conflict.

4. There is not any significant relationship between the teachers’ having modern
approach to conflict and preferring conservatism, self transcendence and self
enhancement value groups.

5. There is a positive relationship between the traditional approach to conflict and

openness to change, conservatism, self transcendence and self enhancement value
groups.

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[24] Schwartz, S. H. Basic human values: Their content and structure across countries. In A.
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[25] Schwartz, S. H., Melech, G., Lehmann, A., Burgess, S., Harris, M., & Owens, V.
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 MODERN WORKFORCE CHALLENGE: APPROPRIATELY
EVALUATING EMPLOYEES’ JOB PERFORMANCES
Jack N. Kondrasuk*
Nick Slepnikoff
Justin Gomez
Jessica Peters
Danielle Castro

*Pamplin School of Business Administration

University of Portland
5000 N. Willamette Blvd.
Portland, Oregon 97219
U.S.A.

kondrasu@up.edu
1-503-943-7278
1-503-943-8041 (fax)

ABSTRACT

U.S. organizations use a variety of performance appraisal formats, but an ideal form still
eludes us. This article is designed to move closer to an ideal performance appraisal system.
Research conducted to ascertain all problems that are occurring with present performance
appraisal systems produced a list of 76 performance appraisal problems (reduced to 4
general categories). Performance appraisal systems are improved by rectifying common
shortcomings (e.g. reducing biases, training those involved, using formats with research
substantiation). Additional changes included 1) clarifying goals of performance appraisal,
2) focusing on both results and behaviors, 3) adding an appraisal category, 4) better timing,
and 5) better involving constituencies.

INTRODUCTION

Performance appraisal is both very important to the functioning of organizations and also
very problematic. The latest edition of one of the most prominent human resource
management textbooks [1] points out that “every manager needs some way to appraise
employees’ performance” [p. 306], that performance appraisal (PA) will be done in each
case—whether by the supervising manager or others (e.g. peers), and “few things managers
do are fraught with more peril than appraising subordinates; performance” [p. 321]. The
appraisal of employee job performance is one of the most important, most common, and
probably the most disliked human resource management activity. Thomas and Bretz [8]
state that PA, as typically conducted, “has remained a largely unsatisfactory endeavor” for
years even though it is a very important HRM area; “both managers and employees tend to
approach appraisal feedback sessions with fear and loathing” [p. 28]. Thomas and Bretz
state that managers and employees dislike the PA process because neither was involved in
developing the forms nor processes, neither’s suggestions for changes are solicited nor
acted upon, managers don’t like to give nor do subordinates like to receive negative
messages, negative PA ratings have negative effects on employee careers and perceptions

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of their managers, and there are no rewards for taking the manager’s valuable time to
appropriately conduct the PA. Performance appraisal has been said to be “one of six deadly
diseases” that keep organizations from performing at their peak [7].

Purpose of the Paper

What would be an ideal PA? The purpose of this paper is to develop an ideal PA—or come
as close as possible to a panacea in this area. To accomplish this we need to understand the
terminology in the field (define PA), how is PA usually conducted, what are the problem
areas encountered in typical performance appraisals, and then propose an ideal PA to meet
the concerns. The ideal PA system proposed here will seek to rectify the problem areas and
achieve the goals of PA. The ideal PA system is meant to be theoretical but with enough
details to make it pragmatically useful now. We start with the general background and the
specific definition of PA.

BACKGROUND OF PA

Performance Appraisal” (PA) has been synonymous with performance review, performance
evaluation, and other terms and combinations of terms. PA has, over time, referred to 1) an
instrument or form to assess an employee's job performance, 2) an interview where an
employee's job performance is assessed and feedback is given to the employee, 3) a system
of setting employee job expectations/employee actual job performance/assessing that
performance/feedback to the employee on the performance assessment and how to improve
it in the future/setting new goals and expectations for another period, or 4) performance
management with job performance appraisal a part of it [1]. More recently a fifth entry has
been Integrated Organizational Performance Management with vertical and horizontal
loadings and strategic/operating plans and individual goals and metrics as described by
McGrath [6]. At the present time, PA typically refers to more of a systems approach as
stated in #3 in the preceding. That is the definition of PA that we will use in this study.

WHAT ARE THE PROBLEMS IN DOING PA?

It is much easier to find problems in doing PA than to find solutions or suggestions for
improvement. PA systems have been criticized in many areas. It would seem that the
present problems could be ascertained by surveying the research and practitioner literature
about PA. Such a survey was completed which led to 76 different problems with PA as it
is typically conducted. The list of problems seeks to be a representative, comprehensive list
of PA problems, not an exhaustive list of all references to those problems. It is still an
overwhelming, confusing list of problems regarding the typical PA system. Kondrasuk,
Crowell, Dillon, Kilzer, and Teeley [5] found 76 problem areas in present PA systems;
these were reduced to four general categories. The categories are problems with: 1) the
purpose of PA, 2) those involved with PA, 3) what is measured and how, and 4) the system
and process of PA.

RECENT SUGGESTIONS FOR IMPROVING PA

Academic scholars and industrial practitioners have suggested many aspects to change, add,
or tweak. Grote [3] recently stated that the ideal PA should consist of a 4-step process: 1)
Employee performance planning where the manager meets with each employee for an hour
at the beginning of the year to discuss goals for the year. 2) Employee performance

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execution where the employee performs his job and seeks to achieve his established goals.
At the middle of the year, the manager and subordinate meet to discuss progress toward
achieving those goals. 3) Employee performance assessment where the manager fills out
the PA form and discusses it with his boss before discussing it with the subordinate. 4)
Employee PA interview where the manager meets with the appraisee for an hour to discuss
the manager’s appraisal, the subordinate’s self-appraisal, and how to improve. They set a
date to reconvene to set next year’s goals/start the process over and set individual
improvement plans. Other authors have recommended trying to produce more measurable
goals to begin with, give more frequent feedback on performance to the operating
employee, reduce biases in appraising employees, and periodically and continually
auditing/reviewing the effectiveness of the PA system. There is also unanimity among
authors that the ideal PA should be pragmatic, cost-effective, and legal (especially
regarding EEO requirements). Regarding what is measured and how, Thomas and Bretz
[8] suggested that managers and subordinates both be more involved in the development of
the general PA system/process as well as the PA forms used. They also suggested that there
should be more rewards for appropriately using the PA system. Strive for clear, specific,
measurable expectations that are as free from biases as possible. Use evidence-based
techniques that are shown by quality research to be valid and reliable. In fact, some, like
Jafari, Bourouni, & Amiri [4], have even developed mathematical approaches to
comparing and selecting the best PA technique to use in given circumstances. A strong
emphasis is being placed on better training of those involved in the PA system. All
managers who currently perform performance appraisals, or any who would potentially do
so, should be required to participate in PA training. A trained HR specialist should conduct
the training programs; the HR specialist can better convey the corporation's culture and
values as well as the legal aspects of PA. New employees should also be trained in PA as
part of their corporate orientation. Present employees should go through refresher training
annually to brush up or learn new and improved elements of the PA process. This learning
should never stop.

ENHANCEMENTS TO THE IDEAL PA

To have an “Ideal Performance Appraisal System” it is assumed that many present

performance appraisal (PA) system components should be retained in general. The
components to retain are 1) establishing expectations for employee performance, 2)
allowing the employee the resources to perform the job, 3) appraising that employee’s job
performance, 4) reviewing the appraisal process, and 5) continuing the cycle of steps 1-4.
However, there are six additional aspects where important changes could be made to
produce a more “ideal” performance appraisal system. Those aspects are: 1) Performing
the changes recently recommended, 2) clarifying the goals and role of performance
appraisal, 3) focusing on both results and behaviors, 4) adding an appraisal category, 5)
properly timing the PA process, and 6) involving more constituencies in the process.

1. Perform the Changes Recently Recommended

Recent articles recommend improvements to conduct PA such as those mentioned above.

Those as well as some others listed here should be employed if possible. For instance,
regarding who does the measuring--the evaluator, it has often been recommended that the
appraisers be trained in the process of appraisal. This way the manager can have more
motivation and more skills to do a better job of appraising her subordinates’ job
performances. With the greater use of computerization, it is more likely to get input from

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additional sources (e. g. 360-degree feedback) for a more well-rounded and accurate view
of the appraisee’s job performance.

Regarding the process of the PA system, assess the evaluatee’s job performance on a more
frequent basis—continuously if possible. This could include daily progress
reports/feedback sessions between supervisor and subordinate(s). Have the performance
appraisals flow through the total organization including, and having support from, the top
management of the organization. Make the PA system clear and relatively easy to perform
so appraisers are not overwhelmed and over-extended. Make sure that audits of the PA
system are conducted—that the system is reviewed frequently to spot problems and to make
improvements. Make sure that users of the PA system are rewarded for properly/accurately
conducting the PA system and applying the results. It has also been recommended that all
PA’s be conducted at the same time in the calendar year—not on each employee’s
anniversary date—to be more consistent in standards used for judgment. Also have
specialists from the human resource department (HR) review the PA results for the same
reason and to pick up biases [7]. Responses to different achievement levels should also be
relatively standardized. For example, meeting standards gets a 3 % raise while exceeding
standards obtains a 6 % pay increase.

Many have recommended that there be more training of appraisers on how to appraise and
how to use the results. Have PA manuals (preferably online) available for further review
and as-needed information. But as with any other area of PA, the ideal PA system must be
practical in the sense that it is easy to use, understand, and administer. It must be useful for
making decisions, and it must be cost effective.

2. Clarifying the Goals of Performance Appraisal

As stated previously, the ideal PA system could refer to a specific instrument, the PA
interview, a PA system, or performance management. We have chosen to focus on PA as a
system as described above. It is very important to realize that the ideal PA system is a
format (process) and not a form (specific instrument).

We need to clarify the purpose of the PA system. Many years ago it was asserted that
organizations typically try to concurrently achieve two goals in their PA’s which produces a
conflict and less than ideal results. Organizations seek to use the PA to a) make
administrative decisions (such as whether to fire/retain/promote, the level of pay increase,
training needs, etc.) and b) improve employee performance (by learning the shortcomings
of the employee and seek to help the employee improve in those areas). The first is a
judicial process where the latter is a counseling process. The appraiser must act as a judge
in the former and a guide/counselor in the latter. It is very difficult to be a judge and
counselor at the same time. On the other side of the desk, the appraisee tends to selectively
hide potentially damaging information that could hurt his being judged highly but tends to
openly state weaknesses that could be rectified when the appraiser is acting as a counselor.
So there are conflicts within both the appraiser and the appraisee in a typical PA. The
proposed best way to deal with these conflicts is to clearly separate the two goals
(administrative and developmental) so that both the appraisee and the appraiser know when
each purpose is occurring. It should be clear when the appraiser is evaluating the evaluatee
on administrative standards (tied to organization goals) or on developmental goals (tied to
what the employee personally wants to achieve in that work setting). This separation also

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has implications for the training of appraisers; they should be trained in how to be a good
counselor as well as a good evaluator.

3. Focus on Both Results and Behaviors Appraisals

As some have previously stated, if we assess both objective aspects like results and
subjective aspects like attitudes, we get a fuller picture of the employee’s performance.
Likewise, if we assess both specific end results and also the process/behaviors that led to
the results, we get a fuller picture of the employee’s performance. But let’s take that
another step further. If we go back to the basic goals of the PA, we start with goals of
making administrative decisions and improving employee performance. Now let’s separate
those two goals and tie them into the results and process dimensions. If our goal is to make
better administrative decisions (e.g. regarding employee retention and promotion,
compensation, training), focus on objective appraisals like performance results. If the goal
is to develop the employee and improve that employee’s job performance, focus on the
subjective/process elements. Administrative decisions, such as employee termination,
should and often are legally required to be based on objective data—not subjective
opinions. The number of items produced or sold, the revenues or profits obtained, even the
number of hours worked to achieve the end result are all objective results and can be
defended to the employee or the judge/jury in a court setting. However, when we talk about
improving an employee’s performance, we tend to take the objective results as givens and
focus on what the employee could do differently; the employee must behave differently to
achieve different (better) results. Doing the same thing (behaviors) should get the same
results (less than perfect performance results). So to improve job performance, the
behaviors (and their motivation, attitude, etc.) should be changed. The employee should do
something differently/behave better to get better objective results.

4. Adding an Appraisal Category

Changing job behaviors may not always be the most efficacious move to make to increase
job performance. We assume that if the employee changes/improves his job performance
behaviors, that his job performance results will improve. However, that assumption misses
one very important ingredient of job performance—the situation. If the economy
deteriorates or the salesperson is suddenly assigned a territory with a dearth of prospects or
the engineer’s computer breaks down or the store check-out clerk has vastly fewer
customers, the job performance will diminish in all cases even if the employee adds job
skills and increases her motivation to perform better. Consequently, the ideal PA must
measure the situation—the opportunity to perform and the organization’s support to
perform well.

As to how to assess the appraisee’s situation, one could look at the instrument to assess the
situation in Fiedler’s [2] contingency theory of leadership. His “situation favorableness”
assessment instrument is not necessarily a panacea to measure the situation for performance
appraisals, but it can be a starting point for developing such an instrument.

5. Timing and Arrangement of the Process

An important aspect in developing the ideal PA system is the timing and arrangement of the
elements in the process. The typical PA has been conducted by setting goals with each
employee at the beginning of the year. This is laborious and also contentious as the typical

191
conflicting appraiser PA goals of guiding and judging cause the skeptical appraisee to
withhold information and resist suggestions or demands by the evaluator for the evaluate to
list certain goals. Since the supervisor, at whatever level, tends to meet with each
subordinate one at a time and each session averages about an hour, it is very time
consuming. Considering that the supervisor has other responsibilities to attend to such as
producing products or services for customers, PA interviews can be drawn out over lengthy
periods of time. Likewise at the end of the period when the supervisor sits down with the
evaluatee to discuss the annual or semi-annual appraisal of the employee’s performance,
that also takes a great deal of time and has even more subordinate resistance whenever the
employee is judged for administrative decisions such as pay raises or promotions. After all,
the average employee believes he is above average—or at least 75% of the employees
believe they are above average. So how do we deal with these challenges?

To alleviate some of these aforementioned problems, it is recommended that the PA be split

into two parts with quick decisions being made regarding administrative decisions at the
front end in setting the standards for the position for the year (or other time period) and at
the end where the PA is done based on achieving the standards based on objective
(measurable) results) and subjective (process, behaviors) evaluations. This will reduce the
“limbo” time between ending one period and starting another as well as increase the
consistency of evaluations across appraises. Then take more time to establish the
developmental goals at the beginning and the end-appraisal of individual goal achievement
at the end of the period. The discussions of extent of goal achievement are to help the
subordinate look at how to meet his personal goals (e.g. be rated ”excellent”) for improving
his work performance (e.g. sell more widgets) to achieve what he wants to on the job (e.g.
be promoted to manager). The supervisor does not have to act as a nasty judge because all
administrative decisions have already been made. The supervisor can focus on helping the
self-motivated subordinate achieve her personal goals-- what she wants to accomplish—and
increase the job performance of that employee. Focusing on employee goals encourages
more involvement and engagement of the employee—thus increasing employee motivation
to do the work on the job.

6. Involve More Constituencies in the Process

The more people that are involved, the more chances for better ideas and fewer mistakes—
to a point. If more sources can make suggestions to improve the job standards and goals,
they should be “better” standards and goals—more accurate, more challenging, more
measurable, etc. Therefore, besides the supervisor and the subordinate(s) developing the
goals, reviewing it by specialists in the organization’s human resource department
(someone who knows the qualities required to write good objectives and who has a system-
wide view of what needs to be done and what others are doing) should result in “better”
employee goals. Also, at the other (performance appraisal) end, having input from others
(basically a 360-degree appraisal) should give a more complete picture of the actual
achievements in comparison with the expectations of what to accomplish (the goals,
standards). Getting evaluations toward the standards and goals from the supervisor and
self-evaluations from the subordinate are routine. Getting evaluations from interacting and
knowledgeable peers and the subordinate’s subordinates have been recommended. It is also
recommended to get assessments from the subordinate’s customers.

Even with all of these recommendations for changes to improve the PA, it is still
questionable if it will work in all situations for all people. Can the same, ideal PA be

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applied the same way in all situations? Will there still be problems with different
appraisers, evaluatees, jobs and levels of jobs, companies, sizes of organizations, types
(public and private; local, regional, national, international), industries, geographical
locations, cultures, countries? Many questions still remain unanswered. More will be
known about that after these suggestions are applied and further research is conducted.

CONCLUSION

The ideal PA system is a format, not a form. It is a process that involves setting
expectations (of the supervisor and subordinate), having the subordinate perform to achieve
the expectations, of appraising and feeding back the results, and applying the results of the
assessment in ways that benefit the organization, the supervisor, and the subordinate
involved. Remember that the ideal PA system has two separate purposes (administrative
and developmental)—which must be separated and not attempted to be achieved
simultaneously. It appraises both standards applied to many as well as goals applied
uniquely to each individual. Administrative decisions, based on standards and objective
results, should be made first and quickly; Developmental aspects, based on individual
goals, are made later and take more time. Both assess objective and subjective aspects of
the employee’s job performance. The appraisal considers the appraisee’s skills and
motivation within the context of a changing job situation to judge the appraisee’s job
performance. The process and techniques applied are based on evidence-based management
that applies valid and reliable approaches. Implementation of the ideal performance
appraisal may not be feasible, or possible, for all organizations. But for those who can and
do use the PA system proposed herein, it should be an improvement.

REFERENCES

[1] Dessler, Gary. (2011). .Human Resource Management. 12th ed., Upper Saddle River:
Pearson Education Inc.
[2] Fiedler, F. E., Chemers, M. M., and Mahar, L. (1977). Improving Leadership
Effectiveness: The Leader-Match Concept. New York: Wiley.

[3] Grote, Dick (2010). Employee performance appraisal—An ideal system. Buzzle.com,
Retrieved 7 April 2000 at http://www.buzzle.com/articles/employee-performance-appraisal-
ideal-system.html.
[4] Jafari, Mostafa, Bourouni, Atieh, and Amiri, Roozbeh Hesam. (2009). A new
framework for selection of the best performance appraisal method. European Journal of
Social Sciences, 7 (3), 92-100.
[5] Kondrasuk, J. N.; Crowell, Emi; Dillon, Kelly; Kilzer, Steven; & Teeley, Jarad (2008).
Appraising performance appraisal: The problems. Proceedings of the 16th International
Conference 2008 of the Association on Employment Practices and Principles, Chicago, IL.
[6] McGrath, Chris (2010). Integrated organizational performance management. The
Industrial-Organizational Psychologist. 47 (3), 17-19.
[7] Staff of Employee Recruitment & Retention (January, 2010). Performance appraisals:
Improve the process and avoid the problems. Employee Recruitment & Retention, Retrieved
April 12, 2010 from
http://www.managementresources.com/ME2/Sites/dirmod.asp?sid=&nm=&type
=Publishing&mod=Publications::Article&mid=8F3A7027421841978F18BE895
F87F791&SiteID=473418383454426DA53DD03044F159BD&tier=4&id=5C3C
747F192D44528E2412F439748CA7.

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[8] Thomas, S. L., and Bretz, R.D., Jr. (1994). Research and practice in performance
appraisal: Evaluating employee performance in America’s largest companies. SAM
Advanced Management Journal, Spring, 59(2), pp. 28-34

Special thanks to the following University of Portland students for their help in developing
this paper: Emi Crowell, Kelly Dillon, Steven Kilze, and Jared Teeley.

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FACILITATING WORKFORCE ADAPTATION TO CHANGING GLOBAL WORK
REALITIES

Mitchell Lee Marks

Department of Management
San Francisco State University
San Francisco, CA 94132
(415) 817-4343
marks@sfsu.edu

ABSTRACT

One outcome of the global economic crisis has been a sharp increase in the number of
downsizings, restructurings, mergers, acquisitions and other organizational transitions.
Mismanaged transitions have unintended negative consequences on organizations and their
members. Ironically, the characteristic of transitions that prompts individual and
organizational strife—the capacity to disrupt the status quo—also enables an opportunity for
organization and individual renewal. This presentation provides a framework for facilitating
adaptation to organizational transition, to both overcome the unintended consequences of
transitions and to accelerate achievement of the transition’s strategic objectives.

Keywords: Transition, mergers, acquisitions, restructurings, downsizings.

FACILITATING WORKFORCE ADAPTATION TO CHANGING GLOBAL WORK

REALITIES

Studies consistently show that, in the aftermath of transitions involving layoffs, survivors’ job
attitudes such as job satisfaction, job involvement, organizational commitment, and intention
to remain with the organization become more negative (Hallier & Lyon, 1996).
Organizational trust falls (Cascio, 1993), while fear increases (Buch & Aldridge, 1991).
Layoff survivor sickness has been well documented, including symptoms ranging from job
insecurity, feelings of unfairness, depression, stress and fatigue to reduced risk-taking,
lessened motivation, distrust and betrayal, and lack of management credibility, (Brockner,
1992).

The unintended consequences of mismanaged transitions are manifested behaviorally as well

as attitudinally. Staw, Sandelands & Dutton (1992) note that under conditions of threat, an
event or situation which individuals or groups perceive as having negative or harmful
consequences (e.g., downsizing), organizations undergo a “mechanistic shift” (p. 516) and
centralize information, restrict communication, and rely on habitual responses that are likely
to be dysfunctional. More specific to downsizings, mergers, and other major transitions,
studies have shown that organizational communication deteriorates (Dougherty & Bowman,
1995) and managerial rigidity increases (Cameron, Sutton, & Whetton, 1987). In addition,
employees who survive major transitions report a lack of direction in prioritizing work, risk
avoidance, and increases in role ambiguity, political behavior, and work team dysfunction
(Marks & DeMeuse, 2003). They also report working harder but not any more effectively—
the workload doesn’t get smaller when the work force does (Greenberg, 1990).

Adaptation Following Workplace Transitions

195
The capacity for a transition to disrupt the current equilibrium and jar people from their status
quo—that is, to unfreeze them (Lewin, 1947)—also gives transitions the potential to be an
impetus for renewal at both the organizational and individual levels. If properly managed, a
transition can be used to replace outmoded organizational structures, cultures, and processes
with new ones more consistent with emerging environmental conditions and competitive
challenges. Concurrently, a transition can be a stimulus for helping individuals abandon
attitudes, expectations and behaviors that may have been congruent with old workplace
realities and identify and adopt new attitudes, expectations, and behaviors consistent with
new global work realities.

Despite this opportunity to spark renewal, research shows that “holding on” tends to
predominate over “letting go” during and after transitions as organizations and their members
tend to maintain the status quo during difficult times (Chattopadyhah, Glick, & Huber, 2001).
Thus, employees are likely to experience real or perceived unintended consequence of
transitions but not realize enhancements to their personal work situation or to overall
organizational effectiveness.

The Two Tasks and Two Levels of Facilitating Adaptation

Progress through the adaptation process will occur only when people are prepared to
relinquish what they hold dear for the purpose of acquiring something new or can find ways
of carrying what they value in the old into the new. In the event that it does not exist
naturally, it may be necessary for the organization to create transitional phenomena through
planned interventions (Morgan, 1997). This would aid the letting go of attitudes,
expectations, and behaviors appropriate to the pre-transition organization and adoption of
attitudes, expectations, and behavior congruent with the post-transition organization.

The forces for the old and for the new are varied and cover both the emotional realities
and business imperatives associated with a transition or a series of transitions.
Emotional realities are the ways in which people experience transition in the workplace.
Research has shown that workplace transitions are always connected with emotional
experiences (Kusstatscher & Cooper, 2005). Leaders who manage transition effectively
rely on and cope with emotions by bringing them to the surface and understanding how
they affect work activities and relationships as groups face challenges and organizational
changes (Urch Druskat & Wolff, 2001). In the ending of the old phase, adaptation
benefits from weakening emotional forces that individuals carry over with them from
before the transition and that may be inadvertently generated during a mismanaged
transition. In the accepting of the new phase, adaptation benefits from strengthening the
emotional pull of the characteristics of the new organizational realities that motivate
employees and attract their attention.

Business imperatives comprise what needs to get done for business success to occur.
These include everything from setting strategies to selecting work procedures, from
patterns of communicating with people to ways of rewarding them. To facilitate ending
the old, certain aspects of the organization should be abandoned or made less
prominent—that is, the forces for their maintenance should be weakened. To strengthen
forces for accepting the new, employees should understand not only what is changing,
but also why the changes are being made and how those changes will contribute to both

196
 business and personal success. This contributes to the social process of “organizational
sensemaking” through which organization members interpret their environment through
interactions with others and construct accounts that allow them to comprehend the world
and act collectively (Weick, 1995). Sensemaking activities are particularly critical in
dynamic and turbulent contexts, where the need to create and maintain coherent
understandings that sustain relationships and enable collective action is especially
important and challenging (Gioia and Thomas, 1996).

A FRAMEWORK FOR FACILITATING ADAPTATION TO CHANGING GLOBAL

WORK REALITIES

The two tasks and two levels produce four elements for facilitating individual adaptation
to workplace transitions brought on by changing global work realities (see Figure I):
1. Empathy. Letting people know leadership acknowledges that things have been
difficult and, for at least awhile longer, will continue to be difficult.
2. Engagement. Creating understanding of and support for the need to end the old and
accept new organizational realities.
3. Energy. Getting people excited about the new organizational realities and supporting
them in realizing them.
4. Enforcement. Solidifying new mental models that are congruent with the desired
post-transition organization.

Figure I
A Framework for Facilitating Adaptation to Changing Global Work Realities

Tasks

Weakening the Old Strengthening the New

Levels

Emotional Realities EMPATHY ENERGY

Business Imperatives ENGAGEMENT ENFORCEMENT

Empathy

The first element weakens emotional forces for holding on to the old by conveying
empathy to employees regarding what they have experienced during a difficult
transition. The objective of empathy is to make clear that leadership is cognizant of the
needs, feelings, problems, and views of employees who have lived through a merger,
acquisition, downsizing, or restructuring. Empathy facilitates adaptation by legitimizing
employees’ responses to the transition, raising their awareness of the adaptation process
and accelerating the pace at which they move through it.

Tannenbaum and Hanna (1985) have identified three steps in the process of holding on
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 and letting go—consciousness raising, reexperiencing, and mourning—that provide a
sequencing for activities to convey empathy. Consciousness raising helps employees
acknowledge what they are personally holding on to and become aware of their reasons
for doing so. Workshops or other learning interventions promote consciousness raising
by educating employees on the difficulties of transitions and making the internal process
of adaptation explicit to them. In a study of an acquired manufacturing firm, researchers
found that employees who were given a realistic assessment of the transition and insight
into the adaptation process had less negative reactions in both job satisfaction scores and
actual work productivity than employees who attended a workshop with a sanguine
content (Schweiger & DeNisi, 1991).

The reasons for and implications of holding on become truly understood only when they
are expressed experientially. Talking through where they have been and what they are
currently experiencing as a result of the transition helps employees bring their feelings
to a conscious level. This is typically an emotional and highly charged process, in
contrast to the more intellectual level at which initial consciousness raising occurs.
However, most employees find it difficult to express negative feelings at the workplace
(Ciulla, 2000). To aid in the reexperiencing step, organizations can sanction events in
which employees vent their pent up anger and other negative feelings. A carefully
facilitated venting meeting can get people to open up in a supportive and safe
environment. Even for employees who do not speak up, vicariously listening to others
express similar views is beneficial in weakening the negative emotions left over from
living through a difficult transition (Marks, 2003b).

Letting go is completed through an active mourning of what is being left behind—old ways
of seeing and doing things, abandoned hopes and expectations, and the loss of what was once
satisfying, meaningful, or simply familiar. This mourning is sometimes accompanied by
remorse—a sense of guilt for the time wasted, the life that could have been but will never be.
Yet it also instills a sense of renewal and rebirth, and an acceptance for what lies ahead.
From the most primitive to the most modern cultures, there has always been a recognized
need for rituals to carry individuals form one phase of life to another (Morgan, 1997).
Adaptation is facilitated through symbolic events, like funerals or graduation ceremonies to
mark the transition from ending the old to accepting the new (Gutknecht & Keys, 1993).

Engagement

The second element weakens forces for the status quo by engaging employees at an
intellectual level in understanding the business imperatives associated with needing to end the
old and by identifying and eliminating roadblocks to the adaptation process. Engaging
employees directly or through representation has long been advocated as a method to help
people contend with disruptions to their work situation (Coch & French, 1948). Engagement
would seem especially pertinent to major transitions such as mergers and downsizings in
which survivors experience a perceived lack of control over their fate (Marks & Mirvis,
2010).

One way to engage people is to communicate with them. Effective top-down communication
that is open, timely, and frequent counters feelings of uncertainty, distrust, fear, anger, and
frustration common in organizations during and after transitions (Krackhardt & Hanson,
1993). During difficult times, there is also a need to convey to employees the principal

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business challenges facing the organization and to involve them in addressing those
challenges (Pascale, Millemann, & Gioja, 1997).

Employee participation in matters directly related to their work situation also weakens forces
against ending the old and helps movement through the adaptation process. Participation
gives survivors a sense of control over their destinies and a means of influencing events that
heretofore had been seen as threats to their livelihood and well-being (Graddick & Cairo,
1998). In a four-year longitudinal study of survivors of a downsizing in which a full 40% of
the workforce was eliminated, for example, there were significant increases in both employee
productivity and employee well-being despite an increase in demands placed on the survivors
(Parker, Chmiel, & Wall, 1997). The potential negative effects of high demands were
counterbalanced by an engagement strategy that enhanced work characteristics including
clarity and participation.

Employee engagement also is useful for weakening forces inhibiting the adaptation process
itself. Despite being a natural and healthy response to transition, the human adaptation
process is rarely facilitated, let alone acknowledged, in most work settings. It is likely that
many forces inhibiting the letting go process are present in the work environment. Leaders
frequently think they know what is going well and what is not during and after transitions
(Marks & Baitch, 2005). But when they consult exclusively with their peers and direct
reports, which typically is all they have time for during and after transition, what managers
hear is often censored and self-serving (Marks & Mirvis, 2010). This gives them a distorted
picture of progress and false assurance that problems will pass so long as they stay the
present course. It also prevents them from speeding up the adaptation process by identifying
and eliminating barriers, perceived or real, that employees feel are hindering their
progression. These barriers may range from structural issues like narrow job categories that
undermine efforts to adopt new approaches to getting work done to the political power bases
of superiors who refuse to change themselves and who downplay the requirements of
adaptation or the need to rebuild relationships. Common employee research methods such as
attitude surveys and focus group interviews can be used to identify barriers to letting go.

Energy

The third element strengthens forces for desired change by generating energy for its
attainment. This occurs on an emotional level by getting people excited about the prospects
of the post-transition organization and reviving their confidence in themselves and their
workplace. As organizational members come to terms with ending the accustomed old, they
need something new to latch onto to direct their contributions in the workplace and continue
progress through the adaptation process. Pederit (2000) suggests that, especially when
numbed by constant and on-going change and transition, employees may be more ambivalent
to change rather than outright resistant to it.

A starting point for generating energy is a clear sense of strategic direction and a compelling
mission for the organization; that is, a clear vision of a new and better organization (Kotter,
1995). Shared commitment to a vision can be built either through wide-scale participation in
the act of its creation or through involvement immediately thereafter in its dissemination.
This addresses key unintended consequences of a difficult transition in ways including
renewing trust and breeding confidence that leadership has a plan for realizing new
opportunities. Comprehending the vision also counters the decreases in sense of direction,
risk taking and innovation that typically accompany major organizational transitions

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(Chattopadyhah, Glick, & Huber, 2001).

Abandoning old routines and then identifying and adopting new approaches to work require
trial-and-error learning in the neutral zone between the old and the new (Bridges, 1991).
Trial-and-error is a powerful way to learn, but also a painful way to learn—relatively few
organizations reward employees for raising up and discussing their errors. Thus, sustaining
the energy for moving forward is enhanced by developing a learning environment in which
employees can experiment with and deliberate the value of new approaches to achieving
personal and organizational success.

Workplaces having leaders and managers who connect with their people, provide emotional
support, accept the confusion and backsliding as normal and give their people time to move
through the natural adaptation process, should be more likely to rebound from a difficult
transition with innovative approaches to getting work done and an energized work force
looking forward to new realities rather than holding onto the old. With research showing that
managers and supervisors having more impact on shaping employees’ reactions to a transition
than senior executives, this support would be most beneficial coming from immediate
superiors (Larkin & Larkin, 1996). Thus, a component of generating and sustaining energy
would be to set expectations with middle managers and lower level supervisors to be sources
of emotional as well as practical support for employees.

Enforcement

The fourth element solidifies perceptions, expectations, and workplace behaviors that are
congruent with the desired post-transition organization. Enforcement brings the momentum
for desired change to the level of consistency required for true cognitive and cultural change
(Cartwright & McCarthy, 2005). It complements the emotional base of energy by supporting
people on a practical level in conducting work and, in particular, by linking individual roles
and responsibilities with the new vision and business strategy (Burke, 2002).

The literature on large scale organizational change suggests three components of

enforcement—involvement, alignment, and measurement. Involvement is a basic
component of organizational change management (Kotter, 1995; Burke, 2003), and its
role in weakening forces for the status has been discussed. Involvement also can
contribute to strengthening forces for the new. One way to do this—both because they
know the work and because involving them in problem analysis generates ownership of
solutions—is to have employees participate in bringing the desire post-transition
organization to life. Pursar & Petranker (2005) note that transformational change occurs
when a critical mass of people can actually "live the vision" in everyday organizational
life. This occurs, however, not by engaging in detached, rational planning in order to
avoid uncertainty, but only after the constricting structures of the old organization have
been unfrozen and people—as well as their time and other resources—are freed up to
dream, think about, and enliven the post-transition organization. Marks (2003a)
describes a process for living the vision which builds upon senior leadership’s vision and
strategic direction for the post-transition organization.

A second component of enforcement is to align the various components of the post-

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transition organization, including its structure, tasks, culture, and people. Consistency
compels people to accept new organizational realities and abandon old perceptions or
expectations. However, some elements of the organization typically lag behind others as
transition unfolds. A compensation system that punishes team leaders for short-term
declines in productivity when they experiment with new ways of approaching work will
not sustain a CEO’s vision of “innovation.” Boring staff meetings plagued by
dysfunctional group dynamics will not contribute a desired culture of “teamwork and
respect.” Managers and supervisors who feel their authority is undermined by involving
rank and file employees in determining how to approach work will sabotage a process
like “living the vision.” Contributing to the difficulty of alignment following a difficult
transition is that many of people who specialized in designing compensation systems,
facilitating group effectiveness, or designing and delivering management development
interventions may have been downsized from the organization.

A third way to enforce the desired post-transition organization is to measure and track its
development. Collecting valid data and monitoring the extent to which the desired
organization is truly being realized—that is, the extent to which forces for maintaining
the old are being weakened and forces for developing the new are being strengthened—
provides the foundation for feedback to all organizational members. On-going periodic
measurements also alert leadership to when things are veering off course. This is
important, given that even the most carefully planned and successfully implemented
transitions like mergers and acquisitions are characterized by flexibility and mid-course
corrections (Marks & Mirvis, 2010). Some methods for tracking the development of the
desired new organization are objective (e.g., measures of productivity, quality, and
voluntary turnover); others, like attitude surveys and focus group interviews, have the
added benefits of involving people and enhancing upward and downward
communication. This seems especially important when the newly espoused vision
includes intentions to increase involvement and communication.

IMPLICATIONS FOR RESEARCH AND PRACTICE

The framework presented here guides both research and action in facilitating the process
of individual adaptation to workplace transitions brought on by changing global work
realities. The basis of the model—the need to weaken forces for the old organizational
order and strengthen forces for the new organizational order at both the emotional and
intellectual levels—has solid conceptual support through enduring models of
organizational change management as well as anecdotal support through practitioner
reports. The four elements of empathy, engagement, energy, and enforcement—along
with their component activities—should direct empirical inquiry into factors that can
facilitate the natural adaptation process during and after major organizational transitions.
However, researchers seeking to study organizational transitions face some substantial
hurdles. To begin, gaining access to workplace approaching, in the midst of, or
recovering from a transition is difficult. And, there are many methodological dilemmas
when studying transitions such as when a merger “begins” (i.e., does a merger begin
when it is planned, when it is announced, or when it receives legal approval from
regulators?) or is “over.”

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Facilitating the adaptation process should counter the many undesirable consequences of
difficult transitions by focusing people on looking ahead and weakening their attachments to
the “good old days” during pre-transition or “dark days” of the transition itself. In addition to
wringing out pent up emotions and loosening grips on the old ways, it also should contribute
to building optimism for the future and strengthening attention to new ways of thinking and
acting congruent with emerging global realities. A formal effort to facilitate adaptation
provides employees with a clear sense of where the organization is headed and how
individual success can be achieved as that vision is attained. And, it contributes to a sense of
workplace stability in the ever changing global environment. The pace of change and the
intensity of major transitions are much more likely to increase rather than decrease globally.
Given that poorly managed mergers, acquisitions, downsizings, and restructurings have had a
substantial negative impact on organizational effectiveness and employee well being, the
need to facilitate the natural adaptation seems substantial and, in fact, essential if transitions
are truly to be used by organizational leaders as vehicles for becoming more highly
competitive and responsive to environmental demands and if employees are expected to adapt
to changing global work realities.

REFERENCES

References are available upon request from Mitchell Lee Marks at marks@sfsu.edu

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 IS GLASS CEILING IN TURKEY THICKER THAN IT SEEMS?
A STUDY ON ISE 100 (ISTANBUL STOCK EXCHANGE)

Zeynep Duren
Istanbul University
Faculty of Social Sciences
Beyazit-Istanbul/ Turkey
zeyduren@istanbul.edu.tr
Tel: 90 (212) 440 0000

S. Ahmet Menteş
European University of Lefke
Department of Business Administration
Gemikonagı,Lefke- Mersin/Turkey
amentes@eul.edu.tr
Tel: 90 (392) 660 2000 Ext: 2795

ABSTRACT

The detection of glass ceiling on boards of directors is an interesting issue because it provides
a good opportunity to observe the obstacles confronted by women in the corporate world. The
descriptive study analyzes ISE100 firms for the period of 2002-2009. As of 2009, the portion
of female board members is 10.07% which is close to EU average. Although the averages are
close, assuming that the intensity of glass ceiling problem in Turkey is not any worse than in
Europe can be misleading. The study discusses the different factors that should be taken into
account at analyzing the problem.

Keywords: Glass Ceiling, Board of Directors, Ownership Concentration, Culture

I. INTRODUCTION

The term “glass ceiling” which indicates the obstacles confronted by women, who aim for the
senior management positions in various organizations was introduced by Hymowitz and
Schellhardt at a Wall Street Journal report in 1986. It is defined as an impassable wall or
barrier made up of procedures, structures, power relations, beliefs or habits that complicate a
woman’s access to high directive positions (Powell & Butterfield 1994, p. 69).

In 1995, the U.S. Department of Labor's Glass Ceiling Commission issued a report saying: “a
glass ceiling exists and that it operates substantially to exclude minorities and women from
top levels of management"(United States Department of Labor 1995, p.7). A vast number of
articles have dealt the issue and found that the glass ceiling exists in executive market
(Duleep & Sanders 1994, p. 416).

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Bertrand and Hallock conclude that the glass ceiling is cracking in the executive market.
They find the participation of female executives at Standard & Poor’s firms has been growing
dramatically through the period 1992-1997 and point out that female's increasing access to
larger firms is the main reason for the cracking glass ceiling (Bertrand & Hallock 2001, p.3).
Judging from relative compensation and increasing female representation in the top rung in
the executive market, researchers are optimistic and conclude that, though not as fast and
widespread as hoped, the weakening and cracking glass ceiling is not just a false hope, but
has some substance (Hu & Yun 2008, p. 10).

Within this context, studying women’s presence on boards of directors is especially

interesting because board of directors represents the last step (the peak) in a professional
career and a good opportunity to quantify the obstacles confronted by women (glass ceiling)
in the corporate world.

This study mainly discusses and evaluates the change in female presence in boards of ISE100
firms and analyzes the developments experienced for the period of 2002 to 2009. The
presence and the perception of women’s role in business life differ from one culture to
another. It is obvious that in societies that have relegated women to secondary role the
presence of glass ceiling will be more evident. The Turkish society has traditionally relegated
women to a secondary role in the labor market. A distinguishing feature of Turkish firms is
the fact that they are mostly owned by families. Families are not only the controlling
shareholders, but they also are very involved with the management of the family firms.
Family members hold the key management positions. It is not a surprise that female members
of the families will hold executive positions, board memberships and CEO positions in the
family firms (Yurtoglu 2000, p. 211). The study will give a special emphasis to the females
on boards of directors who are members of the controlling shareholder of the family firm.
This is really important because the change in number of female board members who are also
the members of the controlling shareholder family may give us more insight about the
changing management culture in Turkish firms.

II. ANALYSIS AND IMPLICATIONS OF THE LOW PRESENTATION OF

FEMALES ON THE BOARDS OF DIRECTORS OF TURKISH FIRMS.

The evidence shows that, women’s participation in the labor market is not only low but also
has a decreasing trend in Turkey. The low rate of women’s participation in labor force in
Turkey looks more alarming when compared to positive trends witnessed in EU, OECD and
other countries (Table I).

Table I: Female Labor Force Participation Rates

2002 2003 2004 2005 2006 2007 2008

EU 60,7 61,2 62,1 62,7 63,3 63,6 64,2
OECD 59,6 59,7 60,1 60,4 60,8 61,1 61,3
Major Seven 65,0 65,1 65,4 65,7 66,2 66,3 66,7

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Turkey 29,5 28,1 27,0 26,5 26,7 25,7 26,7

Source: U.S. Census Bureu, https://www.census.gov/compendia/statab/2010/ tables

/10s1330.xls

There are many reasons for the low rate of women participation to labor market in Turkey.
The persisting patriarchal values and unfavorable economic conditions adversely affect the
educational status of girls. Women and girls continue to lag behind men and boys at all levels
of education and that significant discrepancies exist in the literacy levels of women and men
(CEDAW 2005, p.17).

In 1999, national regulations establishing objective criteria for promotion of governmental

employees for lower and middle level management was adopted in Turkey. These measures,
by favoring competency and career based skills, have been effective in preventing and gender
discrimination in promotions. However, the situation in the private sector is far from
satisfactory. Research reveals that women who are married, pregnant or have children may be
denied employment and face discrimination in promotion or access to in-service trainings.
There are no effective regulatory mechanisms other than that of an investigation upon a
complaint (CEDAW 2003, p.33).

The low women’s representation on Turkish boards of directors can be considered as an

indicator that, in the Turkish labor market, there must be some kinds of discrimination. In
fact, identifying their causes is a key issue, because the type of existing discrimination would
provide different conclusions about how to obtain a greater presence of women on the boards
and even about whether it is actually desirable to increase their presence.

In theory there are two types of discrimination. These are taste based discrimination and
statistical discrimination. Becker’s 1957 book introduced the taste based discrimination
(Becker 1957). In taste based discrimination employers have a ‘taste for discrimination,’
which means that there is a disamenity value to employing minority workers (women in our
case). Hence, minority workers may have to ‘compensate’ employers by being more
productive at a given salary or, equivalently, by accepting a lower wage for same level of
productivity. Phelps and Arrow have concantrated on the statistical theory of discrimination
(Phelps 1972, p.83). The statistical discrimination literature has the assumption that firms
have limited information about the skills of job applicants. Statistical discrimination differs
from taste-based discrimination in assuming no prejudice by employer or employee. It treats
two groups of workers differently may be the rational response of employers to uncertainty
about the individual's productivity. It is often almost impossible to identify statistical
discrimination versus taste-based discrimination (Grout et al 2009, p. 5).

In this paper, the intensity of the glass ceiling problem and the evaluation of this problem in
recent years in Turkey is discovered. ISE 100 firms for the period of 2002-2009 are used for
the study. The firms that dropped out of ISE 100 for the period covered are excluded from the
study. Also, the firms that failed to report the required data or have missing information at

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ISE web site (http://www.imkb.gov.tr) are not included to study. After excluding the firms
that do not fit the criteria the number of firms that will be included in the study are 88. The
descriptive statistics of the firms are given at the table below (Table II).

Table II: Descriptive Statistics for the Boards of Directors of ISE 100 firms

2002 2003 2004 2005 2006 2007 2008 2009

Size of BODs 669 673 687 705 694 684 693 675

Average number of directors 7.60 7.65 7.81 8.01 7.89 7.77 7.88 7.67

Average number of female

directors 0.57 0.63 0.68 0.66 0.68 0.68 0.74 0.77

% of female directors 7.47% 8.17% 8.73 % 8.23 % 8.65% 8.77% 9.38% 10.07%

Number of firms without female

directors 55 51 46 48 44 43 42 40

Number of firms with one female

director 22 24 28 27 33 34 32 34

Number of firms with multiple

female directors 11 13 14 13 11 11 14 14

Source: By the authors.

Average size of Turkish BOD (Board of Directors) has showed an immaterial increase from
7.60 to 7.67. The average size of Turkish board is smaller compared to European average
board size which is 11.6 (Heidrick & Struggles 2009a, p. 15). The size of boards is a
contreversial issue. There are tradeoffs associated with different board sizes. The major
advantage of large boards is the collective information that the board possesses about factors
that affect the value of firms, such as product markets, technology, regulation, mergers and
acquisitions, and so forth. This information is valuable for both the advisory and monitoring
functions of boards. On the other hand, the major disadvantages of large boards are the
coordination costs and free rider problems (Lehn et al 2003, p.4). Jensen argues that keeping
boards small can help improve their performance. When boards exceed seven or eight people,
they are less likely to function effectively and are easier for the CEO to control (Jensen 1994,
p. 19). Although the average size of Turkish boards are in line with Jensen’s
reccommendations the reason behind the comperative smaller size of Turkish boards is
closely related with the high ownership concentration of Turkish firms.

It is clearly observable from Table II that the percentage of female board members has
increased almost 2.5% (from 7.62% to 10.07%) in the period of 2002 to 2009. A more careful
look at the figures reveal the fact that this is mostly due to a decrease in the number of firms
that have no female directors on their board of directors (the number of firms that have no
females on their board decreased from 55 to 40 by year 2009). In other words, the numbers of
firms that have one female on their boards of directors have increased from 22 to 34 and the

206
number of firms that have more than (multiple) female directors have increased from 11 to
14.

Heidrick & Struggles report calculate the female presence on European boards average 10 %.
The Turkey supplement of the same report calculates the female presence on Turkish boards
as 8% (Heidrick & Struggles 2009b, p. 5). Both of findings are very close to the findings of
this study which calculates the presence of female on Turkish boards as 10.07% (Table II).
For a country like Turkey where patriarchal values persist, unfavorable economic conditions
adversely affect the educational status of girls and female labor force participation rates are
very low, having almost the same percentage of female presence on boards is unexpected and
surprising. The reasons behind this unexpected result are discovered and analyzed in this
study.

The kinship of female board members to the controlling shareholder is suspected to be the
potential reason behind the unexpectedly high female presence on the boards Turkish firms
(compared to EU average). The last names of female board members are used to identify their
relationship with the controlling shareholder. Female board members that have the same last
name with the controlling shareholder are assumed to be the family member of the
controlling shareholder. In year 2002 only 24 of the females sitting at the board of directors
were non family members. This figure jumped to 37 in year 2009 which represent a 54.2%
increase when indexed to year 2002. On the other hand the number of family member board
members increased from 26 to 31 which constitutes an increase of 19.2% indexed to year
2002. Yearly composition of female board members is given at Table III.

Table III shows that of 68 female board members in 2009, 31 are the members of controlling
shareholder families and that figure constitutes to 45% (52% in 2002) of all female board
members.

Table III: Composition of Female Board Members

2002 2003 2004 2005 2006 2007 2008 2009

Total 50 55 60 58 60 60 65 68

Index to 2002 100.0 110.0 120.0 116.0 120.0 120.0 130.0 136.0
# of Family 26 23 27 27 31 29 28 31
Member Female

Index to 2002 100.0 88.5 103.8 103.8 119.2 111.5 107.7 119.2
# of Non Family 24 32 33 31 29 31 37 37
Member Female

Index to 2002 100.0 133.3 137.5 129.2 120.8 129.2 154.2 154.2
Source: By the authors.

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Some researchers try to explain the existence of female family members on boards by
reduction of statistical discrimination. The highest proportions of female directors are found
in family-owned firms, cooperatives and, in general, those companies in which the
shareholders have great power when hiring directors. This can be considered as an indicator
of the reduction of the so-called statistical discrimination since, as the company has easier
access to individual information about the board candidates, women seem to be less exposed
to being judged according to the average characteristics of their group (Mateos de Cabo et al
2007, p. 3).

Although the figures show that the presence of female board members in ISE100 firms is
proportionaly very close to European avarage of 10%, explaining this with an argument such
as “reduction of statistical discrimination” or “ highlight of Turkey’s open-minded, quick-
learner personality” is far from explanatory (Heidrick & Struggles 2009b, p. 6). Factors like
legal system, ownership structure and culture are believed to be the main reasons of the heavy
presence of female family members in Turkish boards.

Legal System and Ownership Structure:

Common law countries have the strongest protection of investors (both shareholders and
creditors) whreas French civil law countries like Turkey have the weakest protection. (La
Porta et al 2000, p. 8). An investor in a French civil law country is poorly protected by both
the laws and the system that enforces them. The concentration of ownership of shares in the
largest public companies is negatively related to investor protections (La Porta et al 1998, p.
1141). In other words, weak investor protection causes ownership concentration. In countries
like Turkey where investor protections are ostensibly weaker, the optimal ownership structure
obliges families to hold large equity stakes (Himmelberg et al 2002, p. 38).

There are numerous studies that observed that equity ownership in Turkish firms is highly
concentrated, holding companies had direct ownership stakes in most of the companies and
pyramidal structures were common (Yurtoglu 2000, p. 216). In Turkey families hold the
control and the ultimate ownership of the firms using these pyramidal structures called
holding companies. It is also known that the family members have a heavy presence not only
on the board of directors but also at critical management positions of these firms (Ararat &
Ugur 2003, p. 66).

Culture:

Culture and ideology, not only value maximization and self-interest, might influence a
country’s choice of corporate law, Licht and others find empirical evidence that corporate
laws related with investor protection exhibit systematic cultural characteristics (Bebchuk &
Roe 1997, p.37; Licht et al 2001, p. 2). Hofstede’s study on dimensions of culture classify
Turkey as a highly collectivist culture. In collectivist societies people from birth onwards are
integrated into strong, cohesive in-groups. Loyalty in a collectivist culture is extremely
important and over-rides most other societal rules and regulations. The society fosters strong

208
relationships where everyone takes responsibility for fellow members of their group (like
family) (Hofstede, www.geert-hofstede.com). Loyalty as a dominant future of collectivist
cultures is one of the most important explanatory factors of the dominant presence of family
members on company boards and at other executive positions of Turkish firms.

III. CONCULUSION

The glass ceiling is a barrier against women's advancement into the top rung in the high-
paying and high-skill labor market. Studying women’s presence on boards of directors is
especially interesting because board of directors represents the last step (the peak) in a
professional career and a good opportunity to quantify the obstacles confronted by women
(glass ceiling) in the corporate world. If there exists a glass ceiling, it will definitely affect
the representation of females in the board of directors.

The study analyzes the presence of women on Turkish boards. The findings for Turkey
clearly exhibit that the presence of women on Turkish boards has increased 36% for the
period of 2002-2009. The findings definitely show a progress in the pathway for cracking the
glass ceiling and extinguishing the gender discrimination in boards of directors.

The findings exhibit that the percentage of women on Turkish boards are very close to that of
EU. Assuming that the glass ceiling problem in Turkey is not any worse than EU, by only
comparing the yearly figures can be misleading. Using this type of headcount approach may
cause us to misjudge about the density of glass ceiling problem in Turkey. The composition
of female board members reveals the fact that as of 2009 almost 45% of the female board
members are also the members of the controlling shareholder family. The heavy presence of
female board members who are also the members of the controlling shareholder family can
be explained by three factors. These factors are legal system, ownership structure and culture.

It is obvious that there is still a long way ahead before gender equality is achieved and the
glass ceiling is removed in the Turkish executive market. Increasing merger and acquisition
activity caused by globalization has and will play an important role in cracking the glass
ceiling in Turkey. Increased foreign direct investment is also expected to change the
management culture and organizational dynamics of Turkish firms.

References available upon request from S. Ahmet Menteş, European University of Lefke,
Department of Business Administration, Gemikonagı,Lefke- Mersin/Turkey
amentes@eul.edu.tr, ahmetmentes@yahoo.com, Tel: 90 (392) 660 2000 Ext: 2795

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 CHANGING FACE OF WOMEN WORKFORCE: A QUALITATIVE STUDY ON
WOMEN ENTREPRENEURS IN ISTANBUL

Zeynep Hale Öner

Doğuş University
Acıbadem, Kadıköy, 34722
İstanbul,Turkey.
honer@dogus.edu.tr
tel: 0090 216 544 55 55 ext: 1435

ABSTRACT

This study presents an exploratory investigation of Turkish female entrepreneurs in Istanbul,

Turkey. Semi-structured, face to face interviews with 20 female entrepreneurs were
conducted in Istanbul exploring their motivation for establishing their own business as well
as the level of support they received from their personal social networks and women
entrepreneurship organizations. Findings indicate that major motivating factors driving
Turkish women to set up their own business is a desire for independence, economic necessity
and fulfillment of their dreams. The female entrepreneurs have identified themselves mainly
as innovator type of entrepreneur i.e. committed to entrepreneurial ideals rejecting
conventional female roles.

Keywords: Women Entrepreneurs, Turkey, Innovator type, Social network support

INTRODUCTION

Starting from the 1990’s, the issue of women entrepreneurship has increasingly become one
of the main topics on the agendas of women organizations, civil society organizations,
governmental institutions and international organizations. Women’s entrepreneurship has
become a new component of neo-liberal program for the struggle against poverty as well as
the participation of women in the labor force has proved to be a major factor in sustainable
development (Ecevit, 2007). The unutilized potential of women labor has to be mobilized in
the best and effective way possible for economic welfare in today’s increasing instability and
economic uncertainty. Moreover, an ageing population coupled with a more skill-dependent
economy dictates countries to make better use of their female population. Goldman Sachs
calculates that, leaving all other things equal, increasing women’ s participation in the labor
market to male levels will boost GDP by 21% in Italy, 19 % in Spain, 16% in Japan, 9% in
America, France and Germany and 8% in Great Britain (The Economist, 2010). The level of
female entrepreneurial activity is relatively low compared to EU and OECD countries. The
women employment in the OECD countries is 62%, in EU countries 52%, whereas it is only
23.5% in Turkey (Kagider, 2010).

Turkey is a country, where paternalistic norms and collectivistic values are highly valued and
hence women face difficulties to become involved in entrepreneurial activities. More men
than women start up their own business and the tendency for women to run business which
are on average smaller in size and less growth-oriented than those run by men. Moreover,
there is a relatively small number of sectors where women entrepreneurs are concentrated
(Aslesen, 1998), while men are more evenly spread across a wider range of sectors (Spilling

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& Jordfald, 1996; Ozen Kutanis & Bayraktaroglu, 2002). Ozen Kutanis (2003)’s study on
women entrepreneurship shows that the women’s roles in cultural and social domains are
very rigid and predetermined in Turkey. The negative family reactions and financial
difficulties as well as family demands as mothers do not support women entrepreneurs.
Moreover, the necessity to work much harder as a woman to gain confidence in a man’s
world is another main problem of Turkish women entrepreneurs. However, against all these
hardships, there is an increasing desire for self actualization and the will to use individual
rights as women.

Although Greene and Johnson (1995) theorize that women entrepreneurs draw support from
their family and friends, many Women Business Center (WBC) directors gave examples
where women’s families actively discouraged them from setting up their businesses because
the role of an entrepreneur conflicted with women’s caretaking role ( Langowitz et al. 2006).
WBC directors noted that disproportionate domestic and family obligations were both
motivations for and obstacles to women starting businesses. (cf. Godwyn, M.,2009 ). As will
be discussed later, this finding was replicated in this study as well.

Within this framework, there is limited empirical evidence about the reasons why Turkish
women choose to become entrepreneurs. Given this important gap in the literature, this paper
intends to enable a better understanding of a range of issues pertaining to female Turkish
entrepreneurs, explore the motivating factors of Turkish women to develop their
entrepreneurial capacity in Turkey, and provide a foundation for further policy action to be
taken in female entrepreneurial activity in Turkey.

Based on this context, I will firstly analyze the conditions of women workforce and
employment in Turkey.

Outlook of women workforce and employment in Turkey

In Turkey, the women participation in labor force was 34.1% in 1990, 24.9% in 2006
according to CEDAW’s reports (Kader, 2009). The World Economic Forum’ s Global
Gender Gap 2008 report shows that Turkey ranks 123rd among 130 countries in women’s
political empowerment, economic participation and opportunity (Hausmann, Tyson and
Zahidi, 2008).
According to KEIG’s report (2009), the national household labor force survey of TUIK
(Turkish Statistics Institution) November 2008 data shows that the share of agricultural
employment in the overall employment of women is 45%. A more in depth analysis shows
that 14,4% of employed women work in industrial sector and 37.1% in service industry; out
of 100 women 14% is self employed, 47% is salaried and 39% unpaid household workers
(European commission, 2009 Turkish Progress report).

There are more women working in rural areas i.e.33% versus 19.9% working in cities
(Toprak and Kalaycioglu, 2004), but 98% of women working in agricultural jobs in the rural
areas of Turkey are not registered and thus are excluded from the social security system.
Although the rate of women’s employment in rural areas decreased from 41% to 31% during
2001-2007 due to the neoliberal policies, the nonagricultural unemployment rate of women in
rural areas increased from 11% to 19%. As a result, there was a rapid breakaway from
agricultural employment; however opportunities in nonagricultural areas of employment for
women were far from compensating the resulting gap in favor of women employment (Kegik,
2009).

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Even if women succeed to participate in the labor force, there is a huge pay gap of 22%
between the average wages of women and men in cities of Turkey (World Bank, 2006). The
pay gap between women and men in the private sector is more than 50% which is an
indicator of an undeniable wage inequality between sexes when education and work
experience are factored in. Apart from this existing inequality, there is the reality about the
male –dominated structure of unions which excludes women union members. The rate of
unionization in Turkey is around 9% and the union membership is 892,000 (Gulay, 2007).
Women workers make up only 10% of union members and are not represented in union
boards where only 19% out of 489 board members are women (Celik, 2007).

In this respect, the above statistics prove the unfavorable conditions for women labor force
and their insufficient representation in unions and boards in Turkey. Therefore a need for a
policy update and encouragement of women entrepreneurship is in urgent need.

RESEARCH METHODOLOGY AND SAMPLE SELECTION

This study was carried out with 20 women entrepreneurs in Istanbul from both Asian and
European continents during the last three months of 2009. The female entrepreneurs were
interviewed by using a structured questionnaire. The sample mainly consisted of women
entrepreneurs in the service sector. The selection of respondents for the empirical research
was done through referrals i.e. snowball effect. The face to face interviews were conducted
with semi-structured surveys. The respondents were distributed the surveys and then they
were interviewed in a face to face fashion at their workplaces. During the one to one
interviews, the respondents were given cards which had written descriptions of different
types of entrepreneurs (see Goffe and Scase, 1985) and they were asked to choose one
definition to identify their entrepreneurship style.

This exploratory research is guided by the following key questions:

1) What are the factors motivating Turkish women to become involved in

entrepreneurial type of activities?
2) What type of entrepreneurship are they?
3) What are the key characteristics of their entrepreneurial activities?
4) What is their source of financial support?

Approaches to women entrepreneurship

When we analyze the basic instincts to become entrepreneurs, the classical economic theories
dictate that the maximization of individual wealth and benefits is a key factor in motivating
people to become entrepreneurs (Yazıcı and Sahin, 2006).
Other factor effecting the emergence of entrepreneurship is the personality and environmental
factors. According to Mueller, Thomas (2000) and Koh (1996), trait theory states that
entrepreneurs have distinctive characteristics i.e. unique values and behaviours that define
them to be different than non-entrepreneurs.

The traits theory define the following characteristics to be common to entrepreneurs (cf. Teoh
ve Foo, 1997; Hansemark, 1998): Need for achievement, locus of control, risk taking
propensity, tolerance for ambiguity, innovativeness, and self efficacy.

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Although these personality factors are at work for the emergence of entrepreneurship, there is
an undeniable impact of the environmental factors i.e. market mechanisms and
state/government politics (IGIAD Entrepreneurship Report, 2008).

The gender factor in entrepreneurship

For this study, I will use the four categories of Goffe and Scase (1985) to analyze women
entrepreneurship. These four categories of woman entrepreneurs are based on two factors i.e.
attachment to entrepreneurial values such as individualism and self reliance versus the
commitment to conservative gender roles. Simpson (1993) summarizes these four categories
as follows: Conventional women entrepreneurs are the traditional ones that bring their
entrepreneurial spirit and tie them with gender related roles. They try to achieve a nice
balance with work and family. Innovators are keenly motivated by their entrepreneurial ideals
and that idealism causes them to prioritize work against family. Domestics are driven by
traditional female gender roles, thus their vision of success in business is somewhat limited.
Radicals are those types of women entrepreneurs who rationalize their entrepreneurial ideals
as to fight women subordination.

RESULTS

The age group of the sample ranged from 20 to 50 plus, half of the sample being within 40 to
49 age range. The educational background of the women entrepreneurs is as follows: 20%
primary school, 30% high school, 45% university and 5% graduate school. 50% of the
women entrepreneurs were married, 40% is single 10% is widow. 45% of the interviewed
entrepreneurs has no kids, 10% has one kid and 45% has two kids. 45% of the sample has
three siblings and more, 20% has three, 25% has two and 10% has no siblings.
The face to face interviews show that 30 % of women entrepreneurs have set up their
business to be their own boss, the other 30% for economic reasons, 15% for social status,
25% to realize their dreams. The analysis of their business existence since their set up is as
follows: 45% of women declared to have been in business between 0-9 years, 35% between
10-19 years, %10 between 20-29 years, %10 more than 30 years. %85 of the respondents
expressed satisfaction to be doing their own business as entrepreneurs, however, 15%
declared dissatisfaction due to limited time for self, limited income generation and wish to be
in a different sector.
The women entrepreneurs have set up their business with personal savings (60%), family aid
(5% ), use of debt (20%), and use of credit (15%).
The women entrepreneurs choose different ways to promote their business that is through
internet (5%), brochures (15%), referrals (10%), word of mouth (10%) and all of the
mentioned ways (60%). 90% of the women entrepreneurs employ workers whereas 10% do
not.
The expectations of the women entrepreneurs from the government is tax deduction (45%),
easiness of payment of debts (30%), and no expectations in any ways (25%).
The 50% of the women entrepreneurs were not aware of the existence of the support of
women entrepreneurs associations and out of the other half of the sample, the declared
membership rate is 15%.

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Lastly, women entrepreneurs questioned about their work-life balance have declared that they
were trying to have a balance between home and work (30%), prioritize work (40%) and
prioritize home (30%).
CONCLUSION

The results show that there is supporting evidence to Goffe and Scase (1985)’s theory:
suggestion on female entrepreneurship differing from male entrepreneurship in that women
entrepreneurs view their business as part of a wider system of relationships inclusive of
family, community and friends. Thus Carter and Cannon (1992) state that there is tendency
for female entrepreneurs to hit a balance between interests of family and business. However,
the role of Turkish women in Turkish society is undergoing significant changes due to the
globalization in the world. That is a good sign as the women employment in the OECD
countries is 62%, in EU countries 52% in Turkey, but it is only 23.5% (Kagider, 2010).

The fact, that 30 % of women entrepreneurs have set up their business to be their own boss,
the other 30% for economic reasons, 15% for social status, % 25 to realize their dreams,
reflects the gender perspective view (Kyro, 2001) i.e. women with an attempt to fulfill their
dreams, develop their own ideas and set up their own business. Many women entrepreneurs
were considered creative with a strong desire for getting things done (Yeager, 1999; Moore &
Buttner, 1997; Tang, 1995). Despite this school of thought, women are continually viewed as
‘the other’ in a world where the norms of an entrepreneur is still that of a male and male
characteristics are exhibited in entrepreneurial activities. This research gives supporting
evidence to the abovementioned view as the women respondents in our sample expressed
difficulties while they were trying to survive in a man’s world and have to work extra to gain
extra trust from customers.
The push from the government and other organizations to pull women into labor force for
economic welfare as well as the urbanization of women forced women to change. The Global
Gender report (2009) draws attention to the concept of ‘motherhood gap’ The term
‘motherhood gap’ is defined as the extent of compatibility of motherhood with employment.
The employment gap, according to the findings of the report, is related to the compatibility of
marriage and motherhood with a lifestyle where women can work. Thus the difference in
employment rate of working women within the ages of 35-44 with no children in comparison
with the same age group of working women with kids shows a great variation according to
countries. This variation can only be homogenized by working women friendly initiatives at
workplaces or may be a motivator for women to be either entrepreneurs or non working
women workforce.
Although women tend to be at work, they still either try to balance their work/life or
prioritize family over work. Thus they are still the main caretakers of children and home.
TEPAV (Turkish politics of economy research institution) (Sener, 2010) ’s report firmly
states that care service has to be institutionalized and socialized, children daily care centers
should be obligatory for institutions employing minimum 150 employees and a national
action plan is urgently required to mandate these rules (Sener, 2010).

DISCUSSION

This study has limitations due to the lack of adequate sampling size to draw any conclusions.
This study took place in Istanbul and the sample in question is not reflective of the whole
Turkish population and thus can not be generalized in any ways. Hence, it aims to serve the
literature as an exploratory study to reveal women entrepreneurship motivations, the type of

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women entrepreneurs in Turkey. There is a call for further research to explore the reasons for
the movement of all women workers from agriculture as well as more interviews with women
entrepreneurs in rural and urban locations of Turkey.

Following our examination of the available literature, it seems reasonable to conclude that
this study highlights the changing trends in Turkey. The female movement at the end of the
19th century in Turkey (Sirman, 1989) is a good indicator for this change. Women show signs
of empowerment and self actualization. It is also worth noticing that ‘entrepreneurship is a
mechanism by which many people enter the society’s economic and social mainstream,
aiding culture formation, population integration and social mobility’ (Hisrich, Langan-Fox,
and Grant, 2007). Thus entrepreneurship, as a tool, for women serve the above mentioned
purposes, which reflects the sociological dimension of entrepreneurship which examines the
relationship between group characteristics and the initiation of business activity. By creating
economic stability for a given population and establishing a place in the social and economic
power structure, entrepreneurial enterprises directly contribute to group assimilation (cf.
Godwyn, M., 2009).

As another sociological analysis of this issue, Kaya (2008) suggests that ‘the process of
proletarianization with economic globalization in Turkey was also a process of increasing
utilization of female labor force. However, we must note that the share of routine non-manual
as well as the managerial and professional, and entrepreneurial classes expanded at very
significant rates with the contraction of women's employment in agriculture. This shows that
women also experienced the process of polarization. While some portion of female workers
entered into the labor force at the very bottom and most often on a temporary basis; an
increasing number of women are establishing stable careers at the middle and the top of the
social strata.’

Although race, ethnicity, and religion have been widely used for analysis of entrepreneurial
activity and economic development, gender has increasingly become to be perceived as an
important factor. Thus, there have been recent efforts to extend sociological research to
include gender as a salient group characteristic in its relationship to entrepreneurial activity
(cf. Godwyn, M. 2009).

According to Ozen Kutanis and Bayraktaroglu (2002), Eastern Marmara region and Kocaeli /
Adapazari are more industrial and less urbanized, so the type of women entrepreneurs are
more traditional and conventional, whereas in this study the results show that the women are
mostly innovator and traditional entrepreneur types. The difference between these two studies
can be attributed to the regional differences as well as the different sector make up of the
sample. Ozen Kutanis and Bayraktaroglu (2002)’s study reflects results on a sample of health
and service sector, educational sector unlike this study which is only service sector. However,
the common type of women entrepreneur between the two samples is the domestic/traditional
type, this result may be interpreted as the cultural expectation of women roles in the Turkish
society. This gives supporting evidence to Aldrich (1989) as he suggests that social structures
such as workplace, family, and social life affect women’s access to entrepreneurial
opportunities. Furthermore, the major motivating factors for our sample to become
entrepreneurs are desire for independence, fulfillment of their dreams and economic reasons.
These factors have proved to be the same for the Israeli women entrepreneurs (cf. Lerner, M
and et al.,1997). This finding may be an indication of the changing values of societies due to
globalization.

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Although the gender inequality and the urbanization of women in a patriarchal society with
rigid family roles of women make it difficult for women to be entrepreneurs, the research
results are encouraging as it signals a positive change. It is inspiring to see evidence that a
majority of women either prioritize their work as number one or try to balance work and
family. However, this is also a call for help for women as they need more help to cope up
with this responsibility. Thus policy implications are in immediate request.

Lastly, it is the intention of this paper that further research is pursued in a wide setting of
Turkey with a larger sample size to provide feedback for policy actions. Based on my finding
that only 50% of the women entrepreneurs sample showed interest in network affiliations,
further research should explore the extent to which network affiliations of Turkish women
entrepreneurs become prevalent for their success and the reasons underlined.

References are available upon request from Hale Oner honer@dogus.edu.tr.

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 TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP AND THEIR
EFFECTS ON INDIVIDUAL AND ORGANIZATIONS

Marie-Elene Roberge
5500 N. Saint Louis Avenue, Chicago, IL, 60625,
m-roberge@neiu.edu
773-463-1785

Ozge Ucan
1205 N. Wheeling Ave. Mount Prospect, IL 60056
ozgeersoy@hotmail.com
224-210-0375

ABSTRACT

This article presents information about the transformational and transactional leadership, their
history, the components of these leaderships, and major differences between them. The
research examines the effects of transformational and transactional leaderships on
organizational culture, organizational learning, quality management, and individuals. There is
a positive relationship between transformational leadership with organizational culture,
learning, and quality management. Transformational leadership has a positive impact on
individual’s motivation, satisfaction, and trust. This article also examines empathy as a key
component of the transformational leadership. The directions for future of transformational
leadership are discussed.

INTRODUCTION

Leadership theory, research, education, and development focused on leadership as only a

transactional exchange between the leader and its followers until the last twenty years. Then a
new paradigm of transformational-transactional leadership was introduced that better
reflected the practices of the best leaders. The recent literature in leadership is overflowing
with articles and books describing the “transactional and transformational” leadership. Three
decades ago, the interest in transactional and transformational leadership becomes more
popular. There are two reasons for this: the first one is rapid, global, economic, technological
change, and the crucial role of leadership style on development of an organization, and the
other is the failures of the known leadership theories (behavioral and contingency) to explain
atypical qualities of leaders. In this article, after definition, history and components of
transactional and transformational leadership, the focus is on the effects of these leadership
styles on individuals, groups, and organizations. Finally, futures directions of this leadership
styles are presented.

DEFINITION OF TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP

Transactional leadership “…occurs when one person takes the initiative in making contact
with others for the purpose of an exchange of valued things” [1]. Transactional leadership is
based on an exchange of something the leader possesses or controls that the followers want in
return for his/her services. In this exchange, leaders emphasize goal setting; give instructions
to clarify conditions, control and reward.
Transformational leadership “…occurs when one or more persons engage with others in such

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a way that leaders and followers raise one another to higher levels of motivation and
morality”[1].The transformational style inspires followers to share the leader’s values and
connect with the leader’s vision. Transformational leaders are successful because they tap
into some of our most basic human needs such as the need for a sense of identity, the need to
belong, the need to feel good about our efforts, the need to feel that we are part of something
special, the need to believe that our future is a hopeful extension of our past, and the need to
feel that we are achieving something worthwhile with our lives.

Major Differences between Transformational and Transactional Leadership

Transformational and transactional leadership are complementary to each other as the

circumstances dictate. There is no formula that dictates when one is more relevant than the
other. Leaders exhibit various degrees of transformational and transactional behaviors as
needed. There is evidence that more effective leader’s exhibit a higher level of
transformational leadership than transactional leadership [2].

The transformational style can be seen in a leader of innovation, whereas the transactional
style can be seen as a manager of planning and implementing policies and procedures [3].
Another view is that the transformational style creates new structure in an organization, while
the transactional style depends on existing structures [4]. Whereas the transactional style uses
the power and authority that already exists in the organization, the transformational leader
motivates people to work for a new and greater good and to create changes in the
environment [5]. Transformational leaderships use energy-producing characteristics that
generate new changes for the organization, which transactional management cannot produce.
What transformational leaders do are that formulating an inspiring vision, facilitating the
vision, and encourage short term sacrifices [6]. Transformational leadership can be seen as a
parent of transactional leadership. It provides the reference to the transaction of power within
the organization [7].

The History of Transformational and Transactional Leadership

Research on leadership theory has evolved over the past fifty years. Early leadership research
focused on identifying personal characteristics of leaders (trait approach) then researchers
focused on leader behaviors that increased followers’ productivity. According to Ohio State
Studies, there are two different kinds of leaders. First is oriented toward task, that leader
makes sure that the work gets done. Leaders assign tasks and expect workers to maintain
definite standards of perform. Second is oriented toward people. Leaders in this group help
employees with personal problems, treat all employees equal, and support them. Two major
leadership models found contingency leadership [8] and path-goal leadership [9]. The
contingency approach proposes that appropriate leadership style is depending on situation.
The path-goal leadership model incorporates situational variables to explain employee
motivation. These studies established that successful leaders use many types of power and
that power alone does not explain leader’s effectiveness in influencing people [10].
Behavioral leadership models have not successfully predicted which leaders could lead
organizational change. Researchers have used prior behavioral leadership research to create
the concept of transactional and transformational leadership.

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The concept of transformational leadership was initially introduced by leadership expert and
presidential biographer James Macgregor Burns [1]. According to Burns [1], transformational
leadership can be seen when “leaders and followers make each other to advance to a higher
level of moral and motivation". The term of transformational comes from inspiring and
developing followers and pushing them to higher levels. Through the strength of leader’s
vision and personality, transformational leaders are able to inspire followers to change
expectations, perceptions, and motivations to work towards common goals.

Later, researcher Bernard M. Bass expanded upon Burns’ original ideas to develop what is
today referred to as Bass’ Transformational Leadership Theory [11]. According to Bass [11],
transformational leadership can be defined based on the impact that it has on followers.
Transformational leaders garner trust, respect and admiration from their followers.

Transformational leaders have six central personal characteristics. These are creativity,
interaction, visionary, empower, passionate and ethical [12]. Other theories of leadership also
emphasize the importance of communication, integrity, courage.

Research in transformational leadership focuses more on its outcomes other than its
antecedents. The majority of antecedents research of transformational leadership emphasis
personality, life experience, and motivation. People motivation and its role in leadership
formation and development are related. The study of motivation as an antecedent of
transformational leadership shows that leaders’ motivation is highly correlated with their
transformational behaviors [13].

The Components of Transactional Leadership

Transactional leadership occurs when the leader rewards the followers depending on the
performance. Transactional leadership depends on contingent reward, management by
exception, and laissez-faire [14].1. Contingent Reward: This transaction is effective under
certain circumstances. With this method, the leader assigns what needs to be done and
rewards followers in exchange for doing assignments.2. Management by Exception: This
transaction is less effective than contingent reward or the transformational leadership. It can
be passive or active. In passive, the leader waits for deviances, mistakes, and errors to occur
and then takes action. In the other one, the leader actively monitors deviances and mistakes
and takes action as necessary.3. Laissez-Faire: This means absence of leadership. According
to all research, it is the one that most ineffective. There isn’t any transaction or exchange
between leader and follower. Responsibilities of leaderships are ignored. Decisions are not
made and actions are delayed.

The Components of Transformational Leadership

Transactional leadership provides a basis for effective leadership, but satisfaction, innovation,
and effectiveness can be achieved through transformational leadership. Transformational
leaders act as mentors to their followers by encouraging learning, achievement, and
individual development. They provide challenges, evoke emotions, and foster a climate of
trust. The literature identifies five dimensions of transformational leadership.1. Idealized
Influence: Followers see their leaders as role models and try to copy them. Followers trust

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and admire their leaders. The reason for this is that the leader considers followers’ needs over
his or her needs. Followers know that whenever they need help, their leader will be there. 2.
Inspirational Motivation: Leaders show empathy, enthusiasm, and optimism. This increases
individual motivation. In this dimension, leaders make clear expectations and show
commitment to goals.3. Intellectual Stimulation: Leaders stimulate followers by changing
problems, questioning conditions, and approaching situations in new ways. And leaders
search new ideas and solutions to problems from followers.4. Individualized Consideration:
Leaders consider individual’s growth and success. They act as a coach or mentor for
followers. By offering new learning opportunities, leaders pay attention to the followers’
achievements. Good communication skills are highly important for this dimension.

EFFECTS OF TRANSFORMATIONAL AND TRANSACTINAL LEADERSHIP ON

GROUPS AND ORGANIZATIONS

In literature, the relationship between transformational leadership and organization

performance has been analyzed and found out positive relationship between them. However,
there is little research on the mediating process between leadership and organizational
success. Researches on mediating process have been focusing on followers’ trust, self
efficacy, satisfaction, and group cohesion.

Effects on Quality Management: Transformational leadership is also associated with

quality management. Transformational leadership provides the visionary leadership needed
for successful quality management. The firms with a higher level of quality management
have a higher transactional and transformational leadership. Also, successful firms use a
higher level of transactional leadership than unsuccessful firms use [15].

Transformational leaders communicate the team’s objectives effectively. This

communication turns the team’s objectives into common identity of groups. This common
identity increases the team spirit.

Effects on Organizational Learning: Organizational learning and innovation are positively

affected by transformational leadership. The relationship between organizational learning and
leadership provides the creation of a positive synergy that increases organizational
performance [16].

Transformational leaders trigger followers’ behavior such as Organizational Citizenship

Behavior (OCB). OCB mediates the relationship between transactional leadership and
follower performance [17]. OCB can be seen in extra-role behaviors such as helping
newcomers. Newcomers are easily integrated into the group, then group works efficiently,
and performance variance becomes smaller. Therefore, followers’ performance reaches a
higher level of quantity and quality.

In general terms, positive affects and the environment enhance problem solving and decision
making. That leads to innovation, creation, and success. A research found that the spread of
positive emotions among a group could enhance group cooperation and reduce group conflict
[18]. Transactional leaders change their environments by influencing followers to embrace
positive visions and ideals. Especially in diverse work environment, people are more likely to
perceive themselves as different from another, so they are less likely to empathize with one

220
another. Leaders act as feeling for and having mutual empathy the people work together
create an increase group effectiveness and performance [19].

Effects on Organizational Culture: In transformational leadership process, the

organizational culture changes. Leaders transform organization and its culture. After culture
becomes transformational, then it turns into an environment for more effective individual
growth and organizational performance [20]. Also transformational leaders influence the
culture beyond the people of the organization as well as the culture among the people of the
organization .The environment in transformational organizations consists of long-term
commitments toward organizational goals and mutual interests. Transformational
organization cultures are based on shared interdependence, as well as leaders and followers
who can pass over their self-interests for the good of the organization.

EFFECTS OF TRANSACTIONAL AND TRANSFORMATIONAL LEADERSHIP ON

INDIVIDUALS

Transformational leaders understand followers and inspire them to achieve higher outcomes.
Leaders support, mentor, and coach them. Transformational leaders trigger follower
conscientiousness. Leaders empower their followers and this leads to higher motivation.

Transformational leaders increase their subordinates’ satisfaction and trust .As a

transformational leader, Herb Kelleher, the founder and CEO of the Southwest Airlines,
focused on building relationships with employees. He became involved in helping out
employees personally. He reached down and got to know the employees, so employees
understood what he really believed in and why they should trust him [21].

Transformational leadership has a positive impact on the development of followers’

motivation in terms of their self actualization needs and extra effort. Transformational
leadership has a positive impact on follower’s performance [22].

Basically, as a result of what transformational leaders do, their followers value them, identify
their strengths and challenges, give feedback, guidance for improvements, and support them.
When people feel they are valued, they become open to hear negative feedback and
motivated to change.

In this complex and fast moving world, one of the key elements of competitive advantages of
companies is knowledge creating, sharing, and managing effectively. While knowledge as an
asset is continuously growing, leaders should manage this asset successfully. Leaders are the
ones for creating structure that foster knowledge creation and cultivation. Transformational
leaders facilitate higher level of knowledge creation and sharing. This leads to higher levels
of individual performance [23]. Leaders individually consider their followers, motivate them
on a day to day basis and encourage them to share ideas with a firm. They reward individuals
for coming up with new ideas and sharing the ideas with others. Especially, in high
technology firms and other knowledge based companies, transformational leaders increase
the level of knowledge creating and sharing. For example, Steve Job used a transformational
and transactional leadership style to find out systems and structures that create, share
information, and convert it into a product. Jobs created a vision for computer and pushed his
Apple employees to reach higher goals.

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 TRANSFORMATIONAL LEADERSHIP AND EMPATHY

Emotional intelligence is a strong prerequisite for effective transformational leadership. An

important measurement of emotional intelligence is emphatic response. It is the ability to
understand follower’s emotional conditions. A major characteristic of transactional leaders is
relying on empathy to understand employees’ thoughts, feelings, and point of view. Leaders
who show empathy to followers can improve organizational efficiency. A strong connection
between leaders and followers brings higher organizational performance [24].

Truly effective transformational leaders are distinguished by a high level of emotional

intelligence that includes self awareness, self regulation, motivation, empathy, and social
skills. According to a study, senior managers who had emotional intelligence over performed
goal by 20%, but division leaders without emotional intelligence underperformed by the same
amount [25].

Empathy distinguishes transformational leaders from other leader types. Empathy is the key
element that enables the leaders to balance meeting their own goals with regard for people
whom they lead. Leaders understand follower’s wants, needs, desires and really care for them
with help of empathy. Without empathy, a person with high level of technical skill, IQ, and
analytical mind can’t be a great and effective leader.

Empathy is especially important today as a component of transformational leadership. The

first reason is in business, the use of teams is really increasing. Empathy plays a role that
increases team performance. A team leader can sense and understand the view points of
people around the table. The second reason is with increasing globalization, cultural and
ethnical differences are getting larger in work places. Empathy helps leaders understand the
cultural differences and hear the message beneath the words being spoken. The last reason is
reduction of turnover in today’s economy. With the help of empathy leaders develop and
keep good people. Overall, a leader who is empathetic toward his/her followers is able to take
the place of followers and feels for their welfare and wellbeing.

Future of Transformational Leadership

In the 21st century, the world is going through a transformation. This transformation affects
business, industry, economy, politics, and etc. The world is being reshaped by globalization,
information technology, and diversity. Transformational leaders are the ones who lead the
companies effectively and successfully in this decade. No leader can lead if she/he cannot
respond to the wants of the followers, if she/he cannot produce change through innovation,
and if she/he cannot empower followers. Leaders who are simply power holders cannot be
effective in the long run and not see the ethical effects of their work.

For the future of transformation leadership, Sanders, a research proposes a model that
suggests three dimensions of leadership accomplishment. These dimensions are transactional,
transformational, and transcendental [26]. In this model, leader’s development along with
consciousness (mind), moral character (heart) and faith (soul) is associated with these
dimensions of leadership accomplishment. Transcendental leadership incorporates
managerial aspects of transactional leadership and the charismatic aspects of transformational
leadership. Transcendental leadership is developing of leaders beyond the ego towards a

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higher influence to achieve an extraordinary, spiritual presence in their lives. It is a new and
more complex way of effective leadership [26]. Transcendental leaders integrate the
immaterial with the material, seek clarity between reality and unreal, and have deepened
conviction [27].

REFERENCES

[1] Burns, J. M. (1978). Leadership. New York: Harper & Row

[2] Hetland, H., & Sandal, G. M. (2003). Transformational leadership in Norway: Outcomes
and personality correlates. European Journal of Work and Organizational Psychology,
12(2), 147 – 170.
[3] King, S. (1994). What is the latest on leadership? Management Development Review, 7, 7-
9.
[4] Mink, O. (1992). Creating new organizational paradigms for change. International
Journal of Quality & Reliability Management, 9, 21-23.
[5] Davidhizer, R., & Shearer, R. (1997). Giving encouragement as a transformational
leadership technique. Health Care Supervisor, 15, 16-21.
[6] Ackoff, R. (1999). Transformational Leadership. Strategy & Leadership, 27, 20-25.
[7] Covey, S. (1991). Principle-centered leadership. New York: Simon & Schuster.
[8] Fiedler, F. E. A contingency model of leadership effectiveness. In L. Berkowtir (Ed.)
Advances in experimental social psychology.New York: Academic Press, 1964. Vol. 1.
[9] House, R.J. (1971) “A Path Goal Theory of Leader Effectiveness,” Administrative
Science Quarterly, 16, 3, 321-338
[10] Yukl, G. (1994). Leadership in Organizations, Prentice Hall, Englewood Cliffs, NJ.
[11] Bass, B. M. (1985). Leadership and performance heyond expectations. New York: Free
[12] Hackman, M.Z. and C.E. Johnson (1991), ‘Leadership Communication Skills’, in J.T.
Wren, ed., The Leader’s Companion: Insights on Leadership through the Ages, pp. 428–
31
[13] Barbuto, J.E (2005). Motivation and Transactional, Charismatic, and Transformational
Leadership: A Test of Antecedents. Journal of Leadership &amp; Organizational Studies,
11; 26.
[14] Bass, B.M.(1998). Transformational Leadership
[15] Laohavichien T., Fredendall L.D., and Cantrell R.S. (2009).The effects of
transformational leadership on quality management. Journal of Quality Management 16, 2:7-
24
[16] Morales V.J, Montes F.J., and Verdu’Jover A.J.(2008). The effects of transformational
leadership on organizational performance through knowledge and innovation.
BritishAcademy of Management, 19: 299-319.
[17] Boerner, Sabine, Eisenbeiss, Silke Astrid, Griesser, Daniel(2007). Follower Behavior
and Organizational Performance: The Impact of Transformational Leaders. Journal of
Leadership and Organizational Studies, 13: pp. 15-26
[18] Barsade, S.G. (2002). The ripple effect: Emotional contagion and its influence on group
behavior. Administrative Science Quarterly, 47: 644-675
[19] Roberge M.E .and Dick R.V. (2008). Recognizing benefits of diversity: when and how
does diversity increase group performance? Human Resource Management Review
[20] Bass, B. M. & Avolio, B. J. (1993). Trans form adona! leadership: A response to
critiques. In M. M. C'hemmers & R. Ayman (F.ds), leadership theory and research:
Perspectives and directions, pp. 49-88.

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[21] Bass, B.M & Avolio, B.J. (1997). Full range leadership development: Manual for the
Multifactor Leadership Questionnaire. Palo Alto, CA: Mind Garden
[22] Dvir, T., Eden, D., Avolio, B., & Shamir, B. (2002). Impact of transformational
leadership on follower development and perfprmance. A field experiment. Academy of
Management Journal, 45(4), 735-744.
[23] Bryant,S.E. (2003). The role of Transformational and transactional leadership in
creating, sharing, and exploiting organizational knowledge. Journal of Leadership and
Organizational Studies,9: 32-44.
[24] Barbuto J.E. & Burbach M.E. (2006). The Emotional Intelligence of Transformational
Leaders: A field study of elected officials. The Journal of Social Psychology, 146(1): 51-
64.
[25] McClelland, D. C. (1999). Identifying competencies with behavioral-event interviews.
Psychological Science,9(5), 331-339.
[26] Sanders, J.E.(3rd), Hopkins, W.E. & Geroy, G.D. (2003). From transactional to
transcendental: toward an integrated theory of leadership. Journal of Leadership and
Organizational Studies, 9(4), pp. 21-31.
[27] Kant, I 1997. Prolegomena to any future metaphysics. Edited and translated by Gary
Hatfield. New York, NY: CambridgeUniversity PreKing, S. (1994). What is the latest on
leadership? Management Development Review, 7, 7-9.

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 MANAGERIAL RESPONSIBILITY FOR MERITOCRACY
～PERSPECTIVES ON THE PAY SYSTEM IN JAPAN ～

Tomokazu Sakumoto
Graduate School of Regional Business and Economics
Okinawa International University
Residence: Chatan 2-6-8, Chatan-cho, Okinawa, Japan 904-0116
Email stomo@okiu.ac.jp
Office Tel/Fax +81-98-893-7128
Mobile: +81-90-2859-8507

ABSTRACT

Trends in pay systems of Japanese corporations are considered in terms of comparison to

personnel management in the United States, with specific consideration given to such labor
issues as long-term employment. Given the fact that each country has its own cultural
structures, this study identifies some general characteristics of meritocracy in Japan and in the
US as revealed from investigation of corporate pay systems. It is surmised that long-term
evaluation systems such a those associated with meritocracy in Japanese corporations are
likely to be increasingly significant for the career development of a company’s core workers
as implemented by Managerial Responsibility. Meritocracy, Pay System, Human
Resources Management

MERITOCRACY IN JAPAN AND IN THE US

The expression ‘meritocracy’ as used it in this paper refers to pay systems reflecting ability-
centered evaluation. Ability is either ‘existent’ or ‘potential.’ Evaluation is either ‘job
evaluation’ or ‘individual evaluation.’ This categorization enables contrastive differentiation
of characteristics of meritocracy in Japanese and US corporations.

Overall View of Meritocracy in Japan and in the US

Corporations in Japan have, in general, the following features of personnel management.

Workers expect to remain with their employer until their designated retirement age, though
this is only a custom and is not clearly prescribed by the contract. Layoffs are perceived as
being the last resort for handling managerial difficulties. In addition, most Japanese
companies prefer long-term employment in which the accrued duration of the working period
is closely linked to increases in the employee’s pay. Under such a seniority-pay system,
promotion and raises in salary are affected by, and strongly tied to, the length of service with
the company (specifically, in-house service). Because companies usually ignore previous
work experience in the determination of payment or rank, comparatively few workers who
have obtained a secure job are willing to change to a different employer. Additionally, the
initial pay scale is fundamentally determined by the year of graduation, despite actual age at
graduation, so there is a financial incentive not to delay or prolong one’s education. In Japan,
the labor market is not a factor than affects pay scales. Employees are appraised for potential
and demonstrated ability but are expected to do whatever work they are assigned, so payment
within a company is not so much related to the specific types of jobs undertaken.

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Corporations in the US, by contrast, tend to hire and lay off employees according to the
current needs of the company. Payment is strongly affected by conditions current in the labor
market and is less affected by a worker’s duration with the company. Corporations seek to
improve competitive competence by actively seeking either better or cheaper employees.
Salaries thus become competitive, but sometimes the resulting discrepancies in pay and
benefits tend to promote resentment among employees and loss of corporate loyalty. Such
corporate and employee uncertainty and instability favors short-term management planning
within a more fluid market.

Ability and Evaluation in Japanese and US Corporations

The characteristic features of Japanese personnel management compared with US

corporations and their payment systems can be categorized according to variant perceptions
of employee ability, and the establishment of a connection between that perception and the
resultant pay system. Management in terms of payment systems can be categorized based on
the type of assessment of employee ability and performance. Ability can be existent ability
(EA) or potential ability (PA), and performance can be job evaluation (JV) or individual
evaluation (IV). The degree of emphasis on each of these four factors provides a basis for
recognizing the comparative degree of corporate (or cultural) meritocracy.

As evident in Figure 1, emphasis on EA and IV results in pay for skill and knowledge
whereas emphasis on PA and JV results in pay reflecting the working period. In the case of
strong EA and JV, there is pay for the job and performance. By contrast, strong PA and IV
results in pay for potential ability and qualification. The opposition of these factors is
revealed in the differing pay systems of Japanese and US corporations: the pay system for US
corporations more strongly reflects EA and JV while the Japanese pay scale is seen to put
emphasis on PA and IV. These factors are closely related with the formation of each pay
system.
Existent Ability (EA)

US Corporation

Pay for Job Pay for Skill and Knowledge

Pay for Performance

Job Evaluation (JV) Individual Evaluation (IV)

Pay for Seniority and Service Japanese

Corporation

Pay for Personal Ability

Pay for Qualification

Potential Ability (PA)

FIG. 1. The Relation of Pay System and Meritocracy

Recently in Japan, it has been found that workers are remaining supportive of long-term
employment and seniority pay/promotion. According to the survey of a labor institute in
Japan, more than 86% of employees hope to remain in long-term employment until
retirement, and over 71% willingly accept the seniority system for maintenance of their living
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status [1]. Clearly, Japanese workers still support retention of long-term employment without
contractual specification.

As for a similar investigation viewed from the side of the companies, almost 96% of Japanese
corporations are trying to keep the lifetime employment system with seniority. Moreover,
almost 76% of companies retain long-term employment with employee training at company
expense because of their belief that employee training is important for a Japanese company to
be able to succeed indefinitely into the future [2].

It seems that recent pay systems in Japan exhibit several factors combined with employees’
in-house training under long-term employment systems. For example, as reported in a recent
survey, in the case of general workers, most Japanese corporations ranked the following as
significant factors for payment: seniority system (61.9%), ability (80.9%), and job content
(56.7%), though the percentage points of personal elements such as seniority and potential
ability has gradually decreased in 2007 survey [3]. It appears that the pay systems of these
companies overlap each other.

According to a questionnaire of the Ministry of Health, Labour and Welfare in 2009,

Japanese companies’ non-manager pay determinants were composed primarily of the
following five factors, in descending order: job content, job ability, school career, seniority,
and job achievement. The specific figures are given below in Table 1.

TABLE 1
Pay Determinants （％）
Manager Job Content Job Ability Achievement School Seniority
1998 70.1 69.6 55.1 72.6 NA
2001 72.8 79.7 64.2 73.9 72.5
2009 77.9 69.9 46.9 55.9 54.9
Non Manager Job Content Job Ability Achievement School Seniority
1998 68.8 69.2 55.3 78.5 NA
2001 70.6 77.3 62.3 80.6 79.0
2009 72.7 69.3 46.6 65.4 63.7
Ministry of Health, Labour and Welfare “Shuro Jouken Chosa” 1998～2009.

It is worth noting that of these five pay determinants, the contribution of school career has
decreased the most in the past decade. This may indicate increased reliance on in-house
training.

PAYMENT FEATURES OF SPECIFIC CORPORATIONS

Toyota Motor Corporation in Japan

Established at 1937, Toyota had by the year 2000 grown to over sixty-eight thousand
employees with product sales valued around 120 billion dollars. The production of cars
amounted to about 4.5 million vehicles in 2001. Some of Toyota’s distinctive managerial
characteristics are as follows.

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Paternalism: Toyota’s CEO Hiroshi Okuda insists that a company which parts too readily
with its employees will suffer from the loss of reliability of their workers. In times when the
company is in need of many workers, the company will be unable to retain eligible workers
and as a result will lose its competitiveness. Okuda also stresses education for human
development to make better quality vehicles. Toyota’s managerial philosophy encompasses
human development.

In-house training: In 2002, the Toyota Institute for Human Development was established. The
purpose was to educate employees for knowledge, process and product improvement,
manager training, and human development according to the philosophy of the Toyota Way.
An internship system has been developed for providing 2 or 4 weeks of work experience
along with reports and lectures given without pay except for commuting fees, lodging and
meals. The purpose is to promote company appeal and to foster creative personal
development.

Pay: For four hundred positions which are surveyed and evaluated, promotion and increase of
pay is dependent on global personal appraisal by MBO (Management by Objective) and
perception of competency based on evidence of understanding of the Toyota Way. As
explained by the CEO, the Toyota Way is a kind of managerial philosophy which includes
long-term employment, a model of competency, personal skill development for multiple
skills, loyalty that supports an “upbringing” attitude towards other employees, and an
unceasing effort at improvement “from the bottom up.”

Toyota’s Pay Systems in Japan and at NUMMI

The Toyota system of pay for white- and blue-collar workers is similar. Pay for white-collar
workers is based on job grade (50%) and personal job function (50%). For blue-collar
workers, it is based on job grade 30%, experience 20%, personal job function 30%, and age
20%. For blue-collar workers, emphasis is on working-period experience. However, the
designation of blue-collar and white-collar position is not according to assigned job but by
skill grade, as shown in Table 2, which shows skill development with working experience.
Workers at the same grade, however, may receive different pay because of a “broadband” pay
scale that includes appraisal for job-related functions such as evidence of skill and success at
problem-solving, and capacity for teaching their “know-how.” This system is seen to promote
the learning/teaching of skills on a long-term basis in both job categories.

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 TABLE 2
Pay System in Toyota
White Collar Blue Collar
Position Pay Grade Based Pay Position Pay Grade Based Pay
1 Grade Base on
Profesional CX 1 Grade
2 Grade Job Grade
Job Grade SX 2 Grade 30%
3 Grade
3 Grade Experience
EX
Expert 50% 4 Grade 20%
4 Grade Personal 5 Grade Personal
Mid Skill
6 Grade Job Function
5 Grade Job Function 7 Grade 30%
Skill
Clerk 6 Grade 8 Grade Age
7 Grade 50% Basic Skill 9 Grade 20%
Toyota Motor Corporation in 2002.

Hourly pay for the job is used for blue-collar workers at NUMMI (New United Motor
Manufacturing Incorporated), which was established in 1984 in Fremont, California, with
50/50 investment by Toyota and GM. The payment of union members is at a uniform rate
without appraisal except for maintenance workers. Pay raises are relatively small and
automatically allotted according to six-month working periods without personal-performance
evaluation [4].

The variability of the pay system of Toyota in Japan is clearly related to rotation of
production and maintenance workers, though NUMMI adopted only a division-internal
rotation system. Therefore NUMMI workers have only job experience but do not learn
solution skills for unusual operation as is the case with workers in Japan. For this reason, the
NUMMI pay scales are separated, and there is no need for a broadband pay range to
accommodate the different skill capacities of each worker.

RECENT TRENDS OF PAY SYSTEMS IN JAPAN

Most corporations in Japan have tried to use job-based pay systems for both blue-collar and
white-collar workers under long-term employment. Unfortunately, this seems to have created
several difficulties of the evaluation system based on jobs or performance, difficulties such as
cost and time for job evaluation and the lack of working flexibility.

As seen overall, many Japanese corporations have tried to employ several types of pay
system in heading towards personal ability-centered pay [5]. Several corporations employed
pay systems for personal ability, including a type of competency and broadband pay scale
such as used by Toyota corporations. Evaluation tends to center on personal potentiality
because personal ability does not link so well with job performance under group-focused
working situations without a definite working sphere.

This paper has attempted to consider more relevant pay system under the long-term
viewpoint of Meritocracy. It seems that the pay system in Japan is converging for working
flexibility and employee training. I would like to stress that most CEOs in Japan have a

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management philosophy to encourage employee career development within long-term
employment and to keep in balance employees’ pay, as is done in the Toyota Way. This is
closely related to the pay system under OJT in long-term employment. Considering general
pay systems, most Japanese companies have employed pay systems for meritocracy based on
personal potentiality under long-term employment, more so than the average US
corporations. It appears to me that considerable managerial responsibility remains in
combined pay systems based on career development of employees.

REFERENCES

[1] The Japan Institute for Labor Policy and Training, “Kinro seikatsu ni kansuru chosa” 2004 and
2007.
[2] Japan Productivity Center, “Nihonteki jinji seido no genjo to kadai ” 2008.
[3] Japan Productivity Center, “Nihonteki jinji seido no genjo to kadai ” 2000-2008.
[4] NUMMI and UAW, Local Agreement in 2004.
[5] The Japan Institute for Labor Policy and Training, “Kongo no kigyou keiei to chingin no arikata ni
kansuru chosa” 2009.

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 THE EFFECTS OF DOWNSIZING: A CASE STUDY OF AN IT COMPANY IN
TURKEY

Alaeddin Tileylioglu
Çankaya University
Ögretmenler cad. No: 14 Yuzuncuyıl
06531 Ankara-Turkey
ala@cankaya.edu.tr
phone: +90 312 2844500/237
fax: +90 312 2871672

ABSTRACT

This paper presents findings of a case study, which describes experiences of top management
team together with the human resource (HR) managers implementing a downsizing program
in an IT company in Turkey. The downsizing practice took place at the end of 2009 due to
the ‘global financial crises’. Downsizing was intended as a permanent separation, but due to a
new development only three months later, the management made a decision to re-call all
terminated ‘victims’ to offer them their old positions.

This decision was unusual for implementation of permanent termination. The explanation
given by management was that ‘since the company has contracted a sizeable project, now we
can afford to re-employ all the ‘victims’ of the downsizing’.

Not many empirical studies have paid attention to the processes by which downsizing can be
accomplished. The present study, however, investigated the three groups of the concerned
parties: the ‘victims’ of termination, the ‘survivors’ and the decision makers of the
downsizing, the implementers. We, therefore, in this paper made an in-depth analysis of
several issues: We examined the feelings of the ‘victims’ after returning to the company, the
post-downsizing ‘survivor syndrome’, and management feelings and their interpretation of
the situation.

Key words: Downsizing, lay-off, survivor, commitment, global financial crises

INTRODUCTION

Downsizing refers to planned reduction in the size of the workforce with intent to cut costs
and to improve organizational performance (Kets de Vries & Balazs, 1997; Kozlowski, Chao,
Smith, & Hedlund, 1993). It is also referred as rightsizing, re-organization, restructuring,
(Cummings & Worley, 2002). The organization chooses this strategy when executives are
unable to predict future business activity and the environment and particularly at times of
downturn of the economy.

According to Noronha & D’Cruz, 2006, downsizing will have impact not only on those who
are separated from the organization but also on those who survive the lay-off and stay in the
organization, as well as the implementers, those involved in executing the downsizing
intervention in the organization.

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Downsizing may have positive or negative consequences. Positive consequences involve
decrease in personnel cost and increase in efficiency and productivity while negative effects
include reduced job involvement (Allen et al., 2001), reduced commitment to the
organization (Brockner, Konovsky, Cooper Schneider, Folger, Martin & Bies, 1994) reduced
self-esteem (Wiesenfeld et al., 2001) and reduced performance of the survivors (Brockner,
Grover, Reed & DeWitt, 1992), downsizing is also studied as a violation of the
psychological contract (Spreitzer & Mishra, 2002).

There are more empirical studies indicating the long-term negative effects of downsizing on
surviving employees, (Armstrong-Strassen 1998), productivity, and profitability (Madrick
1995; Rubach 1995) than its long-term benefits. According to some researchers (Baily,
Bartelsman, and Haltiwanger 1994; Cascio 1995; Dougherty and Bowman 1995; Lewin and
Johnston 2000) there is lack of explicit evidence supporting long-term benefits of
downsizing.

Downsizing effects work processes as well: it causes loss of individual security as a result of
job losses, it reduces commitment to the company by survivors, increases moral problems
and reduces motivation and increases the need to develop new skills among survivors. In
addition it increases the need for new organizational form and for re-allocation of resources
and power.

The use of downsizing as management's strategic response to environmental and institutional

changes is prevalent in many industries, particularly during the times of recession and
financial crises.

THE COMPANY

The company under consideration, let’s call it XYZ, was established in 1992 in the capital
city of Turkey, in Ankara. It was established to produce software to the strongly growing
defense industry of the country. The company is owned by both private sector entrepreneurs
as well as the state defense industry companies. The company has been very successful and
profitable over the years. Despite very strong competitors, in the last 3 years prior to 2009, it
was growing at a very fast rate reaching eight to ten times its previous software sales, making
their shareholders extremely happy. In 2009 due to the world financial crises, XYZ started to
show a decrease in its activities.

XYZ’s uses a matrix type organization, with highly centralized structure. It employs 350
people more than half of whom are computer, software and electronic engineers. XYZ is
managed by a general manager and two deputy general managers. It has four operations
departments: namely software, system, certification, and contracts and programs, each of
which is run by a director. They also have strong human resource as well as marketing and
sales departments. Over 90% of the employees are graduates of very good universities, many
of them hold a master degree in various relevant fields. During the last year, due to the very
high growth and particularly diversification in their outputs, the top management started to
seriously talk about restructuring the organization.

In addition to the contracts that are already under operation, at the end of 2008 and beginning
of 2009 they contracted several other projects that would resume work at the beginning of
2010. But following the world financial crises, in 2009, the business started to slow down and

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as a result, some of the contractors asked XYZ to cancel their software project’s contracts
while some others asked for negation or deferment. The management of XYZ was alarmed.
Top management believed that they need to reduce the number of software engineers,
professionals and other support personnel.

Top management met twice to discuss the situation. They believed that if they lose some
more contracts, the high cost of very qualified professional employees may lead to an
inevitable collapse of the company. They panicked. The meetings were held in secrecy. They
did not even inform the human resource manager of the company. The decision was made to
reduce overhead cost significantly, including payroll expenses. In the third meeting, they
shared the downsizing decision with the human resource manager and decided to implement
it immediately as an effective step towards saving XYZ.

Senior managers together with the human resource manager decided to proceed with a
downsizing program as follows: A list of employees who would be terminated was drawn up.
Final decisions on which employees should be sent were made by the senior managers
through selective judgments. The immediate supervisors were not involved in the process.
During the operation they did not take into account performance data.

Terminations were not handled properly. There was discussion over how much notice
employees should be given prior to termination day. Due to the concern that there could be
destruction particularly of software, it was decided that the day of the receipt of the letter that
is sent through the Public Notary would also be the last day worked. The process started with
sending to each of the selected170 employees, through the public Notary, a letter informing
them that their work contract was terminated as of the day of the receipt of the letter. They
also informed the ‘victims’ that their legal severance and notice pay will be made
immediately.

Following considerable debate among senior managers about use of outplacement services, it
was decided that outplacement services would not be provided. There was a rumor that some
of the senior managers asked their main competitors not to hire any of terminated employees
in the short run. Despite this rumor, some of the ‘victims’ believe that managers did not do
this to harm their ex-employees, instead probably they did it because they thought they would
need to rehire some of them in the near future. Still this rumor was strong enough to shock
not only those who were laid-off, but also the survivors.

The selection criteria used were not comprehensive at all. Some of new hires together with
those who have been working in XYZ since its establishment were terminated. In selecting
people to terminate performance appraisal results were not used, neither other criterion, such
as seniority. Senior managers decided to lay-off most of the software engineers upon the
recent cancellation of work contracts. They believe that XYZ will not need that many
software engineers, at least in the short run, or until business activity is better. There were no
termination interviews after the operation.

Three month later, unexpectedly XYZ won a large new contract. The top managers met again
and decided to re-call all the 170 ex-employees. According to the human resource manager
about 90% of the laid-off employees returned to their old jobs with no change in their
previous status or salaries. However, it was reported that the best of the ‘victims’ were
offered jobs in other companies. The operation ended with a loss of several best employees.

233
Soon after the re-call is made XYZ invited an expert to investigate the present situation in the
company and particularly to report any positive or adverse effect caused by the two recent
decisions made. Also top management was concerned with investigating the need for re-
structuring the organization.

METHODOLOGY

Data for this study were collected with the help of primary sources through face-to-face
interviews with the top management team (total of 7 people), a questionnaire filled by both
the returning ‘victims’ and survivors (total of 46) and a focus group interview which included
a total of 40 employees selected by the HR department among both survivors and re-called
‘victims’. In addition the company’s documents were also analyzed.

FINDINGS

The findings of the investigation provide insight into an unusually awkward situation that can
set example to other downsizing practitioners and raise questions about top managers’
making decisions about implementation of downsizing.

Interview with top managers

The interview with top managers revealed that the decision for downsizing was very sound at
the time it was taken. They stood behind the decision to advise the Board of Directors for
reducing the work force. They admitted that they were under pressure during the time of the
decision. The pressure was due to cancellation of two very large contracts that they were
expecting to round 2010 and 2011 profitably.

When senior managers were asked about how they selected employees to be terminated they
said that ‘it was not easy to make such a decision, since nearly all employees were very
qualified and we were happy to work with them. For that reason we believe that until a new
and sizeable work contract is underway, there would be very little work for particularly the
software engineers in the company. We also were not very optimistic about the future of the
market. Many companies were closing down and many others were reducing their workforce.
We were afraid that the uncertainty will prevail for longer time than we foresee. This is why
we were forced to make a very fast decision’.

On the question about not including the human resource manager in the two meetings prior to
the downsizing decision: They said that firstly, it was top management meeting and secondly
they are a software company producing software to the defense industry and the arm forces of
country. For these reasons most of the meeting has ‘top secret’ priority. They’ did not want
any information leaking before a decision is made for a downsizing operation. They added
that the human resource manager was involved in every other step of the downsizing
operation.

We asked them if they had in mind re-calling employees at the time of lay-off. They replied
‘No, this is why we did not mention any dates for re-calling employees. Because we had no
idea about how long the world financial crises will last. Therefore we considered our action
to be understood as permanent separation. We believe that everybody understood it that way.
But frankly, we were not happy to hear rumors that we asked our competitors not to hire the

234
‘victims’. This was never the case. It would have been very unethical to mention anything
like this. Besides, there was no reason to do so.’

Why did you not offer them outplacement services? We asked. ‘We were also criticized for
this. We could have done so. We could have used this as a good example for publicity. We
were ‘also’ hoping that the economic crisis will not last very long. We sincerely were sorry to
lose them. They were very valuable for us. In addition, we did not want to lose them to our
competitors’ they said.

Now, having re-called everyone, do you think that the decision of downsizing was wrong?
Do you regret your decision? This question was answered by the general manager and a
director as ‘We still think that our decision was correct at the time it was taken. For that
reason we never regretted it.’ Other directors and the deputy general manager however, were
not that sure about their decision. They said that ‘the decision was taken very quickly. It was
taken during a ‘panic attack’ we believe that we lacked experience of such decisions’.

Two other top managers despite standing behind their decisions said that ‘XYZ lost several
its excellent software engineers to their competitors during this operation.’ They believe that
‘they should have been more selective’, they should have used performance criterion in the
process.’ They also said that ‘involvement of the human resource manager in the process
from the very beginning would have ended in more satisfactory results both for the company
and the employees. Therefore we think the whole process would have been handled better’.

Did you notice any change in the attitudes of the ‘survivors’ after the downsizing, we asked.
‘On the one hand we believe they were happy and grateful to have survived the downsizing
which left nearly 50% of total employees jobless. On the other hand, we can observe a
change of attitude: the ‘survivors’ are feeling insecure, some of them seem to lost self-
confidence and they were communicating less with management. They seemed to concentrate
on doing their jobs only.’ Do you mean they are more productive than they used to be? We
asked. ‘No, they were somehow less productive and we think they are concentrating on their
jobs less than before. But this was expected because after all they have lost their best friends
and they have uncertainty about their future. We also believe that they lost their trust in
management. For all of these reasons our management was triggered to ask an expert to
investigate the situation’.

Another question asked was related to the re-calls or ‘victims’. According to the top
managers, ‘they are happy to be re-called. After all in such a market situation it would have
been very difficult for them to find a decent job. But they still seem to feel insecure. They
believe that during a new crises, they will be first to get lay-off. Similar to the ‘survivors
syndrome’ they lost self-confidence and trust in the top management. Accordingly since their
return to the company they do not seem happy. We believe that they should work hard to
bring back the previous climate of XYZ.’

Questionnaire results

The questionnaire was designed to find out about several important organizational issues
including relationship between employees and top managers, the level of communication,
motivation, performance appraisal and reward, authority and responsibility, delegation,
autonomy, training and development, participation in decision making, trust by customers,
performance feedback, structure of wages, human resources compared with competitors,

235
corporate culture, trust in the top management, top management trust in employees, and the
effect of fast growth on XYZ. Our aim was to reveal some of the realities underlying the
decisions made to lay-off half of the workforce and after a short period of time to re-call them
all.

A summary of the findings is presented below

It is established that the relationship between top management and employees have never
been very warm. One of the issues that reduced the trust is related to performance appraisal
and reward. The employees claim that while they are working on a particular project that last
more than a year, their performance was evaluated by the manager of the department they
originally worked for, instead of being assessed by their team leader with whom they are
presently working. They believe that it is not fair to be evaluated by someone who knows
little about your recent work, since he/she would have very little contact with you during that
period.

Another issue is related to the level of communication between managers and employees. The
present state of communication has never satisfied the employees’ expectations. Some
employees openly declare that management is not open at all to communication and
particularly to criticism. They tend to take nearly every point raised by employees personal.
They are very susceptible to criticism. This makes the relations very fragile. This situation
eventually leads employees to refrain from making comments on issues raised by senior
managers.

There is also a wide belief held by employees that the senior managers are not empowered
enough by the Board to make critical decisions on their own. This belief reduces the respect
to top managers and impairs their relations with employees.

Another point the employees stress in the questionnaire is related with the balance between
authority and responsibility assigned to employees. In other words it is claimed that too much
responsibility and very little authority is handed over to them. This situation weakens their
positions and forces them to consult with their immediate supervisors or managers on every
point under their responsibility. This is also important from the point of view of their
autonomy.

Another topic of interest raised was on participatory management. Sharing views or decisions
with employees is not very common in XYZ. The end result of this is plenty of gossips and
rumors taking over the real facts in the company. Particularly during review periods of
performance, reward, wage increase as well as times of economic crises.

During the last few years the image of the company in the market improved greatly. Trust by
customers is also excellent. Employees claim that this is the result of very hard work by
everybody, not only senior management. This should have been recognized and declared.

Employees are grateful to the senior managers for their emphasis on training and
development. Training activities are becoming part of the corporate culture. The Human
Resource Department uses the training budget to cater for the need of XYZ and also to fill the
needs of employees. This makes the company one step ahead of their competitors with their
good pool of human resource and specialists.

236
Employees trust each other but have no trust or faith in the management at all. This feeling
has worsened after the terminations. They expressed their opinion on trust with no fear. We
think after what has happened during the last three months such feeling did not surprise
senior managers. This made employees lose their commitment towards the company. Another
point criticized by employees is related with salaries and monetary rewards. They are upset
because while XYZ has been growing and making considerable amount of profit, no salary
increase or performance reward was made during the last two years. Senior managers
admitted that it is time for reviewing the salary structure and performance reward. An
investigation is also underway about some managers and supervisors not providing feedback
related to the performance of the employees.

Another common point derived from the questionnaire was on the growth rate experienced by
the company in the recent years. It is said that fast growth rate of XYZ is to blame for many
of the above problems. It had adverse affect not only on the structure of the organization but
also on several issues that have been mentioned above.

Focus Group

The meeting with the focus group was very fruitful. We talked to 20 survivors and 20 re-
called ‘victims’ selected by the human resource manager to represent several departments. It
was interesting to observe the similarities of thought that were expressed.

The company’s goals and strategies are not discussed or shared with employees properly.
This is viewed as weakness by employees. They feel as if they are deprived from learning
about long-run plans of the company. They are only informed of daily duties, they said. They
interpret this situation as de-motivating. The explanation given by top managers to such a
complaint is more interesting. They say that even they do not know much about the
companies long term objectives. This is mostly due to the uncertainties of the Turkish
economy. They are forced to revise the goals and strategies very often.

Due to the fast growth of the company the organization need restructuring, according to the
focus group. The number of employees has increased and the span of control is wider now.
Similarly a new department is established to deal with projects for the Navy. The first
contract won by this department is far from being a software or consultancy project. It is a
production contract. This alone requires a thought for restructuring the organization. In
addition one of the two Deputy General Managers positions is vacant. The general manager is
substituting this position. It should be filled urgently. Otherwise the general manager,
occupied with daily operations, will be losing the control of strategic issues and the company.

It was also indicated that there are too many different job titles that creates confusion. They
should be simplified. Another weakness of the present organization is that all support
departments are directly under control of the general manager. They explain this with the
general manager’s possessiveness of authority.

Both the ‘survivors’ and ‘victims’ agree that they have no trust in the management. This was
highlighted by the way downsizing was handled: instead of holding a meeting and informing
employees about what is happening, management chose to inform employees of the
downsizing through Public Notary. Particularly those who have been working in the company
since XYZ was established were very upset about it.

237
 SUMMARY AND CONCLUSIONS

As it was indicated earlier in text, downsizing effects work processes, it causes loss of
individual security as a result of job losses, it reduces commitment to the company by
survivors, increases moral problems and reduces motivation and increases the need to
develop new skills among survivors. It will reduce personnel cost and increase efficiency and
productivity. But due to loss of self confidence and motivation it may also reduce
productivity. It may also have an adverse affect on job involvement. In addition it increases
the need for new organizational form as well as re-allocation of resources and power. In the
present study we have observed similar behavior from both the ‘survivors’ and ‘victims’.

Fast growths of companies’, unless intervened on time, may adversely affect the
organizational structure, and impair relations in the company. In XYZ probably most of the
recent chain of events was caused by the unforeseen fast growth of the company. To cope
with and manage the change brought by sudden growth, both management and employees
must spend dedicated effort.

The feeling of employees about trusting senior managers or those involved in the
implementation of the downsizing is a serious problem. The management, in our opinion,
should hold several meetings and try very hard to repair the broken relationship. When they
make promises they should live up to these promises. They should try to be more transparent
in their management style and let employees participate in some of the decisions they take.
Particularly in those that concern human resources.

The most important lesson to derive from this case and other downsizing implementation, in
my opinion, is to smoothly execute the process without too much harming the company,
survivors and ‘victims’. To do so, the practitioners should observe the following points
carefully: Inform employees about the reasons for downsizing, include HR manager from the
very beginning in the process, select the most appropriate criteria for employees to be laid-
off, such as seniority or performance appraisal, use outplacement services and exit
interviews.

REFERENCES

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Survivor reactions to organizational downsizing: Does time ease the pain? Journal of
Occupational and Organizational Psychology, 74, 145-164.

Armstrong-Stassen, M. (2002). Designated redundant but escaping lay-off: A special group

of lay-off survivors. Journal of Occupational and Organizational Psychology, 75, 1-13.

Bailey, M., E. Bartelsman, and J. Haltiwanger. 1994. Downsizing and Productivity Growth:
Myth or Reality? Cambridge, MA: National Bureau of Economic Research.

Brockner, J., Konovsky, M., Cooper-Schneider, R., Folger, R., Martin, C., & Bies, R.J.
(1994). Interactive effects of procedural justice and outcome negativity on victims and
survivors of job loss. Academy of Management Journal, 37(2), 397-409.

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Brockner, J., Grover, S., Reed, T., & DeWitt, R.L. (1992). Layoffs, job insecurity, and
survivors’ work effort: Evidence of an inverted-U relationship. Academy of Management
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Cascio, W. 1995. Guide to Responsible Restructuring. Washington, DC: U.S. Department of

Labor, Office of the American Workplace.
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Cummings, T.G., & Worley, C.G. (2002). Organizational Development and Change. 7
Edition, South Western College Publishing: Thomson.

Dougherty, D., and E. Bowman. 1995. "The Effects of Organizational Downsizing on

Product Innovation." California Management Review 37 (4): 28-44.

Kets De Vries, M.F.R., & Balazs, K. (1997). The downside of downsizing. Human Relations,
50, 11-50.

Lewin, J. E., and W. J. Johnston. 2000. "The Impact of Downsizing and Restructuring on
Organizational Competitiveness." Competitiveness Review 10 (1): 45-55.

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Challenge 38 (6): 31-44.

Noronha, Ernesto, & D’Cruz, Premilla. (2006). A necessary evil: The experiences of
managers implementing downsizing programmes. The Qualitative Report, 11 (1), 88-112.
Rubach, L. 1995. "Downsizing: How Quality Is Affected as Companies Shrink." Quality
Progress 28 (4): 23-25.
Spreitzer, G.M., & Mishra, A.K. (2002). To stay or to go: Voluntary survivor turnover
following an organizational downsizing. Journal of Organizational Behavior, 23, 707-729.
Wiesenfeld, Batia M., Brockner, Joel, Petzall, Barbara, Wolf, Richard, & Bailey, James.
(2001). Stress and coping among layoff survivors: A self-affirmation analysis. Anxiety, Stress
and Coping, 14, 15-34.

239
 INTERNALIZATION VS. EXTERNALITATION OF HUMAN CAPITAL
STRATEGY: A TRUST CLIMATE PERSPECTIVE
Chih-Yuan Wang1 and Nien-Chi Liu2
1
National Central University, Graduate Institute of Human Resource Management,
No.300 Jhongda Rd., Jhongli, Taoyuan, Taiwan, 974407001@cc.ncu.edu.tw, (886)3422-
9588
2
National Central University, Graduate Institute of Human Resource Management,
No.300 Jhongda Rd., Jhongli, Taoyuan, Taiwan, nliu@cc.ncu.edu.tw, (886)3422-9588

ABSTRACT

We extend human resource management thinking regarding how human capital strategies
affect the trust climate and then facilitates employee outcomes. An empirical study of 497
employees employed in 25 IC design companies in Taiwan shows that internal human capital
strategy enforces trustworthy perception, which in turn elicits positive outcomes. In contrast,
external human capital strategy may create a cautious perception that negatively relates to
employee outcomes. The results suggest that firms need to carefully choose their human-
capital-enhancing approaches as well as the ways they implement them in order to effectively
elicit appropriate employee outcomes.
Keywords: Human capital strategy; trust climate; social exchange theory; employee attitudes
and behaviors

INTRODUCTION

Strategic human resource management (SHRM) theorists have devoted much effort toward
the relationship between human resource (HR) practices and organizational performance
[12]. In particular, it is proposed that superior competitive advantage is achieved when
multiple practices are combined into a coordinated system or a complementary bundle, also
known as high-performance work practices (HPWPs) [24].

However, there is much confusion about how the substitutes among HPWPs can really work
and motivate employees. Research have proposed that some HR practices may produce
‘deadly combination’ when one practice substitutes another and send inconsistent or
conflicting messages [9]. For example, there is a typical ‘make-or-buy’ dilemma between
internal development and external staffing practices [23]. Internal approach brings about
greater stability and predictability of a firm’s stock of KSAs. External staffing approach
acquires ‘ready-made’ talents from outside labor market. Although these two human capital
strategies are regarded as important parts of HPWPs [18], the underlying philosophy might be
distinct. Indeed, it may lead to different attributions that employees make toward the purpose
of management in implementing these human capital practices [26].

This study suggests that the two human capital strategies are likely to be substitutes, and
employees may perceive in a different way toward these practices. We propose that the core
mechanism between human capital strategies and employee outcomes is trust climate. Trust
is one’s expectations, assumptions, or beliefs about the likelihood that another’s future
actions will be beneficial, favorable, or at least not detrimental to one’s interests [27]. When
firms adopt internal human capital strategy as principal development mechanism, employees
would like to believe that their efforts are worth for future advancement. They would like to
establish a long-term commitment and investment relationship with the firm to collaborate

240
and help others [15] [29]. In contrast, external human capital strategy reflects a short-term
and purely economic exchange relationship. This situation may hardly result in voluntary
reciprocal obligations from employees to contribute off-role behaviors because implementing
well-specified job is the only expectation in this exchange relationship [29].

Therefore, it is interesting and worthwhile to investigate to what extent of trust climate within
an organization will be influenced by these two human capital strategies simultaneously, as
well as their subsequent effects on employees’ attitudinal outcome of affective organizational
commitment and behavioral outcome of organizational citizenship behavior (OCB).

LITERATURE REVIEW AND HYPOTHESES

Human capital simply refers to individual employee’s knowledge, skills, and expertise that
provide economic value to firms [31] [32]. The premise of SHRM studies is that HR practices
constitute investment in human capital to create sustained competitive advantage of a firm
[32]. Traditionally, firms can increase human capital by internally developing the knowledge
and skills of their current labors or attracting individuals with high levels of knowledge and
skills from the external labor market [23]. However, our focus of here is not further to discuss
the antecedents of human capital strategy. In our view, both identifying and attracting
potentials from the outside and developing and retaining human capital within the firm are
important. The problem is that ‘make-or-buy’ decisions on human capital strategies may
influence employees’ perceptions on organizational climate, and then their subsequent
attitudes and behaviors. To explore the relationships of human capital strategies and
employees’ outcomes, we first examine the theoretical and empirical findings for both
internal labor market and external labor market.

Internal and External Human Capital Strategies. Internal human capital strategy is
considered as an important part of HR practice in acquiring talents and motivating employees
[12] [18]. Several studies have proposed that the reasons why organizations promote
employees from within [6] [22] [23]. First, specific human capital can be kept. Firms utilize
promote-from-within to retain employees with firm-specific skills. Second, internal human
capital strategy reduces uncertainty. For the current employees, firms have abundant
information advantage over external labor market and avoid the risk of adverse selection. The
third and the most important reason is that firms can elicit self-commitment from employees,
that is, internal promotion as an incentive system.

According to the human capital theory [7], both employers and employees evaluate the
advantages and disadvantages whether their rewards or feedbacks are worthy of continued
investments. Tsui and colleagues [29] suggest that both employers and employees hold
expectations about the nature of exchange and then affect the social process. When employers
treat employment relationship as a combination of economic and social exchange, they are
willing to pay more attention in employee wellbeing [29]. Furthermore, employees are given
ample opportunities and a strong motivation to develop their own career on a long-term
relationship with the firm and engage in collaborative behaviors [3] [10].

Contrary to the internalization, the externalization of human capital has been concerned that it
may reduce employees’ commitment toward the organization. In the essence of exchange,
Lepak and Snell [23] used the term ‘symbiotic’ to illustrate the relationship between
employees and employers. Employers search for job applicants who have relevant skills to
quickly implement designated tasks. Employees ‘sell’ their talents to a variety of

241
organizations to exchange the highest returns on human capital investment. Neither the
employers nor employees bear any further obligations and expectations to receive anything
from the other party beyond the exchange. Since externally oriented firms less concerned
employment security and personal potential, employees pay much attention in investing
themselves and seeking next employment opportunity rather than developing social exchange
with the firms [3]. Therefore, employees working in an externalization setting may engage
only in their core tasks but not for non-specified job behaviors. That is, citizenship behaviors
or other helping behaviors are likely to be low because such behaviors are not expected in a
symbiotic relationship [23] [29].

Drawing on the above rationale, we propose that the following hypotheses:

Hypothesis 1: Employees will show positively (a) affective organizational commitment and
(b) OCB when firms are with higher emphasis on internal human capital strategy.
Hypothesis 2: Employees will show negatively (a) affective organizational commitment and
(b) OCB when firms are with higher emphasis on external human capital strategy.

Trust Climate as a Mediator. Trust is the essence of social exchange relationship in which
employees will engage in positive work-related behaviors as currency for reciprocating their
treatment (Robinson et al 1994). Several studies have also proposed that trust is a determinant
of success or failure of HR activities [27] [30]. Trust begins with an exchange of activity,
tangible or intangible, and more or less rewarding or costly, between two or more persons
and develops a mutual obligation [30]. That is, employees should perceive the reciprocated
care and concern from the company; then, they will put forth more efforts in learning and
demonstrating their KSAs as reciprocity. Thus, in an internalization setting, trust is a
manifestation of social exchange and elicits the expression of mutual investment, affection,
and long-term relationship. In contrast, when employees work in a mistrust environment, they
will seek to reduce their vulnerability by emphasizing only those performance areas that can
be objectively tabulated and defended [11] [17]. Executing external human capital strategy is
difficult to elicit employees’ willingness to show altruistic cooperative behaviors because
these behaviors may be perceived as risk from employees. Thus, an outward-oriented human
capital strategy is less likely to induce employees’ vulnerability to act benevolently and
engage in non-specified behaviors.

These arguments suggest a mediating effect of trust between human capital strategy and
employee attitudes and behaviors by hypothesis 3 and 4.

Hypothesis 3: The link between internal human capital strategy and (a) affective
organizational commitment and (b) OCB is positively mediated by trust climate.
Hypothesis 4: The link between external human capital strategy and (a) affective
organizational commitment and (b) OCB is negative mediated by trust climate.

METHODS

Sample and Data Collection. We limit our participants only in IC design industry in
Taiwan. According to the lists of Taiwan Stock Exchange (TSE) and traded over the counter
(OTC), there are totally 92 companies within the industry as our targets. We mailed a survey
packet to HR director of these 92 companies in January 2009. Each company would receive 3
HR questionnaires and 35 employee questionnaires. The first questionnaire, responded by the

242
 HR managers, is used to measure firm’s human capital strategy. The employee
questionnaires, used to measure organizational commitment, OCB, trust climate and assess
the demographic characteristics. Three months later, we receive 49 HR questionnaires and
497 employee questionnaires from 25 IC design firms.

Measures. This study uses two criteria as our outcome variables. Affective organizational
commitment is measured by 8 items reported by [1]. A 9-item by [16] is used to measure
OCB. All items are measured on a scale from 1 (strongly disagree) to 5 (strong agree).

The study includes two human capital strategies as independent variables. Internal human
capital strategy is measured by 5 items from the study of [13], which assess internal career
opportunities, and from the study of [10], which assess internal selection and career
development practices. External human capital strategy is measured by 5 items from the prior
studies [28] [30]. Using a scale from 1 (strongly disagree) to 5 (strong agree), we asked HR
managers at each firm to rate each item of human capital strategies.

Trust is measured with a 4-item scale adapted from [14]. Employees were asked to assess the
degree to which they agreed from 1 (strongly disagree) to 5 (strongly agree). We then
compute interrater agreement (i.e., rwg(j)) which refers to the absolute consensus in scores
furnished by respondents for 25 firms [19]. For all firms, the value of rwg(j) is between .85 and
.96, suggesting strong agreement among the respondents within each firm. Thus, we
separately average the scores of trust within each firm to stand for each firm’s trust climate.

RESULTS

Table 1 presents the sample size, means, standard variations, Cronbach’s alpha and
correlations for all variables.

Table 2 presents the results of the Ordinal Least Square (OLS) regression. Mediation analyses
[4] are conducted to test whether trust climate mediates the relationships between human
capital strategies and employees’ outcomes. The results of Model 4 and Model 7 indicate that

TABLE 1
Means, Standard Deviations, and Correlations for All Variables

Variables N Mean SD 1 2 3 4 5 6 7
1. Internal HCS a 497 3.24 .56 (.80)
a
2. External HCS 497 3.58 .37 .40 * (.69)
3.Org. Commitment 494 3.48 .62 .07 * -.17 ** (.90)
4. OCB 493 3.65 .49 .00 -.14 ** .66 ** (.87)
5. Trust Climate 497 3.64 .31 .09 * -.25 ** .41 ** .26 ** (.88)
b
6. Sex 491 .83 .38 -.08 -.03 .01 .02 .10 * －
7. Education 486 17.11 1.35 -.04 -.07 .10 * .10 * -.01 .32 ** －
8. Tenure 485 3.23 2.65 .07 -.04 .05 -.01 -.07 -.09 -.11*
* p < .05, ** p < .01; The figures in diagonal are Cronbach’s alpha.
a
HCS = Human Capital Strategy; b Sex is a dummy variable (1=male; 0=female)
c
Education level is recorded from categories variable to continuous variable based on years of
school education (i.e., university = 16, master = 18, PhD = 22)

243
 TABLE 2
Results of Hierarchical Regression Analysis

Trust Climate Organizational Commitment OCB

(N=483) (N=480) (N=479)
Variables
Model 1 Model 2 Model 3 Model 4 Model 5 Model 6 Model 7 Model 8
b s.e. b s.e. b s.e. b s.e. b s.e. b s.e. b s.e. b s.e.
Intercept 3.82 ** (.18) 4.56 ** (.23) 2.58 ** (.37) 3.44 ** (.47) -.14 (.60) 3.00 ** (.30) 3.66 ** (.38) 1.81 ** (.51)
Sex b .09 * (.04) .10 ** (.04) -.04 (.08) -.02 (.08) -.10 (.07) -.02 (.06) -.01 (.06) -.05 (.06)
Education -.01 (.01) -.02 (.01) .05 * (.02) .05 * (.02) .06 ** (.02) .04 * (.02) .04 * (.02) .04 * (.02)
Tenure -.01 (.01) -.01 * (.01) .01 (.01) .01 (.01) .02 (.01) .00 (.01) .00 (.01) .00 (.01)
a
Internal HCS .13 ** (.03) .18 ** (.05) .08 (.05) .07 (.04) .01 (.04)
a
External HCS -.30 ** (.04) -.38 ** (.08) -.14 (.08) -.22 ** (.07) -.10 * (.07)
Trust Climate .79 ** (.09) .41 ** (.08)
R2
.017 .131 .014 .062 .195 .010 .033 .088
Adjusted R2 .010 .122 .008 .052 .185 .004 .023 .077
∆R2 .114 .048 .133 .023 .055
∆F 2.687 * 31.454** 2.235 12.090** 78.278** 1.651 5.541** 28.663**

* p < .05, ** p < .01

Unstandardized coefficients are reported; the figures in parentheses are standard errors.
a
HCS = Human Capital Strategy
b
Sex is a dummy variable (1=male; 0=female)
c
Education level is recorded from categories variable to continuous variable based on years of school education (i.e., university = 16, master =
18, PhD = 22)

244
internal human capital strategy has significantly positive effect on organizational commitment
but an insignificant effect on OCB. External human capital strategy has significantly negative
effect on organizational commitment and OCB. Hypothesis 1a, 2a and 2b are therefore
supported.

Model 2 shows that both internal human capital strategy and external human capital strategy are
related to employees’ perception of trust after controlling sex, education and tenure. Model 5
shows that when trust climate is regressed on organizational commitment, the regression
coefficients of internal human capital strategy and external human capital strategy decline
significantly to b= .08 (n.s.) and b= -.14 (n.s.) separately. Therefore, Hypothesis 3a and 4a are
supported that trust climate fully mediates the relationship between human capital strategies and
organizational commitment.

Similarly, Model 8 shows that when trust climate is entered into the equation, the regression
coefficient of external human capital strategy has declined from -.22 (p < .01) to -.10 (p < .05) in
affecting OCB. Hypothesis 4b is supported that external human capital strategy affects OCB
through trust climate.

DISCUSSIONS

This study tries to examine how human capital strategies affect employees’ perceptions of trust
climate and then influence their attitudinal outcome of organizational commitment and
behavioral outcome of OCB. As predicted, the results revealed that internal human capital
strategy indeed elicits employees’ affective attachment and external human capital strategy has
negative relationship with affective commitment and OCB. Furthermore, we also provide
evidences that employees just gain contradictory perceptions from these two human capital
strategies. We argue that the core mechanism in the reciprocal relationship is trust climate.

Some important implications arise from the above findings. First, employees would evaluatethe
treatments by employers and then decide exchange relationship with them. It’s much important
because most of our research participants are R&D professionals employed in IC design
industry. The success of IC design companies relies on invention and innovation in their business
strategy. The firms deploy a significant percentage of their financial resources to R&D and
employ a relatively high percentage of knowledge-intensive professionals who learn, assimilate,
contribute, exchange, and combine their KSAs [25]. How organizations facilitate a climate of
actively participation, mutual trust and effective communication to induce spontaneous
sociability is a key to gain competitive advantage [4] [21].

Second, we also find that external human capital strategy affects organizational commitment and
OCB through trust. According to social exchange theory [8], a long-term mutual investment
relationship should be developed when individuals perceive high levels of trust. It is much
important for our research participants that IC design industry is facing a relatively dynamic
environment and short-life-cycle product market. Employees are not only required to put forth
greater efforts on knowledge creation and exchange, but also expected of emotional attachment
which keeps firms’ human capital investment. However, trust does not mediate the relationship
between internal human capital strategy and OCB. The possible reason is that trust is easier to
destroy than create [2]. That is, employees may be more sensitive to outward-oriented human
capital strategy than inward-oriented human capital strategy because the former injures their
expectation and weaken the vulnerability.

Finally, though SHRM researchers have devoted much effort toward understanding the
combination effects of HR practices [24], limited efforts have been spent on understanding how
these practices interact with each other and whether HR bundles result in a contradictory or
deadly combination [9]. We provide initial evidence that outward-oriented human capital
strategy, such as competitive compensation and extensive selection process, are easily to acquire
‘ready-made’ human capital. However, climate of trust among employees has been damaged, in
turn, decreases their affective commitment to organization and willingness to represent OCB.
Whether the same dilemma appears in different set of HR practices or different industries, such
as intensive training for teamwork but appraisals for individualistic behaviors, more studies need
to be addressed.

As with most studies, our research has several limitations. First, the cross-sectional research
design precludes our inferences about causal relationship. Second, we do not consider the
influences of contingent variables which may affect the research result. The last limitation is that
we only discuss the role of trust in mediating the relationship between HR practices and
individual outcomes. It is possible that other climates are appropriate to explain the effects of HR
practices on desirable outcomes, or more than one dimension of organizational climate will be
affected due to the nature and scope of the particular HR practices [20]. More studies to
investigate the effects of other social mechanisms will be valuable.

REFERENCE
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 DEVELOPMENTAL PAPERS*

* These papers were either submitted as a "full-paper" or as a"developmental paper". The ones
submitted as "developmental paper" were not sent out for blind review and a determination was
made based on internal review. Some the papers submitted as "full-paper", based on reviewers'
comments and internal review, were considered as "work-in-progress" and were accepted as a
"developmental-paper".

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PROCEDURAL JUSTICE AND ITS EFFECTS ON ORGANIZATIONAL OUTCOMES

Nida Hameed Afridi (Author), Institute of Management Sciences, Phase 7, Hayatabad, Peshawar,
nida.h.afridi@gmail.com, Phone: +9291-5829988
Fatima Junaid (Co-author), Institute of Management Sciences, Phase 7, Hayatabad, Peshawar,
fatimaajunaid@gmail.com, Phone: +92091-9217452

ABSTRACT

This study attempts to find out the importance of justice in the private financial institution like
banks and to determine the employee satisfaction, organizational commitment and intent to leave
the workplace. This study judged the employee’s perception of procedural justice and its effects
on organizational commitment, job satisfaction and turnover intention in the private banking
sector only. The research is conducted by personal visits to nine different private banks of
Peshawar. The methodology used for the collection of data is questionnaire. The findings
achieved after the data analysis suggests that procedural justice has a significant positive
relationship with organizational commitment and job satisfaction. On the other hand the
association of procedural fairness with turnover intention is found to be negative. These
outcomes are consistent with many past researches in the same field.

Keywords: Procedural justice, organizational commitment, turnover intention, job satisfaction

ORGANIZATIONAL JUSTICE

The concept of justice is said to be first grounded in the social exchange theory. It represents that
procedural as well as distributive justice has a single justice motive – the resource motive i.e.
concern of the resources obtained during the process or as an outcome. Justice is considered to
be a social phenomenon if Cropanzano and Greenberg (1997) are to be believed for their view
of justice i.e. the acts that are perceived to be just by majority of individuals, are just.

PROCEDURAL JUSTICE

The concept of procedural justice deals with the fairness of procedures governing decisions as
perceived by individuals. It is the equity and the perceived fairness in order to make decisions
(Folger and Greenberg, 1985). Procedural justice deals with the norms about the proper
procedures (Lind and Tyler 1988). It has been compared to distributive (McFarlin and Sweeney,
1992) and interactional justice (Bies and Moag, 1986) for its effects on job satisfaction,
organizational commitment, turnover intention, and several other variables.

PROCEDURAL JUSTICE AND CORRELATES

Procedural justice has been analyzed by different angles such as the influence of work
environment on the perception of fairness (Greenberg, 1990a), Leventhal( 1976: 1980) has given
the attributes Of procedural justice : (1) accuracy, (2) consistency, (3) unbiasedness, (4) ethics,
(5), correctability and (6) representativeness . Representativeness has been erased because it
overlaps with the concept of voice. Voice has been discussed by Thibaut and Walker (1975)
where they explained the concept of instrumental and non instrumental voices. This concept has
250
been further explained by Greenberg and Folger (1983) that if the employees are given an
opportunity to express their opinion in the decision making process affecting them, it enhances
their perception of fairness but also brings with itself a possibility of a much lower level of
fairness perception if the authorities fail to respond to the employee’s input.

The initial researches were carried out by Greenberg (1979),Folger and Konovsky
(1989),Cropanzano and Folger (1989) and Tyler ( 1990) showing the relationship between
procedural justice and these behavioral and organizational constructs. Job satisfaction is
undoubtedly a major behavioral outcome if the perception of fairness is higher in employees.
Several studies link performance evaluation procedures to job satisfaction (e.g. Brownell, 1982;
Harrison, 1992; Lau and Sholihin, 2005) and it is justified because the rewards and compensation
received by the employee are reflective of his success and failure in performing a task. If their
jobs are justly evaluated, it leads to job satisfaction (Hopwood, 1972:174).

Job satisfaction and organizational commitment are mostly studied together. The extensive work
of Folger and Konovsky (1989) found that procedural justice is a much stronger predictor of
organizational commitment as compared to job satisfaction. McFarlin and Sweeney (1992)
seconded the findings saying that distributive justice was a much better predictor of personal
outcomes like job satisfaction whereas the reverse was true for procedural justice that predicted
the organizational outcomes like organizational commitment and evaluation of the supervisor. A
fairly recent research by Arti, Kuldeep & Ekta (2009) also indicates that distributive justice is
significantly related to job satisfaction whereas procedural justice does not, though both
procedural and distributive justices are related to organizational commitment. A research by Kim
(2009) also suggests that when individuals were fairly treated they showed more commitment
towards the organization as well as a higher degree of trust and satisfaction.
Turnover intention is a very important issue as Robbins (1998) puts it as a behavior that leads to
leaving the organization as well as looking for a new job. It is also one noteworthy construct that
is influenced by the job satisfaction and organizational commitment of the employee (Mobley,
1982). Higher the perceived fairness, higher will be job satisfaction and organizational
commitment which will in turn lead to a decreased level of turnover intention (Poon, 2004).
Every organization makes huge investments in training, developing and maintaining their
employees. Therefore, managers always strive to minimize turnover. The image theory model
(Beach, 1990) has analyzed that employees leave the organization only when they have
discovered the reasons for leaving. There are several reasons that compel employees to quit from
one organization to another. The effects of job related stress (job stress), lack of commitment in
the organization and job dissatisfaction make employees to quit (Firth, Mellor, Moore, Loquet,
2004).

Job satisfaction, organizational commitment and turnover intention are taken as dependent
variables. Job satisfaction is an extremely essential dependant variable as evident by the Lind
and Tyler (1998) research in which they discovered job satisfaction as one of the principal
consequences of procedural fairness. They concluded that “the great practical value of
procedural justice lies in …its value as a source of… satisfaction.” On the basis of the above
discussion, the following hypothesis can be proposed:

Hypothesis 1: Procedural Justice Is Positively Related To Job Satisfaction.

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Another dependent variable is organizational commitment. It is perceived to be associated with
the fairness of procedures (Hopwood, 1972; Folger and Konovsky, 1989; McFarlin and
Sweeney, 1992; Magner and Welker, 1994; Magner, Welker& Campbell, 1995). If employees
believe that the organization’s procedures for the determination of compensation and evaluation
of performance are fair, they do not develop adverse feelings towards the organization even if
their compensation is inadequate On the contrary, if they perceive the organizational procedures
to be unfair and compensation to be inadequate, they hold unfavorable views of their
organization which give rise to lower organizational commitment (McFarlin and Sweeney,
1992). Accordingly, I propose:

Hypothesis 2: Procedural justice is positively related to organizational commitment.

The relationship of turnover intention as a dependent variable along with procedural justice is
also studied. Knowles (2004) research discusses some personal, contextual and institutional
factors that can prove to be principle antecedents of turnover intention. Supporting the finding of
Knowles (2004), Poon ( 2004) finds out that disrespectful behavior and unfair reward system can
influence turnover compelling the employee to leave the organization. Hence, it is hypothesized:

Hypothesis 3: Procedural justice is negatively related to turnover intention

These hypotheses demonstrates a relationship of the dependant variables with procedural justice
that has been previously analyzed by Folger and Konovsky (1989), McFarlin and Sweeney
(1992)..
METHOD

This research is a cross sectional (one shot) study which is based on data collected at one point in
time; it is causal in nature. The employees of the nine private banks were surveyed. The data
were collected through questionnaires. A total of 150 structured questionnaires were distributed
by the researcher herself. Altogether, 101 employees gave their response with the response rate
of 67.3 %. Simple random sampling was used for the selection of banks. The instruments used
for the variables were previously used several times e.g Mowday, Steer and Porter (1979) for
organizational commitment etc.
RESULTS

For job satisfaction, the value of beta is positive (.297). It indicates that procedural justice has a
positive relationship with job satisfaction and the value indicates that one unit increase in
procedural justice will increase the job satisfaction by .297. As we can see that, the significance
value is below 0.05 so it shows that procedural justice has a significant relationship with job
satisfaction i.e. procedural justice is a predictor of job satisfaction. The model for job satisfaction
is significant but the relationship between procedural justice and job satisfaction is weak, though
it is positive in nature.

For organizational commitment, we found out that the value of beta is positive (0.390). It
confirms the positive relationship between procedural justice and organizational commitment
and it also shows that if a unit increase in procedural justice happens to occur, an increase of
0.390 units will be witnessed in organizational commitment. The significance value lies below

252
0.05 even in this case indicating that procedural justice is a significant predictor of organizational
commitment. The model for organizational commitment suggests that the model is significant
and the relationship found between them is weak, yet there exists a positive relationship between
the two.

For turnover intention, the value of beta is negative which means that procedural justice has a
negative relationship with turnover intention. It also explains that a unit change in procedural
justice will bring a change of 0.228 units change in turnover intention. The significant value is
lesser than 0.05 even for turnover intention which means that procedural justice is a predictor of
turnover intention. The model for turnover intention is also significant but the relationship of
turnover and procedural justice is weak, and is negative in nature.

DISCUSSION

This study was conducted to in order to judge the effects of procedural justice i.e. the fairness of
the processes being run in the private banks of Peshawar. The effect was studied on three
important aspects of organizational commitment, job satisfaction and turnover intention. The
banks were randomly selected and the results are based only on branch level analysis.
The findings in the research report indicate the procedural fairness is one of the predictors of job
satisfaction. The relationship between them is found to be significant and that they have a
positive association with each other. This means that fair procedures effects an employee’s
satisfaction at the work place. These findings are fairly consistent with the findings of previous
researches (McFarlin and Sweeney, 1992; Folger and Konvosky, 1989) carried out on procedural
fairness. Some researches regarding procedural fairness do not consider it to be a very strong
predictor as far as job satisfaction is concerned (McFarlin and Sweeney, 1992; Folger and
Konvosky, 1989). Our results are also aligned with the past researches indicating only a 30% (β=
0.297) change in job satisfaction due to procedural justice.

On the other hand, the significance tests of procedural justice considering organizational
commitment as dependent variable shows quite a significant association. The positivity of the
relationship shows that higher procedural justice is a determinant of higher organizational
commitment. Commitment is extremely important for every organization in order to reach their
set goals and targets. It is predicted that employees who are treated fairly even go out of their
way to favor the organization.. A change brought about in the organization commitment due to
the effects of procedural justice happens to be 39 %( β=0.390). This shows that, though
procedural justice is not a very significant predictor of organizational commitment yet it is a
stronger predictor than job satisfaction. This finding is congruent with that of McFarlin and
Sweeney (1992), Folger and Konovsky (1989) and Konovsky and colleagues (1987).

Turnover intention is also in a significant relationship with procedural justice but the relationship
is found to be weak. The amount of change brought about by perceived fairness in the intent of
leaving the organization is very low i.e. 23% (β= 0.23). It predicts that according to our study,
turnover intention does not have any major effect due to procedural fairness in the processes of
the organization.

References available upon request from Nida Hameed Afridi (nida.h.afridi@gmail.com)

253
 INTEGRATED WORKFORCE ENRICHMENT SOLUTION FOR
MODERN WORKFORCE CHALLENGES

Ripple Gupta,+91-9920337178, ripple.gupta@gmail.com

Sudhir Rai, +91-9821738819 , sudhir.rai15@gmail.com
Prin L.N.Welingkar Institute of Management Development & Research,
Lakhmi Napoo Road, near Matunga (Central Rly),
Mumbai, Maharashtra, India – 400019

ABSTRACT
In an age of fast changing markets, limited budgets, increased regulatory compliance issues,
increasing competition and significantly higher demands on limited HR resources, most
workforce development strategies have become obsolete. In this paper we have highlighted the
three most critical and serious workforce challenges and designed an integrated solution to
alleviate these issues. These issues are:

• Multi Generational Workforce Issues & Generational Dynamics

• Meaning of Work and Employee Retention
• Cross-Cultural & Geographical Workforce Differences

The employee needs to overcome these challenges to be successful at work and the organization
needs to overcome these to grow in a global economy.

WORKFORCE CHALLENGES AND SOLUTION

Challenge 1: “Multi Generational Workforce Issues & Generational Dynamics”

The workforce now comprises four generations, each with very different needs, drivers and
learning styles. The key challenges they have come up are:

 What are each generation’s most pressing concerns with regard to choosing a new job?
 How do we attract the right mix of employees to meet our skill needs now and in the
future?
 How can we effectively leverage the experience and knowledge of each generation to
benefit the whole organization?
 How can we balance meeting the diverse needs of our employees in a simple, cost-
effective manner?

Solution:
Multi-Generational Workforce Collaboration Model
This solution shows how the rights and responsibilities of the employees and the organizations
can be brought together to resolve the multi-generational workforce issue.

254
 What Employees can do
What Organizations can do
Share knowledge, new ideas, lessons learnt, best practices
Learning & Development
Share knowledge, new ideas, lessons learned, best
practices and inculcate mentoring Workforce Planning Analytics
Find experts irrespective of generation, get answers
instantly Knowledge Management
Display flexibility to collaborate and accept ideas of
others Collaborative Innovation

Challenge 2: “Meaning of Work and Employee Retention”

The workplace should be a place where employees can make constructive contributions by doing
their job well and where they have a chance to engage with others, help them out, work towards
a common goal and see the positive results of their pitching in. Employee retention involves
being sensitive to people's needs and imbibing a sense of belongingness towards the company.
To retain good people they should be supported in terms of Environment, Relationship, Support,
Growth and Compensation. Employee retention takes effort, energy and resources but results are
worth it.

Solution: There are three primary drivers of employee retention:

We suggest workforce retention model, which incorporates the 3 drivers in the whole process.

Systematic Workforce Retention Model

255
Challenge 3: “Cross-Cultural & Geographical Workforce Differences”

Due to globalization companies have started spending more resources in the process of recruiting
and training workforce to work in cultures that are foreign to them. Employers these days
emphasis on CQ and employees should work on increasing their CQ.
Cultural Intelligence (CQ) can be defined as: your capability to grow personally through
continuous learning and good understanding of diverse cultural heritage, wisdom and values, and
to deal effectively with people from different cultural background and understanding.

Cultural intelligence requires having or acquiring the following aspects:

• Cognitive: creating learning strategies to recognize cultural traits (e.g., punctuality,

shared preferences)
• Physical: adopting habits and gestures of another culture (e.g., shaking hands, serving
coffee)
• Emotional or motivational: confidence and commitment to adapt to a new culture (e.g.,
overcoming obstacles and setbacks)

It is the responsibility of employers to help their employees to improve their CQ and employee
in-turn is responsible to study and work on his cultural intelligence.

Solution:
Cultural Adaptability Evolution Model

256
The employees should experience, learn the various ethnic, cultural, behavioral and geographical
diversities at the workplace and macro-environment and should readily adopt and display the
similar traits as a part of continuous evolution process.

INTEGRATED SOLUTION
The diagram below shows an overall view of the Integrated Solution to the aforementioned three
critical workforce challenges that need to be resolved now and in near future.

257
 THE STATUS OF PARKING LOT GUN LAWS: ANNIE GET YOUR GUN3

Marsha Katz, Governors State University

m-katz@govst.edu
Helen LaVan, DePaul University
hlavan@depaul.edu
Yvette Lopez, DePaul University
YLOPEZ9@depaul.edu
Wm Marty Martin, DePaul University
MARTYM@depaul.edu
Charles Naquin, DePaul University
CNAQUIN@depaul.edu

Anyone who reads or listens to the news is bombarded with reports about violence within
our society, including reports of violence in the workplace. For example, there were the recent
shootings in Henderson, Kentucky that left eight dead (at a plastics plant), in St. Louis that left
three dead (at a power plant), and at Alabama University that left three dead. Although the total
number of killings in American workplaces remains relatively low, they still average more than
one a day.

The Bureau of Labor Statistics reported nearly five percent of the 7.1 million private
industry business establishments in the United States had an incident of workplace violence in
the year prior to the 2005 survey. Homicide, the most severe form of violence, is considered the
fourth leading cause of job-related deaths (OSHA, 2007). The Bureau of Labor Statistics (2007)
reports that there were 516 workplace homicides across all employees in the United States in
2006. In addition, Lee (2009) reported that while workplace homicides did not increase between
1997 and 2007 (just over 600 occurred in 2007), the rates of homicide from customers and
clients has steadily increased. Furthermore, State government workers reported higher
percentages of all types of workplace violence than did local government or private industry.
Thirty-two percent of all State government workplaces reported some form of workplace
violence. Local government reported 15 percent of their workplaces experience some type of
workplace violence (BLS, 2006).

Precipitating incidents can range from being laid off, being reported to management, or
no precipitating incident whatsoever. As this abstract is being written the following workplace
homicides have been reported: James Badasci, a dealer for John Deere equipment, was recently
laid off after ten years from the company. He showed up with a shotgun, killed a person whom
he allegedly “targeted,” then fired several more shots into the equipment, before eventually
turning the gun on himself (Ames, 2009).

An employee of the Publix store in Tarpon Springs, Florida was killed in the store
parking lot and another escaped injury by a dismissed co-worker. The dismissal was related to
the gunwoman being reported to management for working on her own time - a violation of
company policy. Publix policy did not allow employees to bring handguns into the workplace,
3
The musical by Irvin Berlin

258
but the gunwoman brought one anyway. According to Florida parking lot law, (which has
recently been upheld in Florida Retail Federation, Inc., v. Attorney General of Florida ("Florida
Retail")) handguns are permitted in the parking lot where the homicide occurred (Kennedy,
2010).

Even if there is no resulting death, the trauma associated with a gun in the workplace can
be exceedingly psychologically damaging. The Indiana Chamber of Commerce says an office
shooting in Portage shows why the law recently signed by Gov. Mitch Daniels which allows
workers to keep firearms locked in their vehicles while parked on company property is a bad
idea. Police say a 60-year-old employee became upset during his job review, and then retrieved a
shotgun from his car that he fired twice at a state Department of Workforce Development office.
He faces a charge of attempted murder, although no one was injured (Chesteron Tribune, 2010).

Barling (2009) notes that there are many definitions of workplace violence. The
Workplace Violence Research Institute’s definition of workplace violence includes threats,
harassment and intimidation. Schat and Kelloway (2005) definition is a behavior by an
individual or individuals within or outside an organization that is intended to physically or
psychologically harm a worker or workers and occurs in a work-related context. In general, it
has been categorized into three major types based on the assailant’s relationship to the
workplace. In the first type, the perpetrator of the violence has no legitimate business
relationship with the targeted workplace and enters the establishment to commit a criminal act
such as robbery. The major occupations that experience this type of violence are taxicab drivers,
convenience store employees and gas station attendants. The second type, the perpetrator, is a
recipient of an object or service provided by the target workplace. The most common victim are
health care provides and social service employees. In the third case, the offender is an employee
or former employee of the workplace (LeBlanc, Kelloway, 2002). This type of behavior has
captured the public’s attention. For example, the statement “going postal” came into our
vocabulary on August 20, 1986, at a post office in Edmond, Oklahoma, when employee Patrick
Henry Sherrill, known as "Crazy Pat" to some who knew him, shot two of his supervisors then
continued his rampage killing a total of 14 co-workers and injuring seven others. Ultimately, he
turned the gun on himself and committed suicide. After this incident, there seemed to be a rash
of work-related violence in post offices, hence the term, "going postal (Montaldo, 2009). This
paper will be dealing with only gun violence in the workplace.

Remarkably, 221 years after the Second Amendment (Right to bear arms), there is still no
agreement on the role of possessing guns within the workplace. The legal issues surrounding the
Second Amendment are complex. On one hand, there is a Constitutional Amendment right to
bear arms. On the other hand, the Fourteenth Amendment prohibits the deprivation of liberty or
property without due process of law. This can occur when gun owners are deprived of their
property interest in their guns or when owners of workplace property are deprived of their right
to use their property. There can be Fifth Amendment issues relating to the confiscation of the
gun without due compensation. Furthermore, employers' duties under OSHA would seemingly
conflict with the aforementioned constitutional protections. Moreover, state and municipal
ordinances are seemingly in conflict with each other. Some have handgun bans while others
permit gun possession in workplace parking lots.

259
 Some studies have found that businesses that allow firearms are five to seven times more
likely to have a homicide occur on the premises than those that ban firearms (Loomis et al.,
2005). These raise two important social issues: what about the legitimate rights of gun owners
who are hunters and court challenges on both sides of the issue.

The legal issues behind gun control have been under scrutiny lately. In the District of
Columbia v. Heller (2008), the Supreme Court struck down parts of Washington's gun control
ordinance, the strictest in the country, and stated for the first time that the Second Amendment
gives individuals a right to keep and bear arms for personal use. However, while it held that the
Second Amendment guarantees a personal, individual right to keep and bear arms, it also
conceded that reasonable regulations on gun ownership might be acceptable (Miller, 2009).
However, the court declined to say whether the Second Amendment in general applies to state
and local governments. Thus, there have been several recent court cases on this issue.
Chicago’s ban on automatic weapons and concealed handguns was upheld. Judge Easterbrook
ruled that there was no basis for the court to apply the Second Amendment to the states. He
stated that only the Supreme Court, not the appeals court should make such a decision.
However, a California court disagreed on the issue. The differing opinions mean that the whole
issue of city and state gun laws will probably head back to the Supreme Court for clarification,
leading many legal experts to predict a further expansion of gun rights (Schwartz, 2009).

With the advent of shall-issue-concealed-carry laws, also known as carrying-concealed-

weapons laws ("CCW laws"), many employers and gun-control advocates argue that employers
must ban firearms from their property in order to provide for a safe workplace environment. In
response to the increasing number of businesses that ban firearms from their premises, the
National Rifle Association (NRA) is pushing state legislatures to pass laws that prohibit property
owners from banning firearms from their parking lots (Erickson, 2005, Steines, 2008).
Oklahoma became the first state to pass such a law by adding new sections to the Oklahoma
Self-Defense Act and the Oklahoma Firearms Act on March 31, 2004. The amended sections
states: “No person, property owner, tenant, employer, or business entity shall maintain, establish,
or enforce any policy or rule that has the effect of prohibiting any person, except a convicted
felon, from transporting and storing firearms in a locked motor vehicle, or from transporting and
storing firearms locked in or locked to a motor vehicle on any property set aside for any motor
vehicle” (Steines, 2008). These laws are now known as the “parking lot laws.”

Several months later, a number of interested companies filed suit, seeking to enjoin the
law's enforcement. Among other assertions, the companies claimed that such "parking-lot laws"
violated their property rights under both the Fourteenth Amendment's Due Process Clause4 and
the Fifth Amendment's Takings Clause5. The National Rifle Association has been pushing for
the passage of parking-lot laws in all fifty states claiming such laws are necessary for employees
to be able to freely exercise their rights to self-defense. While other states such as Florida,

4
The Fourteenth Amendment prohibits the deprivation of liberty or property without due process
of law.
5
The Fifth Amendment Takings clause is when the government acquires private property and
fails to compensate an owner fairly. A taking can occur even without the actual physical seizure
of property, such as when a government regulation has substantially devalued a property.
260
Georgia, and Kansas have followed Oklahoma's lead in passing these laws, a number of national
and Oklahoma-based companies have challenged the Oklahoma law's constitutionality.
Businesses that are in shall-issue states must adopt explicit gun-free policies in order to prevent
individuals from bringing firearms onto their properties. These businesses must effectively
publicize their policies - by posting signs, for example - to encourage employees and customers
to abide by the ban. Businesses may also "refuse entry or bring a criminal trespass action against
anyone who violates" their policies (Beaver, 1997). Some businesses have gone so far as to fire
employees who have violated their gun-free policies. Some such terminated employees have
attempted to challenge their employers' gun-free policies that led to their firings. On October 4,
2007, the U.S. District Court for the Northern District of Oklahoma issued an order in
ConocoPhillips Co. v. Henry permanently enjoining the enforcement of the law against
employers. The ConocoPhillips plaintiffs alleged that the Oklahoma parking-lot law was a
"taking" of their property without just compensation in violation of the Fifth Amendment. The
Fifth Amendment states, "private property shall not be taken for public use, without just
compensation (Steines, 2008). In addition, the NRA then launched a national boycott of
ConocoPhillips and erected billboards that read, "ConocoPhillips is No Friend of the Second
Amendment" (Steines, 2008).

Thus, there are differences in the states on not only whether or not guns can be owned by
individuals, but also on whether they can be concealed and whether or not an employer can ban
guns on their property including the parking lot. Indiana was the most recent state to enact
legislation that says employees may keep legally permitted firearms out of sight in their locked
vehicles while they are working. Furthermore, the National Rifle Association has successfully
lobbied for similar laws in 12 other states (Allen, 2010, Volokh, 2006).

Research Plans for paper for AEPP

This study will analyze Federal and State cases that are illustrative of the conflicts
between Federal Constitutional Issues of the Second Amendment and States Rights including the
Fifth Amendment and the Fourteenth Amendment of Due Process, which suggest States have the
right to ban guns. In addition, it will also analyze the Federal regulations that are imposed by
OSHA regulations to have a safe working environment. Thus, in light of the disturbing levels of
gun violence in the workplace the focus of this paper will be to ascertain the current legal status
of guns in the workplace. and also to make recommendations for improving employee relations
and subsequently reduce workplace homicides.

References available on request.

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 VOLUNTEERISM AND GENDER IN TERMS OF ETHICS OF CARE

Cigdem Kirel and Ilke Oruc

Anadolu University College of Economics and Administrative Sciences
Eskisehir 26470
Email: ackirel@anadolu.edu.tr, ioruc@anadolu.edu.tr
Phone: (90) 22 335 05 80
Fax: (90) 222 335 05 95

ABSTRACT

This study basically aims at exploring what employees (different gender) in organizations think
about volunteerism in terms of ethics of care. This is a qualitative study and the opinions of ten
married ten couples working as academicians at a university regarding volunteerism were
obtained through individual interviews. It will be interesting to examine the role of gender
differences in giving importance to others and sharing social responsibilities. As a result of this
study, it can be concluded that there is no significant evidence indicating a difference regarding
the volunteerism of the sample with high educational background.

Key Words: Volunteerism, ethics of care and gender.

INTRODUCTION

Feminist ethics criticises gender blindness and contradictions in traditional ethics and proposes
gender sensitive alternatives [4, pp. 1]. Those studying on feminist ethics try to reveal the
inadequacy of the perspective of ethical theories towards women. Starting from this, they focus
on actual status of individuals and human relationships caused by the social order [14].
Relationship ethics developing within feminist ethics emphasize importance paid to others,
taking relationships as basis. Concept of voluntariness also includes activities indicating care
about others. Activities done regarding certain social problems and troubles incurred by others
support issues advocated by relationship ethics. Because of these reasons, concepts of
voluntariness and ethics of care mentioned above must be clarified.

Voluntariness and ethics of care

The relationship between self-sacrificing and voluntariness is quite obvious; self-sacrificing

involves giving more importance to wellbeing of others than those of one’s own, and
voluntariness is about working for the wellbeing of others without expecting something in return
[2, pp. 89-104] [7]. Pragmatically, voluntariness involves individuals’ and organizations’
transferring their resources for the wellbeing of public [10, pp. 1-18]. Voluntariness means
transferring knowledge, time, skills, experience and other resources by individuals with their
own will in order to increase life quality and to achieve important targets for the benefit of the
society without expecting a financial compensation as part of social philantrophy.

262
Care highlights various values such as not giving harm to others, giving importance to
relationships with others, sustaining and repairing relationships [13] [16, pp.43] [1, pp.137-138]
[6] [3,pp.3] [12,pp.21]. From a different point of view, it might also include devotion and the
consideration of others’ physical and psychological needs. Human relationships involve three
components necessary to sustain care; namely being open to others, accepting other creatures
and supporting others when they need help [15, pp.111]. In this perspect society is at macro
level [9], and interpersonal relationships are at micro level [11, pp.24]. First of all, care theory
believes people are primarily relational not individual or free [5, pp.213). From ethics of care
point of view, feelings and affection cannot be avoided while making moral judgement. It also
focuses on broader social issues such as justice and unfairness by considering individual
relationships. Ethics of care, which provides various opportunities and risks for social conflicts,
is in fact a different approach [8, pp.15]. The approaches from feminist theory provide a general
approach for the emergence of ethics of care and the involvement of experiences by women in
the process. Therefore; it is necessary to mention about the values ethics of care, we can
highlight these values as follows: It is important to maintaning and repairing relationships; No
harm should be given to others; Self is interdependent with others; Situational approach is basic
to understanding and care; Feelings and emotions are legitimate and valuable; Motivation guides
actions; Intellect and intuition are both valued [15].

METHOD AND DATA ANALYSIS

The main problem of this study is to determine the opinions of individuals in organizations about
voluntariness and about non-governmental organizationsin terms of ethics of care. The main
scope of the study is to discuss whether the perception of voluntariness differs according to
genders on the basis of ethics of care. This research is a qualitative case study. The study was
realised in Anadolu University. Sample population was selected from a group with an even level
of education in order to determine whether they asses the subject matter in the same perspective
or not. Based on the quantitative research, 10 married couples (10 female, 10 male) were
selected. Later vis-à-vis interviews were made with the individuals considering the possibility of
couples being influenced by each other. In order to analyse data obtained by these interviews,
first interview records were transcribed and then these data were analysed. Main themes of the
study were defined taking interview questions as basis and subthemes were determined
according to the answers of the participants. Subthemes were defined by classifying answers of
the participants. Themes; Voluntariness; Contributions to students’ development; NGO’s; Problem;
Solution; Relationships; Work- family conflict. Subthemes; Individual development, social development,
satisfaction, democratization; Awareness, individual development and contribution for the future career;
Society, lack of trust, membership, position; Lack of education, inequality in income, to get used to
inappropriate conditions; Education, economic development; Family; Women, time
Since the current study is based on qualitative research method, the data cannot be realized to
larger contexts.

FINDINGS

They reported that voluntariness is the activities carried out for the wellbeing of society without
expecting something in return or any kind of benefit provided as part of social philantrophy.
Voluntary activities are believed to foster individual development, increase awareness and
develop sensitivity to social issues. The data clearly presents positive ideas about voluntariness.

263
However; female participants care about taking part in voluntary activities and relationships in
general more than males, which is in harmony with the principles of ethics of care. The questions
about the course Practices in Social Services showed that 9 out of 20 participants have given this
course at the university. Those who do not give this course stated that the projects in the course
should be based on voluntariness, it should not be a lesson and students should not chosen
because it is a lesson that be passed easily. All of the participants thought that the course
Practices in Social Services contributed a lot to students in terms of personal development,
increased awareness about social issues and acquiring teamwork spirit through voluntary
activities. This idea was stated by a male participant as follows: “I believe that this course
contributes a lot to students. First of all, they see that they do something useful for the society
thanks to this course and have invaluable experiences they might use in the future. In addition, it
helps students for personality development and social solidarity. It is important to create feeling
of being useful for the society by serving people in the society. Since this is a collective work,
this feeling of solidarity is highly likely to trigger future voluntary activities in collaboration with
non-governmental organizations”.

The data shows that all the participants were quite sensitive to social problems. A male
participant, who attributed the problems mainly to economy, stated: “The government gives up
its social practices due to increasing liberalization and the problems increase. We cannot solve
these problems without eliminating them completely. If we are not successful in these attempts,
we just fill in some gaps temporarily. In my opinion, the campaigns of non-governmental
organizations in Turkey simply try to fill in these gaps”. Generally speaking, education is the
main reason of social problems according to female participants. However; male participants
believed that economic inequality is the most important factor for such problems. One female
participant talked about problems as follows: “all of our problems are due to lack of organized
actions, lack of education and the continuing presence of feudal structure in Turkey”. As for the
solutions to these problems, most of the participants suggested economic development and
quality education. As for the question about membership to non-governmental organizations, it
was found that 6 participants are members of such organizations: 3 male and 3 female. The most
interesting result here is that some of the couples did not remember whether they are members of
a non-governmental organization or not. Another outstanding result is the insufficient number of
memberships although the participants highlighted the importance of NGOs for a society.
Finally, it is clear that women tend to be interested in NGOs working on issues related to women
or children.

The answers given for the question about the conflicts between family and job responsibilities
reflected similar ones observed in almost all societies. Especially, women were observed to
experience such conflicts between the family and job more than men. It is inevitable that such a
multiple roles conflict leads to considerable stress. A female participant stated: “It is impossible
not to have any conflicts since these two (family and job) are quite different areas. There is no
possibility to be perfect in both, so it is quite natural to have conflicts if you want perfection”.
Although male participants reported about similar conflicts, they feel less anxious and stressful
than women. Nowadays, despite the fact that males have more tendencies to help their wifes for
child care, they are reluctant to do housework. However; some male participants were observed
to care about the time they spend in their jobs as well.

264
 RESULTS AND DISCUSSION

That study tries to find voluntariness value aspect on ethics of care. This perspective used micro
(family) and amcro (society) level. Interviews questions created according to ethics of care
values and we are trying to connect volunterism concept. Data showed that results very related to
Hofstede’s findings in Turkish culture. Turkey’s have feminine values. All people sensitive
society, other people and family but other hand observed indivituation. This study may provide
an approach to topic from different perspectives.

REFERENCES

[1] Burton, B. & Dunn C. P. Feminist Ethics as Moral Grounding for Stakeholder Theory.
Business Ethics Quarterly. 1996, 6(2), 133-147.
[2] Chesters, C. & Lawrance S. The Business Doing Good: An Australasian Perspective on
Corporate Philantrophy. The Journal of Corporate Citizenship (JCC ) , 90–104.
[3] Ciulla, J. B. Leadreship and Ethics of Care. Journal of Business Ethics. 2009, 88, 3-4.
[4] DiQuinzo, P. & Young I. M. Reconciling Equality To Difference: Caring (F)or Justice For
People With Disabilities. Hypatia. 1995, 10(1).
[5] Donleavy, G.D. Care, Contracts and Kolhberg. International Review of Business Research
Papers. 2007, 3(1), 208-224.
[6] Engster, D. Rethinking Care Theory: The Practice and Obligation to Care. Hypatia, 2005,
20(3), 50–74.
[7] Godfrey, P.C. The relationship between corporate philanthropy and shareholder wealth: a
risk management perspective. Academy of Management Review, 2006, 30(4), 777-98.
[8] Meagher, G. & Parton N. Modernizing Social Work and The Ethic of Care. Social
Work&Society, 2004, 2(1), 10-27.
[9] Nobbis, N. Feminist Ethics without Feminist Ethical Theory. Philispohy Documentation
Center, 2005, 213-225.
[10] Schwab, R.G. & Sutherland D. Philantrophy, Non-goverment Organizations and
Indigenous Development. Discussion Paper No.242. Center for Aboriginial Economic Policy
Research, 2002, 1-18.
[11] Sevenhuijsen, S. Citizenship and Ethics of Care: Feminist Consideration on Justice,
Morality and Politics, London: Routledge, 1998.
[12] Slote, M. The Ethics of Care and Empathy, Routledge, 2007.
[13] Tronto, J. Moral Boundaries. New York: Routledge, 1993.
[14] Walker, M. U. Moral Understandings. New York: Routledge, 1998.
[15] White, J. Ethical Comportment in Organziation: A Synthesis of the Feminist Ethics of Care
and Buddist Ethics of Compassion. International Journal of Value-Based Management, 1999, 12,
109-128.
[16] Wood, J. T. Who Cares? Women Care and Culture. Southern Illinois University Press,
1994.

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 EMPLOYEES IN PERFORMING NONPROFITS:
WORKERS ADRIFT IN THE EPHEMERAL ARTS
Paul Lorton, Jr
School of Business and Professional Studies - University of San Francisco
2130 Fulton St. San Francisco CA 94117-1045
415 422 6185 email: lorton@usfca.edu

ABSTRACT

In this discussion, we will briefly look at the history of performing artists and at the divergence
of performing art forms that could be engaged in “for-profit” from those for whom profit was left
behind. From this context we will examine the 21st century components of the nonprofit
performing arts workforce (performers, designers, directors, technical staff, front of the house
personnel and management) to delineate the elements and conditions they share with the broader
workforce and those which are unique to their chosen careers which include the elements that
impinge on their role as fully franchised members of the labor force.

SETTING THE FRAME

Performing arts are a significant component of not only the workforce but also the preservation
of our cultural heritage. In particular, those who work for not-for-profit organizations such as
Ballet companies, Operas or Symphonies are charged with keeping the classical arts alive and
actively in our present. These organizations do not make a profit and have to work very hard to
break even. These activities are also labor intensive and the people working in the organizations
must bear the brunt of any short fall in the box office (which is never sufficient to meet the
payroll) and the solicited contributions.

The confluence of the emotion of “culture,” the needs of labor and hardscrabble sources of
funding have created some very unique issues for those who seek a living in an industry that may
trade on their passion for the art form. The conditions of the employment arrangements are, by
and large, more akin to those of the 18th century than those of the 21st. Faine [1] noted, from his
long experience, that:

in all probability future collective bargaining in the arts will not be between management
on one side and the union on the other, but more likely be between management and
union on one side confronting the source of funding on the other. [1, p73]

Live entertainment is expensive and risky. The event, in the finest sense of ephemeral, only
exists at a moment in time. When that moment has past, the event is gone leaving only the
memories, perhaps recorded, and the revenue contributed by the audience that shared that
moment. The cost of presenting an event can be astronomical. For example, as noted in the
Sidney Morning Herald 3 Dec 2004. “ to stage an average full-scale, Australia-wide tour by an
A-list international artist now costs between $6 million and $10 million, depending on the
act.”[2]

266
The components of the performing arts with which we are concerned include performers but,
because they are perhaps more affected by the labor practices in these arts, we will most
especially want to look at those who support the performing artist:

1. Designers: Costume, Sets, Props

2. Technical staff : Stage Managers, Stage hands and Technicians
3. Front of the House personnel: House Management, Box office, Ushers, etc.
4. Directors: Artistic Directors, Stage Directors
5. Management: Producers, Boards

In addition to this list, the American Guild of Musical Artists adds a useful Schedule “C” to its
contracts that define performing roles from Leading and Featured soloist to “Mute Bit” roles of
supernumeraries. Supplementing this schedule is a lengthy list of Operas and the cast
requirements; for example, Bizet’s Opera Carmen requires 14 named roles and a minimum of 36
in the Chorus. Mozart’s Opera Cosi Fan Tutti requires six lead singers and a chorus of 12.[3]

SOME HISTORY

Performers have been around for a very long time, and not uniformly treated with respect or even
tolerance. A widely acknowledged first reference to public performing is found in the Twelve
Tables of Roman Law:

Table VII, LAW VIII.

When anyone publicly abuses another in a loud voice, or writes a poem for the purpose of
insulting him, or rendering him infamous, he shall be beaten with a rod until he dies. [4]

Other laws and regulations throughout history constrained and restricted the performing artist
severely. A gradual movement from the 18th century toward allowing more freedom of
expression for the individual also provided performing artists with a less restrictive environment
in which to display their creativity.

MODERN SCENE

One of the most significant developments of the last 100 years, of course, has been the union
movement that codified guilds and other workers organizations under the protection of the law.

Performing artists live to perform. But their talents, their skill and the beauty they create won't
necessarily pay the rent, put food on the table or guarantee the necessities of life. Without forceful
advocacy and defense of their rights, artists may be vulnerable to exploitation or illegal
discrimination. They need protection. They can find it by joining AGMA, the American Guild of
Musical Artists. [5]

Various organizations to protect the employment rights of those in the performing arts were
established in the 20th century. For example:

International Alliance of Theatrical Stage Employees (IATSE) 1893. The IATSE serves wide
variety of skilled individual who are part of the craft of the theater and work, specifically, in the

267
following areas: Animation / Computer Generated Imagery, Front of House, Laboratory, 
Make-
up and Hair, Motion Picture and Television Production, Post Production, Projection and Audio-
Visual Scenic Artists, 
Stagehands, Television Broadcast, 
Trade Show/Exhibition, Treasurers
and Ticket Sellers, and Wardrobe. [6] These are members of the labor force the attending public
seldom see or, as is the case with ticket sellers and other front of the house personnel are part of
a general background to which attention is seldom paid. Thus, they were one of the first groups
to organize to defend their working rights and improve their work conditions.

Other groups to organize to protect their constituent skills and craft groups include:
American Society of Composers, Authors and Publishers (ASCAP) 1914 [7]
Actors Equity Association 1913 [8]
Screen Actors Guild (SAG) 1933 [9]
American Guild of Musical Artists (AGMA) 1936 [5]

Even with this range of associations available to support and represent those working in the
performing arts, the ultimate conflicts between wanting to ply one’s trade – create an ephemeral
experience for an audience - and need for compensation in order to continue to be able to do that
leads to significant opportunities for the workers to be failed by the system.

NO CONCESSIONS FOR NONPROFITS

The various associations noted above are dedicated to protecting their workers. As noted in the
statement from the AGMA, performing artists live to perform but they need to put food on the
table and pay their rent just the same as those without their talent who are employed in the
sectors of the economy that produce more tangible goods and services. These organizations
recognize that nonprofit performing arts groups are not as capable of producing revenue as they
are in producing opportunities for performers. In some cases accommodation can be made (e.g.,
guest artist agreement from the AGMA, see [5]). But in most cases there is no available
accommodation for a nonprofit for, as one provider of weapons for the stage states, they are all
nonprofit.

THE KNOCK-ON EFFECT

In 2005 the Washington ballet voted for the AGMA as their bargaining representative. There was
an impasse with enough finger-pointing to populate a year’s supply of a French glove maker. As
a consequence of the “misunderstanding” the staging of Tchaikovsky’s Nutcracker Ballet was
cancelled for the season. This caused the whole organization to shut down and, as Nutcracker
seasons usually contribute 50% of a ballet company’s annual revenue (as well as a substantial
amount of community support as the event is perennially popular with the young making them
fans of the art form) the damage was extensive.

With a for-profit company the damage can be as large and the knock-on effect substantial (think
only of strikes by flight attendants during the summer travel season). For a profit producing
organization, the pain hits those for whom the profit is a reward. The solution is also with them.

268
With a nonprofit company, the solution is never easy to find, for more money cannot simply
come from charging enough for the public performance to cover the costs. In a business where
bringing the artistry to the public does focus on prices that are affordable, raising prices to cover
the costs is never attractive. Often with nonprofit performing companies experience a short fall
in revenue, it is the board who may have to make up that difference from their own resources of
that of their friends. Thus the solution inflicts more pain than it relieves.

INTELLECTUAL PROPERTY

One of the ways to recover some income and gain productivity is to have some title to the
created work – the song, the play, the ballet or opera might be performed by others with some
tribute (symbolic but monetary is usually most appreciated). As a small additional wrinkle in this
opportunity to make additional revenue from a performance, the origins of copyright law came
from the desire of booksellers to preserve their monopoly on a certain work and not from the
creator. Even now, ASCAP, which has some very good arrangements to make sure reproductions
of a live performance that create revenue transfer some of that revenue to the creative artists –
but they represent the creators (Composers, Authors, Publishers) and not performers. In fact
their agreement on residuals with broadcasters sends nothing back to the performers.

EVOLVING APPROACHES

To allow those who wish to perform in the nonprofits sector to do so without exploitation, a
process that can educate the public in the need to support these artists (for the general public is,
after all, the beneficiary of the artist’s performances and willingness to do so) as well as an effort
to make sure that the trade organizations fully realize their obligation to facilitate these artists’
professional desires.

REFERENCES

[1] Faine , Hyman R. “Unions and the Arts,” The American Economic Review, Vol. 62, No. 1/2
(Mar. 1, 1972), pp. 70-77
[2] Sidney Morning Herald 3 Dec 2004 www.smh.com.au/news/Music/The-price-of-
fame/2004/12/03/1101923322669.html
[3] http://www.musicalartists.org/agreements_schedule_c.html
[4] Scott, S. P. THE CIVIL LAW. Vol I. Including The Twelve Tables, … Translated from the
original Latin, 
edited, and compared with all accessible systems 
of jurisprudence ancient and
modern. Cincinnati 
The Central Trust Company 
Executor of the Estate Samuel P. Scott, Deceased

Publishers, 1932 (Reproduced on www.constitution.org/sps/sps01_1.htm)
[5] www.musicalartists.org
[6] www.iatse-intl.org/about/crafts.html
[7] www.ascap.com/about
[8] www.actorsequity.org/AboutEquity/historicaloverview.asp
[9] www.sag.org/content/about-us

269
 BUILDING SUSTAINABLE CAPACITY DEVELOPMENT THROUGH
PARTICIPATORY GOVERNANCE AND SUB-NATIONAL CAPACITY
DEVELOPMENT:
Why development and international support failures in Africa?
Call for Action

Israel Jacob Massuanganhe

Public Policies, Governance and Local Development
Center of Excellence in Public Policies and Local Governance
University Agostinho Neto - Faculty of Law - Angola
Email: jacob.massuanganhe@gmail.com

ABSTRACT
A recurrent question in Africa development debates has been: Why development and
international support failures in Africa? Africa, with enough natural resources, possesses large
extension of arable land with diversity agro-ecologic conditions, but hungry and misery affects
more that 1/2 of the population, with major incidence in Sub-Sahara Africa. Imagine, today is
31st December 2014. What the poor will be told tomorrow about the commitment made to reduce
poverty? (Any idea?). This is evident because 1) the concept of Poverty is vague and does not
reflect the real dimension of who feels and 2) the concept of capacity development in many
debates has mostly stopped at the national level and rarely does the concept sufficient extended
to sub national level where needs are felt, services are demanded and less attention is devoted to
the role of local institutions and traditional authorities, civil society and grassroots organizations
and structures that are the real agents of local development. In Africa development, less attention
has been devoted to grassroots perspective and political leadership, looking local institutions and
the role of traditional authorities who are leaders, holding local traditional power, spiritual
power, knowledge, and essential skills to influence local community and control over the
territory and cultural transmission. Traditional institutions and authorities are rarely included
within plans of development that are formulated. Have mostly disregarded their potential for
collective action that inheres within these institutions, partly because of ignorance and partly also
because development paradigm, which is seen as “modernisation and scientific knowledge”.

One way to increase the effectiveness of local government is through democratic

decentralization, which involves a transfer of powers, resources, and capacity. Many developing
countries have initiated this process in an effort to improve the quality of service delivery and
strengthen sustainable local development. Decentralization is a vehicle to achieve the MDGs due
its nature to operate at local and community level and planning is crucial to ensure participation
in governance and local development. Increasingly participatory governance is emerging as a
key focal area, both in its own right, and as a means for securing the MDGs, and especially
poverty reduction. Decentralization and participatory processes are complex and takes years to
implement, but are recognized that should play critical role to achieve the MDGs, it because the
nature to work at local level. Sustainable development cannot be realized without robust strong
institutions and active citizenry engaged in key decision-making. Political leaders should
promote good Governance, by strengthening institutions (formal and informal structures) and
public participation to address national and local development agenda. Furthermore, functional
local structures and ancestral systems are of particular importance to the flourishing of a strong

270
service delivery, which is prerequisite to any meaningful, vibrant, democratic, and decentralized
governance.

The new development paradigm involves political commitment. In view to address local
development, on one hand, capacity, authority and resources have to transferred, and on other
hand, it’s crucial to promote citizen´s engagement at all levels. The paradigm should consider a)
strengthening of Local governments, b) building capacity of Civil society organizations,
including communities, leaders and traditional authorities, and finally c) Promotion of emerging
Private sector - small and medium enterprises through stimulation of local economic
development interventions that generate employment and income for the poor, while local
institutions create enable set to address local structures and systems to promote local
development.

1. INTRODUCTION

A recurrent question in Africa development debates has been: Why development and
international support failures in Africa? This old continent has been to the international
community the most privileged recipient of donor support during last 20 years. More than $500
billion in foreign aid6 – the equivalent of four Marshall Aid Plans – was invested in Africa
between 1960 and 1997 in development programmes. Instead of increasing development, aid has
created dependence. The more aid poured into Africa, the lower its standard of living. Per capita
GDP of Africans living south of the Sahara declined at an average annual rate of 0.59 percent
between 1975 and 2000. Additionally, other direct and/or indirect forms of assistance were
provided via technical cooperation/ assistance by multilateral or bilateral partners. Nevertheless,
Africa is the poorest in the globe and still being affected by chronic poverty, violence and
unstable regimes that are called to carry long term development vision of their people.

Africa, with enough natural resources, possesses large extension of arable land with diversity
agro-ecologic conditions, but hungry and misery affects more that 1/2 of the population, with
major incidence in Sub-Sahara Africa. Child and women mortality, associated with high
HIV/AIDS prevalence rate, especially in women; illiteracy and low enrollment level are some
critical challenges to be addressed in Africa development agenda. African agriculture itself is in
crisis, and according to the International Food Policy Research Institute, this has left 200 million
people malnourished. In many debates about Africa development, one issue has been part of the
agenda: The need of strong Africa Leadership. In this connection, it is particularly highlighted
political problems such as civil strife, refugee movements and returnees. The implication is clear
- Africa's years of wars, coups and civil strife are responsible for more hunger than the natural
problems that befall it7. By some measures, more that 70 percent of African nations have
experienced internal conflicts in the last three decades. Conscious that Africa’s poor are getting
poorer and that good governance is essential for successful economic development, the continent
adopted fundamental reforms - The New Partnership for Africa’s Development (NEPAD) 8.
Researchers have been pointed out that the critical issue in Africa leadership is Good
Governance, meaning strengthen institutions and public administration reforms to address

6
https://www.cato.org/pubs/edb/edb2.html
7
http://www.globalpolicy.org/socecon/develop/africa/2006/0131sistcrisis.htm
8
http://africaunchained.blogspot.com/2005/07/strengthening-african-leadership.html

271
national development agenda. In Africa good governance debate, less attention has been devoted
to local governance perspective, looking local institutions and their capacity towards response to
the local demands and to address decentralization and local development issues.

The concept of institutions in many good governance debates has mostly stopped at the level of
sub national authorities (local governments) and rarely does the concept sufficient extended to
civil society and grassroots organizations and structures that are the real agents of local
governance9. Good governance does not means to advocate strong states or centralism, but in
market economy is to have state intervening on behalf of the poor (regulatory) and let the poor
brings his voice (devolution). It will lead to enhance effectiveness and efficiency of public
interventions by the central government, who are distant from the point where needs are felt and
service delivery are needed: demand-driven public administration.

Persistent rural poverty is one of the most stubborn social problems facing Africa. Considering
that tomorrow is 1st January 2015, how far were honored the commitments made to achieve the
MDGs? What will be told the world about eradication of the extreme poverty? In many debates
about Africa development, one issue has been part of the agenda: The need of strong Africa
Leadership. It’s consensual that Africa good governance, less attention has been devoted to local
perspective, looking local institutions, traditional authorities and their capacity towards response
to the local demands and to address local development agenda, meaning that there is a critical
need to promote participatory governance and inclusive local development. This paper is a
grassroots perspective that aims to bring the concept of Poverty and MDGs close to the poor,
since in many debates has mostly stopped at the national level and rarely does the concept
sufficient extended to sub national level where needs are felt, services are demanded. It is noted
that less attention has been devoted to the role of local authorities, civil society and grassroots
organizations and structures that are the real agents of local development. The concept of poverty
is rhetoric and based on our self perceptions and never incorporates the grassroots perspectives
or the poor dimension of who fells, what is poverty. The exercise of modeling the MDGs[1] is
critical to identify the variable and support the governments to forecast what needs to be done
today to achieve the MDGs tomorrow, meaning that the critical variables have to be identified
(e.g. good governance, leadership, economic growth, population, etc). The variable determining
the MDGs, almost are critical and under control of the governments. In most cases, the variable
determining the MDGs are related to endogen factors and internal capability to sustain local
development.

Simultaneously, national and sub-national debates are needed. It is consensual that transferring
capacity and resources to the poor is the most direct and immediate way to reduce poverty and to
achieve the Millennium Development Goals. One way to increase the effectiveness of local
government is through democratic decentralization, which involves a transfer of powers,
resources, and assets to local structures. Effective local governments are vital to achieving the
Millennium Development Goals. The MDG’s implies strong commitment, long term
development vision and will not be achieved if the governments do not strengthen institutions of
governance and build capacity at local level. There are actions to taken in view to touch the poor,
e.g promote leadership, public policies, institutions, and pro-active systems that provide better

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services, capacity development, and livelihoods improvement. If not, as result, in 2015 the world
will continue being constrained and affected by current problems.

Participatory Governance and Local Development

A recurrent question in development debates has been: Why development agenda and
international support failure in Africa? This old continent has been to the international
community the most privileged recipient of donor support during last 20 years. More than US$1
trillion in foreign aid[2] – more that the equivalent of four Marshall Aid Plans – was invested in
Africa between 1960 and 2005 in development programmes. Instead of increasing development,
aid has created dependence. The more aid poured into Africa, the lower its standard of living. Per
capita GDP of Africans living south of the Sahara declined at an average annual rate of 0.59
percent between 1975 and 2000. Additionally, other direct and/or indirect forms of assistance
were provided via technical cooperation/ assistance by multilateral or bilateral partners.
Nevertheless, Africa is the poorest in the globe and still being affected by chronic poverty,
violence and unstable regimes that are called to carry long term development vision of their
people.

Africa, with enough natural resources, possesses large extension of arable land with diversity
agro-ecologic conditions, but hungry and misery affects more that 1/2 of the population, with
major incidence in Sub-Sahara Africa. Child and women mortality, associated with high
HIV/AIDS prevalence rate, especially in women; illiteracy and low enrollment level are some
critical challenges to be addressed in Africa development agenda. African agriculture itself is in
crisis, and according to the International Food Policy Research Institute, this has left 200 million
people malnourished. In many debates about Africa development, one issue has been part of the
agenda: The need of strong Africa Leadership. In this connection, it is particularly highlighted
political problems such as civil strife, refugee movements, and returnees. The implication is clear
- Africa's years of wars, coups, and civil strife are responsible for more hunger than the natural
problems that befall it[3]. By some measures, more that 70 percent of African nations have
experienced internal conflicts in the last three decades. Democracy and transparent and
accountable governance and administration in all sectors of society are indispensable foundations
for the realisation of social and people-centred sustainable development (Declaration of the
World Summit for Social Development, 1995).

Conscious that Africa’s poor are getting poorer and that good governance is essential for
successful economic development, the continent adopted fundamental reforms - The New
Partnership for Africa’s Development (NEPAD) [4]. For a long time, the worsening rural
poverty levels in Africa were explained principally in terms of poor economic performance, and
externally prescribed economic remedies predominated in policy prescriptions. Emerging
evidence, however, shows that economic growth alone is not sufficient to bring about, in a
sustainable way, the needed poverty reduction. It is particularly worthy to observe that Africa
possess extremely low growth elasticities of poverty reduction[5]. This recognition does not
minimise the importance of economic growth in poverty reduction and rural development. For
poor countries, rapid growth is a necessary, essential and powerful tool for poverty reduction in
the medium to long term. In interventions that target poverty, one of the primary conceptual
hurdles is to define who the poor are and, consequently, how to target them. Proper targeting of

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the poor has generally proved to be elusive and this is one area where more work is still required.
The other challenge regards how best to ensure that there is local ownership of the interventions.
This consideration brings to the fore the issues of local governance. One of the lessons from the
past failures of poverty-focused interventions is the importance of avoiding a ‘top down’
approach to project design and implementation, as this invariably results in ineffectiveness of the
interventions, while a decentralised and participatory approach has resulted in poverty reduction.
The global community has recognised the development of Africa, especially Sub-Saharan Africa,
as the world’s foremost development challenge.

Researchers have been pointed out that the critical issue is Good Governance, meaning
strengthen institutions and public administration reforms to address national and local
development agenda. UNDP[6] defines governance as the exercise of political, economic, and
administrative authority to manage a society’s affairs. This broad concept encompasses the
organizational structures and activities of central, regional and local government; the parliament;
the judiciary; and the institutions, organizations and individuals that constitute civil society and
the private sector. Governance requires concerted efforts by those managing the affairs of
developing countries. Elements contributing to the latter concept of good governance include the
basic laws and institutions of a nation, the administrative competence, and transparency,
decentralization of its administration, and the creation of an appropriate market environment; all
of these are needed to support people's participation in every aspect of politics, the economy, and
society. These are therefore necessary components of good governance as "the government
functioning as the basis for participatory development."

In Africa good governance debate, less attention has been devoted to local governance
perspective and political leadership, looking local institutions and their capacity towards
response to the local demands and to address decentralization and local development issues.
Good governance doesn’t means to advocate strong states or centralism, but in market economy
is to have state intervening on behalf of the poor (regulatory) and let the poor brings his voice
(devolution). Increasingly participatory governance is emerging as a key focal area, both in its
own right, and as a means for securing the Millennium Development Goals, and especially
poverty reduction. There is a growing consensus that democratic governance creates the
conditions for sustainable development and poverty reduction. Local governments can play a
major role in this effort by ensuring more effective and accountable local infrastructure and
service delivery for the poor and by improving the dialogue between the state, citizens and their
communities, and the private sector. Institutional capacity plays a central role in any
decentralization process. Failure of institutional setting will result in poor outcomes. It’s evident
that the reluctance of decentralization in developing countries mainly is associated with weak
systems, poor institutions, weak capacity and administrative diseconomies. Community
developers must understand both how to work with individuals and how to affect communities'
positions within the context of larger social institutions[7].

References and full paper available on request.

274
 THE IMPACT OF THE ECONOMIC CRISIS ON YOUTH EMPLOYMENT IN
SLOVENIA

Jasmina Pavlin, jasmina.pavlin@fov.uni-mb.si; Mojca Bernik*, mojca.bernik@fov.uni-mb.si;

Miha Marič, miha.maric@fov.uni-mb.si
University of Maribor, Faculty of Organisational Sciences
Kidričeva cesta 55a, SI-4000 Kranj, Slovenia

ABSTRACT

Companies in Slovenia have implemented a number of measures to cope with the recent
economic crisis and to adapt to market conditions. One of these measures has been eliminating
jobs and reducing the number of employees. This led to an expansion in the number of
unemployed, while the number of newly employed people has decreased. We have examined the
problem of the employability of young people who are seeking employment and are often
without the experience necessary for the work place. The aim was to make a systematic review
of the programs for promoting youth employment that are carried out in Slovenia and that may
reduce the number of unemployed youth.

Keywords: employment, unemployment, youth, crisis

INTRODUCTION

Within the dynamics of transitions between the different situations of young people, the
transitions from education to employment remain the most demanding and critical. Young
people in modern society are placed in a contradictory situation; on the one hand, they are forced
into earlier and more informed, which implies a shift of responsibility for their own lives in
childhood [11]. On the other hand, the period of education and economic independence has been
extended, which is a sharp contrast to the requirements of the early choices and taking
responsibilities [15]. Youth unemployment is not a problem only in terms of placement in the
system of work and future career opportunities of young people, but also in the form of negative
psychological and broader social consequences [14]. The employability of young people or first-
time jobseekers is a major problem in Slovenia, as well as throughout the European Union. Since
the start of the current economic crisis, the situation in the labor markets has become even worse.
A particularly vulnerable group in this difficult situation is youth. This not only includes those
with low education, but also those with higher education.

This paper highlights the situation of youth in the Slovenian labor market, focusing on current
trends and issues that they are facing. We will also examine programs aimed at solving youth
unemployment.

YOUTH EMPLOYMENT PROBLEMS IN SLOVENIA

Youth labor market in Slovenia

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The term "youth" is usually used for people during the period from childhood to maturity. The
term “youth workforce market” identifies the segment in which youth are seeking their first job
as well as the supply of jobs that employers are willing to offer to youth without work
experience. Youth labor markets constitute the segment of the labor market that is most greatly
exposed to different fluctuations, and where pressures for flexibility and adaptability are the
greatest. At the same time, young people are often also the least protected sector of the
workforce [14]. Youth as jobseekers are currently confronted with a more flexible, less secure
forms of employment in comparison to the older work force, i.e., with fixed-term jobs, part-time
jobs, with occasional or temporary jobs under contracts [13].

In the case of flexible employment forms, it is especially important to emphasize “student work”
via student services that is liberally regulated Slovenia. Such student work has been and is often
criticized as one of the key causes for high youth unemployment in Slovenia, because employers
meet their needs for unskilled or less qualified workers with student labor. Indeed, for
employers, this type of labor is the cheapest and the least demanding form of workforce
engagement. At the same time, this form of work is certainly the reason for lengthening the
period of education and massive enrollment in higher education because it offers many young
people a way to “survive” for several years.

Regarding the problem of youth labor market in Slovenia, we also have to highlight some
problems directly related to this topic. This is primarily the social exclusion of relatively high
proportion of young people who do not finish school, lengthening the period of education to
avoid unemployment, a lack of skills and experience in seeking their first job, a mismatch of
education with labor market requirements, regional development disparities affecting youth
employment opportunities, and the brain drain of highly educated young people.

Youth unemployment in Slovenia

Youth unemployment is a major and an increasingly critical issue problem in Slovenia.

According to the cause for the application to the Employment Service of Slovenia, unemployed
young graduates are separated into two major groups: first-time job seekers and persons seeking
re-employment [17]. The group of first-time job seekers without experience is currently
increasing. As a particularly vulnerable group among unemployed youth, we should emphasize
low-educated young people, since they have a difficult time competing with educated young
people as well as with older people with lower education [14]. A general finding is that youth
with high education respond much more to changes in economic opportunities than those with
low education levels [12].

By looking at the data of registered unemployment in Slovenia on 31.12.2009, we can see that
there were 12,059 people below the age of 25 who were unemployed. Of these, the largest
groups of unemployed young people were 3,704 with no education, 2,852 with secondary school
(three years), and 4,287 with general secondary education (four years) [20]. Of young people
searching for their first employment, 7,462 found it in 2008 and 6,016 found it in 2009; these are
very low numbers compared to the data on how many there were searching for it in the selected

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years. The rate of unemployment among those who are searching for their first employment was
14.3% in 2009 [20].

The consequences of youth unemployment in Slovenia

Social exclusion and marginalization are usually indicated as the main consequence of
unemployment, not only in the labor market, but also in other areas of life. Youth unemployment
in Slovenia is a key risk factor that impedes young people’s overall long-term involvement in
society. Research findings indicate that the accumulation of bad experiences of unemployment
among youth contribute to economic deprivation, social isolation and the mental health problems
[10]. Young people in Slovenia are exposed to the uncertainties in the form of great flexibility,
which consequently leads to reduced ability of full economic and social independence because of
uncertainty in the youth labor market [1]. Moreover, they remain a burden longer for their
parents, leave home later and create their own families later. The result of this delay is also
lowering the fertility rate, because there are fewer opportunities to have children [7]. Fergusson
et al. [4] argue that unemployment among youth is also associated to increasing risks of disorder.
Results of the research showed that young people exposed to six months or greater
unemployment in any given year had rates of mental health problems, criminal offense,
substance use disorders and suicidal behaviors that were between 1.4 and 8.4 times higher than
their non-unemployed peers. The high rate of inactivity among young people (apart from the
participation in education and training) and the failure to integrate into the labor market is
usually associated with high overall unemployment [3].

YOUTH EMPLOYMENT POLICY IN SLOVENIA

The European Union and its member states, of which Slovenia is one, have given a clear priority
to young people as the main target group. Employment policies focus more attention on young
people, among which are not just employment measures aimed at first-time job seekers and
unemployed young people, but also the meaning and place that the issue of youth employment
has in employment policies [5]. The state plays a major role in solving youth unemployment.
Measures and incentives to tackle unemployment are summarized in active employment policies,
which represent key state interventions in the labor market and are targeted at specific groups of
people [6]. The programs for solving unemployment in Slovenia and as a target group include
young people are: the Programs of Measures to Promote Entrepreneurship and Competitiveness
for the period 2007–2013, the Operational Programme for Human Resource Developments for
the period 2007–2013, various regional development programs, the partnership program “Young
People in the World of Work” for the period 2007–2013 and the Program of Active Employment
Policy for the period 2007–2013 [16].

The Active Employment Policy Programme (AEP) has been designed to assist in obtaining
employment for the unemployed and for the preservation of threatened jobs and is especially
intended for those target groups that face any handicap to entering the labor market [2, 9]. The
program is partly financed from the state budget and the rest of the money is obtained from
European funds, principally from the European Social Fund [20]. Part of the attention in the AEP
program is also given to tackle youth employment. The main substantive attention in 2010 is
focused on operations to promote the establishment of scholarships, the promotion of

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employment of young first job seekers, and some other measures that also affect young people,
i.e., the promotion of employment of disadvantaged persons, promoting the creation of new jobs,
boosting the development of new employment programs for the most vulnerable people in the
labor market, developing new opportunities for job creation and others. Young people are
particularly exposed to the program of the third measure, i.e., the promotion of employment and
self employment, in which incentives are implemented in the form of subsidies for the
employment of disadvantaged groups. Here, we should emphasize two projects aim at reducing
youth unemployment: a pilot project “Graduate, Activate and Employ Yourself” [18] and the
project “Employ.me” [19].

The main goal of the project "Employ.me" is to include young people into training at the
workplace, in order to enable them to obtain relevant work experience and subsidized
employment through public tenders via the project. A subsidy in this project is offered for
employment of particularly youth seeking their first job. The subsidy amounts to €4,000 and is
paid after the recruitment of unemployed persons. The employer must enter into a full-time
employment contract with its new employee and keep the new employee for at least one year. In
2009, there were 2,904 people involved in this program, of which there were 944 below 26 years
of age. For the period of 2010–2011, there is €18 million for the tender: 85% of these funds are
supplied by the European Union through the European Social Fund (ESF), the remaining 15% is
provided from the state budget [20].

The second project “Training of graduates in the workplace and the subsidy for employment of
graduates – Graduate, Activate and Employ Yourself” aims at mobilizing students during
graduation to enable them to undergo training in the workplace and to gain the knowledge and
skills to facilitate the integration into work as well as promoting the employment of graduates
after training for the same employer through an employment subsidy. Training lasts from one to
six months. Employers are reimbursed for eligible costs of training graduates as the grant of
€2,000 is awarded to employers for employment of graduates for full-time for at least six months
[20]. In 2010, the project has intended projected budget of €39.2 million and €23.9 million in
2011 [8].

CONCLUSION

Using the full potential of young people and creating a favorable environment in which young
people can develop their skills, work and participate actively in society is essential for the
economic and social development of the country. This is especially true considering the fact that
the economy is knowledge-based, and that we live in an aging society in which it is essential to
give all young people the opportunity to fully develop their potential. Labour markets urgently
need to respond to these challenges to use the potential of the youth population [3]. For the actual
situation of young people following the completion of education in the labor market, the
unemployment rates are not the only important indicator of unemployment, but also the question
of whether they have managed to get jobs that are appropriate for their qualifications. For an
overall assessment, it is therefore necessary to analyze the quality of their employment. Only in
this case, is it expected that the investment in education of these people is in fact recovered
through an appropriate increase of value added in the economy [17].

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Young people today face many complex challenges. Searching for solutions to increase
employability is only one aspect of a much wider problem on the labor market. It is important
not only to narrow search channels to raise the employability of young people, but also to
broader the search for multidimensional measures that enable young people to get good and
decent employment, and conditions that will enable them to find their place in society, achieve
independence and realize their personal aspirations. The issue of young people in the labor
market is extensive and requires comprehensive investigation. In this article, we have highlighted
only some of them. The paper does not cover the role of grants and scholarships in the education
and their impact and connection with the recruitment of young people. We have also touched the
problem of employment for youth with special needs, which is a specific group of young people
and requires much attention.

REFERENCES

References available upon request from the authors.

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‘BEING HUMAN’ – THE ESSENCE OF BEING A SUCCESSFUL HUMAN RESOURCE
PROFESSIONAL

Ranjan Phadke
65/1, Erandavana, Ramdhun, Prabhat Road, Lane No 15, Pune-411004, INDIA
Mobile – 91-9890930647
Email- rvphadke@gmail.com

Being Human, what does that mean?

Prof Ramnath Narayan Swami from the prestigious Indian Institute of Management –
Bangalore and one of the pioneers in the field of ‘Creativity in Management’ once said, “You
know what the problem with today’s Human Resource Professionals is? They have forgotten
the meaning of the first word, being HUMAN”. This statement aptly summarizes the
perception and frustrations surrounding Human Resource functions in today’s business
world. So what does it mean to be human? Does a human resource professional need to have
certain personality traits that make them suitable for the role? Do they need to have a code
that can dictate their actions towards employees? There has to be one. In the hard world of
business, an HR person has the ‘designated’ job to take care of people. To be fair all
managers and leaders need have an HR person within them. However since business today is
more about profit than people, that task has been given to the HR department. As part of this
introduction, let us try and define some traits that an HR professional must have;

1) Basically good natured.

2) Uncompromising about ethics.

3) Aware of social responsibilities.

4) A sense of humor.

5) Natural ability to mentor and counsel.

6) Creativity.

7) Ability to analyze facts within the back-drop of emotions.

8) Ability to express thoughts clearly.

9) Selfless.

10) Good balance between being a conformist and non-conformist

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These I believe are a few decisive character traits that will define the future human resource
professional. The reason that the above traits and not others are the most important is due to
modernity. Modernity is a series of reforming cultural movements in art, literature,
architecture, music etc. Rise in capitalism, representative democracy, individualism,
increasing role of science and technology, social movement, urbanization, literacy, media,
advances in medicine, pollution, climate change, values related to globalization, information
technology, rootlessness, all these have an indelible influence on today’s youth which is
tomorrows work force.

We will now discuss some aspects directly related to an HR professionals job and how they
are dealt with today and how they can be dealt with better.

My targets – A person is a target

Many believe that an HR professionals targets are defined by numbers. A person is a

number. When it comes to people, numbers are important only for analysis of problems.
They have no significance in the solution. Let us consider examples;

a) Recruitment – My target is to hire 50 people in a month. If I don’t meet them, my

appraisal is doomed.

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b) Training and Development – I have to cover 50 employees a month on conflict
management, else I have failed.

c) Compensation and Benefits – I have to ensure a critical balance between giving the
least possible raise and still lose the least possible number of employee’s due to a
competitor offering more.

d) Employee Relations – I have to have no more than 10% attrition or labor turnover and
nothing more than 5% daily absenteeism.

On the face of it, these seem like normal, reasonably common targets that traditionally
have seemed to work. This is the most common way an HR unit or team or person
approaches his or her job. The consequences of such an approach or attitude are also
extremely common and usually the root of all problems that an organization faces.

a) Recruitment – If you are stretched to hire 50 people a month, which in this case is
difficult, an HR professional will quickly reduce the threshold for entry consciously
or sub-consciously. This affects quality and right fitment in terms or work as well as
culture. This has an effect on not only the organization but also the candidate, as they
are now in a job that they are either not suitable for or at times too good to do.

b) Training and Development – It’s a myth that the more people you cover the better
chances of improved performance. The concept of training needs analysis is often lost
while conducting ‘behavioral’ training modules. As is often found, it is a difficult and
tedious task to assess training needs for behavioral aspects. Hence it not uncommon
to have these conducted for all. Most behavioral trainings are related to a person’s
leadership capabilities. Employees need a certain environment, experience and
interest in attending and gaining from such programs. Such en-mass trainings only
increase training costs, create disillusionment amongst those who are not suited for
them, creates unproductive time hence reduces morale as well as profits, which is the
reverse of what the training intended to achieve.

c) Compensation and Benefits – To lose sight of employee welfare while deciding

remuneration and benefits is common. Compensation has to be decided on , current
company profits, future growth targets, current standard of living, inflation, position
and placement of employee, skills and motivations, ability and performance, loyalty
and honestly. Unfortunately, most first look at the market scenario. In a recession

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 year, regardless of company profits, increments will be stopped. It is the childhood
mentality of looking at what the other does and then follow, which is prevalent in
CnB departments. If my competitor is giving an 8% hike, I will either match it or give
a little less and still hope to keep people. The common misconception amongst
leaders in the human resource industry is that ‘Compensation and Benefits can never
be employee friendly’. With proper research, genuine care of employee welfare,
consideration of facts and figures, performance etc an employee can be positively
motivated to stay and continue working with an organization by providing for
generous yet appropriate increments, compensation and benefits. What is also missing
is ‘communication’. In certain genuine cases where an organization is not able to
provide the expected raise, they often fail miserably to communicate the real problem
to their employees. The worst mistake is to consider the employee unequal and
unworthy of being part of the larger picture. It’s definitely not the sole domain of the
top management.

d) Employee relations – Absenteeism is an aspect which most ER’s professionals fail to

address effectively. On most occasions, the line manager or team leader addresses
these on the spot and hence such incidents are never documented.

Here are some common reasons for absenteeism stated by Dr Rao;

i. Maladjustment with Working Conditions: If the working conditions of the company

are poor, the workers cannot adjust themselves with them. Then they prefer to stay
away, or at home.

ii. Social and Religious Ceremonies: Social and religious functions divert the workers
attention from the work. Most employees today have to give traditional holidays and
engagements a miss. This can create a bit of frustration and lead to increased
absenteeism during such periods.

iii. Industrial Fatigue: This is simply being drained out, working extra hours, doing 12
instead of 9 hours of work and then finally the employee feels the need to stay away
from work.

iv. Unhealthy Working Conditions: Poor and intolerable working conditions might
irritate the employee. Excess noise, low lighting, poor ventilation, poor control over
the central air conditioning which either keeps the indoors too warm or too cold for
comfort.

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 v. Poor Welfare Facilities: Poor welfare facilities include poor sanitation, washing, first
aid appliances, ambulance, rest rooms, drinking water, canteen, shelter, crèches etc.
Employees dissatisfied with these facilities tend to stay away from the work place.

vi. Alcoholism: Urban, young employees have been known to be lavish in their spending
where parties and boozing trips might find common place in their life. These if done
during the weekday will lead to absenteeism the next day as they will not even be in a
position to wake up, let alone come to work.

vii. Being in debt: Many employees, to cover their costs might end up borrowing from
friends and colleagues at the workplace. Inability to repay them, might lead to them
not wanting to face them, hence might result in absenteeism.

viii. Maladjustment with the Job Demands: The fast changing technology demands higher
level of skill and there is a constant pressure to meet targets. Some employees fail to
meet these expectations and feel ashamed. This leads them to skip work, to avoid the
constant negativity surrounding their performance.

In relation to company policies, unsound personnel policies, inadequate leave facilities

and low level of wages might tend to keep the employees away from work as well. Such
problems can be analyzed and avoided if a little care is given in understanding the human
nature of work. The problem of focusing just on 10% attrition or 5% absenteeism is that
you are ignoring most employees as long as the numbers are right.

Have a party – boost morale

The most disturbing trend in employee relations is to have a party to boost morale. This is
the worst solution to employee problems, such as stress, disinterest, absenteeism, attrition
etc. The thought that having a ‘fun’ work place by arranging a party will reduce problems
is false. A fun work place is one where an employee feels welcome, where their work is
considered important; their opinions are respected, where they have the freedom to make
decisions. These factors give true meaning to the phrase “A fun work place”, not, having
a party. The fact that HR professionals and the management now resort to such initiatives
is proof of the dying art of understanding people and problems. It is also indicative of a
growing casualness in approach by the management towards employee relations and
problems.

Continuing education policy really a retention tool

Most organizations have this. A policy which allows employees to enroll in courses,
master’s degrees, diploma’s all in the name of skill enhancement and employee welfare.
Most organizations provide financial assistance to such initiatives. One would ask, what

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is wrong? It seems like a win-win situation. Unfortunately the reality is different. Though
most organizations now offer online, distance learning or weekend learning Master’s
degree in association with local institutes, by the end of the course, the organization has
no plan to help the employee use their newly acquired skills. Most of these courses, since
done while working full time, are conducted in double the normal duration of a full-time
course. This keeps the employee locked within the current job as the organization might
be providing financial assistance for the same. Another troubling fact is, that though
almost all organizations have these programs, when an employee changes jobs and
decides to apply for better opportunities based on new degree’s and skills acquired the
market does not accept this degree’s as anything special. Human resource professionals
seldom afford the candidate the same consideration as candidates with full-time degrees.
Such work and study degrees are often considered second rate. Hence the employee or
candidate stands to lose twice, the time and enormous effort spent in achieving success in
work and study and now being considered unequal to full time degrees.

Hence I conclude that such a policy is a cold “save attrition” gimmick, devised by
brilliant but inconsiderate management and HR professionals.

Recruitment, you don’t fit in the template

Most recruiters today have a template. If you do not fit EXACTLY in the profile
mentioned no one will consider you. The reason for this is that HR professionals are often
considerably removed from the real work environment. Hence they have no experience to
bank on to make informed, considerate judgments about a person’s skills and abilities. To
avoid ‘thinking’, asking questions to search for the right skills, the recruiter depends on
the template come what may. In some cases even this is outsourced and done over the
phone. Many a talented candidates fail to make the cut since their CV’s may not fall
exactly in the job description and candidate profile given to the HR from Operations.
This inability to assess, ask questions, probe and search the best candidate often leads to
random, CV centric hiring. We have also now seen a trend of automated software’s
filtering profiles based on the choices you select from drop-downs. This maybe an
efficient way to dispose of thousands of applications, but a disastrous approach in finding
the best or right candidate. It only seems that recruiters now don’t even want to read
CV’s let alone ask right questions.

Understanding your problems, over the phone

Most HR professionals have many employees to handle. Hence many now resort to
dealing with employee problems over the phone. Even worse, most organizations have
software’s and systems in place to allow the employee to ‘register’ their complaints
online. These have an SLA and time to resolve. But no one will ever think of meeting the

285
employee personally. It is observed that such systems and methods of addressing
employee concerns or questions over the phone fail to give an accurate solution leaving
the employee even more distressed. Losing human touch and one-on-one interaction, is
the start of losing the employee for good.

Overtime, what’s that?

If you work in the IT field then chances are that you work more than 9 hours every day.
Why? It’s expected, the work pressure is enormous and I have no choice. After all, we
are paying the employee a lot of money, they must meet targets, even if they have to
work 24 hours a day. This is such a common trend. The worst part is that no one
complains. They feel privileged even obliged to be able to work with great companies for
high salaries. It’s no secret that professionals today face a burn out far earlier in life, have
higher instances of health related issues and usually have a miserable family and social
life. Overtime is becoming so common that, not only does an employee not get paid for
it; they are often looked down upon, reprimanded and sometimes even laid off if targets
are not met. Why have targets that require more than 9 hours of work in a day? Of all the
trends that I have discussed in this paper, this is the most dangerous of them all.

In the blind greed for profits, success, targets, we are losing touch with reality every day,
a reality that is so simple yet never considered. It is important that businesses treat their

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employees as human beings, not money minting machines, replaceable after the warranty
and service period on ones, mind and body is over.

‘Being human’ is that difficult in business?

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 GENDER, ORGANIZATIONAL JUSTICE, JOB ATTITUDES AND ABSEENTEEISM
Betty Jane Punnett, Priscilla Glidden, Dion Greenidge
Department of Management Studies, University of the West Indies,
Cave Hill Campus, Barbados, 246-256-6434; eureka@caribsurf.com

ABSTRACT

Background

There is a body of literature which finds that women have higher absenteeism rates than men
(Akyeampong, 2005; Dionne & Dostie, 2007; Patton & Johns, 2007). There are many
possible explanations for these findings, including women taking more home focussed
responsibility for children, aging parents and so on. This explanation can be questioned,
particularly when good alternatives exist for these responsibilities and where men often have
similar responsibilities. An alternative explanation is that women experience a sense of
discrimination in the workplace which impacts negatively on their attitudes toward the job and
organization. There is abundant literature to show that women are treated differently from men at
work (Catalyst, 2009; Diekman & Eagly, 2000; Eagley, Johannesen-Schmidt & van Eagen,
2003; Hausmann, Tyson & Zahidi, 2009; The European Commission, 2006), for example
facing glass wall, ceilings, and cliffs (Burke and McKeen, 1990, 1997; Jackson, 2001;
International Labour Office, 2004; Maniero & Sullivan, 2005, Powell and Graves, 2003;
Punnett et al., 2006).

Given the differential treatment of women at work, it seems likely that women will perceive
lower levels of justice at work, this in turn will lead to lower levels of satisfaction, and lower
levels of organizational commitment and loyalty. These negative attitudes will result in
withdrawal behaviors, such as absenteeism. In addition these negative attitudes may result in
higher levels of stress which also leads to withdrawal behaviors.

There is literature which more generally links these attitudes and behaviors in both men and
women (Cohen-Charash & Spector, 2001; Colquitt et al., 2001; Latham & Pinder, 2005;
Cole, Bernerth, Walter & Holt, 2010). We propose that the relationships will be particularly
salient in the case of women, because of their differential treatment and perceptions of injustice.
We plan to test this proposition using data from a job attitude survey across 24 organizations.

THE VARIABLES AND MEASURES

Various job characteristics have been investigated as predictors of absenteeism (Johns, 1997;
Rentsch & Steel, 1998). The strongest evidence from research in North America is a consistent
relationship between job satisfaction and attendance at work. The more satisfied employees are
with the workplace, the more likely they are to attend (Hackett, 1989; Harrison & Martocchio,
1998). Job satisfaction is a broad concept, and while a global satisfaction variable has been
shown to be related to absenteeism, a variety of facets of job satisfaction have also been
identified, and survey instruments have been designed to measure these facets. Broadly, intrinsic
job satisfaction has been differentiated from extrinsic job satisfaction – intrinsic is defined as

288
satisfaction with the job itself, and extrinsic as the satisfaction with factors external to the job
(Weiss, Dawis, England, & Lofquist, 1967). Research has looked at these facets of job
satisfaction extensively in North America, and found them, to varying degrees, to be related to
absenteeism. It seems that if employees are satisfied with the job itself (intrinsic) and with the
workplace environment (extrinsic) they will want to attend, and avoid absences. Some research
suggests that intrinsic job satisfaction may be the best predictor of absenteeism (Hackett, 1989).
Two other organizational characteristics that have received substantial attention are loyalty and
justice (Harrison & Martocchio, 1998). Results of studies in North America have found that the
more loyal and committed employees are, the more satisfied they are, and the more likely they
are to attend work - loyalty and commitment are thus positively correlated with both satisfaction
and attendance (Addae & Parboteeah, 2006; Bennett, 2002; Harrison & Martocchio, 1998; Lok
& Crawford, 2001, Yousef, 2000). Some research has suggested that satisfaction leads to loyalty
and loyalty in turn leads to attendance, so that loyalty is an intervening variable (Hackett, 1989;
Lok & Crawford, 2001). Organizational justice, or perceptions of equity, has also been identified
as contributing to absenteeism (Guerts, Schaufeli & Rutte, 1999; Lam, Schaubroeck & Aryee,
2002; Moorman, 1991; Neihoff & Moorman, 1993). Employees who believe they are treated
equitably at work are more likely to attend, while those who see the workplace as unjust or unfair
are more likely to be absent.
The survey instruments used in the project were all existing instruments with previously
demonstrated high levels of reliability and validity. A variety of instruments were examined, and
these were selected as the best available. Specifically, the instruments were:
• The Minnesota Satisfaction Questionnaire (MSQ short form) - Weiss, Dawis, England, &
Lofquist, 1967

• Organizational Commitment - Meyer, Allen & Smith, 1993

• Perceptions of Organizational Justice - Moorman, 1991; Niehoff and Moorman,1993

SAMPLE AND INITIAL ANALYSIS

Based on 773 usable responses (two hundred and ninety five – 38.2% - males and four hundred
and seventy eight - 61.8% -females), we have done an initial analysis, comparing male and
female respondents on the relevant variables. Table 1 gives the means for all employees and the
reliabilities for the scales. An independent sample t-test was computed to test for significant
differences between male and female employees on intrinsic job satisfaction, extrinsic job
satisfaction, general job satisfaction, affective commitment, continuance commitment,
distributive justice, procedural justice, and interactional justice. There were significant
differences on (results are summarized in Tables 2):

• intrinsic job satisfaction (t (92, 285) = 4.14, p < .05), with male employees having higher
levels of intrinsic job satisfaction 3.77 versus 3.59.

• extrinsic job satisfaction (t (12, 765) = 2.22, p < .05), with males having higher levels of
extrinsic job satisfaction 3.13 versus 2.99.

• general job satisfaction (t (98, 679) = 3.81, p < .05), with males employees having higher
levels of general job satisfaction 3.55 versus 3.38.

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 • affective commitment (t (12, 765) = 2.16, p < .05), with males having higher levels of
affective commitment 4.20 versus 4.00.

• continuance commitment (t (12, 765) = 2.49, p < .05), with females having higher levels
of continuance commitment 4.16 versus 3.91.

• distributive justice (t (12, 765) = 2.65, p < .05), with males perceiving higher levels of
distributive justice 4.42 versus 4.15.

• procedural justice (t (12, 765) = 2.96, p < .05), with males perceiving higher levels of
procedural justice 4.19 versus 3.89.

• interactional justice (t (12, 765) = 2.22, p < .05), with males to perceiving higher levels of
interactional justice 4.55 versus 4.32.
The results of the t-test showed no significant differences on normative commitment and overall
organizational commitment (all ps >.05).

Table 1
Employee Survey Responses

Standard Reliability
Variables Mean Deviation
Job Satisfaction
(scores 1-5, 3=midpoint)
General Job Satisfaction 3.44 .61 .81
Intrinsic Job Satisfaction 3.65 .61 .80
Extrinsic Job Satisfaction 3.04 .82 .87
Organizational Commitment
(scores 1-7, 4=midpoint)
Overall Organizational
Commitment 4.04 .93 .83
Affective Commitment 4.07 1.23 .71
Continuance Commitment 4.06 1.33 .74
Normative Commitment 3.98 1.30 . .74

Organizational Justice
(scores 1-7; 4=midpoint)
Distributive Justice 4.25 1.42 .83
Procedural Justice 4.00 1.36 .89
Interactional Justice 4.40 1.44 .96

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 Table 2
Independent Sample T-test

Males Females Test for equality of

(n =291) (n=476) Levene's Test means
Variables M SD M SD F p t df p
Intrinsic Job Satisfaction 3.77 .55 3.59 .64 9.30 .00 4.14 92 .00
Extrinsic Job Satisfaction 3.13 .79 2.99 .84 1.49 .22 2.22 12 .03
General Job Satisfaction 3.55 .56 3.38 .64 7.43 .00 3.81 98 .00
Affective Commitment 4.20 1.28 4.00 1.21 2.41 .12 2.16 12 .03
Continuance Commitment 3.91 1.36 4.16 1.32 .17 .68 -2.49 12 .01
Normative Commitment 4.00 1.32 3.96 1.29 .48 .48 .36 12 .71
Overall Organizational
Commitment 4.03 .93 4.04 .94 .06 .80 -.06 12 .94
Distributive Justice 4.42 1.33 4.15 1.48 3.64 .06 2.58 12 .01
Procedural Justice 4.19 1.38 3.89 1.35 .16 .67 2.96 12 .00
Interactional Justice 4.55 1.41 4.32 1.46 .42 .52 2.08 12 .03

Of the variables investigated, satisfaction and organizational justice clearly show more positive
attitudes among men. The results are not as clear cut for commitment. Men were more positive in
terms of affective commitment, but women were higher on continuance commitment and there
were no significant differences on normative and overall commitment. Taken together these
results suggest support for the proposition that women’s experiences at work may result in
negative attitudes which result in withdrawal behaviors.

Advancing the Paper

Our intent is to model gender, organizational justice, and job attitudes, relative to absenteeism
(see Figure 1). This analysis will be completed prior to the conference.

References available on request.

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 Figure 1
A Gender Difference Model of Organizational Justice, Job Attitudes and Absenteeism

292
 THE GOVERNMENT DECISION-MAKING PROCESS ON THE POLICY
LEVELTOWARDS THAI STATE OWNED ENTERPRISES (SOEs) OPERATING
WITHIN METROPOLITAN AREAS10

Sutada Mekrungruengkul11
43/51 Moo Ban Pokaew, Prachachyen Road, Pak Kred, Nonthaburi 11120, THAILAND
Telephone: + 66 1 809 5401 (Cell), + 66 2 984 5492 (Home), + 66 2 696 8624 (Work)
E-mail:sutada.mod@gmail.com

ABSTRACT

The developing research study on The Government Decision-making Process on the

Policy Level towards Thai State Owned Enterprises (SOEs) Operating within Metropolitan
Areas:) offers some ideas that may provide a useful interpretation of the government decision-
making process on the policy level to the discipline of public administration. The researcher aims
to propose a better understanding towards government policy formulation and implementation
towards Thai SOEs through two case studies, The Government’s policy on TMN Privatization
and National Shipping Line Establishment Policy by the Thai Maritime Navigation Company
Limited (TMN) Joint Venture with 23 Ship-owner Companies and the Government’s policy on
the Suvarnabhumi Airport Construction by the Airports of Thailand Public Company Limited
(AOT).

Keywords: Organizational Decision-making Process, State Owned Enterprises (SOEs), Satisficing

Model, Incremental Model, Garbage-can Model, The Garbage-can model in political institutions as
according to Kingdon’s Theory.

Analytical Framework

The developing research analytical framework aims to interpret the dynamics of metropolitan
areas or urban regions [1]. The researcher would like to focus on the social forces and SOEs
operation and administration within metropolitan environments. Having an assumption that the
social forces and SOEs operation and administration are altering the patterns of local decision
making from institutional to non-institutional and cross-institutional forms of governance, the
metropolitan environments are unique places than they were decades before: the metropolitan

10
This research is developed from the dissertation submitted to the Faculty of Public Administration, National
Institute of Development Administration (NIDA) in Partial Fulfillment of the Requirements for the Degree of
Doctor of Public Administration.
11
DPA Candidate at the Faculty of Public Administration, National Institute of Development Administration
(NIDA)

293
have transformed into more complex environments of diversified power centers with cross-
jurisdictional issued and demands [2]. Therefore, the Government decision-making on Policy
Level towards SOEs Operating within Metropolitan Areas will be understood as a set of skills
and tools that are framed around collaborative efforts designed to meet cross-jurisdictional and
cross-boundary needs of publics [3], privates and non government organizations (NGOs) [4].
Drawing upon insights from complexity theory [5], the developed research aims to offer some
ideas that may provide a useful interpretation of the SOEs operating within the Metropolitan
context from which we can understand metropolitan environments and the way in which
decisions are made within these environments.

Developmental Research

The research questions explored in the developing research is how are administrative, political,
and policy decisions formed in complex metropolitan environments? This research question
contains two different concepts. The first concept is the deeply traditional frame of reference that
relies on the oft-touted principles of rational decision making. Long traditional in public
administration, rational decision making theories are the bulwark of the field, and most
approaches rely on the underlying principles and assumptions of the rationality in conducting
and understanding decision making in public administration [6]. Under this concept, the
emphasis of the quality of decisions is viewed as a result of a form of rationality that seeks to
order policy decisions around the criterion of efficiency.

Rational
Choices Decision
making

Solutions Efficiency

Problems

The second concept places emphasis on the very different question of who is involved ion the
decision process. This approach to decision is representative of what is referred to as post-
positivist [7] in which there is a reliance on expanding the decision frames of reference to
improve policy and administrative deliberation. The second concept that focus on expanding
participation will lead to a more fully developed sense of understanding the problem at hand and
a more fully committed response to the problem solution once meaningful involvement is
achieved.

294
 Choices

Representative Improve
Solutions Decision policy and
Communities
making administrative
deliberation

Problems Policy evaluation and adaptive strategies

Research Objectives
The developing research aims to assess the use of rationality in the study of organizational
behavior. As argued by Mary Zey’s [8] that organizational change and adaptation is best
understood within the various contexts of organizations. Hence, the decision makers do not make
decisions independent of their environments. The researcher believed that this understanding to
examining organizations varies greatly from that outlined by rational choice theory and being
replaced by organizations “subjected to economic analysis in attempts to make them accountable
or productive or competitive [9].

The literatures review will emphasis the boarder, more inclusive nature of administrative and
political decision making in public administration as refer to as the “logic of appropriateness”
[10] which the decisions are based on shared understandings of the decision situation. The core
value concepts will be derived from the work of Waldo [11], March and Olsen [12] and March
[13], where it is understand that decision making is deeply contextual and are more attuned to the
notions of social construction and sense making [14]. It is to this mentality that this research will
focus on.

References
[1[ Stone, C.N., Regime Politics: Governing Atlanta, 1946-1986, Univrsity Press of Kansas,
Lawrence. KS, 1989
[2] Wikstrom, N., The city in the regional mosaic, In The Future of Loca Government
Administration, Frederickson, H.G. and Nalbandian, J., Eds., International City/County
Management Association, Washington, DC, pp 21-38, 2002.

295
[3] Agranoff, R., Leveraging Networks: A Guide for Public Managers Working Across
Organizations, IBM Endowment for the Business of Government, Arlington, 2003
[4] Linden, R.M., Working Across Boundaries: Making Collaboration Work in Government and
Nonprofit Organizations, Jossey-Bass, San Francisco, 2002
[5] Richardson, K.A.,Ed., Managing Organizational Complexity: Philosophy , Theory, Application,
Information Age Publishing , Greenwich, CT, 2005
[6] Ferderickson, H.G. and Smith, K.B., The Public Administration Theory Primer, Westview Press,
Boulder, 2003.
[7] Fischer, F., Citizens, Experts and Environment: The Politics of Local Knowledge, Duke
University Press, Durtham, 2000
[8] [9, pp 88] Zey, M., Rational Choice Theory and Organizational Theory: A Critique, Sage,
Thousand Osks, CA, 1998.
[10] Ferderickson, H.G. and Smith, K.B., The Public Administration Theory Primer, Westview
Press, Boulder, 2003.
[11] Waldo, D., Development of theory of democratic administration, American Political Science
Review, 46, 81-103, 1952
[13] March, J.and Olsen, J., Rediscovering Institutions, The Free Press, New York, 1989
[14] March, J., A Primer on Decision Making: How Decisions Happen, The Free Press, New York,
1994
15] Weick, K.E., Sensemaking in Organizations,Sage, Thousand Oak, C

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 ABSTRACTS*

* These submissions were designated as "abstracts" by the author(s). They were internally
reviewed to determine their contribution to the conference and a decision was made based on
these determinations.

297
 CORPORATE INNOVATION: GROWING NEW BUSINESS THROUGH NEW
BUSINESS INCUBATORS, CHALLENGES AND SOLUTIONS

Roger (Rongxin) Chen

Professor of Management,
Chair, Department of Marketing, Globalization and Strategy
School of Business and Professional Studies
University of San Francisco
Emai: chenr@usfca.edu

ABSTRACT

Launching a new business is a key element in corporate innovation strategy. Yet growing
emerging business is a major challenge to many companies as the organizational capabilities and
processes required for new business are drastically different from, and even in conflict with those
required for established business. As a result, many companies set up separate venture
departments/units to incubate new business. The objective is to use such new venture units to
explore and grow future core business. If some of the new business turn out to be not fitting with
companies’ strategic directions, the companies can spin off or sell the ventures thus to generate
financial returns.

Does this corporate venture strategy work? Can venture units help companies develop future
core business or general financial returns? What are the challenges and lessons of pursuing such
a strategy? Although these issues have received a lot of attention, our research reveals some
important lessons that have not been adequately addressed in the past. Based on detailed case
studies and interviews with executives of companies such as IBM, P&G, Nortel, Nokia, Intel,
Xerox, NEC, HP etc, our findings have important implications for companies trying to pursue
such corporate venture strategies.

298
 STRATEGIC MANAGEMENT OF CORPORATE SOCIAL RESPONSIBILITY AND
WORKFORCE ISSUES IN THE GLOBAL ARENA

Michele V. Gee, Ph.D.

School of Business & Technology
University of Wisconsin-Parkside
900 Wood Road, Kenosha, WI, 53141
gee@uwp.edu

ABSTRACT

Corporate social responsibility (CSR): What does it mean philosophically and operationally from
the varied perspectives of multinational corporations? This paper examines CSR in the global
workplace. Immense social and environmental challenges confront organizations and employees
operating internationally. There is increasing pressure for corporations to be more socially
responsible. Furthermore, the relevancy of CSR is becoming increasingly important given the
current state of national, regional, and global economies. Issues to be explored include differing
views of corporate social responsibility and its relationship to global workforces.

Keywords: corporate social responsibility, multinational corporations

299
AN IMPLEMENTATION ROAD MAP FOR HIGH-IMPACT, LOW-COST EMPLOYEE
ASSISTANCE STRATEGIES THE BOLIVAR GROUP EXPERIENCE

Debra McKinney
Javier Sanchez-Rueda
Seguros Bolivar S.A.
Cra. 10 #28-49, piso 5
Bogota, D.C.
Colombia
South America
Phone: +571-243-6888, +571-243-4166, +571-243-4427
debra.mckinney@segurosbolivar.com
javier.sanchez@segurosbolivar.com

ABSTRACT

The Bolivar Group has a decade of successful experience in low-cost, high-impact strategies
designed to improve the quality of life for employees and their families. This paper focuses on
practical implementation of specific programs: small businesses as a source of income generation
for unemployed family members, and psycho-social wellness and prevention services for
employees and their families. The first program follows a branching linear path, while the second
employs a cluster strategy. The key processes include building on existing infrastructure,
creating internal and external alliances, enhancing and interrelating existing programs, and a
simple growth and development process for strategies.

Keywords: Employee assistance, low-cost, high-impact, quality of life, strategy

300
 AN EXAMINATION OF THE INFORMATION PROCESSING AND EMOTIONAL
TENDENCIES OF SOFTWARE ENTREPRENEURS

Larry E. Pate
Professor and Burwell Endowed Chair in Entrepreneurship
Chair, Department of Entrepreneurship
College of Business & Public Administration
293 Centennial Drive, Stop 8098
University of North Dakota
Grand Forks, ND 58202
Tel. 701-777-6380
larry.pate@business.und.edu

ABSTRACT

This paper examines the primary and back-up information processing patterns, emotional
patterns, and rigidity/stability of the decision patters of 217 entrepreneurs who started software
businesses between January 2002 through December 2005. Subjects were mostly male, college
graduates, and between the ages of 23-29. Subjects completed the 45-item Driver Decision Style
Exercise (DDSE) measure of Operating Style; the 60-item Driver-Streufert Complexity Index
(DSCI) measure of Role Style; the 72-item Emotional Reactions Inventory (ERI) measure of
emotional patterns; and the 15-item ACES Questionnaire (ACESQ) measure of rigidity/stability
in their decision patterns. Findings support 8 of the 10 hypotheses. Software entrepreneurs were
found to be mostly Flexible with Integrative back-up in their Operating Style, but Decisive with
Hierarchic back-up in Role Style. Implications of the findings for entrepreneurship education and
research are discussed.

301
NEW TRENDS OF HUMAN RESOURCE MANAGEMENT IN PUBLIC AND BUSINESS
ORGANIZATIONS OF PAKISTAN

M. Abuzar Wajidi
University of Karachi, Pakistan
Email: abuzar_wajidi@hotmail.com

ABSTRACT

Developing countries lag behind in progress because their response to change is very slow. Case
of Pakistan is also not different. This country with a large population of about 185 million faces
various political, social and economic problems. The agricultural outlook of its economy has left
majority of its population un-educated. This uneducated segment of population finds it very hard
to accept and adopt changes. For these obvious reasons, human resources in this country have
remained greatly underutilized.

Global markets are today in easy access of nations by virtue of advancement in communication
technology. Pakistan needs to raise quality of its products and reduce costs to compete in the
international markets. For this purpose, quality of human resource needs changes according to
new trends of human resource management in order to play its role in the development. As
observed, developed human resources remain in large demand in this country.

Application of modern trends of human resource management is visible in several organizations

of private sector. However, the story of the public sector organizations is different. For various
reasons, acceptance of change in the public sector organizations seems to be a big and stubborn
challenge. This situation leaves the human resource of these organizations unable to contribute
their efforts for their organizations with the result that citizens find their grievances and problems
increasing day by day. Since the public sector organizations have influence on the production
sector, therefore, the productivity and quality of service delivery are affected. The ultimate
impact falls on the economy and, obviously, on the people themselves.

Since the new trends of HRM tend to filter deficiencies in the organization of human resources,
the change brought about in the process of HRM will bring in development of the organizations
as well as of the individuals, thereby reshaping outlook of the entire society.

Key Words: New Trends, human resource management, Public & Business Organizations

302
 WORKSHOPS/PANELS*

* These submissions were to provide tools and techniques (workshop) and to discuss concepts,
issues in a topical area to provide ideas to attendees for future research or personal growth. These
were internally reviewed and a decision was made based on the value of the session and
possibility of interest by the conference attendees.

303
 INTERNATIONAL PERSPECTIVES ON RESPONSIBLE EMPLOYMENT
PRACTICES IN TIMES OF ECONOMIC UNCERTAINTY

Overview

This interactive, international panel examines current and emerging issues with respect to
responsible employment practices in times of economic uncertainty as these pertain to individual
countries and regions. The focus will be on socio-cultural factors across countries as well as
recommendations and strategies for improvements. Both scholarly as well as practitioner
perspectives will be included.

John P. Keenan (Session Chair)

President and Professor of Leadership Studies,
Institute for Leadership and Global Education (ILGE)
Email: john@institute-leadership-global.org

Nuria Calvo Babío

Facultad de Ciencias Económicas y Empresariales
Economic Analysis and Business Administration Department.
University of A Coruña, Spain
e-mail: nuriacb@udc.es

Ali M. Al-Khouri
Managing Director,
Emirates Identity Authority
United Arab Emirates
Ali.AlKhouri@emiratesid.ae

Sutada Mekrungruengkul
DPA student at School of Public Administration,
The National Institute of Development Administration (NIDA)
Nonthaburi, Thailand
mod.sutada@gmail.com

Tomokazu Sakumoto
PhD. of Business Management
Okinawa International University
Okinawa, Japan
Email stomo@okiu.ac.jp

Debra McKinney Gehman

Directora Centro de Formación Gerencial
Seguros Bolívar, S.A.
Bogotá, Colombia
Email: Debra.Mckinney@segurosbolivar.com

304
 EMERGING TRENDS IN LEADERSHIP AND MANAGEMENT EDUCATION AND
DEVELOPMENT

Overview

This interactive roundtable examines the emerging trends in the fields of leadership studies,
management education, and diverse development programs and initiatives from a global and
futuristic perspective. Traditional as well as eclectic approaches are discussed with a focus on
both scholarly work and practitioner applications.

John P. Keenan (Session Chair), President and Professor of Leadership Studies,

Institute for Leadership and Global Education (ILGE),
Email: john@institute-leadership-global.org

Marilynn Cash Mathews, President, Networker, Inc., St. George, Utah

Email: mcm@networkeronline.com

Raj Parikh, Dean, School of Business, Southern Oregon University, Ashland, Oregon, USA
Email: rajparikh@aol.com

Sonia Ghumann, Assistant Professor, Shidler College of Business

University of Hawaii at Manoa, Email: ghumman@hawaii.edu

Emerging Trends in Leadership Development - John Keenan

International research studies conclude that traditional leadership development training and
development programs and methods provide no evidence to support that they actually help
executives and managers make substantial long-term improvements in their leadership behaviors
and performance. Today there is an increasing need for more impactful and effective leadership
training and development programs. If this is to be achieved, there will need to be new
strategies, approaches, and models to initiate real leadership development and change that
impacts organizational performance outcomes. Effective leadership development programs and
learning methods will need to have more of an applied, “real world” focus and be grounded in
new “leadership” paradigms which emphasize principles and practices of personal growth,
development, break-through thinking, and transformation. This presentation focuses on
emerging new perspectives on developing leadership competencies for the 21st century.

Curbing Illegal Corporate Behavior: Where Do We Go From Here? - Marilynn (Cash)

Mathews

While we researchers and academicians were busy engaging in ethics training in corporations
and writing about the importance of company codes of ethics, it seems our efforts didn’t deter
corporate criminal activity. Corporate managers and executives just keep engaging in unethical
and illegal behavior – the latest such as Bernie Madoff, Jeffrey Skilling, etc. etc.

305
Beyond the ethics training and writing and revising company codes of ethics, it seemed clear
since the late1990’s that corporate wrongdoers would be held legally responsible. Yet the ethics
codes, the ethics training, the threat of imprisonment, do not seem to have made a difference.
Was anyone deterred?

Now we have to ask, where do we go from here? Why don’t ethics training and ethics codes
work? Where did we go wrong?

We can start by examining other other possible causes, such as:

1. Is illegal activity by some corporate executives a type of gambling or addictive behavior?

2. Is there a personality type that is more predisposed to engaging in illegal behavior in
corporations?
3. Is illegal behavior by corporate executives “contagious” within the organization?

Emerging Trends in Higher Education – Raj Parikh

The growth in international trade has caused an increased demand for business education that
conforms to generally-accepted international academic standards. Rapidly developing countries
such as China and India, as well as smaller nations such as the United Arab Emirates and
Vietnam, have looked to the United States as a possible provider of business education. This has
resulted in direct investments by US institutions in these countries as well as collaborative
ventures between American institutions and host country academic institutions. This new model
is in contrast with the thousands of international students coming to the US each year to study.
The new model requires a new kind of leadership – both at the institutional level and at the
regulatory level. The presentation focuses on what sort of new educational model is necessary
for success, and illustrates the model through a few examples.

Women in Leadership: Embracing the Values of Feminine Leadership Styles - Sonia

Ghumman

Compared to women, men are not only more likely to hold leadership positions but to also be
rated more favorably in such positions. Research has focused considerably on addressing various
reasons for the underrepresentation of women in leadership positions; discrimination, gender role
stereotypes, work-family conflict, low aspirations, low self esteem, and lack of support. The
purpose of this presentation is to not just explore the barriers confronting women leaders, but to
directly address the growing need for organizations to embrace female values in leadership roles.
Although masculine leadership styles are traditionally desired in organizations, feminine
leadership styles can provide a competitive advantage for managing in an increasing global
environment. As organizations become global, the need for flexible decentralized structures is
becoming more necessary as is the need for collaboration and cooperation over competition.
Consequently, autocratic styles of leadership associated with masculine values might be too rigid
for modern organizations and leaders might benefit by shifting towards more democratic
leadership styles associated with feminine values. This presentation will highlight the emerging
trends for more feminine leadership styles that encourage participatory decision making,
developing team work skills, and building long-term relationships.

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 CHALLENGES AND OPPORTUNITIES IN AMERICAN HIGHER EDUCATION

Overview

This panel discusses some of the opportunities and challenges facing American higher education.
Faced with shrinking budgets and uncertain economic conditions, American institutions have
sought to become more entrepreneurial and expanded domestically and abroad. Panelists present
case studies on how their institutions have sought to maintain the quality and viability of their
institutions through a variety of activities.

Raj Parikh (Session Chair)

Professor and Dean, School of Business
Southern Oregon University
Ashland, Oregon

James Klein
Provost and Vice President for Academic Affairs
Southern Oregon University
Ashland, Oregon

Barry Doyle
Associate Dean
University of San Francisco
San Francisco, CA

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 HOW YOUTH ENTREPENEURSHIP FOSTERS CREAIVITY IN HIGH SCHOOL
STUDENTS AND MAY HELP YOU IN TEACHING COLLEGE UNDERGRADUATES

Krista Katsantonis
Program Director
Network for Teaching Entrepreneurship
San Francisco Bay Area
t 415 422 4438 m 415 797 8048
krista.katsantonis@nfte.com
http://bayarea.nfte.com

ABSTRACT

This 1 hour workshop session is intended to expose educators to techniques used in youth
entrepreneurship education which foster creativity and inspiration in the classroom while
developing skills necessary for success in the modern workforce.

The United States currently has one of the highest dropout rates of any industrialized nation, with
only 7 out of 10 students graduating from high school. This failure rate poses a direct threat to
the competitiveness of the American workforce in the global economy. According to a Bill and
Melinda Gates Foundation report, nearly 47% of students who dropped out of high school did so
because their classes weren’t interesting and 69% said they were not motivated or inspired to
work hard. Three-fourths (74%) said that if they were able to relive the experience, they would
have stayed in school

Entrepreneurship education has been used successfully for more than 20 years by NFTE
Certified Entrepreneurship Teachers to engage at risk and hard to reach youth by helping them
see the relevance of their core studies in language arts and mathematics through the process of
developing a business plan for their own small business idea. Participants in this workshop will
be exposed to some of the core strategies and experiential activities used to help NFTE students
engage in a creative process in the classroom. Participants will learn about how teaching the
process of opportunity recognition and learning the fundamentals of business ownership
enhances students’ learning, increases their professional and educational aspirations and
ultimately can make them more productive members of the workforce.

Objective: By the end of this session, participants will be exposed to a unique population of
youth entrepreneurs and a specific set of experiential activities that have been successfully used
to develop creativity and innovation in the classroom. They will learn about the NFTE model for
engaging students in learning and helping them foster a sense of ownership for their futures
including their potential for post-secondary education.

Description of Presenters:
Deborah Reinerio is a high school teacher who has been teaching NFTE youth entrepreneurship
education since 2002. She specializes in integrating creativity and innovation into her classroom
and is a certified small business ownership and management teacher credentialed in CLAD. She

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is also a successful entrepreneur, operating her own graphic design business Red Hot Design
since 1980. She was NFTE’s Teacher of the Year in 2009.

Krista Katsantonis is the Program Director for NFTE Bay Area where she has led program
development and teacher training since 2007. A former advertising media manager for
advertising agencies and Gap, Inc, she has worked training and advocating for entrepreneurs
since 2001. She earned her MBA at the Monterey Institute of International Studies.

The Network for Teaching Entrepreneurship (NFTE) provides entrepreneurship education

programs to students (11-18) from low-income communities. NFTE's award-winning curriculum
and experiential learning activities help middle and high school students engage in their
education and improve their academic, business and life skills.

NFTE trains teachers to implement its entrepreneurship program in schools and provides on-
going program support. NFTE students learn business concepts including negotiation and pricing
and work to complete individual business plans.

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