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Knowledge Management and Organizational Performance

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 Knowledge Management and Organizational Performance
Zuzana Papulová, zuzana.papulova@fm.uniba.sk
Matej Mokroš, matej.mokros@fm.uniba.sk
Comenius University, Slovak Republic

Abstract

Changes in corporate environment should be reflected into the business management but their intensity and variability
are hard to predict. Nowadays, we have entered “Knowledge Economy” where value of human resources and knowledge
in the organizations have became more important than the traditional sources of economic power such capital, land and
labor. Knowledge management is the discipline of capturing knowledge-based competencies and storing them for the
benefit of the organization as a whole. Knowledge management is a systematic organized attempt to use knowledge in
business within an organization to transform its ability to store and use it. It is valuable a tool how to improve individual
performance of employees and performance of the whole organization. Increasing the value of human resources through
knowledge management is a key to success in the challenging environment. The notion of knowledge management might
seem old ground, but in transition economies like Slovakia it is still hot topic. In the article is described the level of
knowledge management in Slovakia.

Introduction
Rapid change is nothing new, there is a new discovery every day, turbulent environment and the change is the only
constant. These almost “clichés” are used worldwide in describing today’s situation. Organization has to deal with
this dynamic and uncertain environment. In order to succeed, the organization has to reflect this situation into their
management. Organization ought to understand how these changes affect their position in competitive environment
and response with appropriate changes in the business management.
Fast growth of information leads to the importance of managing knowledge in organizations. Organizations
should recognize the value of knowledge and experience of its individual employees, they should capture, organize
and store knowledge within and organization and make it available for others in the organization. Knowledge
management deals with the process how to make the best use of the knowledge in the organization.

Revolutions in Ages
During the evolution of mankind there have been undeniable moments, which shifted the mankind dramatically
ahead in its evolution (FIG.1).

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 Knowledge Age
Information Age
Industrial Age 1990s
Agrarian Age 1989
Age of hunters an gathereres fall of Berlin Wall
2,2 mil. B.C. 200,000 B.C. 10, 000 - 4,000 B.C. 1770-1910
homo habilis homo sapiens domestification industrial revolution
FIG. 1: EVOLUTION OF MANKIND

Back in 200,000 B.C. people were mere gatherers and hunters. Primary aim was survival by acquiring
enough food. This period lasted till 10,000-4,000 B.C.
The Agrarian age started with domestication of animals and harvesting crops. Thus people became less
depending on the twist of nature as they were able to store food.
Afterwards the Industrial Age started. It was started with the first Industrial Revolution, spanning
approximately from 1770s to 1860s, which brought the development of steam engine, locomotive, telegraph and
cotton gin. Second Industrial Revolution, spanning from the 1870s to 1910s, brought another inventions such as
telephone, electric light bulb, internal combustion engine, movies and radio.
Vast increase in farm productivity freed lot of farmers to go into other occupations. The percentage of
U.S. Workforce in agriculture dropped from 90% in 1700 down a mere 3% in 2000. More and more workforce was
available for other industries. People changed from being self sufficient to being depended on each other.
Next change started with a widespread of computers, the Internet, nanotechnology and bioengineering.
Some called it the third Industrial Revolution, but a more accepted term is Information Revolution and thus
Information Age. The approximate time is usually referred to the fall of Berlin wall. This change has affected the
worldwide social evolution, which is characterized by transformation from industrial to information society.
Information Age is a term applied to the period where information rapidly propagated and where information was a
scarce resource and its capture and distribution generated competitive advantage.
When information ceased being scarce, another era – “Knowledge Economy” commenced. This era started
approximately in ninetieths. There are many names of the current era like: “New Economy”, “Digital Economy”,
“Information Society” or “Experience Economy”. Modern economy is no longer driven by physical flows of
material goods and products; there is a different way in which value is being created in this new economy. Some of
the economists call this area “Intangible Economy”, because of the shift form tangible to intangible assets.
“The new value drivers are intangible assets such as the knowledge of your people, computer systems and
software, your work processes, the culture that allows you to innovate” (Norton, 2001). “On the demand side, we
consume more and more content-based information and entertainment. On the supply side, intangible assets such as
brand, human capital, intellectual property and knowledge have become major determinants of performance and
value.” (Goldfinger, 2000) The intangible economy is structured around relationships between man and ideas and
symbols. The source of economic value and wealth is no longer the production of material goods but the creation
and manipulation of intangible content
These moments, these massive changes in “ages” bring always large potential within, which is not foreseen
and considered when the change starts. Demján described the apparent features of age change as: (Demján, 2006):
• Approximately 50 times increase in performance

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 • A big wave of unemployment due to change in technology
• Necessary change of mental model, i.e. change in paradigms
Looking back at these changes, the voyage of organization in the 20th century still looks like a smooth and
quiet level of lake, where eight men (employees) are paddling the boat to move forward and one steersman (i.e. the
manager) is steering the boat. This was mainly due to fact, there were more manually working employees managed
by managers. However the 21st century is like going down a wild river, where pairs must coordinate themselves
without a leader and make decisions at an instant. Managers are leading knowledge people, employees who must be
able to learn quickly as new information is created every day. Every knowledge employee must behave as a leader,
he must be able and willing to make decisions and feel responsible for own contribution to the organization
(TABLE 1, Demján, 2006).

TABLE 1: PARADIGM SHIFT BETWEEN AGES

20th century 21st century
Industrial Age Information/Knowledge Age
Increase in performance = do things right Increase in effectiveness = do the right things right
Management of Management of
• things (manufacturing plants) • people – knowledge workers
• industrial workers (mainly manually
working)
Performance was measured by Effectivity is measured by
• quantity • results
• quality
• cost

At this point we can talk about a shift in paradigm from “industrial society” to “knowledge society” which
is elicited by new system of wealth creation based on the knowledge where acquiring and applying knowledge will
become key competitive factors. It brings the necessity to learn how to manage the knowledge and permanently
increase the productivity of knowledge employees through relatively new approach – Knowledge management.

Knowledge Management and Performance

Knowledge Management Basics
Information systems and information technology have become at the beginning of the 21st century the most
important factors for functioning of economy in developed countries. However, there are not only the information
systems and information technology but actually working with information itself which convey change of thinking
and creation of value in modern approaches to business and management.
These changes are reflected in current economy. The utilization of resource is being shifted from strategic
resources as a capital to new strategic resources as an information, knowledge, creative thinking and innovation.
Information is therefore one of the most valuable resource. For example, Peter F. Drucker already in early 1960s had
mentioned the term “knowledge worker”. At the turn of millennium he pointed out: “Knowledge and information
are today most meaningful resources. Traditional manufacturing resources – land, labor and capital have not
disappeared, but have become second-handed. The main factor of wealth is information and knowledge.”
Successful organizations are aware that they must shift their attention toward knowledge: its creation,
transformation, and ways of storage, selection, processing, usage and evaluation of the expenses. It is a process of
knowledge management.
Knowledge management does not have a universal definition; the key component is to apply the already
acquired knowledge to gain the new knowledge. Sharing and application of knowledge is the basics of commercial
success in today world of information. No organization can underestimate their value.

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 In the 21st century knowledge management is equivalent to information management. It is an umbrella term
for making use of the human knowledge efficiently that it exists within an organization. Burke and Howard describe
Knowledge management as “a systematic approach to facilitate the flow of data, information, and knowledge to the
right people at the right time so they can act more efficiently and effectively” and divide the process into 3 stages
(Burke and Howard, 2005):
• Retrieve and understand the structured and unstructured data.
• Convert data into useful information.
• Share the knowledge.
Angus, Patel and Harty see Knowledge management as a concept, a way of doing business rather than only
technology (Angus, Patel and Harty, 2006). It can be summarized in a four stages process (TABLE 2) and is
achieved through automation on one hand and human intervention on the other hand.

TABLE 2: KNOWLEDGE MANAGEMENT PROCESS

Stage Activities
Data entry
OCR and scanning
Gathering Voice input
Pulling information from various sources
Searching for information to include
Cataloging
Indexing
Organizing
Filtering
Linking
Contextualizing
Collaborating
Refining Compacting
Projecting
Mining
Flow
Sharing
Disseminating
Alert
Push

Knowledge guides humans in their use of information so that they can make better judgments, decisions
and do their best work. Knowledge is considered now as an asset and it has to be managed just the same as the
financial and physical assets. It is estimated that 70 to 80 percent of what our workers know is hidden, so the
managers usually do not know what workers know and workers do not know who knows it.
Value of tacit knowledge for the organization is enormous. The greatest wealth of knowledge is in the
heads of employees, in tacit form. Gain and utilize that potential is not easy. Many organization and managers have
tendency to disregard and underestimate it what has harmful consequence for the organization.
Knowledge and Performance of Individuals
Knowledge is the primary driver of performance of individual, consequently the organization as a whole.
Knowledge affects performance by making it possible for people to perform good and effective actions. Application
of knowledge provides opportunities for higher performance. Although the term used widely is knowledge
management, in fact the real value stems from creating and sharing knowledge not from just barely managing it.
Over the past 15-20 years many heavy investments were made into “knowledge management systems” but the
benefits have been limited, because they were made just for the sake of managing the knowledge rather than creating
and sharing (Bryan and Joyce, 2005).

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 This is the heart of the problem. The usage and creation of knowledge from the stored knowledge is the
most crucial point of knowledge management, i.e. the ability to work with the knowledge to produce results. The
knowledge had become important “manufacturing” factor, so the organization should put it in the “production”
process. This means to apply the gathered knowledge.
However, there are still some remnants from the Industrial Age. One of them is the rigid organizational
structure, which is still causing nightmares for knowledge workers. The era of globalization created large
multinational corporations with thousands of employees. An employee many times can spend the whole day just
searching for the person who has the knowledge. This can be observed especially in cross-divisional, cross-
departmental not to mention cross country communication. Brief example is that the volume of global corporate
e-mail has increased almost ten times from 1998 (1.8 billion a day) to 2004 (17 billion a day). There are certain
factors, which should be changed in order to reduce the complexity of interaction and to create a more suitable
environment for sharing of knowledge within organization (Bryan and Joyce, 2005):
1) Simplify the vertical orientation in organizational structure and narrowing the scope of the line manager’s
role to the creation of current earnings. Like take important support functions that require focused
management, out of the hands of line managers (who are at best gifted amateurs), so specialized
professionals can run them as shared utility.
2) Deploy off-line teams of professional (who have the freedom “to wander in the woods”) to search and
discover new wealth creation opportunities for organization such as launch of new products or building
new business. Not many down-line managers who must bring daily results have time for such discovery
process.
3) Develop knowledge and talent marketplaces and formal networks to stimulate the exchange and creation of
knowledge. These overlays make it easier to exchange knowledge. People with common interest (e.g. same
profession, same industry or same geography) naturally form social networks, but these have limited reach
due to the nature of creation. On the other hand marketplace is artificial and managed – so organization has
to create them. To boost the value of network the organization should invest and formalize its role within
the organization
4) Rely on measurement of performance rather than supervision. Let the people direct themselves, guided by
performance metrics. The workforce is increasingly consisting of self-directed professional (knowledge
workers), thus inspiring leadership is more needed than intrusive management. It is more important to
measure the performance to motivate certain behavior than providing just financial incentives to reward it.
At first glance these ideas might look obvious and like nothing new, the hidden secret is that all four parts
must be implemented at the same time or the organization need to make all four changes to be able to perform up to
potential. For example, an organization can simplify the vertical organizational structure to increase efficiency. But
if it not manages to help the knowledge workers to collaborate more easily the gain will be offset by decrease in its
effectiveness.
Tacit knowledge is the one with higher added value but by its nature it is the hardest to transform it into
shareable form. Let us assume the organization had managed to form the “perfect” internal environment for
employees to share and use knowledge. This generates inherent difficulty and creates paradox – the more freedom
and availability for employees to share and use knowledge there is the less willing are they actually to share it. With
the availability of storing and sharing the knowledge, the performance of individual increases, consequently
increases the performance of organization. Once knowledge is stored, services of some employees might not be
needed. Therefore, employees might feel threatened to become reluctant to share information because somebody
younger with half the cost for the organization can replace them.
On the other side, much of knowledge of the organization is in employees’ heads. If the knowledge is not
stored and employee leaves, organization is losing his/her knowledge.
Knowledge Performance Measures
Historically, definition of strategy and objectives of the organization were a separate process from the measurement
of performance of employees and organization. Organizations typically define and manage a process for reviewing
individual performance on a quarterly, semiannual or even annual basis. Therefore it is difficult for this approach to

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be effective because information is often outdated. It is almost like trying to read a map based on where you have
been, rather than where you are or where you are going.
Organization have invested time and money into systems that measure and report financial and later also
non-financial performance and the effectiveness and productivity of the manufacturing cycle, but these systems can
not measure the performance of an individual employee (Yazdani, 2006). Because of lack of such measurement
system, organization have little or no insight into performance of employees, which skills are they missing and what
learning needs to be done within the organization. Vice versa organizations do not know how the performance of
employees affects the performance and productivity of organization.
Organizations start to focus at the performance of their people. Thus managers have a renewed focus on the
production and performance of their employees. To achieve long-term results on a sustainable basis the organization
needs to focus on people skills. However skills are rapidly becoming obsolete. Managers are challenged by the
limits of the production of people. One of the factors that can constrain performance of organization is development
of capabilities of employees, either as individual or groups. Employees often report that they do not understand their
individual activities contribution to performance on the organization.
Like everything in the business, also the knowledge must be measured, so it can be managed. Unless the
impact of knowledge management is measured, value and results would be only are only theoretical. Once the
measures are defined and publicized, employees will be encourage to be act as they can contribute to achieve
knowledge management results. Measures can help to change employees' behavior change because of their focusing
efforts on specific goals. People will manage their time and resources to hit defined goals, so it is necessary to set up
right measure.
The problem is to set up right measures and metrics. According to Wesley, there are two things
organization has to keep in mind while they are identifying and creating metrics or performance measures. First, it is
extremely difficult to create any measure of knowledge sharing that will show an absolute one-to-one correlation
between a knowledge-sharing action and a business result. The measuring of the impact of knowledge sharing
requires correlation and some assumption. It is always important to understand critical success factors for the
business area that is being measured. Second, to truly understand the impact of knowledge sharing and reuse, the
organization must first understand the baseline business or process performance before starting Knowledge
management (Wesley, 2002).
As Norton said, there is fundamental difference in this economy because there is not a direct one-to-one
relationship between an intangible asset, like the knowledge of a worker, and a financial outcome (Norton, 2001).
Manager cannot show that if the employee is sent to training programs for a month that sales will go up or costs will
go down. Instead it can be assumed that training will improve something like quality, and if quality will improve,
customer confidence will improve, and if customer confidence improves, then they will buy more.
The mechanism by which knowledge affects performance is through people. It is not possible to isolate the
value of a single intangible asset like knowledge. The creation of value is like a recipe. Several ingredients are
needed to be put together. Training of employees is only one ingredient. They also need to have computer systems.
Other ingredients are incentives and leadership. It’s impossible for a financial system to describe this process of
value creation. Financial systems are always snapshots: they cannot describe a time-based logic of cause and effect
(Norton, 2001). That’s why he and Kaplan created Balanced Scorecard, which allows organization to deal with non-
financial indicators and to show how those are being tied to financial outcomes. Balanced Scorecard contains
metrics in four perspectives, metrics for finance, for the area how your customers perceive organization, for the
internal processes that are critical to success and the knowledge and resources needed to sustain organization
business model. They together give the holistic view of the organization and they are linked to organization strategy.

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Knowledge a Performance in Slovakia
Position of Knowledge Management in Slovak Organizations
The area of knowledge management is more widespread in global world then in Slovakia, in transitive economy,
mainly with phase of implementation in praxis. However, the development in Slovakia indicates a trend to
strengthen the role of knowledge management. Slovakia and other countries of Middle and Eastern Europe are in
transitive period, trying to integrate with developed Western Europe, especially in the economic area. Requirements
for knowledge and skills of employees are changing in the modern society. An employee should constantly widen
and deepen his/her knowledge and skills.
In Middle and Eastern Europe skilled employees after finishing university or other preparatory studies
usually learn by praxis, i.e. by actually doing the work, solving problems and communicating with people. The
current trend is connected to the reasons on which the education and development of employees is based in
European Union:
• Managerial praxis and theory is rapidly developing, knowledge acquired at college or university is
becoming old and only personal experiences of individual are not enough to follow this development.
Therefore it is necessary to follow also experience of other managers and organizations including
experiences, which has been generalized into methodologies and new management theories
• Majority of managers undergo more functions and their range of authority and responsibility is changing
several times. Every help that shortens or make the preparation easier is welcomed; it is inspiring to keep in
touch with other managers and share experience and with other leading workers / executive from other
professions, countries and cultures.
• It is more accepted that continuous education increases the quality and ability of action of the
organization’s management team and thus organization gains important competitive advantage
Global process of fundamental society changes leading to information society is more deeply affecting all
areas of social activity. Changes, characterized by the fundamental influence of knowledge and information, on
current and perspective development of civilization cannot avoid the educational system for the needs of
development of organizations. Current status of education in organizations is still “stained” by the shift from central
planning to market economy, whereas in centralized system the concept of customer, communication and human
resource was missing. One of critical cause for this state is irrationally managed privatization. Capital and
managerial function were taken over by “manager” without relevant skills and knowledge about management, what
caused economical decay of many Slovak organizations. The possibilities of foreign investor with years of practice
were not used at all.
Expertise of particular employees and the forms of their management are still very individual and often
depend on coincidence – how they obtain information. Systematic approach to acquire professional skills and
learning new knowledge is missing. Lack of knowledge is especially by starting sole proprietors, who conduct a
licensed trade, which is their only skill. They lack entrepreneurial thinking in the area of management, managerial
skills, experiences from working in teams, financial literacy etc.
Negative effects on praxis are low level of business ethics, lack of experience of employees with organizing
creation of organizational culture, mastering strategic decision-making, communication with foreign partners. Many
managers absent basic economical and legal knowledge and ability to predict economic phenomenon, acquire
process and use needed information and knowledge. They underestimate the possibility of further education.
According to research done by Economic University, in the area of further education in year 2003 worked
approximately 2500 educational subjects. 4.8 % persons (of total population in the age of 25-65) took part in some
sort of education. This is only half of European Union average (9.7 % of total population in the age of 25-65). The
demand from employees and employer for further education is mainly in the area of information and communication
technology (ICT), management of an organization, human resource and foreign languages (Vážna, 2004).
It is important for the organization that the employees perform at their best – quality and quantity. To
measure the performance of employee and find “gaps” or opportunities for improvement and growth, organization
needs to perform evaluation of the performance. Evaluation of employees consists of:

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 • Assessing how the employee is carrying out the assigned work, tasks a requirements of the job position,
what are the relationships to co-workers and customers
• Communicating with the employee the results of evaluation
• Searching ways to improve the employee’s performance
The rate of employees taking part in formal evaluation regularly is increasing and generally about ¾ of
employees are assessed regularly. The Slovak organizations are aware of the need to identify the weaknesses and
strengths of employees, but are not trying to use for own advantage. The organization realized the importance of
evaluation as a source of information to better recognize the educational needs and development potential of an
employee, but seldom do they actually use this information. On average only half of the organizations use the
gathered evaluation information to analyze the needs of education and development and only one third use it for
career management (Vážna, 2004). As a result the evaluation procedure becomes only a formal process happening
annually or semi-annually at best.
Subjects and Methods in Area of Knowledge Management and Performance utilizing by Slovak organizations
As the one of the definitions of knowledge management says “Knowledge management is the discipline of capturing
knowledge-based competencies and storing them for the benefit of the organization as a whole”. The organizations
in Slovakia mainly focus on capturing knowledge-based competencies.
There are several ways how to increase abilities and knowledge of own employees. Majority of Slovak
organization tends to rather use external lecturers than internal lectures. But the organization should first know,
whether the external lectures are more suitable and skilled and offer the services that is relevant to organization’s
needs. Only then can they bring better results. Also line managers should take part in this process as they are
familiar with the organization and can help employees to apply the learned knowledge directly into their work.
The need for education should be analyzed in organization as a whole, but also in department and teams.
To recognize the need of the whole the organization needs to get down to a single individual. Tracking the needs of
the individual in the organization will then help to find the needs of the whole organization. However, there is no
such system designed for Slovakia (especially for managers who govern the organization), which would reflect
current and future trends and at the same time the characteristics of particular regions stemming from their historical
evolution, current state and geographical location. Based on the studied resources (Jasaňová, 2005) the educational
process for managers in small and medium enterprises is not sufficiently or at all defined. The methodological area
needs improvement in structure, length, form and lectors and in managerial areas it is mainly management of
process, especially the customer process.
Education activities should focus on greater entrepreneurial awareness of organization in the area of
marketing, counseling, information systems, tax and legal laws, finance, comprehending new technologies, study of
world languages (technical terminology), tourism, development of crafts, agriculture and production of food
characteristic for Slovakia, protection of environment and customer.
The choice of educational method plays an important role in the effectiveness of the educational process. In
corporate education there is no single best or universal method, ideal method for every organization in every time
and situation does not exist. Each of them has own strengths and weakness.
Methods can be divided into two groups: on the job training and off the job training. First one is
educational methods used on the work place, when performing regular tasks. Second group of methods is used in
courses organized in educational facility or in the organization, but not directly at the work place. Following is
summary of methods as used in Slovakia, which might slightly vary from other definition of these methods.
On the job training methods are:
• Instruction at the workplace is the simplest method usually used to train new or less experienced
employee, where experienced employee or superior shows the work procedure and employee learns by
observing. This is useful for simpler procedures, so in some cases more suitable method is coaching.
• Coaching is time restricted partnership of employee and coach, which is created to achieve concrete goals.
Qualified coach support the employee in the process of problem solving and personality development
(Albert Einstein once noted that you can not solve a problem from the state in which it was created) by
using precise questions and structured communication. As there are over one hundred different schools of

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 coaching world-wide it might look confusing as to methodology, and also because there is no universal
recipe or standard advice, but only stimulus for creative problem solving and help with search for tools so
the employee can solve the problem alone.
• Counseling is mutual relationship and influence of the employee, who is being educated, and the
counselor, which remove the one side relationship of regular teacher and student. It is more time
consuming and can inflict with fulfilling regular working tasks.
• Assisting is traditional method of forming work abilities of an employee. Employee is assigned to
experience employee and helps with fulfilling the tasks and is learning from him/her. Employee is doing
more and more work by himself/herself until one can perform the work alone. Advantage is that the
assisting is continuous, but one educated employee can pick up bad habit and reduce own creativity.
• Delegation is a next step from assisting. Educated employee is assigned with a task, has the competency
and the work is controlled. This method leads to self decision making and creative problem solving, but the
employee can “hurt” confidence if failure occurs.
• By rotation employee is gradually assigned different tasks for set time period. He/she can widen skills and
knowledge and learns more complex work procedures. The employee might not succeed at every
workplace and can gain lower self confidence.
• Work meeting are sometimes just informative meeting, but can also be used to form work abilities of an
employee as he/she exchange experience also with other departments. When meeting are taken during the
workday, they shorten the actual time need for carrying out the assigned tasks.
• Workshop is newer method, at least in Slovakia. The team looks for practical solution to problems a
complex level. If offer different angles of views and is good tool for building team skills. However there
are extensive prerequisites for preparation of the lecturer.
Off the training methods are:
• Lecture is suitable everywhere, where a lot of theoretical information is needed. Lecturer is lecturing the
speech and employees listen. Effectivity of this method is controversial.
• When attending seminar the employee based on the topic covered study some material before hand and
prepares a short lecture for the studied topic, which he/she also delivers. It trains the employee to
independent work with literature and ability to stand up and deliver a speech.
• Case studies are simulation of work tasks. A problem situation is simulated on fiction or non-fiction case,
so the participating employees can learn step by step new skills and procedures, when solving the case.
This knowledge is later used at concrete work.
• Syndicate method is a variation of case study method. The employees are divided into small group of 2-4
people, who solve the problem independently. A selected “spokesperson” from each group then presents
the group’s solution.
• Role playing is a special type of situational methods, where the learning is not primarily based on the
solution finding, but actually on rehearsing the right procedure as the actor rehearses in theater.
Modern educational methods also have reach Slovakia and are gradually “oozing” into human resource
practices of organizations.
• Outdoor trainings are more diverse and dynamic than regular schooling sessions in classrooms. Natural
environment together with modeled situation foster soft skills – communication and leadership, teamwork
and stress control. Nonstandard tasks reveal hidden potential of the employee and are good start further
personal development. The demand for this type of training is at rise
• Assessment centers are based on simulation of managerial tasks, by which the aptitude of certain
candidates for particular managerial position is tested. Participants solve case studies and simulated
practical problems. This method is not only used for education or development of employees, but more for
selection and evaluation of employees. Developing Assessment centre is called Development Centre (DC).
There are basically two types of DC: first with immediate feedback when there is result available after each
modeled situation, second with feedback after the end of the program where a written report is generated

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 and possibly also “face to face” feedback. However, Assessment centers are not that widely used, almost ¾
of questioned organization is not using this method.
• E-learing is considered technological approach to education. Its core are interactive multimedia course
distribute to employees on CD-ROMs or via computer networks – such as internet or intranet. The
education is tailored to needs of individual employee and he/she can choose own pace. The barriers could
be lack of information infrastructure, large initial investment and old “methodology” of education. This will
not halt the coming trend, just slow it down a little bit.
• Distant learning methods are used more in small and medium enterprise. These are correspondent courses
done via mail, the educated employee receives study material and during certain time he can consult them
with the lecturer over the phone. The education has good professional; level and the cost is lower, but there
is lack of immediate control and feedback between employee and the lecturer.
Organizations use various methods for education. Each has certain advantages and some restrictions. For
the organization to learn how to achieve long term performance it must not only rely on the formal schooling
methods. It must take into account the motivation of the employee “to play”, to create and the need of moving
forward. There is a thin line between learning/remembering and forgetting/using the learned knowledge. The
employee can find opportunities for learning everywhere, anytime and anyhow. It is up to the organization to find
out, how to best developed own “working capital” – knowledge worker.
The part of knowledge management which deals with storing and reusing the capturing knowledge is less
developed or organized. The most used tools for this are intranet, internal database or special public folders.
Occurring Problems in the Area of Knowledge Management in Slovak Organizations
Knowledge management is complex organization activity, which does not bring the results without target setting and
particular plan. There are many organizations in Slovakia that are trying to implement the concept of managing
knowledge and performance of its individual employees, but without desirable outcomes. Most of the time, the
problem is nonsystematic approach to this concept, without uncertain goals or the financial burden/cost of
implementation.
Managers of the organizations mostly focus on two criteria – strictly bounded methodology and technology
of implementation of knowledge management. They hire external consultancy organization to create project of
knowledge management implementation. That could be a problem, because offered methodology by consulting
organization can contradict the processes in the implementing organization. These offered methodologies are often
just generalized “best practices” of consulting organization supported by suppliers of technology.
On one hand technology vendors frequently affirm that with purchase of technology the organization also
secures ongoing knowledge management. For knowledge management is more needed than just providing the
equipment and its maintenance. Every organization should have own methodology that respects the particular
organization needs. Consulting organizations on the other hand sometimes rely on good result achieved in similar
situation and therefore they offer this solution to other customers. The problem usually shows up - incompatibility of
that particular environment and “historical” situation derived from other environment. Organization can not expect
that when it comes out from foreign environment, it can achieve identical good result.
Another problem is excessive dependence on technology. Although technology is priceless helper in
knowledge management (gathering, sorting, organizing and storing knowledge) but the sole processing of
knowledge is not enough. The usage of knowledge depend mainly on the individual employees, thus the technology
should not be put at the first place.
Many organizations believe that there is one “universal” key or receipt, how to implement knowledge
management but it is incorrect assumption. Organizations operate in different areas; they have different employees,
different history, culture and goals. Creation of the structure of sharing and managing knowledge requires individual
approach.
However, there are still many organizations in Slovakia, which executive belies that knowledge
management is something above standard, something not really necessary. They are not aware that competition is
“not sleeping” and not staying still. Organization, which wants to grow/survive, cannot stop improving and it also
cannot loose knowledge without out storing it when key employees leave. Unfortunately the days various

1054
employees spend in schooling are staggering - in the bad meaning. The managers spend only eight days per year in
educational activities. Specialist and administration staff average on six days and blue collar worker spent a
minimum - just two days, which mostly represents a bare minimum of education required by law. It is the skilled
and knowledge employees who can help the organization to become and stay competitive. Slovak organization
seemed not to have realized this fact yet. And even when education of employees occurs, only 2/3 of organization
actually evaluates the efficiency of the education, whereas the evaluation carried out several months after schooling
is even more underestimated – almost 2/5 of organization do not perform second postponed evaluation at all
Searching, gathering and above all sharing and using knowledge is increasingly affecting the performance of
individuals in the organization and evaluation of the organization as a whole. Employees are the main source of
knowledge. They could be more efficient and could speed the decision-making process, because they have accurate
information and they create new sources of income in case the organization finds the value in what it knows.

Conclusion
People are again “on stage”. After several years of IT dominance the organizations all over the world began focus on
the biggest values – the knowledge of people. Sharing and application of knowledge is the basic of success of
organization in current economy. Much of knowledge of the organization is in employees’ heads.
If they want to balance out the fast changes in science, technology, economy and the character of work,
they must learn continuously the whole life. If the organization wants to be successful, it needs to pay attention to
the concept of knowledge management and learn how to create store, select, process, reuse and evaluate knowledge.
Development and management of knowledge increase the performance of the employees.
To identify whether the performance of organization or employees has decreased or increased, management
must be able to measure the performance of individual. Annual reports are filled with financial information but offer
little about employees beyond a simple expense item. Yet it is the talented knowledge workers who drive the
creation of wealth. Technology is available for every organization to buy and the employees will make the
difference in the performance of organization. The organization will lose the knowledge that has not been captured
yet (e.g. employee leaving the organization). However if the organization manages only to capture the knowledge
but fails to create the environment in which it can be further shared, organization will reduce the opportunity for
performance improvement.
Although there is not a direct casual relationship between knowledge and performance, organization still
should find measures that can help change the employees’ behavior to increase the performance thus it also
important to set the right measures.
Although Slovak organizations are falling a little behind after current world trends, here we can talk about
this topic as very actual and in the centre of attention. Organizations in Slovakia should be active in implementation
of knowledge management and be interested in these newest trends.
All who will work on solid knowledge and thought base can assure good position in the fast global
development and also in future.

References

[1] Ackoff, R. L. (1989) From Data to Wisdom. Journal of Applies Systems Analysis, Volume 16, 198, 3-9
[2] Angus, J. – Patel, J. – Harty, J. (1998, March 16) Knowledge management: great concept... but what is it.
Information Week. Retrieved April 4, 2007 from http://www.informationweek.com/673/73olkno.htm
[3] Bryan, L. L. – Joyce, C. (2005) The 21st -century organization. BetterManagenemt. Retrieved April 4, 2007
from http://www.bettermanagement.com/library/library.aspx?l=14359
[4] Burke, G – Howard, W. (2005) Knowledge management and process improvement: a union of two
disciplines. BetterManagenemt. Retrieved April 4, 2007 from
http://www.bettermanagement.com/library/library.aspx?pagetype=1&l=12448

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[5] Demján, Z. (2006). A journey for the leaders of the 21st century. Proceeding from 2nd International
Coaching Conference. Personal growth - organizations riches source. 2006 [2nd International Coaching
Conference ´06. Sielnica, Slovakia, 16.11 – 17.11. 2006.]
[6] Doyle, R. (2006). Not so revolutionary. Scientific American, December 2006, 42
[7] Goldfinger, C. (2000, April 18) The new economy and the intangible economy. EIB. Retrieved April 4,
2007 from http://www.gefma.com/Present/EIB%20Seminar%20April%2018%202000_fichiers/frame.htm
[8] Hittmár, Š. (2006) Information and knowledge in management. [Slovak version] Symposium
Management ´06. Proceedings from symposium. Žilina: The University of Žilina, 2006, 56 – 64.
[Symposium Management ´06. Žilina, Slovakia, 20.4 – 21.4. 2006.]
[9] Mončeková, K. (2006) Future of management belongs to new trends – it just need to be chosen carefully.
[Slovak version] Symposium Management ´06. Proceedings from symposium. Žilina: The University of
Žilina, 2006. p. 296 – 301. [Symposium Management ´06. Žilina, 20.4 – 21.4. 2006.]
[10] Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization Science, Vol. 5
No.1, 14–37.
[11] Norton, D. (2001, July 18) Interview with David P. Norton: “Intangible assets and the balanced scorecard”,
The new New Economy Analyst Report. Retrieved April 4, 2007 from http://www.juergendaum.com/news
/07_18_2001.htm
[12] Wesley, V. (2002) Measuring knowledge management. APQC. American Productivity and Quality Center.
Retrieved January 17, 2007 from http://www.providersedge.com/docs/km_articles/Measuring_KM.pdf
[13] Yazdani, B. (2006) Managing performance through learning. Chief Learning Officer, 12, 20-23.
[14] Jasaňová, K. et al. (2005) Educational level and qualification of entrepreneurs and usage of continuous
education. Proceedings of research study. Economic University in Bratislava. Analysis of entrepreneurial
environment and barriers of absorbing ability of regions [Slovak version] Retrieved May 15, 2007, from
Technical University in Košice, Institute for Regional and Communal Development Web site:
http://www.tuke.sk/IRKR/Anproba/?go=archiv
[15] Vážna, D. (2004) System of corporate education and it’s analysis in Slovak companies. Economic
University in Bratislava. [in process of publishing]

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 Knowledge Management in Compliance with Organization Strategy
Ján Papula, jan.papula@fm.uniba.sk
Dagmar Weberová, dagmar.weber@fm.uniba.sk
Faculty of Management, Comenius University, Slovakia

Abstract
Knowledge management, as a current concept in business management, is not a new term. A lot of organizations have
already dealt with creating, keeping, sharing and multiplying their knowledge. Successful organizations, which
established these knowledge management processes right into their organization cultures, are called “learning
organizations”. But the current trends do not lead only to better and proper execution of these well-known knowledge
management processes, but they also try to achieve the right knowledge management performance as part of the business
performance. In this meaning organizations have to bring their knowledge management into line with corporate strategy
and this way they can make sure that organizational goals will be achieved.

Management Strategy under the Influence of the Changing Environment

The development of the management theory and the need of its further improvement is the objective consequence of
constant pressure of the management practice. The pressure on improving management is produced by the effort of
managers to achieve success of organizations in the demanding and constantly changing competitive environment.
Problem solving of the articulation of abilities of the flexible reaction of management with the ability to prepare for
the future in advance belongs to important problems of current management practice and nowadays there is space
for the direction of the development of management theory. At the same time, the constantly changing environment,
on one side, is increasing the level of difficulty of searching for ways of improving management, on the other side, it
constantly creates new and unexpected scope for its improvement. Rivalry with competitors, the pursuit of
competitiveness and getting comparative advantages is one of the important motives and driving forces for
improvement of management of organizations.
Successfulness of organizations in the constantly changing environment depends to a large degree on the
ability of managers of organizations to adapt the exercised methods and techniques to changes being in progress in
the environment. These days, hardly anybody doubts the importance of preparation for the future in advance, the
importance of strategy and management strategy of organizations. The task of strategic management in the current
turbulent environment is to ensure the ability of the organization to react to changes being in progress in the
environment. Considering fast changes of the market environment, where products, markets and rules are changed in
the short time horizon, the existing efficiency and time response of decisions ceases to be enough for the company
management. Taking into consideration the regularities of development, it has been confirmed that if the pace of
changes in an organization is lower than the pace of changes in the environment, the organization will come to an
end [Papula, 2005].
Understanding the importance of preparation for the future and searching for possibilities of how better to
prepare for the future than others is the fundamental motive for the development of strategic management of
organizations. Preparation for the future means being prepared for the use of expected future opportunities and to
prepare for fighting against future obstacles and threats.
On the basis of this it can be said that the one who prepares for the future and prepares for changes, is in the
frame to join the competition for the best positions. That’s the reason why many of important specialists in the field
of management consider strategy to be one of the decisive critical factors of a company’s success [Papula, 2005].
The level of difficulty of management decision-making processes and the information ensurance of these
processes are increasing particularly under the influence of uncertainty and vagueness of the environment.
Management decision-making is getting more sophisticated and requires information of higher quality. That’s also
the reason why changes related to the transition from functional to procedural approach belong to most important

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changes in theory and practice of current management; this together with informatization and building up a
knowledge company creates better prerequisites for the ability to react to changes in the environment.

Knowledge as a Strategic Tool of Competitiveness of Organizations

In the current era of globalization, which is characterized by high dynamics of constant changes, terms like
competitiveness and productivity particularly resonate when evaluating successfulness of organizations. It is
possible to measure competitiveness by comparing parameters of the own company to parameters of a competitive
company in the same area. Productivity represents effectiveness of how inputs are changed into outputs. But it is
necessary to understand these terms in a complex way and attention has also to be paid to managing a company’s
processes and the company environment, which make it possible to achieve them.
A competitive company has to maximize productivity of all its resources that are at its disposal. It is
impossible to achieve a profit without a customer and therefore company management runs company’s processes in
order to satisfy the customer and at the same time it creates the company environment that is favorable to all who
achieve high productivity and participate in increasing of competitiveness. To sustain competitiveness it is inevitable
to search constantly for ways of how to improve the use of all company’s resources – people, machines, materials,
information and other inputs – by day-to-day running and managing of the company. To make the right decision it is
necessary to have all the needed information and knowledge. People are the most important resource in the company
and their level of know-how and skills is the fundamental category of sustainable growth. The ability of workers to
make use of gained knowledge at every-day work enables them to react flexibly and quickly to arising situations and
to find immediately solutions to them regarding company’s effectiveness. According to constant changes brought by
the common era, it is vitally important to adapt knowledge and skills to current requirements.
Knowledge is becoming the most valuable capital of the company. The growing globalization forces
companies to penetrate into less-known areas what makes company management focus their attention not only to
traditional developed resources, such as material resources, financial resources and workforce but also to an until
now less appreciated and used resource – knowledge. Constant changes in the environment, in which the company is
situated, force managers to re-consider their view on knowledge and know-how and their approach to them. In
today’s quickly changing world it ceases to be important to teach someone that something is given because
tomorrow this can mean that the learned fact is not true anymore. And that’s way the ability to find the right
information at the right time is considered more important than anytime before.
And here we have knowledge management to help companies react through their instrumentarium to
processes taking place at the present time and decide upon future on the basis of knowing the past and the ability to
analyze future development. In companies based on knowledge, managing human resources concentrates on
increasing the so-called organization intelligence and developing potential of workers by means such as learning,
participation, co-operation and initiative. To know is an advantage, to learn is necessity. This has always been
acknowledged. But these attributes are gradually becoming the main comparative advantage in a knowledge
company now and they are the basis for creating wealth.
Knowledge management can be generally understood as an effort to make know-how available in an
organization to those who need it, there where it is needed, at that time, when it is needed and in a form in which it
is needed in order to increase human and organization performance. A problem can arise when nobody really knows
what knowledge is and how to make use of it. Figure 1 points out the difference between information and
knowledge.
Know-how is an important source for manufacturing and it improves business performance. The current
business environment of a today’s world places high requirements for interpreting information from the information
systems considering the fact that future is predictable only to a certain degree of probability. On the basis of this it is
necessary to combine, with the help of knowledge management, information and know-how and to develop such
flexible strategies that are based on the real situation of the company. Knowledge management deals mainly with
organizations’ adaptation to constant changes of the environment so that organizations are competitive in the long

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run. This includes organization processes that integrate data, information and know-how with the help of
information technologies and link them with innovation and creativity of employees.

Knowledge to understand when, how and for what

purposes to use which part of knowledge

Know-how information and direction towards

its use

Information data transformed into a meaningful and

for people useful form

Data bare facts or findings of a useful form

FIG. 1: PROCESS-DATA-INFORMATION-KNOW HOW-KNOWLEDGE

Commercially, knowledge is all about the need to know to be competitive. This need to know is ultimately
necessary for our survival, and in particular, to enhance our decision-making processes. Although our successes will
ultimately depend on worthy, on-time and on-line know how – knowledge [Davis]. But the effective use of
knowledge management requires that know-how, which contributes to development of key processes and running of
the company, is at a company’s disposal in time. Should knowledge management be a comparative advantage, it is
necessary that it takes into consideration all aspects of the organization. While implementing knowledge
management, it is essential to find out what organization culture is like and at which level knowledge assets of the
organization are, including various information, communication and knowledge technologies. It is also essential that
implementation of knowledge management leads to measurable results commonly monitored in an organization.
Managing company knowledge could be effective if it does not only become a declared concept but also people –
their work, habits and culture – will get an active role in it.
The importance of knowledge management in company’s development lies mainly in maximal use of the
entire intellectual property of the company in main firm’s value forming processes and its development for future
needs. It should speed up and help the adaptative mechanism of the organization, adaptation to an internal and
external change and react to these changes in an appropriate way. The main objectives of in this way composed
knowledge management are [Mesároš, 2005]:
a) Identifying knowledge (to make it visible) and showing the possible use of it in the company.
b) Introducing knowledge culture in the company by supporting such activities and pursuits of employees that
enable them mutual exchange and information supply.
c) Building up a suitable infrastructure, a system of working knowledge management, by which we
understand not only the technical side, but also it is necessary to create connections among people,
techniques and working methods and support mutual co-operation.

Organizations that meet these objectives are known as learning organizations. Peter Senge [Senge, 1994]
describes learning organizations as a type of organization culture that has to be introduced in the company, and
whose objective is progress not only of its individual workers but thanks to them it also means progress for the
entire company. Such a company shows an increased capacity to learn, adapt and change via people who are
learning. If we refer to the statement that a man is the primary holder of knowledge capital – knowledge, then it is

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just people who are the most important elements while working on the project of implementation and use of the
knowledge management system.

Intellectual Capital as a Hidden Potential of an Organization

Knowledge is becoming the most important form of capital of a modern company. This does not mean that capital or
technical progress is not important at creating a product, but priorities have changed – knowledge is becoming a
priority. Knowledge management is then a process that makes use of knowledge assets of a company.
In connection with this, the term intellectual capital has been arising more and more intensively since the
mid nineties, and experts have used it trying to explain striking differences between accounting value of a company
and its actual market value, i.e. those differences which can be added to effects that are derived from a company’s
knowledge management.
Intellectual capital can be regarded as the hidden value of an organization [Davis]. These are differences,
which are often justified as influence of factors such as: ‘trade name’, ‘know-how’, or ‘goodwill’. Due to the fact
that these differences have arisen too often, mainly in connection with businesses operating in the area of
information technologies, finance and business consulting, experts started to ask a question, what is it what is
significantly increasing the market value of a company? One of the explanations for this is that it is the functioning
intellectual capital, which essentially increases economic results of companies, and that it is intangible property
hidden inside a company in a form of the ability of its employees to create not only a comparative advantage on the
market but also an additional value of a firm. [Němec, 2003]
An organization should achieve and maintain its comparative advantage by effective use of intellectual
capital and knowledge within a company.
Getting to the subject of evaluation and measuring of intellectual capital, it is necessary to recognize single
components which intellectual capital consists of. Intellectual capital includes / consists of ideas, inventions, general
know-how, computer programs, publications, etc. Distinguishing between different components of intellectual
capital can help us enhance the understanding of the problem of intellectual capital and subsequently we can apply
this concept at both the strategic and operative levels. To show the positions of intellectual capital and its influence
on the market value of an organization, together with a detailed and structured description of the content of this
quantity I will use the scheme of the Swedish company Skandia (see Figure 2), which was published in the second
half of the nineties, but it has often been referred to by experts and authors of scientific publications.

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 Market value

Financial capital Intellectual capital

Human capital Structural capital

Customer capital Organization capital

Innovative capital Procedural capital

Intellectual property Intangible assets

FIG 2: SKANDIA MODEL-INFLUENCE OF INTELLECTUAL CAPITAL ON THE MARKET PRICE OF THE COMPANY

This model differentiates six parts of intellectual capital [Van Deventer, 2002].
• Human capital represents the part of intellectual capital concentrated on company managers, specialists and
employees. We can describe it as a complex of intellectual property which can be transferred into a real value
by a company. Human capital is the main driving force of creation, innovation and value of intellectual capital.
• Structural capital is a complex of what remains in a company if we absorb it in our workers. Here we have
company organization (organizational structure, company rules, regulations, procedures), processes, manuals,
documentation, working procedures, customer database, technologies, software, brands, patents, and inventions.
• Customer capital is a complex of what is characterized by the relationship of the company to its customers, e.g.
market share, market segmentation, brand awareness, and customer satisfaction.
• Organization capital describes the ability of a firm to create added value with the help of company processes
and to innovate and improve the current methods of creating the added value, and other types of intangible
capital.
• Innovative capital describes the ability of a firm to innovate, create and improve the current methods of creating
added value, products and services, manufacturing procedures, new patents, trademarks. Innovative capital is
composed not only of its own innovations but also of innovation methods and procedures, their documentation,
publication and use for other parts of intellectual capital.
• Procedural capital is mainly determined by the proportion of documented and stabilized processes, the
proportion of outstanding commitments and speed and quality of communication.
Besides the right understanding of importance and role of intellectual capital, effective managing is also
important for the company. To succeed in managing intellectual capital, it is necessary to measure it, i.e. to monitor
measurable changes in all parts of intellectual capital.
Recently, new and new procedures and methods have been arising in connection with the research of possibilities
measuring intellectual capital. In short, we illustrate four fundamental groups [Nepolská, Hlínová, 2003]:

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• Methods that directly measure intellectual capital. These methods result from a detailed structure of parts of
intellectual capital and are followed by evaluation of each part. Summarizing evaluations we get the overall
value of a company’s intellectual capital.
• Methods based on market capitalization. The value of intellectual capital is set as a difference between the
market capitalization of the company and its equities.
• Methods based on measuring capital return. These methods result from different values of capital return in a
branch, where the valuation of a company’s intellectual capital is derived from a reverse calculation of
calculated increased effects.
• Methods based on scorecard. Individual parts of intellectual capital are measured and evaluated in a form of
indicators and indexes by these methods.
The concept of managing intellectual capital is focused on complex assessment of how a company deals
with the identification of individual parts of intellectual capital, how strictly a company measures it, how
consistently it monitors development and changes, how it approaches benchmarking of key factors, which influence
the given business segment, and how it plans its development.
The organization has to implement management of intellectual capital, which was composed this way, into
its corporate culture, processes and company strategy, because this is the only way to successfully put into effect
needed measures at both the operative and management levels.

Balancing Knowledge Management with Processes of Strategic Management by using the

Concept Balanced Scorecard
The concept Balanced Scorecard (BSC) and its role in the area of implementing strategy arises out of the facts that
objectives and indicators, by which successfulness of achieving them is evaluated, are a common denominator of a
plan and strategy too. BSC is more a tactical rather than an operative system of indicators focused on measurement
and managing performance of a company. Innovative companies use BSC as a strategic management system, that
means they use it in order to manage their long-term strategy. These businesses use metrical attributes to implement
critical management processes, which means for:
1 clarifying and translating vision and strategy into actual objectives that may help management identify the
right strategy and create a model directed at implementation of strategy;
2 communicating and connecting strategic plans and indicators, by which strategy is given to other
hierarchical levels and by this way strategy is further specified. Specific objectives in the given area and
individual objectives are balancing, what makes sure that all participants understand and identify
themselves with long-term objectives;
3 planning and setting objectives and balancing strategic initiatives where partial allocations of sources
directed at a company strategy are carried out;
4 improving strategic feedback and learning process that is used for analysis and additional questions related
to achieved results and possibilities of improvement.
First users of this concept have already found out that by the right choice of objectives and indicators BSC
clarifies the strategic direction of a business and at the same time it makes its measuring possible. Another important
quality of BSC is the fact that by an appropriate choice of objectives behavior can be directed in compliance with
strategy (because objectives influence behavior). So, the most important meaning of the original concept has
significantly been changed: strategic objectives and their illustration are of a high interest rather than a structured list
of indicators (see Figure 3).

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 Vision
Mission

Strategy

Critical Success Factors

Key Performance Indicators

Learning
Finance Internal and
Customers
processes growth

FIG: 3 BALANCING INDICATORS OF PERFORMANCE WITH STRATEGY

It could be said that the concept Balanced Scorecard includes an integrated process of managing in which
strategies of a company and company units are consistently operationalized, communicated in a top-down direction
within the entire company and divided into projects of different priority.
Strategic objectives stem from vision and strategy, and this way they become objectives of strategic
importance determining a company’s success. If it is possible to plan and follow their achievement, it is necessary to
add to these objectives relevant financial and non-financial indicators as well as objective and real values of these
indicators. Strategic actions, which match single objectives, should enable the company to achieve objectives. Each
strategic action is given a deadline, budget and responsible person. On the basis of the strict logic of the concept
introducing vision and strategy into strategic actions Kaplan and Norton extended BSC methodology by a
subheading “Translating Strategy into Action“.
In practice companies often face problems of setting actual objectives arisen from strategic thinking.
Strategies are, that is to say, not clearly defined, they are composed of many single opinions, isolated concepts, huge
analyses, loudly sounding visions, etc. BSC process forces companies to concretization of objectives on the basis of
the ‘fundamental strategy’ so that this fundamental strategy is confronted with questions of perspectives (see Figure
4).
Strategy operationalization is running in a way that strategic objectives and defined relevant indicators are
drawn for each perspective. Objective values are determined and concrete measures are developed to execute
strategy and achieve objectives for every single indicator.
Introducing BSC means that objectives, indicators and strategic actions are matched to a concrete frame of
reference, to the so-called perspectives. Matching perspectives should prevent companies from one-sided thinking
while stemming and following objectives. Thinking in a frame of perspectives and their connecting document main
associations important for strategy implementation. The authors of BSC suggest on the basis of the empirical
experience mainly four fundamental perspectives: financial, customers, internal processes and (learning and growth)
potential. Of course, perspectives can be modified to specific conditions of the field and company. A balanced
consideration of perspectives at setting strategic objectives leads to a balanced system of objectives – Balanced
scorecard.

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 Finance

Internal Vision
Customers
processes Strategy

Learning and
growth

FIG: 4 FUNDAMENTAL PERSPECTIVES OF BALANCED SCORECARD

Perspectives of Balanced scorecard are the fundamental building blocks for creating a working model. The
four fundamental perspectives of BSC enable companies to set balance between long-term and short-term
objectives, between needed outputs and driving forces of these outputs and between hard indicators and more
subjective (soft) indicators of performance.
The BSC concept innovatively combines lots of known elements of company management (e.g. objectives,
indicators, plans and actions) with new approaches to strategy illustration, thinking in perspectives and
differentiating strategic and operative objectives.
Strategic objectives as well as their indicators and strategic actions are not mutually separated, on the
contrary, they are closely linked by cause-and-effect relationships. Implementation of one strategic objective helps
to achieve other objectives, which are part of the complete balanced system of objectives. Identifying and
illustrating significant strategic relations is an important BSC output. Only the mutual connection of objectives
describes strategy in full.
Besides illustrating strategy a clear illustration of apparent links and dependency among strategic objectives
is a further contribution of this procedural way. Reciprocal effects at achieving objectives will be cleared by this
documentation. Knowing the links and meaning of single objectives requires common understanding of strategy,
which means that co-operation among managers is being improved. By developing links we are returning to systems
of objectives again. In a general view of links, some of the objectives will lose their importance whereas others will
strengthen it or they will get a new meaning.
But the system of BSC objectives is not based on algorithmic relations. Objectives and also indicators are
linked together on the basis of logical, but not strictly mathematical connections. However, this does not decrease
the quality and contribution of this concept in the process of strategy implementation at all.
The influence of introducing knowledge management on company performance is most visible in the area
of innovations due to improved processes, products, and services or because of developing new more effective ways
of manufacturing. The degree of success of knowledge management is to be seen in company’s outputs based on
innovations resulting from knowledge management strategy and practice in a company. Processes and objectives of
knowledge management are in BSC shown by a learning and growth perspective which creates the innovative
potential of a company.
This is possible thanks to the existence of three groups of sources: employees, information systems and
company procedures. To achieve high performance requires considerable investments in people, systems and
procedures, which create company’s abilities. The effort to do quality work and the feeling of responsibility, i.e.
increasing abilities of employees, their satisfaction, development and career, the relationship with the company,

1064
development of the working environment, improving access to strategic information, linking rewarding to
employees’ performance:
• company strategy – determines fundamental starting points of all activities carried out in a company;
• organizational structure – precisely shows authority and responsibilities, enables employees to co-operate
and communicate effectively among departments;
• company culture – favors mutual co-operation, formal and informal communication channels in a way that
new knowledge can be generated;
• motivated workers – represent a critical factor. They are the only holders of hidden, tacit knowledge;
• company processes – workers in companies know why the do certain activity, how they should do it,
regardless of the fact whether they work in production or marketing. They benefit from knowing the best
procedures in the branch and try to use them in their own company environment;
• information and communications technologies – represent technological infrastructure, which supports and
makes processing and flowing of data, information and knowledge easier.

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2005 (Development of theory of strategic management under the influence of changes in the environment)
[7] SENGE P.: The Fifth Discipline: The Art and Practice of Learning Organizations. Currency/Doubleday,
október 1994
[8] VAN DEVENTER, M. J.: Introducing intellectual capital management in an information support services
envirnonment, University of Pretoria, South Africa, 2002

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 Knowledge Management in Guadalajara Firms
Jose Sanchez-Gutierrez, jsanchez@cucea.udg.mx
Aurora Abigail Aguila-Zendejas, boris_cange@hotmail.com
Sandra Alvarez-Alvarez, sandyceli@hotmail.com
Karla Garcia-Delgado, karlamar_y_solk@hotmail.com
Universidad de Guadalajara, Mexico

Abstract

Knowledge Management (KM) refers to a range of practices used by organizations to identify, create, represent, and
distribute knowledge for reuse, awareness and learning across the organization. And it can also apply to the ways
organizations gather, manage, and use the knowledge that they acquire. Current studies show that knowledge
management leaders look forward to utilizing initiatives oriented to a better way of sharing their knowledge,
communication and decision making to all levels, bringing up a research culture about new knowledge. The present
research, applies the e-knowledge center methodology adapted to the Mexican culture environment in 60 Guadalajara
companies, where directives, supervisors and operatives were surveyed. Based on the obtained results from the surveys
that reveal the differences between the companies, the present research tries to show a model that identifies what they are
doing, in order to propose a model that can improve it.

Introduction
In 1991 Argyris commented “Any company that aspires to succeed in the tougher business environment of the 1990s
must first resolve a basic dilemma: success in the marketplace increasingly depends on learning, yet most people
don’t know how to learn. What’s more, those members of the organization that many assume to be the best at
learning are, in fact, not very good at it.” A learning organization is an organization skilled at creating, acquiring,
and transferring knowledge, and at modifying its behavior to reflect new knowledge and insights (Garvin, 93). As
an organization learned, knowledge is created, and the task is now how to share and developed it. Nonaka (1994)
developed a model for the knowledge that represents how the tacit and explicit knowledge interacts to create
knowledge in an organization. This was the frame of reference for an organization that learns (identifying four
processes or patterns of conversion of the knowledge: the socialization (tacit to Tacit); the externalization (of Tacit
to explicit); the combination (explicit to explicit) and the internalization (of explicit to Tacit). This model implies
that the KM activities are within these four phases, whereas the business’ intelligence can directly affect the
combination, but is indirectly smaller to the socialization, externalization and internalization.
As today, we can say that knowledge management was introduced into the business world to help the
companies to create efficiently, to share and to use the knowledge (Davenport, 2000). According to Gottschalk and
Khandelwal (2003) the Knowledge management can be classified in four categories or stages. The first stage is
general support in the Information Technologies for the workers of the knowledge. This includes data processing,
spreadsheets and electronic mail. The second stage is information on knowledge’s sources. An information system
keeps information about who knows what is inside and outside the company but the system does not keep what they
know tangibly. The third stage is information representing knowledge. The fourth and last stage is the processing of
information. An information system uses information to evaluate situations.
The most important processes of a business are frequently found in the value’s configuration of a company.
A value configuration shows how the most important processes of a businesses work to create value for the clients.
The most known configuration of value is the chain of value (Gottschalk, 2003). The value not only can be created
through chains. The value also can be created in two alternating configurations: The establishment of value and the
linking of value. The value establishment is a company that creates value when solving unique problems for its
consumers and clients. The knowledge is the most important resource and the reputation is critical for the success of

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the company. Often, these companies are called companies of professional services. The linking of value is a
company that creates value when connecting clients and consumers who are, or want to be, dependants between
them. The knowledge component will be found mainly in the services of a linking of value, in the shape of
information systems provided to the costumers to interchange relevant information (Stabell, 1998).
The society of the knowledge is a structural change for the long term in the economy; the production,
dissemination and use of the knowledge will play a prominent role like source of creation and operation of wealth.
The learning is critical for such society in terms of comfort, assimilation and transformation, slope of subjects,
contexts and conditions, and for the individuals, organizations and nations in terms of formation of new abilities to
be able to produce new knowledge (Lindley, 2003).

Literature Overview
A definition of KM It is the process to collect the knowledge in where this it exists - data bases, in paper, the hands
of the people - and to distribute this where it can help to produce the best result (Hibbard, 1997). This concept is
arising again as an interdisciplinary model leading with all the aspects of the knowledge within the organization,
including: creation of knowledge, codification, to share it and to know as those activities promote the learning and
the innovation. For Taft (1999), it consists of the classification, dissemination and categorization of information and
thoughts of the people in an organization. Knowledge management is a discipline that promotes an integrated
approach to identifying, managing, and sharing all of an organization’s knowledge assets, including unarticulated
expertise and experience resident in individual workers. Knowledge management involves the identification and
analysis of available and required knowledge, and the subsequent planning and control of actions to develop
knowledge assets so as to fulfill organizational objectives (Kim, 2000). Knowledge management is defined as the
process that creates or locates knowledge and manages the dissemination and use of knowledge within and between
organizations (Darroch, 2003).
Knowledge can come from a variety of different sources and relate to a broad spectrum of issues facing a
firm (Darroch, 2003). Knowledge management is not a technology; however, technology is fundamental to the
knowledge management process. Knowledge is the new organizational wealth. It underpins an organization’s
worth, fuels profitable growth, and drives stakeholder value. The term “knowledge assets” denotes core
competencies, processes and human potential that together create value for a company. Perhaps the biggest barrier to
the widespread implementation of knowledge management practices is the demand placed on organizational
resources by other priorities (Duffy, 2000).
The systems of knowledge management are based on information technologies developed to support and to
improve the organizational processes of creation, storage/recovery, transference and application of knowledge
(Alavi, 2001). It is of conventional understanding that a system of KM must fit with the culture, norms and schemes
of existing incentives in the organization; when lacking such components, the result will be highly uncertain
(Gallivan, 1997). The “process” is highly associated with concepts like “explicit knowledge”, “routine” and
“codification” whereas the “practice” is highly associated with the “tacit knowledge”, “heuristic” and the “non-
codifications”. Explicit knowledge is rule-based knowledge that is used to match actions to situations by invoking
appropriate rules (Kim, 2000). Explicit knowledge is used in the design of routines, standard operation procedures,
and the structure of data records.
A business practice is frequently looked like a repeated act, a habit or custom made at level known abilities.
Often described like a decoded “know-how” product of the human experience, the improvisation and innovation.
One of the benefits attributed to the management of the knowledge has been the ability to share better practices in
great organizations. Eight basic functions exist that include/understand the administrative system of process of
businesses (Lee, 2005):
1. Process of discovery: to discover since the things are produced.
2. Design process: to mold, to simulate and to redesign a process.
3. Unfolding process: to distribute the process to all the participants. 4. Execution process: to assure that all carry out
the process.

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5. Maintenance process: to solve exceptions and adaptations.
6. Interaction process: to allow the human interaction with the process.
7. Optimization process: improvement of the process.
8. Analysis process: to measure the operation and to devise improvement strategies.
The driver for the use of a management process in businesses comes from the desire of the organizations to
participate in Inter-companies collaborations, creating therefore the demand of a common way to implement inter-
company business processes independent as well of the technology used for nourishment (Lee, 2005). The
knowledge has been recognized like corporative assets key and the only source of sustainable competitive
advantage. The organizational knowledge is due to apply, to administer and to use of effective way to maintain a
competitive advantage.
The advances in the technology of e-commerce and Internet provide to the companies not only of new ways
to create knowledge, also opportunities to improve their ability in the management and use of the knowledge, (Siau,
2000). In order to reach the goal of the KM, a systematic approach is needed to identify and to capture information
and knowledge on the processes, products, services, markets, clients and competitors of the company, and to share
them to reach an objective greater of well-being and operation (Bushko, 1998).
The intellectual capital exists in all the companies and includes rights of author, investigations, databases
that improve the practice, loyalty to the marks and the ability of the management (Dzinkowski, 1999). It is the
combination of the physicist (buildings, equipment) and the intangible property that the capital of all company
(Nasseri, 1996).
How to obtain within companies the transformations that contribute to this Knowledge Society? The
answer to this question is knowledge management.
For Probst, Raub and Romhardt (2001) recommends the following:
I. Review your company, your department and yourself against the
pillars of knowledge management.
II. Knowledge is the prime material of the future. Try to understand it better and to use it for your own
intentions.
III. Observe things from the knowledge view point and see your company through different eyes.
IV. Re orientate yourself in your personal atmosphere of knowledge.
V. Maintain your own competency folder.
VI. Look for people with your same mentality in and outside the company.
VII. Use the existing knowledge systems and information infrastructures
VIII. Develop a language to speak about knowledge.
IX. Knowledge management needs knowledge managers. Assign somebody.
Fui-Hoon Nah, Siau & Tian. (2005) comment that knowledge has been recognized as a key corporate asset and
the only source of sustainable competitive advantage. One must effectively apply, manage, and utilize
organizational knowledge to sustain competitive advantage, and explain it in their research model FIG. 1.

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 Knowledge
acquisition

Internet-Based
Knowledge customer Knowledge
dissemination knowledge sharing
management

FIG.1: RESEARCH MODEL

Source: Fui-Hoon Nah, F., Siau, K., Tian, Y. (2005). Knowledge Management Mechanism of Financial Service Sites

Knowledge management significantly affects short-term stock market returns; moreover the integrated
governance framework indicates that an integration of process compliance, performance, measurement, and
knowledge management throughout an organization is necessary for future firms gaining success. It views
accountability toward the stakeholders in three perspectives- compliance, performance, and knowledge with a
integrated governance framework (Sabherwal and Sabherwal 2005), presenting a model that link the three
perspectives (FIG. 2).

FIG.2: THE INTEGRATED GOVERNANCE FRAMEWORK.

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 Source: Sabherwal, R., Sabherwal, S. (2005). Knowledge Management using information technology:
determinants of short-term impact on firm value. Decision Sciences.

Methodology

For this work the methodology proposed by the eKnowledge Center (2000) was used. This is an organization
specialized in knowledge management. This organization proposes and designs a survey as a tool to measure the
knowledge management in several dimension and purposes dealing with KM such as:
- Events, activities, facts and goals, with the idea to be sure that the project or program of KM has a positive impact
in the measuring process.
- Players, activities, times, objectives, innovations, feelings, goals and metrics, with the idea of determinate the
organization’s primary knowledge sources, and the methods used to acquired it.
- The entire dimension, with the idea of developed a good image of the future in the knowledge’s environment, and
to present the needed goals needed to be reached.
A survey was applied to 60 small enterprises oriented to the retailing industry, all them from Guadalajara,
the capital city of Jalisco, second largest city in Mexico population. The questionnaire was apply to directives,
supervisors and operatives from each enterprise, in order to perceive if there were homogeneous in their comments
related to the way of how the KM is realized and what elements they consider necessaries. The questions used in this
study were adapted with the structure proposed by the eKnowledge Center.

Results

The Figures and their interpretation of the questions in the survey applied to the directives, supervisors and
operatives in the companies are presented.
The organizational culture to develop show that the support and cooperation are the most important
activities considered, and second are the high communications level. Personal development accounts by only the
18% followed by autonomy by areas (FIG. 3).

Organizational Culture to Develop

Support and
Cooperation

6% Autonomy by areas
18%
40%
High communictions
level
24% Personal Development
12%
Customer Oriented

FIG. 3: ORGANIZATIONAL CULTURE

Training was most important for the people surveyed (FIG. 4), and was almost tied with the sharing of the
information with the employees.

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 Activities for Knowledge Management

Continuity in the
learning
6% 18%
Trainning
29%
Comunication
process
35%
12% To share
inf ormation w ith the
employees
others

FIG. 4: KNOWLEDGE MANAGEMENT ACTIVITIES

The most important source of generating of KM (FIG. 5) was the objective’s accomplishments, the total
involvement of the individuals was considered on second place (27%), the aligned objectives were third important
issue.

Generation of Knowledge Management goals

by the Team Work

Aligned objectives
18%
Others
46% 9%

Total Involvement of
the individuals
27%
Objective´s
Accomplishment

FIG. 5: GENERATION OF KM GOALS BY TEAM WORK

The metrics of the KM goals were the profits and sales (43%) are the most important source for, and they
considered important the resulting vision (FIG. 6).

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 Metrics of the Knowledge Management Goals

19% 13%
others
Resulting Vision
25% Prof its and Sales
Previous statistics
43%

FIG. 6: METRIC OF KM GOALS

Other important characteristic was the performance of the personnel on KM. They gave more importance to
the empowerment of the employees. They comment that the KM must be reinforced by knowledge sharing, and
with this get performance improvement and organizational reinforcement.
The opinion about the effects to share the knowledge is the compromise and motivation that could generate
in the work environment.
Related to innovation roll, they considered necessary the continuous update in knowledge and methods and
to hold in vanguard about the company and the competence.
The structure shown for FIG. 7, shows that small and medium enterprises in Guadalajara focuses also on
reaching results and income, but their culture in the starting point of the KM process is oriented to support and
cooperation. The training process is helped with the sharing of information and the companies learning, all these to
achieve their objectives, with the involvement of the individuals.

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 FIG. 7: KM MODEL FOR SMALL RETAIL COMPANIES FROM GUADALAJARA, MEXICO.

Conclusion

The present research shows KM theories and concepts from several authors such as Nonaka, Davenport, Prusak, Kim, Duffy,
Pollard, Fui-Hoon, Sabherwal, who have developed KM application processes in several studies. Surveys were applied on
directives, supervisors and operatives from 60 small retail enterprises, from Guadalajara’s metropolitan area in Mexico. It is
perceived that they have little notion of what KM implies, with a primary approach on developing customer oriented
cultures, but only in theory, because their processes do not stimulate or motivate employees to focus on the
customer.
KM must lead to involve the individuals, and also contributes to the sharing of the information. The people
surveyed consider that the manager and the employees must act different regarding KM processes does enhance the
need to encourage superior levels of responsibility, as well as, individual and team empowerment. KM goal metrics
do not focus on all aspects knowledge search, as well as their processes, they solely aim to revenue metrics.
Regarding the use of technology in KM just computers and computer systems are well known, but there is a
complete ignorance regarding technologies and methodologies for the systemic development of KM, in the people
surveyed. The results show that KM technology is practically non existing, given the fact that they do not know how
to generate, process, implement, communicate, and develop new knowledge in a systemic manner, which requires
training reinforcement in that aspect, to foment a KM culture towards each and every member of the organization.
The people surveyed has general opinions in the generation of KM, due the ideas commented about
empowerment development, total participation, high performance teamwork, and with this strategy have a

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differentiation of competition and continuous improvement and feedback, it may be attributed to the changing and
development of a city that was focused in the commerce in past years, and now is turning its orientation to the
services and industrial activities.

References

[1] Alavi, M., Leidner, D.E. (2001). Knowledge management and knowledge management systems:
conceptual foundations and research issues. MIS Quarterly, 25, 107-136.
[2] Argyris, C. (1991, May-June). Teaching Smart People How to Learn every company faces a learning
dilemma: the smartest people find it the hardest to learn. Harvard Business Review, 69 (3), 99-109.
[3] Bushko, D., Raynor, M. (1998). Knowledge management: new directions for IT (and other) consultants.
Journal of Management Consulting, 10, 67-68.
[4] Davenport, T.H., Prusak, L. (2000). Working Knowledge. Harvard Business School Press, Boston, MA.
[5] Darroch, J. (2003). Developing a measure of knowledge management behaviors and practices. Journal of
Knowledge Management, 7, 41-54.
[6] Dzinkowski, R. (1999,october). Managing the brain trust. CMA Management, 8, 14-18.
[7] eKnowledge Center (2006). Worksheets. [Electronic version] http://www.eknowledgecenter.com/
[8] Gallivan, M.J. (1997). The influence of organizational culture on information technology implementation:
a success story. Failure and Lessons Learned in IT Management, 4, 243-257.
[9] Garvin, D.A. (1993, July-August). Building a Learning Organization beyond high philosophy and grand
themes lie the gritty details of practice. Harvard Business Review, 71(4), 78-91.
[10] Gottschalk, P., Khandelwal, V.K. (2003). Determinants of knowledge management technology projects in
Australian law firms. Journal of Knowledge Management, 7, 92-105
[11] Kim, S. (2000). The roles of knowledge professionals for knowledge management. INSPEL, 34, 1-8.
[12] Lee, L.L. (2005). Balancing business process with business practice for organizational advantage. Journal
of Knowledge Management, 9, 29-41.
[13] Nonaka, I. (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5(1), 14-
37.
[14] Siau, K. (2000). Knowledge discovery as an aid to organizational creativity. Journal of Creative
Behaviour, 34, 248-258.
[15] Taft, W. (1999, January 28). Anthropological Perspectives on Cultural Knowledge and its management.
KM ANSI/ISO Standards Committee Meetings, Conquering the KM Tower of Babel: Knowledge
management as a multidisciplinary science and applied science, KM, Inc., Silver Spring.

Contact the authors for full list of references

1074
 Knowledge Management Initiative at Bharti Airtel Limited: A Case Study
Ashish B, ashishmom@gmail.com
Ashish Singh, ashish.singh15@gmail.com
Neeta Baporikar, neetab@isquareit.ac.in
International Institute of Information Technology, Pune, India

Abstract
The unprecedented growth in mobile market is, perhaps, the most vivid facet of India's economic transformation since
1990s. As a pioneer, Bharti Airtel Ltd (BAL) has been instrumental in leading and ushering the mobile revolution in
India. The case intends to present “Knowledge Management (KM) Initiative at BAL”. The research methodology
adopted, is case study, which helps in building analytic bridges between theory and practice (Case Method: Cases in
Management, 2005). The focus, in our research has been to recount as objectively and meticulously as possible—real
events and problems in adopting KM as a strategy, so that it opens doors for further research. This case study would help
in understanding not only what KM means for BAL, but also throw light on what KM strategy can do for organizations’
excellence. The findings reflect how this initiative of BAL has been a strategic move to achieve its vision of becoming a
benchmark for the global telecom industry.

Introduction
Every day new products are introduced in the market but only few survive. Why does the new product even with
good features fail? Also, some products that make a good beginning, loose their market at a later stage, example -
pagers. What causes the product or business to fail? Going into fundamentals, business does not exist in vacuum but
in an environment - customers, suppliers, competitors, and government. It scans the environment for changes and
finds new opportunity, which is a continuous process for a business and when it stops, it is out of the race. When
business interacts with environment it starts acquiring knowledge by learning, perceiving, communicating and
associating. This acquired knowledge facilitates the business to find new opportunities for growth and survival in the
market.
According to Webster’s Dictionary, knowledge is the fact or condition of knowing something with
familiarity gained through experience or association. Knowledge may also be described as a set of models that
describe various properties and behaviour within a domain. Knowledge may be recorded in an individual brain or
stored in organizational processes, products, facilities, systems and documents. In reality, though, there exist many
possible equally plausible definitions of knowledge for the purpose of this paper the focus will be on this definition:
“The ideas or understandings, which an entity possesses that are used to take effective action to achieve the
entity’s goal(s). This knowledge hence is specific to the entity, which created it”.

Stages of Indian Economy

India has started economic reforms from 1991 due to the winds of change in the international economic scenario.
The need for a policy shift had become evident earlier, as many countries in East Asia achieved high growth and
poverty reduction through policies, which emphasized greater export orientation and encouragement of the private
sector. India had taken some steps in this direction in the 1980s, but it was only in 1991 that the paradigm shift
occurred. Policies signaled a more open economy with greater reliance on market forces, a larger role for the private
sector, including foreign investment.
On the face of it, the figures are compelling. India's real GDP grew by 9.2% in the year (2006) to last
(2005) September. Over the past four years it has clocked up an average annual pace of more than 8%, compared
with around 6% in the 1980s and 1990s—and a meager 3.5% during last three decades. India seems to be reaping

1075
the rewards of reforms that were made in the early 1990s. These lowered barriers to trade and liberalized capital
markets. As a result, total trade in goods and services has leapt to 45% of GDP, from 17% in 1990.

Overview of Indian Telecom Industry

The Indian Telecommunications network with 110.01 million connections is the fifth largest in the world and the
second largest among the emerging economies of Asia. Today, it is the fastest growing market in the world and
represents unique opportunities for U.S. and other foreign companies in the stagnant global scenario. The total
subscriber base, which has grown by 40% in 2005, is expected to reach 250 million in 2007. According to
Broadband Policy 2004, Government of India aims at 9 million broadband connections and 18 million Internet
connections by 2007. The wireless subscriber base has jumped from 33.69 million in 2004 to 62.57 million in 2004
to 2005. In the last 3 years, two out of every three new telephone subscribers were wireless subscribers.
Consequently, wireless now accounts for 54.6% of the total telephone subscriber base, as compared to only 40% in
2003. Wireless subscriber growth is expected to surpass 2.5 million new subscribers per month by 2007. The
wireless technologies currently in use are Global System for Mobile Communications (GSM) and Code Division
Multiple Access (CDMA). There are primarily 9 GSM and 5 CDMA operators providing mobile services in 19
telecom circles and 4 metro cities, covering 2000 towns across the country.

Early Bird – Bharti Airtel Ltd (BAL)

Sunil Bharti Mittal, the founder-chairman of Bharti Enterprises (which owns Airtel), is today, the most celebrated
face of the telecom sector in India. He symbolizes the adage that success comes to those who dream big and then
work assiduously. Sunil Bharti Mittal began his entrepreneurial career manufacturing bicycle spare parts in the late
1970s. His strong entrepreneurial instincts gave him a unique flair for sensing new business opportunities. In the
early years, BAL established itself as a supplier of basic telecom equipments. His true calling came in the mid 1990s
when the Government opened up the telecom sector.

Genesis of BAL
Bharti Enterprises accepted every opportunity provided by the 1991 new economic policy to evolve into India's
largest telecommunications company and one of India's most respected brands. Airtel was launched in 1995 in
Delhi. In the ensuing years, as the Airtel network expanded to several parts of India, the brand came to symbolize
the very essence of mobile services.
Since its inception BAL has achieved many firsts and unique records: it was the first to launch nationwide
roaming operations, it was the first to cross the one million and the five million customer marks. It was also the first
to launch oversea services. There are other 'firsts' credited to BAL - many of them in the area of innovative products
and services. Today, BAL innovates in almost everything that it presents to the market. An excellent example is
Easy Charge - India's first paperless electronic recharging facility for prepaid customers. The numerous awards,
conferred upon it, reflect the evidence of BAL’s fine record. It won the prestigious Techies Award for 'being the
best cellular services provider' for four consecutive years between 1997 and 2000 – an unbeaten record. In 2003, it
received the Voice & Data Award for being 'India's largest cellular service provider'. BAL’s strategic objective is
“to capitalize on the growth opportunities available in the telecommunications market and to consolidate its
position in being the leader for integrated telecommunications services provider, with a focus on providing mobile
services.”

Business Model at BAL

BAL started information technology as its central function to support various functional processes. During that time
the focus of the company was on systems automation and cost efficiency. The IT functions mainly focused on

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development of technology and maintenance of the system through in-house resources. In due course of time, it
realized that technology couldn’t be at the core of its central function, because it is the customer who forms the core.
Having realized that the customer is the focal point, BAL went for transformational business innovations through
outsourcing as reflected in Table 1.
Table 1 is a proof of BAL’s realization that its strength is not technology but customer relations which led
to transformational business innovations through outsourcing network maintenance and information technology
services. This has made it India’s largest telecom service provider with a huge customer base. This is also the
period when BAL gained knowledge about the telecom industry and its customers. This knowledge gained is its core
strength and if lost to competitors, would mean threat to the business. Hence, managing this knowledge-both internal
and external, has become an important corporate agenda for BAL. Thus – “Knowledge Management” initiative
undertaken is a pioneering case worth studying Indian corporate sector.

TABLE 1: BAL’S OUTSOURCING MODEL

Business Innovations Through Outsourcing
Outsourcing Deals Vendors Features/Advantage
- Pricing linked to capacity as US$ per erlang
Network outsourcing ERRICSSON® - Payment linked to usage and network quality
and Maintenance NOKIA® - Ease in network planning
- Scalability, sustainability and accountability
- Pricing and payment as a % of revenue
- S1 Outsourcing, which provide end to end IT
including hardware, software and services
Information
IBM® - Service Delivery Platform which enables delivery of
Technology(IT)
content to end user mobiles and personal computers
- Service level agreements for quality and deployment
- Scalability, sustainability and accountability
IBM Daksh®,
-Enhanced and consistent customer experience
Mphasis®,
Call Center - Common platform across the group
Hinduja TMT®,
- Scalable business model to meet business needs
Tele Tech®, Nortel®
Source: Bharti Airtel Ltd.

Challenges Encountered by BAL

The growth story of BAL is encountered with various challenges. In its early days BAL faced challenges to establish
itself as prominent telecom service provider. Later it faced challenges to sustain its growth and be the leader in
Indian telecom space. To increase its presence and customer base BAL adopted both inorganic growth models by
acquisitions and organic growth model by rolling out new circles. Due to this increased geographical spread BAL
encountered with some of the key challenges. They are,
•Inadequate-trained manpower for telecom services in India
•Local and regional variations in service and products to meet specific needs of customers
•Ever changing Indian telecom regulatory environment
•Significant upsurge in number of subscribers lead to increased usage of resources and maintenance cost
•Increase in geographies serve lead to meeting diversified customer’s needs
The bottom line of the above challenges faced by BAL is even with its increased geographical spread and
customer base it wanted to provide consistent customer experience across all locations covering all lines of business.
BAL’s outsourcing model shown in Table 1 would address only few of the above issues. But after a detailed study
of these challenges by BAL team, Knowledge Management was identified as a strategy to address these issues.

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KM – Overview

In the corporate world where uncertainty is the order of the day, the only source of lasting competitive advantage is
knowledge. When markets shift, technologies proliferate, competitors multiply, and products become obsolete
overnight, successful companies are those that constantly create new knowledge, disseminate it widely throughout
the organization, and quickly embody it in new technologies and products. Companies, which indulge in these
activities, are defined as knowledge creators, and their businesses tend to focus and revolve around innovation.
Therefore, KM is a means to an end and not an end in itself. But what does KM mean? Managing knowledge or is it
much more than that?
"Knowledge is the right information put into use in the right way at the right time, whereas information is
merely the amalgamation of various data sets within a specific context."
- Darwin Magazine, July 2001
Consider, if someone says that sales started at $100,000 per quarter and have been rising 20% per quarter
for the last four quarters, we are somewhat confident that sales are now about $207,000 per quarter. We are
confident because we know what "rising 20% per quarter" means and one can always calculate.
Yet, if someone asks what the likely sales are in the next quarter, we would have to say, "It depends!" we
would have to say this because although we have data and information, we have no knowledge. This is a trap that
many fall into, because they don't understand that data doesn't predict trends of data. What predicts trends of data is
the activity that is responsible for the data. To be able to estimate the sales for next quarter, we would need
information about the competition, market size, extent of market saturation, current backlog, customer satisfaction
levels associated with current product delivery, current production capacity, the extent of capacity utilization, and a
whole host of other things. When we are able to amass sufficient data and information to form a complete pattern
that we understand, we would have knowledge, and would then be somewhat comfortable estimating the sales for
next quarter. Anything less would be just a guess! In this example what need to be managed to create value is the
data that defines past results, the data and information associated with the organization, market, customers,
competition, and the patterns, which relate all these items to enable a reliable level of predictability of the future.
Research has already indicated that value of data and information deplete with passage of time since data
and information tend to be time-related (Fig.1). But the value of knowledge increases as one keeps on applying the
learning. Knowledge when applied not only enlarges but also encompasses more and more, thereby taking a
dynamic characteristic. The reason is, data and information can be transferred by well designed databases, software
applications and documentations, but it may often be out of date with respect to evolving strategic needs, whereas
knowledge gets transferred when information is shared, interpreted among and by people. During the information
sharing process, dynamic transformation takes place as it gets updated according to time.
"Successful knowledge transfer involves neither computers nor documents but rather interactions between
people."
- Davenport, T.H. "Think Tank: The Future of Knowledge Management," CIO, December 15, 1995
What we would refer to, as KM would be the capture, retention, and reuse of the foundation for imparting
an understanding of how all these pieces fit together and how to convey them meaningfully to some other person.
KM is an audit of "intellectual assets" that highlight unique sources, critical functions and potential bottlenecks,
which hinder knowledge flows to the point of use. It protects intellectual assets from decay, seeks opportunities to
enhance decisions, services and products through adding intelligence, increasing value and providing flexibility. KM
should complement and enhance other organizational initiatives such as Total Quality Management (TQM),
Business Process Re-engineering (BPR) and Organizational Development and Learning (ODL), providing a new and
urgent focus to sustain competitive position. KM in organizations can be considered from three perspectives namely:
Business Perspective: focusing on why, where, and to what extent the organization must invest in or exploit
knowledge. Strategies, products and services, alliances, acquisitions, or divestments should be considered from
knowledge-related viewpoint.

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 Management Perspective: focusing on determining, organizing, directing, facilitating, and monitoring
knowledge-related practices and activities required to achieve the desired business strategies and objectives.
Hands-On Operational Perspective: focusing on applying the expertise to conduct explicit knowledge-related
work and tasks.

FIG.1: DATA, INFORMATION AND KNOWLEDGE VALUE GRAPH (ROBERT B. POJASEK, JOHN GARN
AND NICK PAPADOPOULOS, 2001)

KM from Telecom Perspective

KM for the Telecommunication is relatively new term as in the case with other industries. It is used to describe a
number of loosely related approaches and tools. KM is the name of a concept in which an enterprise consciously and

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comprehensively gathers, organizes shares and analyzes its knowledge in terms of resources, document, and people
skills. In early 1998, it was believed that few enterprises actually had a comprehensive KM practice in operation.
Advancement in technology and the way we access and share information has changed that and many enterprises
now have some kind of KM framework in place.
From this theoretical perspective, we could actually consider telecommunication business intelligence,
telecommunication data warehousing and telecommunication data mining to be subsets of the broader
telecommunication KM. However, in day-to-day operational term, we use the term telecommunications KM, to
identify all of those solutions that have to do with the storage, management, retrieval and analysis of non-data based
information.

KM Process

In one Information Week article, Jeff Angus and Jeetu Patel described the four major functions of KM, and the
processes involved in accomplishing them. These functions include:
•Gathering of information to bring the data into the system.
• Organizing it into a usable form through the process of associating items to subjects and giving them context.
•Refining what is being stored for accessibility and utility through the process of adding value by discovering
relationships, abstracting, synthesis and sharing.
• Disseminating it to the people who can use it.

Telecommunications KM Tools

By far the single most popular and highly utilized telecommunication knowledge management "tool" is a company’s
website. Both the internet and intranet provide most telecom companies with a huge backlog of opportunities to
gather, organize, refine and disseminate the information critical to telecommunications company executives,
employees, business partners, stakeholders and customers at an exceedingly low cost. In addition to this
packaged solutions are also available which include "knowledge engines", "knowledge portals", "text mining" and a
variety of other systems.

Need for KM at BAL

“Learn and labor before you grow old, for learning is better than silver and gold, Silver and gold may vanish away,
but knowledge acquired if managed well will never decay”
-Anonymous
One of the key challenges faced of BAL discussed earlier in the case is inadequate trained manpower in telecom
services space. Due to shortage in human resource competitors poach knowledge workers with decades of
experience who can easily migrate to any other location or organization. People with adaptive minds can park
their knowledge anywhere and become mobile. In many ways, BAL can lose their vital intangible assets overnight
if employee leaves. Organizations without a KM initiative become vulnerable to the turnover of knowledge
workers and become victim to high-cost operations. The following are some of the key findings by BAL when
knowledge workers leave their organization:
• When they leave, 70% of their knowledge leaves with them.
• They spend 30% to 40% of their time looking for information.
• Redeveloping information that already exists costs approximately $5,500 annually per employee and the average
document is copied nine to eleven times.
To overcome the above listed issues of knowledge worker leaving the organization, BAL has initiated KM
as Corporate IT agenda. KM initiates knowledge convergence and management of common knowledge that are

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essential to accelerate learning and innovation, improve time-to-market and maximize service quality. Corporate
IT leads this initiative in the organization as it has the overview of the organization and hence in better position to
identify opportunities for knowledge sharing. It also understands and has capabilities to deploy IT tools to
make knowledge sharing happen.
KM for BAL is a strategy to achieve business objectives faster and better - through an integrated set of
initiatives, systems and behavioral interventions to promote smooth flow and sharing of knowledge relevant to the
business and eliminate re-invention. Mr. Manoj Kholi, President, Bharti Airtel Ltd. says, “I believe that within our
circle and functions, there exist pockets that are truly global benchmarks. There is substantial opportunity for us to
transfer these best practices across all our circles and functions and make 2007 the year of “Made in Airtel”. We
must share and replicate to be best- in-class as One Airtel. The circle or unit which has already become best of
Bharti can target becoming best of globe so that we achieve our vision of becoming a benchmark across the
telekcom world”

Good to Great

“Knowing is not enough: we must apply. Willing is not enough; we must do” is what Goethe rightly said. World
over KM has become embedded in policy and strategy and successful implementation of KM will help in making
organizations good and to a large extent successful. But for BAL, KM initiative was not seen as a mere strategy but
as a differentiator in helping it to become from ‘good to great’ (Collins, 2001). The most successful business
enterprise distinguishes itself from its peers is by making a leap from “good to great”. BAL also did the same by
taking care of the following points:
1. Focusing solely on what it can potentially do better then any other organization and outsourcing non-core
functions.
2. Thoughtless reliance on technology is a liability (Malhotra, 2005). When used right with a clear vision it
accelerates growth, at BAL KM ranks number five out of the company’s top ten strategies identified to achieve
the company’s business objectives.
3. The good-to-great companies never began with technology-push model (Malhotra, 2005) but with strategy-pull
model, which facilitates organic sense making (Malhotra, 2001b) as in the case of BAL.
This “good to great” journey has made BAL to win “Most Admired Knowledge Enterprises (MAKE)” award in
2006 and MIS Asia IT Excellence Award at the MIS Asia IT Summit 2006 for Best Knowledge Management
company, a milestone which no other telecom service provider to have ever won.

Four pillars of KM at Bharti Airtel Ltd

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 FIG.2: KM PILLARS

Knowledge Resources
Knowledge resources are the source where knowledge could be identified. Employees are the major source for
knowledge for BAL as they are the real knowledge contributors and knowledge users. Another major source of
knowledge is telecom circles. The best performing circles share, while others replicate the best performing circle,
which acts as knowledge resources can be replicated in new or emerging circle. To create additional knowledge
sources KM initiatives is around the following parameters: creating internal and external benchmarking,
identification and sharing of best practices, replication of best practices, creation of communities of experts,
measurement of results and variation across circles. Most importantly the knowledge identified through knowledge
resources should address at least any one of the following strategic imperatives.
• Increase customer satisfaction, which leads to customer delight.
• Share holders value maximization through increased productivity and efficiency.
• Revenue enhancement.
Culture
The overlapping portfolios of customers and suppliers have made it possible for the group to derive maximum
value out of KM. Recognizing this potential of KM in giving Bharti Airtel Ltd. an edge over the competition, a
formal KM process was embarked. This was started by conducting a survey amongst the senior executives in the
organization to understand their expectations from KM, which led to the launch of a KM site called
“ Insight@Airtel” on the intranet. However, realizing the importance of KM being a people centric process, the
focus was shifted on emphasizing formal / informal interaction amongst people from various functions
organizations. A significant amount of success has been achieved in R&D and quality functions through well-
established KM process. This ranges from sharing information and knowledge on products, projects and
processes to formation of informal groups known as the Eureka Club, and communities facilitating KM. Sharing
of information, expertise and even facilities have started yielding results. With the usage of KM technologies group
companies also began participating in KM movement. The knowledge from these companies is being made
'shareable' for the benefit of the g roup.

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 FIG.3: SNAP SHOT OF KNOWLEDGE PORTAL INSIGHTS@AIRTEL

To make employees create, share and replicate knowledge BAL has created following initiatives towards
KM culture.
• Sharing and replications of knowledge is part of employee Key Resultant Areas (KRAs)
• Knowledge competency of the employee is taken as one of the behavioral indicators
• Greater focus on replications as it allows people to spend time on true innovation
• “K-Dollars” reward scheme for employees sharing and replication knowledge.
But, the KM movement will reach the high success levels once it spreads to every individual of the
organization and becomes an organizational culture.
Technology
KM entails processes of capturing, distributing and using knowledge effectively. KM is not about servers, software
and database, although a set of sophisticated tools is the backbone of a reliable KM system. Thus KM should never
be equated to information technology. One such tool used in BAL for KM is Airtel world – it is Airtel’ intranet
site which is every employee’s prime interface with the organization and also the organization’s key interface
with the employee as seen in F i g . 4 . This is the hub of communication and information; and is accessible by all
Airtel employees. A dedicated corporate communication group updates the intranet regularly. Airtel world
contains top stories, corporate event, group home pages and helpdesk application for each of the functions. It has
a direct link to KM web Airtel knowledge portal Insights@Airtel, acts as a primary vehicle for information and
knowledge sharing. The portal contains KM tools enables employees all location log in to complete all knowledge
related task as seen in F i g . 3 .

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 FIG.4: SNAP SHOT OF AIRTEL WORLD

Knowledge Process
At BAL the various processes performed are defined and standardized which are followed the same way across
various circle. To have a systematic and standard KM process, knowledge processes are formally defined as shown
in Fig.5.

FIG.5: KNOWLEDGE PROCESS

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Key Enablers for KM at BAL

Strategic Focus
The biggest enabler is the focus and seriousness of top management and high expectations from KM. KM ranks
number five out of the company’s top ten strategies identified to achieve the company’s business objectives over the
next three to five year time horizon. KM and its results form part of monthly business reviews, and of all important
management communications. Performance appraisals at all levels include KM-specific measures.
Alignment with business objectives
KM and its results form a permanent agenda item on the President’s business reviews with CEOs of each business
productivity / value maximization. A set of top priority business measures has been defined. It is ensured that each
top priority measure maps with at least one of the President’s three strategic imperatives (discussed in Knowledge
Resource section) otherwise, it wouldn’t be on the top priority list. All KM initiatives including knowledge
repositories, sharing, replication and communities of experts, are structured around each of these top priority
business measures.
KM organization and roles
BAL has dedicated KM coordinators centrally and at each business unit. These people act as catalysts in the KM
process. They are change agents who bring in and spread the culture of knowledge sharing across the organization.
They influence other employees and facilitate the process of sharing and replicating knowledge and measuring the
results.
Standard KM processes
They have defined and are institutionalizing standardized, close-looped processes for knowledge-sharing, replication
and measurement of results. They believe that knowledge-sharing and replication that could help improve
performance on critical business measures will no longer be a matter of chance or choice, but a mandatory activity
like any other business process.
Culture and people engagement
For creating an organization-wide culture of knowledge sharing and replication, and to institutionalize KM, it is
critical for all employees to engage in KM activities, and not just a fraction of the employee base. To track of this
they are putting in place a measurement of “employee engagement in KM”. Each month, the percentage of
employees in every business unit and in every critical business process who have been part of at least one knowledge
submission to the company knowledge base, or a knowledge replication initiative or a knowledge sharing session,
will be measured and reported. This will be included in regular business reviews.
BAL has “knowledge-dollar (K$)” scheme under which employees earn points or K$’s every time they
share new knowledge in the company knowledge base or every time they replicate or apply knowledge shared by
others. The K$ is redeemed in exchange for gifts listed in KM portal. This and similar reward and recognition
schemes have been institutionalized at the level of individual employees, functional heads and business units.
Quality of content in knowledge repositories
Quality of content is ensured in two steps. First, all content submitted is scanned by a member of the KM team to
ensure relevance to the business, quality of documentation and adherence to standard KM formats. The content then
goes to the knowledge champion and community of experts who own the concerned knowledge repository. They
finally review and approve content for publishing, or edit or reject it if required. Having standard documentation
formats for knowledge sharing, replication and knowledge-sharing sessions helps to maintain quality and objectivity
of content. These standards are also part of the KM orientation training, which a majority of the employees have
gone through.
Technology enablement
Knowledge portal “Gyan Bharti” on the corporate Intranet is a common virtual platform for all employees to share
knowledge and replication at BAL. It contains repositories of re-usable organizational knowledge structured around
critical business processes. The KM portal has automated workflows for knowledge submission, approval and
publishing. It also automatically allots K$ to employees, and lets them check their K$ balance and transactions.

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KM Gear Wheel
The knowledge value graph in fig.1 reflects that value of knowledge increases with time but our study, observation
while doing the project at BAL and subsequent analysis in the area of KM brings out, that value of knowledge, if
unutilized and unshared also deplete, due to passage of time. Technology is only an enabler, Strassmann (1997)
emphasized, that it is not computers but what people do with them that matters.

FIG.6: KM GEAR WHEEL (SOURCE: AUTHORS)

Similarly, we have identified four gears, which form the KM wheel. To ensure that the KM wheel operates
smoothly, one needs to understand the inter linkage of these four gears. They are: People, Culture, Rewards and
recognition, Strategy. These gears are independent and interdependent and a fine alignment among these only will
ensure that KM is a not a myth and it becomes a reality. Knowledge acquisition wheel is moved by people and not
through technology. Knowledge sharing wheel is moved by organizational culture characterized by high level of
commitment and motivation. Knowledge utilization wheel used to share knowledge and increase the value of
knowledge, is moved by rewards and recognition program as K$ in the case of BAL. Strategy is the fourth gear
which will make KM the differentiator and help other organizations to benchmark against and unless seen as the
most important gear will not enable the organizations to higher plane of success.
Thus, KM gear wheel helps us to understand that, KM is all about people, culture, rewards and recognition
and strategy - development of strategy, based on knowledge and how of it, which in turn helps to achieve
organizational objectives, goals, mission and vision.

Results of KM

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As emphasized earlier, for BAL, KM is what it does for business results. It measures the results of KM in terms of
its impact on critical business measures. The impact of each knowledge replication on a business measure is
captured and documented. It has a simple standard format for documenting replications. The format includes the
quantified impact of the replication on a business measure. Till date (2006) more than 14000 knowledge submissions
by employees were published on the KM portal. Each one of these was from an internal or external source, and
screened for relevance to at least one critical business process before publishing. During this period, nearly 69% of
these submissions were applied or replicated by at least one other business unit within the group. The data below
highlights the benefits BAL has gained through its KM initiative.

TABLE 2: KM BUSINESS RESULTS

Particulars Business Results
Savings (from Replications)
−Mobility (2005-06) ~ Rs. 320 Million (23 circles)
−ABTS & Others (2005-06) ~ Rs. 30 Million (7 circles)
No. of Submissions on Portal
−Oct 2004 to Dec 2006 14000+
−Replication rate 69%
Employee Engagement
−Penetration (Usage): 65%
−Engagement (Contribution): 35%
SOURCE: BHARTI AIRTEL LTD

TABLE 3: KM BENEFITS
Particulars Benefits
Reduction in Bills Not Received Complaints From 4.2% to 0.74%
Billing by eBilling by e-mail 2-5 days of dispatch time saved
Reduction in faults on new installation within 30 days From 4.4 to 1
per 100 new installations
Reduction in Hard and Soft Fault rate (from Aug’’03 From 4.4 to 1
to Feb’’04)
Reduction in Tariff Plan Migration Complaints From 5.1% to 3%
Savings in Power Cost Savings of Rs.1.90 Mnas against the target
of Rs.1.19 Mn (budgeted).
SOURCE: BHARTI AIRTEL LTD

Factors Responsible for Institutionalization of KM at Bharti

While many enablers have been discussed above, and Fig.7 reflects the KM Journey, the biggest factors responsible
for results, institutionalization to date, and future sustenance are:

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 FIG.7:
KM JOURNEY

• High expectations and seriousness of top management. The alignment of performance appraisal systems at all
levels to include KM-specific measures and including KM performance as a regular agenda item on business
reviews reflect this seriousness. At Bharti, KM is not a fad, but is a serious tool for business excellence.
• Constant focus on hard business results, without losing sight of the culture angle.
• Standardized close-loop processes for knowledge sharing, replication and measurement of results.
This is just a snapshot of application of KM. Knowledge has always been managed, at least implicitly.
However, effective and active knowledge management requires new perspectives and techniques and touches almost
all facets of an organization. The organizations need to develop a new discipline and prepare a cadre of knowledge
professionals with a blend of expertise that no one has, previously. The impact on business of use of KM is
measurable. Knowledge is an asset that transcends time, individuals and geographies (Neeta Baporikar, 2004).

Conclusion

KM is the process of capturing and making use of a firm’s collective expertise anywhere in the business on paper, in
documents in databases or in people’s heads. It is not intended to favor expert systems of the early processes. The
goal is to present a balanced view of how computer technology captures, distributes and shares knowledge in the
organization by linking human expertise and documentation in an integrated KM system. This is what exactly the
KM initiative at BAL aimed at and succeeded to a large extent. In some ways, KM was all about survival in a new
business world of telecom - a world of competition that increased in complexity and uncertainty each day. The
mobile technology belongs to a world that challenges the traditional way of doing things. The focus is not only on
finding the right answers, but also on asking the right questions. What worked yesterday may or may not work
tomorrow. The focus is on ‘doing the right things’ rather than “doing things right” so that core competencies do not
become core rigidities in the future (Malhotra, 2000).
KM is fuel or raw material for innovation and the only competitive advantage that can sustain a company is
an unpredictable business environment, hence organizations need to keep outward eye and focus on unseen
opportunities for growth. This research paper aims at opening new vistas in the field of knowledge management.
Questions, which need to be addressed in the coming years for organizations to excel, in spite of good strategies and
knowledge base, would be:
• How to convert data, information into knowledge powerhouse?
• How knowledge management leads to organizational learning and development?

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 • How to evolve successful strategies of merger, acquisition or
diversification by using KM for crafting global organizations?
• How such strategies can be replicated?

References
[1] Amrit Tiwana(2002), The Knowledge Management Toolkit, 5,59-611.
[2] Ansoff, H.Igor. (1965). Corporate Strategy: An Analytical Approach to Business Policy for Growth and
Expansion. New York: McGraw Hill.
[3] Argyris, C. “Organizational Learning and Management”
[4] B. Rathan Reddy, Knowledge Management, Himalaya Publishing House, 2007.
[5] Bennis, W.&Nanus, B.Leaders: The strategies for Taking Charge, New York, NY, Haper & Row, 1985
[6] Bharti Airtel ltd. corporate website www.airtel.in
[7] Collins, J., 2001, Good to Great: Why Some Companies Make the Leap and Others Don't, Harper-
Business, New York, NY.
[8] David J. Skyrme, Knowledge Networking Creating the Collaborative enterprise 73,173.
[9] Ganesh Natrajan, Sandhya Shekhar, Knolwledge Management Enabling Business Growth Annexure 6.1,
155.
[10] Jeff Angus, Jeetu Patel (March, 1998), Knowledge-Management Cosmology, Retrieved on December 20,
2006, from http://www.informationweek.com/673/73olkn2.htm
[11] Madanmohan Rao, Leading with Knowledge” KM Chronicles: Travelogue 1, 465-501.
[12] Malhotra, Y., 2005, “ Integrating knowledge management technologies in organizational business
processes: getting real time enterprises to deliver real business performance”, Journal of Knowledge
Management, Volume 9 Number 1 2005 pp. 7-28
[13] Neeta Baporikar, “Knowledge Management” in GITAM Journal of Management Vol.2 No.1 pp 125-
132, Jan-Jun 2004. (ISSN 0972-740X)
[14] Neeta Baporikar, “Case Method: Cases in Management”, Himalaya Publishing House, 2005.
[15] Robert B. Pojasek , John Garn and Nick Papadopoulos.,2001, “Knowledge Management and Visual
Context”, Environmental Quality Management, Volume 11, Issue 1, Pages 77 - 87

Contact authors for full list of references.

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 Financial Leverage Changes Following Mergers of Australian Firms

Subhrendu Rath, s.rath@curtin.edu.au

Curtin University of Technology, Australia

Abstract
This study analyzes the changes in financial leverage for the firms involved in merger and acquisitions in Australia
during the period 1996 to 2004 and attempts to identify the reasons for changes in leverage. Consistent with previous
studies, the present study also finds that the target firms’ shareholders gain the highest in takeovers and that the
combined firms financial leverage tend to increase after the merger. Further, the present study finds support for the
argument that it is increased debt capacity that influences increased financial leverage.

Introduction

Firms may engage in mergers and acquisitions for several reasons: to realize synergies between the merging entities,
to achieve market power by forming monopolies or oligopolies (Andrade, Mitchell and Stafford, 2001), to take
advantage of the market valuation errors of the acquisition candidates, and to utilize the unused debt capacity of the
acquired firms. All these are in turn expected to lead to an increase in the market value of the combined firm.
Mergers and acquisitions have several implications for investors, managers and other stakeholders. For
instance, investors of both merging and merged entity may experience wealth redistribution that may or may not be
fair and often face a new set of risk return characteristics1. Similarly managers may have to deal with several people
related issues besides a modified agency structure that they may have to adapt to. Other stakeholders including the
government and lenders may have implications: governments may be concerned about concentration of market
power where as lenders may be concerned with possible increases in debt levels. Lewellen (1971), Shrieves and
Pashley (1987), Trifts (1991) and Ghosh and Jain (2000) provide support to the argument that financial leverage of
the combined firm tend to increase for the following reasons: increase in debt capacity2, motives of wealth transfer
from bondholder to shareholders and ex ante unused debt capacity.
Increase in debt capacity may be due to lower probability of default of the merged entity compared to the
erstwhile individual entities on account of increase in the size of the merged entity. As literature on credit risk
explains size is an important factor and has positive influence on debt capacity. However, the increase in financial
leverage has mixed implications in that it may lead to tax savings on one hand and increasing the bankruptcy cost on
the other hand. Thus the firm may have incentives to use up increased debt capacity up to a point where the
increased bankruptcy costs are just offset by the tax benefits3. Shrieves and Pashley (1984) and Ghosh and Jain
(2000) find that the increase in financial leverage after merger is caused by the increase in debt capacity.
Another argument relates to unused debt capacity in the past in one of the individual firms thereby
implying that an increase in leverage would enable the merged firm to attain its optimal capital structure and thereby
deriving the benefits of increased market value. Melicher and Rush (1974) find evidence of conglomerate firms
taking advantage of unused debt capacity to finance acquisitions. However, Shrieves and Pashley (1984) and Ghosh
and Jain (2000) find weak evidence of unused debt capacity resulting in increased financial leverage.
Similarly firms either individually or through mergers and acquisitions may engage in acts that tend to
increase the financial leverage when there is a possibility of expropriation of lenders by shareholders (Jensen and
Meckling, (1976)). Increased debt implies that the claims of bondholders are diluted thereby reducing the value of
bonds. Increased debt may also enable the firm to undertake risky projects which when they actually pay off would
provide increased returns to shareholders after meeting the fixed claims of bondholders. Galai and Masulis (1976)
argue that there may be a possibility of expropriation of wealth by bondholders of shareholders or new bondholders
after mergers. This would be the case if bondholders have same seniority of claims as they have more protection
now either due to increased size of the firm or due to new investments financed through issue of subordinated debt.

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 Most of the previous studies analyzing the relationship between financial leverage and mergers and
acquisitions are confined to the US despite an increase in merger and acquisition activity in Australia in the last few
decades4. Hence the present study focuses on the firms listed on Australian Stock Exchange (ASX). Given the
similarities between the Australian corporate law and securities regulation and that of the US system5, it would be
interesting to study the Australian markets to see whether the leverage changes after mergers and acquisitions are
similar. Similarly the present study also analyzes the reasons for changes in leverage in the post mergers and
acquisitions period.

Theoretical Framework and Hypotheses Tested

Financial Leverage in the Post Merger Period
Given that coinsurance benefits are derived entirely by bondholders thereby reducing the value of equity (Galai and
Masulis, 1976), firms may increase financial leverage so as to expropriate wealth from bondholders to shareholders.
Similarly presence of unused debt capacity in the pre-merger period may lead to increased leverage in the post
merger period as firms may want to take advantage of tax deductibility of interest payments.
Kim and McConnel (1977) and Ghosh and Jain (2000) show that financial leverage of the combined firm
increases in the post merger period compared to the aggregate leverage of the acquiring and target firms in the pre-
merger period. We therefore hypothesize that financial leverage of the combined firm increases in the post merger
period.
Financial Leverage and Return to Shareholders
The gains from mergers are shared between target and acquirer shareholders (Israel, 1991). Since the shareholders
of target firm lose control of the firm, they expect a premium to be paid. Therefore it may be hypothesized that
shareholders of target firm experience higher returns compared to that of the shareholders of acquiring firm.
Method of Payment and Shareholder Return
Similarly, the method of payment in takeovers and acquisitions also influences the returns of shareholders. Trifts
(1991) and Datta and Iskandar-Datta (1995) show that cash transactions tend to be financed by debt, increasing the
leverage of combined firm, where as stock financed transactions tend to decrease leverage, reducing leverage.
Therefore we hypothesize that shareholders gain more when the transaction is financed by stock rather when cash is
used to finance the transaction.
Increased Debt Capacity as a Reason for Increased Leverage
Lewellen (1977) finds that the default risk of merged firms decline in most mergers because of the correlation
between cash flows of acquiring and target firms is less than one. Only in the extreme case, where the earnings are
perfectly positively correlated, the default risk stays the same. The reduced probability of default implies that the
merged firms derive the diversification benefits and these benefits accrue to the bondholders as coinsurance. Thus
coinsurance leads to expropriation of wealth by bondholders of shareholders. This prompts the shareholders to
require increased leverage as the investors have better pay off compared to bond holders. Therefore it is
hypothesized that increase in financial leverage is on account of increased debt capacity.
Past Unused Debt Capacity as a Reason for Increased Leverage
Another possible reason for the increase in financial leverage could be because of the underutilization of the past
unused debt capacity of the target and / or the acquiring firm in the pre-merger years. The merged firm tends to gain
from such increase in leverage in the post merger period. Hence it is hypothesized that increased financial leverage
is on account of unused debt capacity.
Desire of Shareholders to Expropriate the Wealth of Bondholders as Reason for Increased Leverage
Yet another reason why firms may increase leverage is the desire of shareholders to expropriate the wealth of
bondholders. Expropriation is possible by either increasing the variability of firm cash flows or by diluting the
claims of investors. The latter – dilution of earnings claims of bondholders – would occur when fresh debt is issued
with similar seniority to the existing debt. Given that bondholders anticipate expropriation; their concerns may have
been reflected in the covenants, particularly in countries like Australia. Therefore it is hypothesized that financial
leverage increase may not be on account of desires of shareholders to expropriate wealth from bondholders.
Permanence of Increase in Financial Leverage

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 Choudhry and Nanda (1993) argue that the increase in financial leverage surrounding mergers and acquisitions is
short term in nature and that firms use leverage strategically. Hence it is proposed to study the permanence of
increase in financial leverage following mergers and acquisitions. We hypothesize that increase in financial
leverage tend to be short run as leverage is only used strategically.

Data and Methodology

Sample Selection and Data Sources

Information relating to announcement date, actual takeover date, industry category, and method of payment for the
firms engaged in mergers and acquisitions are obtained from the Securities Data Company (SDC) merger and
acquisition database.
The initial sample consists of companies that fulfill the following requirements: (i) companies involved in
merger and acquisition activity in Australia from 1996 to 2004, and have financial statement for a period of five year
prior to and after the takeover for either the target or the acquirer firm; (ii) listed and traded in the Australian Stock
exchange (ASX); (iii) firms whose primary business is not in financial businesses - banking, insurance, investment
and financial services industry; and (iv) the merger and acquisition activity listed in the Financial Analysis
publication “Takeovers in Australia”6. These criteria result in a final sample consisting of a set of 104 mergers or
acquisitions. Distribution of these firms on the basis of method of payment shows that a majority of these are cash
offers (63), followed by stock offers (34) and the remaining transactions are financed using combination of cash and
stock (Table 1). The mergers and acquisitions are distributed evenly throughout the sample period except for 1998
where there are only 2 cases.

TABLE 1: YEAR-WISE DISTRIBUTION AND THE METHOD OF PAYMENT OF MERGERS AND

ACQUISITIONS
By Method of Payment 1996 1997 1998 1999 2000 2001 2002 2003 2004 Total

Cash Tender Offer 1 9 7 2 10 6 5 11 12 63

Stock Swaps 1 2 1 5 2 5 6 9 3 34
Combined 0 1 2 1 0 1 0 1 1 7

Total 2 12 10 8 12 12 11 21 16 104
% 1.9% 11.5% 9.6% 7.7% 11.5% 11.5% 10.6% 20.2% 15.4% 100%
Year-wise distribution and the method of financing are based on 104 target and acquirer firms from 1996 to 2004.
These firms must be listed on the ASX at the time of merger. At least one of the firms involved in the merger must
have financial statements available for 5 years before and 5 years after the merger and acquisition.

A 5-year time frame is used to see the changes of financial leverage overtime. The announcement date is
used as the event or reference year instead of the effective takeover date because it is more reflective of the
expectations of investors of acquiring and target companies. Another important reason as pointed out by Asquith and
Kim (1982) is that a time lag between the announcement and the merger date tend to be different between different
mergers and if the merger date is used as the reference period, the statistical tests may not be able to detect any
systematic movement in share prices due to the noise that the variable time lag may create.
The financial statements of the target and acquirer firms are obtained from DataDisc CD-ROM, company
Analysis database and Datastream database. Similarly, the closing share price information is obtained from the
Datastream database. Market capitalization for each firm is calculated by multiplying the number of shares
outstanding at the end of each financial year with the share price at the end of that financial year.

1092
Description of Methodology
Market adjusted returns are calculated to capture the returns gained by the target and acquirer firms shareholders.
All Ordinaries Price Index return is used as a proxy for the market return. The market adjusted return is calculated as
the difference between daily return of each firm and the market index return. The market adjusted return is defined
as the difference between the daily return of each firm and the daily market return. Cumulative abnormal returns
(CAR) are calculated relative to the announcement date.
The market adjusted return for the acquirer firms’ are separated and grouped according to the method of
payment – cash, stock and combination of cash and stock – to analyze the influence of method of payment on the
gains to the shareholders.
To analyze the increased debt capacity hypothesis, firms in the final sample are compared with a matched
sample. The matched firms are selected on the basis of the market value of equity of the combined firm i.e., the
combined market value of the target and acquirers one year prior to merger.

Discussion of Results

Results show that the shareholders of the target firms on average tend to gain substantially more than the
shareholders of the acquirer firms around the merger announcement period (Table 2). The shareholders of the target
firms tend to gain highest for the period of -20 to +1, whereas at the same time, the shareholders of the acquirer
firms have a negative gain (-3.12%). However, the shareholders’ of the target and acquirer firms in the US appear to
earn substantially more than the Australian shareholders of acquiring and target firms around the merger
announcement7. Another striking aspect is that the acquirers on average lose where as the target companies gain on a
market-adjusted basis in mergers and acquisitions in Australia.

TABLE 2: MARKET ADJUSTED RETURNS AROUND THE MERGER ANNOUNCEMENT DATE

Market Adjusted Returns
Days relative to the Weighted average
Announcement Date Acquirers (%) Target (%) (Acquirers + Targets)
(%)

-1 0.71% 0.56% 1.2585%

0 -0.92% 4.24% -0.6129%
-1 to 0 -0.21% 4.80% 0.5839%
-1 to +1 -0.33% 9.24% 2.3053%
-5 to +1 -0.40% 10.09% 2.1729%
-10 to +1 -1.83% 10.74% 1.1201%
-10 to +5 -3.38% 10.95% 1.6452%
-20 to +1 -3.12% 12.79% 1.5307%
-119 to -7 -4.21% 2.87% 2.2649%

Consistent with Israel (1991), shareholders of the target firm benefit more from the merger (Table 3).
However, the target firms’ shareholders tend to benefit more if the transaction is financed using cash rather than
stock. On the other hand, around the announcement period (1 day prior to the announcement), the acquirer’
shareholders tend to gain more if they use stock as a method of payment. However, although the market adjusted
return of the acquirer appear to be negative, the acquirer shareholders are better off when they use cash as method of
financing rather than stock as the market adjusted returns is negative albeit low.

1093
 TABLE 3: MARKET ADJUSTED RETURNS AROUND THE MERGER ANNOUNCEMENT DATE BY METHOD
OF PAYMENT
Market Adjusted Returns
Days relative to the
Announcement Date Weighted average (Acquirers
Acquirers (%) Targets (%)
+ Targets) (%)

Panel A: Cash as a Method of Payment

-1 -0.0497% 0.1658% -0.4080%
0 -0.3978% 7.4800% -0.4206%
-1 to 0 -0.4475% 7.6458% -0.8286%
-1 to +1 -0.0705% 11.5209% 1.6438%
-5 to +1 0.1367% 11.9812% 1.7350%
-10 to +1 -0.8086% 11.2851% -0.2849%
-10 to +5 -1.5294% 11.7756% -0.5798%
-20 to +1 -3.0754% 16.1021% 0.2010%
-119 to -7 -6.4937% 4.6201% 1.6782%

Panel B: Stock as a Method of Payment

-1 1.4956% 1.5976% 2.5467%
0 -2.0990% -1.0425% -1.3297%
-1 to 0 -0.6034% 0.5551% 0.9849%
-1 to +1 -1.3996% 6.6373% 2.6512%
-5 to +1 -2.2287% 8.0626% 1.6957%
-10 to +1 -5.2178% 11.6766% 0.8417%
-10 to +5 -7.8305% 10.5927% 2.5324%
-20 to +1 -7.2982% 7.8201% -0.6281%
-119 to -7 -1.6969% -2.7461% 1.2311%

Analysis of the changes in financial leverage of the combined firms shows an increase in financial leverage
in the post-merger and acquisition period compared to the pre-merger years (Table 4 and 5). The weighted average
financial leverage for combined companies increases from 19.91% (year -3 to -1) to 22.11% (year +1 to -3).
Similarly the weighted average financial leverage increases from 18.52% during the period -2 to –1 to a level of
21.10% during the period +1 to +2. This is consistent with earlier studies.

1094
 TABLE 4: FINANCIAL LEVERAGE AROUND MERGERS FOR THE COMBINED FIRMS
Year No of Firms Mean (%) Median (%) Min (%) Max (%)

Panel A: Year-wise analysis of financial leverage around mergers

-5 10 25.87% 25.49% 4.00% 48.18%
-4 10 27.82% 25.49% 1.95% 61.00%
-3 15 25.11% 25.45% 0 62.29%
-2 27 19.47% 18.51% 0 55.32%
-1 29 17.63% 10.40% 0 88.13%
1 60 20.30% 19.52% 0 62.10%
2 56 21.96% 21.39% 0 99.72%
3 56 24.21% 24.55% 0 99.26%
4 53 23.85% 22.68% 0 96.54%
5 41 23.54% 21.87% 0 99.07%

Panel B: 3-year Average before and after Merger

Weighted Average for Period -
3 to -1 19.91% 16.56% 0.00% 70.19

Weighted Average for Period

+1 to +3 22.11% 21.77% 0.00% 86.45%

Increase 2.20% 5.21% 0.00% 16.25%

Panel C: 2-year Average before and after Merger

Average for Period -2 to -1 18.52% 14.31% 0.00% 72.31%

Average for Period +1 to +2 21.10% 20.42% 0.00% 80.26%

Increase 2.59% 6.11% 0.00% 7.95%

From table 5, the increase in financial leverage can be seen more clearly. Instead of the combined firms’
financial leverage, individual firms’ financial leverage has been examined. Financial leverage increases from
19.55% for the acquiring firms in t-1 and 17.71% for the target firms in t-1 to 20.30% for the merged firm in year
t+1. The 3 years and 2 years weighted average of the individual firms’ financial leverage also show increase during
the post merger period. Hence, consistent with the findings of Kim and McConnel (1997) and Ghosh and Jain
(2000) for the American firms, the financial leverage tends to increase after the acquisition for the Australian firms.
Further, the increase in leverage appears to be permanent rather than a short-run phenomenon and therefore
the findings of this study appear to contradict the findings of Chowdry and Nanda (1993). Chowdry and Nanda point
out that the acquirers use financial leverage to finance the bidding wars to acquire the target firms at a bargain price.
Therefore they expect the financial leverage to decline over a period of time. The financial leverage in the case of
Australian firms appears to be stable even for five year after the merger. Hence, it may be concluded that the
increase in financial leverage appears to be permanent.

1095
 Analysis of reasons for an increase in financial leverage shows that increased debt capacity could be a
possible explanation (Table 6). The weighted average of the difference in financial leverage for the period of year -3
to -1 compared with the difference in financial leverage for the period of year +1 to +3 shows an increase of 0.14%.
Where as the weighted average of the difference in financial leverage for the period -2 to -1 compared with the
difference for the period +1 to +2 shows an increase of 3.04%. This could possibly on account of increased debt
capacity. Hence, the findings of the present study are consistent with Shrieves and Pashley (1984) and Ghosh and
Jain (2000).

1096
 TABLE 5: ACTUAL FINANCIAL LEVERAGE (DEBT TO MARKET VALUE) AROUND MERGERS
Actual Financial Leverage
Acquiring Firms Target Firms Combined Firms
N Mean Median Min Max N Mean Median Min Max N Mean Median Min Max

-5 21 34.66% 30.58% 0.14% 99.28% 38 28.01% 24.86% 0.00% 90.87%

-4 27 24.57% 24.84% 0.00% 51.39% 46 28.74% 22.36% 0.00% 93.29%
-3 41 22.31% 21.48% 0.00% 75.10% 52 28.48% 18.37% 0.00% 92.65%
-2 54 20.66% 19.06% 0.00% 75.10% 62 19.61% 8.99% 0.00% 91.04%
-1 60 19.55% 18.11% 0.00% 99.52% 51 17.71% 8.81% 0.00% 97.89%

hted Average for

d -3 to -1 20.66% 19.34% 0.00% 84.55% 20.24% 11.89% 0.00% 93.67%
d -2 to -1 20.07% 18.56% 0.00% 87.95% 18.75% 8.91% 0.00% 94.13%
+1 60 20.30% 19.52% 0.00% 62
+2 56 21.96% 21.39% 0.00% 99
+3 56 24.21% 24.55% 0.00% 99
+4 53 23.85% 22.68% 0.00% 96
+5 41 23.54% 21.87% 0.00% 99

hted Average for

d -1 to -3 22.11% 21.77% 0.00% 86
d +1to +2 21.10% 20.42% 0.00% 80

1097
TABLE 6: FINANCIAL LEVERAGE AROUND MERGERS FOR THE COMBINED FIRMS AND THE MATCHED FIRMS
Year No of Firms Mean (%) Median (%) Min (%) Max (%)

Panel A: Year-wise analysis of financial leverage around mergers

-5 6 3.13% -5.55% -11.58% 26.36%
-4 7 8.29% 6.31% -22.19% 42.84%
-3 11 0.46% 1.17% -50.14% 58.86%
-2 22 -7.20% -0.45% -82.21% 54.55%
-1 27 -4.68% -0.16% -86.70% 68.95%
1 24 -5.62% -3.40% -41.56% 29.90%
2 24 0.07% -0.39% -35.95% 43.20%
3 25 -7.89% -1.58% -67.75% 44.87%
4 22 -5.69% -0.04% -82.25% 35.59%
5 18 -3.61% -4.44% -76.18% 39.26%

Panel B: 3-year Average before and after Merger

Weighted Average for
Period -3 to -1 -4.66% -0.02% -78.35% 61.82%
Weighted Average for
Period +1 to +3 -4.53% -1.78% -48.69% 39.40%
Increase 0.14% -1.77% 29.67% -22.42%

Panel C: 2-year Average before and after Merger

Average for Period -2
to -1 -5.81% -0.29% -84.69% 62.48%
Average for Period +1
to +2 -2.78% -1.89% -38.76% 36.55%
Increase 3.04% -1.60% 45.93% -25.93%

Summary and Conclusion

This study analyzes the changes in financial leverage following mergers and acquisitions of Australian firms and
attempts to explain the reasons for changes in financial leverage. An analysis of firms engaged in mergers and
acquisitions during the period 1996 to 2004 shows that the target firms’ shareholders tends to gain more than the
acquirers’ shareholders around the merger announcement. This result is consistent with several earlier studies. The
study also finds that the target shareholders tend to gain more if the acquirers use cash rather than stock as a method
of financing the acquisition. It appears that this gain is higher when the debt level of target firms is higher while the
financial leverage of the acquiring firms is lower. The study also finds that financial leverage tends to increase after
the merger and that the potential reason for the increase in leverage is the increased debt capacity. These findings are
consistent with Ghosh and Jain (2000) and that the firms in Australia appear to show similar behavior compared to
that of the American firms.

1098
 References

[1] Agrawal, A., J.F. Jaffe, and G.N. Mandelker (1992), The Post-Merger performance of Acquiring Firms: A
Re-examination of an Anomaly, Journal of Finance, 47, 1605 – 1621.
[2] Allens Arthur Robinson News Release, 21 January 2002, Australia defies Asia Pacific Merger &
Acquisition Slowdown, Http://www.aar.com.au/news/pressrelease/prjan02.htm.
[3] Andrade, G., M. Mitchell, and E. Stanfford (2001), “New Evidence and perspective on Merger”, Journal of
Economics Perspective, Harvard Business School working Paper
[4] Asquith, P. and E.H. Kim (1982), The Impact of Merger Bids on the Participating firm’s Security Holders,
Journal of Finance, 37, 1209-1228.
[5] Auerbach, A.J. and D. Reishus, The Effects of Taxation on the Merger decision, in Auerbach, A. (ed),
Corporate Takeover: Causes and Consequences, University of Chicago Press, Chicago, 1998.
[6] Billett, M.T. (1996), Targeting Capital Structure: The Relationship Between Risky Dept and The firm’s
Likelihood of Being Acquired, Journal of Business, 69, 173 - 192.
[7] Brealy, A.R., S.C. Myers, Principles of Corporate Finance, 4th edn, McGraw Hill Inc, USA, 1991.
[8] Chowdry, B. and V. Nanda (1993), The Strategic Role of Debt in Takeover Contest, Journal of Finance,
58, 731 - 745.
[9] Copeland, T.E., and J.F. Weston, Financial Theory and Corporate Policy, 3rd edn., Addison-Wesley
Publishing Company, Canada, 1988.
[10] Datta, S., M.E. Iskandar-Datta (1995), Corporate Partial Acquisition, Total Firm Valuation and The Effect
of Financing Method, Journal of Banking and Finance, 19, 97 - 115.
[11] De Mott, D.A. (1998), Comparative Dimensions of Takeover Regulation, in J.C. Coffee Jr., I. Lowenstein,
and S. Rose-Ackerman (eds), Knight, Raiders and Target: The Impact of the Hostile Takeover, Oxford
University Press, USA, 1998.
[12] Franks, J., R. Harris, S. Titman (1991), The Post-Merger Share Price Performance of Firm, Journal of
Financial Economics, 29, 81 – 93.
[13] Galai, D., and R. Masulis (1976), The Option Pricing Model and the Risk Factor of Stock, Journal of
Financial Economics, 3, 53 – 81.
[14] Ghosh, A., and P.C. Jain (2000), Financial Leverage Changes Associated With Corporate Merger, Journal
of Corporate Finance, 6, 337 - 402.
[15] Harris, M., and A. Raviv (1990), Capital Structure and the Information Role of Debt, Journal of Finance,
45, 321 - 349.

End Notes

1
Several studies offer support for the view that the wealth gained by the acquired firm’s shareholders is greater than
that of the acquiring firms’ shareholders.
2
Stapleton (1982) define debt capacity as the amount of debt that can be raised at a give rate of interest.
3
Copeland and Weston (1988) shows that the value of the common stocks increase as the firm uses the increase in
debt capacity after the merger on account of tax savings on interest payments.
4
According to Thomson Financial figures, Australia has the highest merger announcements amounting to US $ 36
billion in 2001 followed by US $ 18.6 billion in South Korea. Source: www.aar.com.au.
5
De Mott (1988) compares the corporate law and securities regulations in the US and Australia among other
countries.
6
This is necessary since SDC provide a list of merger and acquisition announcements including those that are
unsuccessful.
7
See Ghosh and Jain (2000) Table 2, pp.384. Ghosh and Jain (2000) report that the target shareholders earn 28% for
the period of -20 to +1 and around 24% for the period -10 to +1 and -10 to +5.

1099
 Managing Cultural Differences:
Values and Work Goals in Culture and Personality Contexts

Vesa Routamaa, vmr@uwasa.fi

Tiina M. Hautala, thau@uwasa.fi
University of Vaasa, Finland
Maria Moshin, mariamohsin@hotmail.com

Abstract

International business, expatriates´ work and any international cooperation require understanding of cultural
differences. Along with globalization, the knowledge of cultural differences and their association with people's values,
attitudes and behavior have become more and more important. It is not enough to know the values but it is also
important to recognize that each individual personality has its own ranking of values. Knowing the relationship between
personality, values and cultures can assist the expatriates in better understanding the intercultural differences within
regions. Hofstede´s cultural dimensions (masculinity-feminism, collectivism-individualism, power distance and
uncertainty avoidance) serve well to explain the differences of values of different countries. In this paper, the value
differences of different personality preferences in two cultural contexts will be compared.

Introduction

International business, foreign direct investments, expatriates´ work and any international cooperation require
understanding of differences between cultures. For example business negotiations, expatriate managers and
professionals, management of foreign personnel, and cross-cultural teams presuppose good knowledge of cultural
differences (see e.g. Boyanova, Routamaa & Hautala 2006). Studies abound with recommendations on how to
increase expatriate success mostly with lists of “suitable” personality characteristics and behaviors to succeed in a
new culture. However, research on expatriates indicates that failed expatriate assignments are still costly and
numerous. Kale and Barnes (1995:271-280) recommend for international salespeople training in a combination of
Hofstede’s national cultural dimensions, Reynold’s typology for organizational culture and the MBTI as a method of
understanding personality. Studies abound with recommendations on how to increase expatriate success mostly with
lists of “suitable” personality characteristics and behaviors to succeed in a new culture. Black, Mendenhall and
Oddou (1991) introduced three main skill areas that expatriates need to focus on to survive in a new culture: skills
related to maintenance of self, skills relating to fostering relationships with host nationals and skills that promote a
correct perception of the host environment and its social systems. Strategies for coping with this adjustment process
introduced by Berry, Kim and Boski (1988:63) were three. Expatriates could psychologically adjust by adjusting
their behavior to the environment, or they can adjust by changing the environment, or they can move to a more
congenial environment. Recently more emphasis has been placed on cross-cultural training but research shows this
to be sporadic and culture-based. Some personal characteristics needed for a successful assignment are technical
ability, stress tolerance, flexibility, communication skills, and cultural empathy (Hiltrop & Jassens 1995:358-365).
For example, Routamaa & Rautiainen (2002) found that the psychological type has an association with the
expatriate adjustment in a new culture.
Along with globalization, value types and values from a cross-cultural perspective have awakened great
interest in recent years (e.g. Abramson & Inglehart 1995; Hofstede 1980, 1982, 1991; Markus & Kitayama 1991;
Schwartz 1992, 1994, 1997; Schwartz & Bardi 1997; Schwartz & Ros 1995; Smith & Schwartz 1997; Inglehart
1997; Triandis 1990, 1995; etc.). In different cultural contexts, the values have different weights but mostly the
relationship structure between personality types and values is similar (cf. analogical results, Routamaa & Pollari
1998).

1100
 Tylor (1871) defined culture as 'that complex whole that includes knowledge, beliefs, art, laws, custom, and
any other capabilities and habits acquired by man as a member of society'. Fundamental webs of culture constitute
patterned ways of thinking, acting, feeling, and interpreting (see e.g. Kluckhohn 1951: 86; Ting-Toomey 1985: 75).
As Hofstede (1984: 21) defines it, culture is 'the collective programming of the mind that distinguishes the members
of one human group from another'. Ronen (1986: 18) sees culture as 'the frame of reference' of individuals, and
Harris and Moran (1987: 102) discuss 'mental frameworks' which groups, organizations and nations develop. The
more individuals conform to each other in terms of background variables such as nationality, education and sex, the
more probably they perceive their social environment similarly and in that way share the same subjective culture
(Hofstede 1976). Dealing with values here, the subjective culture is of special interest instead of the objective
culture, which is composed of the more concrete infrastructure (cf. Routamaa & Pollari 1998).
Hofstede's definition referring to the collective programming is a good frame of reference in analyzing
values in a cultural context. Studying work-related values at the societal level, Hofstede (1984) identified four
dimensions: 1) Power distance, 2) Individualism, 3), Uncertainty avoidance, and 4) Masculinity.
Power distance can be defined as the extent to which the less powerful members of institutions and
organizations within a country expect and accept that power is distributed unequally. Individualism-collectivism
pertains to societies in which the ties between individuals are loose: everyone is expected to look after himself or
herself and his or her immediate family. Collectivism as its opposite pertains to societies in which people from birth
onwards are integrated into strong, cohesive in groups, which throughout people's lifetime continue to protect them
in exchange for unquestioning loyalty. Uncertainty avoidance is defined as the extent to which the members of a
culture feel threatened by uncertain or unknown situations. This feeling is expressed e.g. through nervous stress and
in a need for predictability: a need for written and unwritten rules. Masculinity pertains to societies in which social
gender roles are clearly distinct, and femininity pertains to societies in which social gender roles overlap. (Hofstede
1991:23-158) Also a fifth dimension, long-term versus short-term orientation, has later been identified in a survey
with the Chinese Value Survey instrument carried out by M. H. Bond (Hofstede 1993), which could be of great use
if some comparative data across countries were employed.
In spite of the criticism (see e.g. Spector, Cooper & Sparks 2001; Hofstede 2002; Spector & Cooper 2002),
Hofstede´s studies and cultural dimensions serve well the understanding of cultural differences. Different cultural
contexts may also explain the differences of values of different countries. Culture, ‘software of the mind’ or
‘collective programming’, as Hofstede puts it, may affect our values. However, as found by Routamaa and Pollari
(1998), the mutual relationships between values and personality types may be fairly similar in each culture. They
found that the cultural background affects leadership style. In the masculine culture, the average manager may favor
more dedicated, benevolent autocrat behavior. Correspondingly, the feminine culture with its negotiating and
compromising practices refers to integrated, even related styles. However, the leadership style differences between
personality types were similar in both cultures except that they were more task oriented in the masculine culture.
Accordingly, a similar relationship between culture, values and personality preferences may be assumed.
'Software of the mind' functions as a filter when people interpret what kind of values they emphasize. Do
the values differ significantly because of the cultural differences when the personality type is controlled? Controlling
the type may be an answer to the question of the effect of the culture. In this paper, the relationships between
personality preferences and values in Pakistani and Finnish contexts will be compared. In fact, the countries are not
as important as the cultures represented by them that are high vs. low power distance, high vs. low uncertainty
avoidance, collectivism vs. individualism, and masculinity vs. feminism.
Next, Pakistan and Finland that represent the cultures concerned here will be compared to each other in
relation to Hofstede's cultural dimensions and based on Hofstede's (1984) results, and the differences will be
characterized to the extent they are relevant to potential value differences.

1101
Culture Differences of Pakistan and Finland

Comparing Pakistan and Finland with regard to power distance and masculinity dimensions, both are higher in
Pakistan. Finland is characterized by small-power distance, and a less masculine cluster. Finland is feminine and a
small-power distance country compared to Pakistan. In the individualism-collectivism dimension, Finland is in the
individualism cluster whereas individualism is lower in Pakistan. Uncertainty avoidance is higher in Pakistan (See
Table 1).
In feminine cultures, the preference for resolving conflicts is compromise and negotiation. In masculine
cultures, there is a feeling that conflicts should be resolved by a good fight: Let the best man win (Hofstede 1991:
92). In feminine cultures a humanized job gives more opportunities for mutual help and social contacts. The
masculine leadership culture is assertive, decisive, 'aggressive', and a decision-maker is looking for facts rather more
than a group-discussion leader. The management in a feminine culture is less visible, more intuitive than decisive
and more consensus seeking than the counterpart in a masculine culture (Hofstede 1991:94). In weak uncertainty
avoidance, masculine cluster, achievement and esteem are typical whereas security and belongingness are typical of
strong uncertainty avoidance, feminine cluster (Hofstede 1991:125).
On the power distance and uncertainty avoidance dimension, Finland is in the cluster of small-power
distance and strong uncertainty-avoidance cluster, whereas Pakistan is in the cluster of larger-power distance and a
little stronger uncertainty avoidance. Countries with strong uncertainty avoidance but small power distance have
organizations on the well-oiled machine model, the activities structured without concentrating the authority. In the
large-power distance, weak-uncertainty-avoidance countries, a family organization with an omnipotent owner-
manager is characteristic; concentration of authority without structuring of activities (Hofstede 1991: 142-143).

TABLE 1: COMPARISON OF HOFSTEDE'S CULTURAL DIMENSIONS IN THE CASE OF PAKISTAN AND FINLAND
Cultural dimensions Pakistan Finland
Power distance Higher power distance Small power distance
Masculinity Highly masculine Feminine
Individualism-collectivism High collectivism Quite high individualism
Uncertainty avoidance Higher uncertainty avoidance Lower uncertainty avoidance

Values and Work Goals

In accordance with Hofstede's 'social programming', values are also seen as 'abstract social cognitions' that help
people's adaptation to the environment (Claxton & McIntyre 1996). According to Comte, value consensus is usually
defined as concurrence among members of a society concerning their values (Comte, cited in Partridge 1971; see
Schwartz & Sagie 2000)
Theoretically, the values, i.e. the types of values used here are based on Schwartz's (1992) and Schwartz and
Boehnke's (2004) definitions (TABLE 2).
The comparison of work goals is based on Vunderink and Hofstede's (1998) list of items (see Appendix 1)
that measure their importance in one's ideal work. The work goals indicate values on work.

1102
 TABLE 2: TYPES OF VALUES AND SUB-VALUES OF THE STUDY

Achievement - Implies personal success through demonstrating capabilities respecting the social standards that the individual has
to respect. The associated values include ambition, influence, capability, success, intelligence and self-respect
Benevolence - Is associated with the values of being helpful, responsible, forgiving, honest, loyal, capability for mature love and
true friendship
Conformity - The restraint on action, inclination and impulses that are likely to upset or harm other individuals or groups and
violate social norms or expectations are the relevant goals here. The associated values include obedience, self-discipline,
politeness and honoring of parents and elders
Hedonism - Pleasure and the sensuous gratification of oneself are the defining goals here, leading to pursuit of pleasure and
enjoyment of life
Power - The attainment of social status and prestige and control or dominance over others and resources define this motivational
type. Values associated with this include social power, wealth, authority, preserving public image and social recognition
Security - Safety, harmony and the stability of society, of relationships and of self-preservation are the defining goals of this
value type. The relevant values include national security, reciprocation of favors, family security, a sense of belonging, social
order, health and clean living
Self-direction - Independent thought and action in choosing, creating, exploring (creativity, freedom, choosing one’s own goals,
curiosity and independence) Spirituality - Implies meaning and inner peace through the transcendence of everyday life. The
associated values associated include a spiritual life, meaning in life, inner harmony and detachment
Stimulation - Values derive from the assumed need of individuals and groups for variety and stimulation in order to maintain an
ideal level of activity, motivating an exciting life, a varied life, and a daring outlook
Tradition - It springs from commitment to, and acceptance of, the customs and ideals that are imposed by an individual’s culture
or religion. The associated values are tradition, devotion, acceptance of one’s ‘lot in life’, humbleness and moderation
Universalism - This motivational type is defined by understanding, appreciation, tolerance and protection for the welfare of all
other people and of nature. The associated values include equality, unity with nature, wisdom, a world of beauty, social justice,
broad-mindedness, protecting the environment and a world at peace.

Personality Preferences
There are several ways to conceptualize and assess personality. In this study, the Myers-Briggs Type Indicator
(MBTI) was used. It is based on Carl Jung’s theory of psychological types and it reports personality preferences on
four scales: Jungian Extraversion – Introversion, Sensing – iNtuition, Thinking – Feeling, and the Judging –
Perceiving preference added by Briggs and Myers (Myers 1990). According to Myers (1990) ’the MBTI is primarily
concerned with the valuable differences in people that result from where they like to focus their attention, the way
they like to take information, the way they like to decide, and the way they like to adopt’. Usually one pole
dominates over another. The eight preferences are identified in sixteen types, each representing a certain preference
order (Myers & McCaulley 1985). Briefly illustrated the preferences or dimensions are (Myers 1990):
Extraversion (E) Interested in people and things in the world around them.
Introversion (I) Interested in the ideas in their minds that explain the world.
Sensing (S) Interested in what is real and can be seen, heard and touched.
Intuition (N) Interested in what can be imagined and seen with ’the mind’s eye’.
Thinking (T) Interested in what is logical and works by cause and effect.
Feeling (F) Interested in knowing what is important and valuable.
Judging (J) Interested in acting by organizing, planning, deciding.
Perceiving (P) Interested in acting by watching, trying out, adapting.
As stated by Myers & McCaulley (1985), ”according to theory, each of the 16 types results from a
preference for one pole of each of the four preferences over the opposite pole. A preference of any dimension is
designed to be psychometrically independent of the preferences of the other three dichotomies, so that the
preferences on the four dichotomies yield sixteen possible combinations called types, denoted by the four letters
identifying the poles preferred (e.g., ESTJ, INFP). The theory postulates specific dynamic relationships between the

1103
preferences. For each type, one process is the leading or dominant process and a second process serves as an
auxiliary. Each type has its own pattern of dominant and auxiliary processes and the attitudes (E or I) in which
these are habitually used. Determining these dynamic relationships is enabled by the J-P dichotomy of the MBTI.
The characteristics of each type follow from the dynamic interplay of these processes and attitudes”.
Next, the personality preferences will be briefly illustrated (obtained from Hautala 2005).
Extraversion (E) – introversion (I). Extraverted people direct energy mainly toward the outer world of
people and objects. They are energized by interaction and activity. At work, extraverted people try to reach
understanding through interaction and discussion. They are willing to engage and involve others and are energetic
and prone to take action. Extraverted types seek and give feedback. Introverted people direct energy mainly toward
the inner world of experiences and ideas. They are energized by reflection and solitude. At work introverted types
experience people who "stop by" as interruptions and they prefer physical space, which allows for privacy and
concentration. They seem less engaged, even when around others (Demarest 1997; Myers et al. 1998). Extraverted
people can be seen easily as too overwhelming with their energy and enthusiasm. Too many extraverts in groups or
teams can result in confusion because they interrupt each other to express their views (Bradley & Hebert 1997;
Demarest 1997). On the contrary, introverted people may be seen as too quiet, stable, thoughtful, deep, and
sometimes as disinterested, less active than others and not naturally sharing much information (Demarest 1997).
Sensing (S) – intuition (N). Sensing people focus mainly on what can be perceived by the five senses. They
are naturally interested in concrete and verifiable information about what is or what has been. Sensing people prefer
to work at a steady pace, and complete instructions indicating both the end result and the specifics about how to get
there. They like to work with one thing at a time. In teams, they tend to want clear purposes and goals. Intuitive
people focus mainly on perceiving patterns and interrelationships. They tend to be naturally interested in flashes of
insight, abstractions, theory, and notions of what could be. Intuitive people prefer to work in bursts and wait for
inspiration. They prefer general instructions and may work on several things at the same time. In groups and teams
they want to have an engaging vision and mission (Demarest 1997; Myers et al. 1998). Sensing types may be
experienced as too much down-to-earth, meticulous, reminding others of what is practical and realistic, and
sometimes not giving much attention to the long-range view, paying too much attention to details and not wanting to
try something new. Whereas intuitives may be experienced as too full of ideas, rising to a challenge, looking to the
future, seeing connections among seemingly unrelated things, and sometimes as overlooking the facts and making
proposals that seem impossible to carry out (Demarest 1997).
Thinking (T) – feeling (F). Thinking people tend to base their conclusions on logical analysis with a focus
on objectivity and detachment. They prefer to focus on the work at hand, and do not spend much time on getting to
know others and building relationships. They have interaction that is often brief and to the point. They are also
often critical of ideas and proposals, and often make suggestions for "how to improve" things. Feeling people tend to
base their conclusions on personal or social values with a focus on understanding and harmony. At work they often
want to spend time getting to know others. They have interactions that encompass both work and non-work matters.
They are naturally appreciative of people's contributions (Demarest 1997; Myers et al. 1998). Thinking types may be
experienced as independent thinkers, task-oriented, skeptical, analytical and sometimes as making suggestions for
improvements that are experienced as criticism by others. On the contrary, others may see feeling types as too
people-oriented, affirming, and sometimes as not making the "hard" decisions, giving too much attention to
relationships, taking things personally when they were not intended to be and not being logical (Demarest 1997).
According to Kroeger and Thuesen (1992) the difference between thinkers and feelers can cause major problems in
organizations, because thinking types are mostly concerned with accomplishing the task, while feeling types are
concerned with how well people work together.
Judging (J) – perceiving (P). Judging people prefer decisiveness and closure. They like to live in an orderly
and structured fashion. As a working style, judging types tend to be methodical and systematic, and often develop
routine approaches to work. They like to finish things, bring a structure to the work at hand and see work and play as
distinct aspects of life. Perceiving (P) people prefer flexibility and spontaneity. They like to live with options open
as long as possible in an unstructured way. Perceiving people tend to be adaptable and often device flexible and
have innovative approaches to work. They like to start things, but motivation and interest may decline when it is
time to finish. They see work and play as combined aspects of life, and want work to be both productive and

1104
enjoyable (Demarest 1997; Myers et al. 1998). Judging types may be experienced as dependable, deliberate,
conclusive, focused, and sometimes as taking things too seriously, deciding too quickly, demanding, and being so
focused on goals they have set that they miss out on other things. However, perceiving people may be experienced
as too spontaneous, open to new experiences, fun loving, and sometimes as having difficulty deciding, tentative and
less organized than others (Demarest 1997).

Sample and Method

The sample consisted of 390 Finnish people and 98 Pakistani people who completed the Myers-Briggs Type
Indicator (MBTI) and the value questionnaires. In case of the value questionnaire (Schwartz), a 7-degree scale was
provided for respondents to indicate how important the values presented are. Because of the cultural differences, the
rankings of the sub-values will be reported. The factors, that are the value dimensions obtained of US or Finnish
data, do not correspond to the factors obtained from the Pakistani data, perhaps due to the cultural differences and
different conceptual and language surroundings. In order to measure work goals, a 5-degree questionnaire presented
by Vunderink and Hofstede (1998) was administered. 22 items indicate how important it would be to a respondent to
have the goals presented in an ideal job. The ranking orders of each personality preference and total samples will be
compared. Because of the limited number of different personality types, the analysis was based on personality
preferences E, I, S, N, T, F, J and P (see TABLE 3).
Actually, concerning values, the preferences play an important role in differentiating people. The
comparison of values and work values will be presented in the form of ranking orders in the whole sample of each
culture and of ranking orders of each personality preference. In TABLES 4 and 5, Pakistani data is normal text,
Finnish italic, and the Common Values or work goals of each preference of the sample are Bolded. The rankings of
each preference will not be analyzed in detail but the purpose is to show the variation of value and work goal
rankings between preferences, in addition between cultures.
Even though men and women are not compared here, it may be mentioned that the differences between
male and female respondents were insignificant in feminine culture and individual culture. Instead, in collective and
masculine culture the rankings of values differed more; the status of women is different. In this connection,
however, the means of total sample will be analyzed.

TABLE 3: THE DISTRIBUTION OF THE PREFERENCES

Sample Pakistani Sample Finnish Sample

Total
Freq. % Freq. % Freq. %
Preference
323 66,2 46 46,9 277 71,0
E
I 165 33,8 52 53,1 113 29,0
S 321 65,8 64 65,3 257 65,9
N 167 34,2 34 34,7 133 34,1
T 265 54,3 61 62,2 204 52,3
F 223 45,7 37 37,8 186 47,7
J 260 53,3 55 56,1 205 52,6
P 228 46,7 43 43,9 185 47,4
Results Total 488 100,0 98 100,0 390 100,0

Values
Concerning the personality preferences and values, there were many differences. As could be concluded, based on
the mean of the whole sample and the means of most preferences, the most preferred value in Pakistan was self-

1105
respect. That is, achievement in terms of self-respect is honored in masculine, collective environment. Honoring
parents and elders was second, on the average, and at least among the three top values of all preferences. That is,
conformity seems to be important in a collective culture. On the average, family security was the third in Pakistani
culture even though there were variations from second to sixth place in the ranking lists of the preferences. This
means that security, especially family security, is very important in a collective and in a high- uncertainty-avoidance
culture. Averagely, the meaning of life (spirituality) was fourth in the ranking list, varying from second to tenth
place depending on preference. True friendship (benevolence) was on the fifth place but the variation was large.
Family security, meaning of life (spirituality), true friendship (benevolence), health (security), inner
harmony (spirituality), capability (achievement), freedom (self-direction), and loyalty (benevolence) were the next
of the top ten.

TABLE 4A: A COMPARISON OF THE RANKINGS OF THE MEANS OF THE VALUES OF PAKISTANI (1P-10P) AND
FINNISH (1F-10F) PREFERENCES (FINNISH ITALIC, COMMON VALUES FOR BOTH COUNTRIES BOLD)

Total Sample Extraversion Introversion Sensing iNtuition

(n=P98/F410) (n=46/277) (n=52/113) (n=64/257) (n=34/133)
1P. Self-respect 1P. Self-respect 1P. Self-respect 1P. Honoring of 1P. Self-respect
parents and elders
1F. Health 1F. Health 1F. Family security 1F. Family security 1F. Health
2P. Honoring of 2P. Honoring of 2P. Family security 2P. Self-respect 2P. True
parents and elders parents and elders friendship
2F. Family security 2F. Family security 2F. Healthy 2F. Healthy 2F. Family security
3P. Family security 3P. Meaning in life 3P. Honoring of 3P. Family security 3P. Honoring of
parents and elders parents and elders
3F. True friendship 3F.True friendship 3F. Freedom 3F. True friendship 3F. True friendship
4P. Meaning in life 4P. Family security 4P. True 4P. Meaning in life 4P. Meaning in life
friendship
4F. Self-respect 4F. Self-respect 4F. Inner harmony 4F. Self-respect 4F. Freedom
5P. True 5P. Cleanity 5P. Inner harmony 5P. Loyalty 5P. Freedom
friendship
5F.Freedom 5F. Freedom 5F. Honesty 5F. Freedom 5F. Self-respect
6P. Healthy 6P. Successful 6P. Health 6P. Health 6P. Family security
6F. Honest 6F. Honesty 6F. Self-respect 6F. Honesty 6F. Honesty
7P. Inner harmony 7P. Equality 7P. Meaning in life 7P. Honesty 7P. Successful
7F. Inner harmony 7F. Enjoying life 7F. True friendship 7F. Inner harmonity 7F. Enjoying life
8P. Capability 8P. Healthy 8P. Capability 8P. Inner harmony 8P. Broad-minded
8F. Enjoying life 8F. Loyalty 8F. Responsibility 8F. Loyalty 8F. Inner harmony
9P. Freedom 9P. Responsibility 9P. Freedom 9P. True friendship 9P. Inner harmony
9F. Loyal 9F. Inner harmonity 9F. Loyalty 9F. Enjoying life 9F. Mature love
10P. Loyal 10P. Honest 10P. Loyalty 10P. Capability 10P. Capability
10F. Responsibility 10F. Mature love 10F. Enjoying life 10F. Responsibility 10F. Equality

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 TABLE 4B: A COMPARISON OF THE RANKINGS OF THE MEANS OF THE VALUES OF PAKISTANI (1P-10P) AND
FINNISH (1F-10F) PREFERENCES (FINNISH ITALIC, COMMON VALUES FOR BOTH COUNTRIES BOLD)
Feeling Thinking Perceiving Judging
(n=37/187) (n=61/204) (n=43/185) (n=55/205)
1P. Honoring of 1P. Self-respect 1P. Honoring of 1P. Self-respect
parents and elders parents and elders
1F. Healthy 1F. Healthy 1F. Healthy 1F. Family security
2P. Self-respect 2P. Meaning in life 2P. Self-respect 2P. Meaning in life
2F. Family security 2F. Family security 2F. Family security 2F. Healthy
3P. Inner harmony 3P. Honoring of 3P. Inner harmony 3P. Honoring of
parents and elders parents and elders
3F. True friendship 3F. True friendship 3F. True friendship 3F. True friendship
4P. Sense on 4P. Family security 4P. Family security 4P. Family security
belonging
4F. Self-respect 4F.Freedom 4F. Freedom 4F.Self-respect
5P. True friendship 5P. Healthy 5P. True friendship 5P. Healthy
5F. Honesty 5F. Self-respect 5F. Enjoying life 5F. Honesty
6P. Family security 6P. Capability 6P. Meaning in life 6P. Loyalty
6F. Inner harmony 6F. Honesty 6F. Self-respect 6F. Loyalty
7P. Cleanity 7P. Successful 7P. Healthy 7P. Cleanity
7F. Enjoying life 7F. Enjoying life 7F. Honesty 7F. Inner harmony
8P. Freedom 8P. True friendship 8P. Freedom 8P. Capability
8F. Freedom 8F. Responsibility 8F. Inner harmony 8F. Responsibility
9P. Loyalty 9P. Social justice 9P. Capbility 9P. Honesty
9F. Mature love 9F. Loyalty 9F. Mature love 9F. Freedom
10P. Meaning in life 10P. Honest/ 10P. Honest 10P. Successful
Responsible
10F. Loyalty 10F. Inner harmony 10F. Loyalty 10F. Mature love

Honoring of parents and elders (conformity), meaning of life (spirituality), and capability (achievement)
differed from the Finnish top ten. As could be assumed, it seems that in the collective culture conformity (honoring
of parents and elders) is valued more explicitly than in the individual culture. The importance of meaning of life
(spirituality) may also arise from the collective Asian religious culture which is different from individual Lutheran
culture. On the other hand, the top place of self-respect and the placement of capability (both typical of
achievement) in the top ten may be derived of the masculine culture where power and effectiveness are honored. In
an individual culture, personal health and freedom (self-direction) seem to be more important than in a collective
culture. True friendship (benevolence) and family security (security) seem to be of great importance in both cultures,
maybe due to both collectivism and feminism.
Looking at the personality preferences, because of the collective and masculine cultures, especially, self-
respect (achievement) and honoring of parents and elders (conformity) were nearly independent of preferences. Also
family security (security) was generally valued. Typical culture based value in feminine and individual culture was
security in terms of health, family security, and also inner harmony. Enjoying life (hedonism) was quite valued in
individual culture but not ranked in masculine culture. Also responsibility was ranked only in feminine, small-power
distance culture, mainly by Es, Is, Ts and Js.
That is, the culture standardizes certain values. In feminine culture, extraverted (E), intuitive (N) and
spontaneous (P) valued mature love that was not on the top ten of any preference of masculine culture. Clean,
referring to security, was mentioned by extraverted (E), feeling types (F) and judging (J) types maybe due to higher
uncertainty avoidance. Single preferences had some typical values for their nature, for example Pakistani intuitive
(N) broad-minded, and Finnish feelers (F) sense of belonging (for details, see TABLES 4A and 4B).

1107
Work Goals
Looking at the work goals (TABLES 5a and 5b), fully using skills and abilities on the job was most valued by
Pakistani respondents, except feeling (F) preference that valued most having sufficient time left for personal life,
and secondly having a good working relationship with the supervisor. That is typical of feelers who prefer nice
atmosphere and company. Fully using skills and abilities was in correspondence with masculine, achievement-
valuing culture.

TABLE 5A: A COMPARISON OF THE RANKINGS OF THE MEANS OF THE WORK GOALS OF PAKISTANI (1P-5P)
AND FINNISH (1F-5F) PREFERENCES (FINNISH ITALIC, COMMON VALUES FOR BOTH COUNTRIES BOLD)
Total Sample Extraversion Introversion Sensing iNtuition
(n=P98/F390) (n=46/277) (n=52/114) (n=64/258) (n=34/133)
1P. Fully using 1P. Fully using 1P. Fully using 1P. Fully using 1P. Fully using
skills and abilities skills and abilities skills and abilities skills and abilities skills and abilities
on the job on the job on the job on the job on the job
1F. Have 1F. Have sufficient 1F. Have sufficient 1F. Have sufficient 1F. Have
sufficient time left time left for time left for time left for challenging
for personal life personal life personal life personal life tasks to do
2P. Get the 2P. Make a real 2P. Get the 2P. Make a real 2P. Get the deserved
deserved contribution to the deserved contribution to the recognition when
recognition when success of the recognition when success of the doing a good job
doing a good job company doing a good job company
2F. Fully using 2F. Fully using 2F. Live in a 2F. Fully using 2F. Fully using
skills and abilities skills and abilities desirable area skills and abilities skills and abilities
on the job on the job on the job on the job
3P. Make a real 3P. Get the 3P. Have an 3P. Work in a 3P. Have an
contribution to the deserved opportunity for prestigious, opportunity for
success of the recognition when advancement to successful company advancement to
company doing a good job higher jobs higher jobs
3F. Have 3F. Have 3F. Have a good 3F. Have a good 3F. Have an element
challenging tasks challenging tasks working working of variety and
to do to do relationship with relationship with adventure inthe job
supervisor supervisor
4P. Have an 4P. Have an 4P. Have an 4P. Get the 4P. Have sufficient
opportunity for opportunity for opportunity for high deserved time left for
advancement to advancement to earnings recognition when personal life
higher jobs higher jobs doing a good job
4F. Have a good 4F. Have a good 4F. Have 4F. Live in a 4F. Have sufficient
working working challenging tasks to desirable area time left for
relationship with relationship with do personal life
supervisor supervisor
5P. Have a good 5P. Have a good 5P. Have sufficient 5P. Have training 5P. Make a real
working working time left for opportunities/ Have contribution to the
relationship with relationship with personal life a good working success of the
supervisor/ Have supervisor relationship with company/ Have good
sufficient time left supervisor fringe benefits
for personal life
5F. Work with 5F. Work with 5F. Work with 5F. Work with 5F. Have a good
people who people who people who people who working rela-
cooperate well cooperate well cooperate well cooperate well tionship with
supervisor/Work
with people who
cooperate well

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 TABLE 5B: A COMPARISON OF THE RANKINGS OF THE MEANS OF THE WORK GOALS OF PAKISTANI (1P-5P)
AND FINNISH (1F-5F) PREFERENCES (FINNISH ITALIC, COMMON VALUES FOR BOTH COUNTRIES BOLD)
Feeling Thinking Perceiving Judging
(37/186) (61/204) (43/185) (55/203)
1P. Have sufficient time 1P. Fully using skills 1P. Fully using skills and 1P. Fully using skills and
left for personal life and abilities on the job abilities on the job abilities on the job
1F. Have sufficient time 1F. Have challenging 1F. Have sufficient time 1F. Have sufficient time
left for personal life tasks to do left for personal life left for personal life
2P. Have a good working 2P. Get the deserved 2P. Have an opportu-nity 2P. Get the deserved
relation-ship with recognition when doing a for advancement to higher recognition when doing a
supervisor good job jobs good job
2F. Fully using skills and 2F. Fully using skills 2F. Fully using skills and 2F. Have challenging
abilities on the job and abilities on the job abilities on the job tasks to do
3P. Make a real 3P. Have an oppor-tunity 3P. Get the deserved 3P. Make a real
contribution to the success for advance-ment to recognition when doing a contribution to the success
of the company higher jobs good job of the company
3F. Work with people who 3F. Have sufficient time 3F. Work with people who 3F. Fully using skills and
cooperate well left for personal life cooperate well abilities on the job
4P. Live in a desirable 4P. Make a real 4P. Make a real 4P. Have a good working
area contribution to the contribution to the success relationship with
success of the company of the company supervisor
4F. Live in a desirable 4F. Have an element of 4F. Have an element of 4F. Have a good working
area variety and adventure variety and adventure relationship with
inthe job inthe job supervisor
5P. Have an opportunity 5P. Work in a 5P. Have sufficient time 5P. Have training
for high earnings / Fully prestigious, successful left for personal life opportunities
using skills and abilities company
on the job
5F. Have a good working 5F. Have a good working 5F. Have challenging 5F. Work with people who
relationship with relationship with tasks to do cooperate well
supervisor supervisor

To get the deserved recognition when doing a good job and to make a real contribution to the success of the
company were also at the top of valued work goals suiting well in the masculine, achievement culture. Along the
same lines was also having an opportunity for advancement to higher jobs that could also be typical of an individual
culture but it was not, maybe due to the feminine dimension.
In the individual and feministic culture, to have sufficient time left for personal life was the most important
work goal. Also to have challenging tasks to do was felt as valuable. To work with people who cooperate well was
also emphasized in the feministic culture.
The common work goals for both cultures concerned were fully using skills and abilities on the job and
having a good working relationship with the supervisor but the feminine, individual culture emphasized strongly
sufficient time left for personal life instead of only the job. The top fives of work goals were quite different in each
culture except feelers (F) who had four common work goals of five. Typical of feelers were to have sufficient time
left for personal life, of course, to live in a desirable area, to have a good working relationship with the supervisor,
and fully using skills and abilities on the job. Also other preferences had typical work goals for their traits but not
common in both cultures. To mention some examples, Pakistani sensing (S) respondents want to work in a
prestigious, successful company and have training opportunities. Introverts (I), sensors (S), and feelers (F) want also
to live in a desirable area in the individual culture. Typical of intuitive (N) and spontaneous (P) people and also
thinkers (T) in individual culture, they want to have an element of variety and adventure in the job. In all, except the
feelers (F), work values differed quite much between the cultures concerned.

1109
Conclusions

What are the lessons to be learned based on the analysis above? Firstly, the study confirmed the earliest studies that
there are culture-based stresses in the values that must be taken into consideration in international business.
Secondly, the study revealed that there is a certain amount of conformity among members of a society concerning
their values. That is there may be some shared values over the individual values. Thirdly, the study uncovered that
there are values and work goals typical of certain personalities. Fourthly, the study confirmed that certain
personalities have common values or work goals over cultures.
Most typical values for high power distance, high uncertainty avoidance, collectivism and masculinity
culture were particularly achievement and conformity but also spirituality, security, benevolence and self-direction
to some extent. Hedonism, benevolence, security, self-direction, and partly spirituality in terms of inner harmony
were valued in the opposite culture. It may be noted that, for example, power, tradition, and universalism were not
on the top of rankings.
Inside cultures, personalities have their value and especially work goal differences. Each individual
personality has its own ranking of values. In global business, the business person or traveler should recognize the
intercultural differences within regions in order to succeed in business or leisure relationships. As was noted, for
example, true friendship, to have a good working relationship with the supervisor and to work with people who
cooperate well were high values in both cultures. That is personal relationships are a sensitive area where insulting
of values may lead to bad effects. The great number of unsuccessful expatriate recruitments is a serious example of
scarce understanding of cultural and personality differences of values and work goals.
To succeed as manager work in foreign culture needs training and coaching in self-knowledge and cultural
differences in terms of values and work goals. For example, a manager in masculine, collective, high-power
distance, and high-uncertainty-avoidance culture has to take into account achievement and security which demand
quite task-oriented leadership behavior while benevolence and self-direction require a certain degree of human
orientation. Also honoring spiritual values may be hard to manage for a western manager. A manager from an
individual and feminine culture may also have difficulties to apply task oriented and collective leadership style when
used to working in work communities colored by hedonism and benevolence. Correspondingly an expatriate coming
from high-power distance, high uncertainty avoidance, collectivism and masculinity culture to the opposite culture
may feel insecure and inactive in an un-collective milieu of hedonism. Additionally come personality differences,
which, at best improve effectiveness and organizational climate but, at worst will be misunderstood and wasted. In a
global world, business communities are more and more multicultural, despite the country where they are. That is
why knowledge of the relationships between cultural dimensions, values, work goal and personalities is a big
challenge for management.

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Appendix
APPENDIX 1: WORK GOALS QUESTIONNAIRE ITEMS (VUNDERINK & HOFSTEDE, 1998).

1111
1.have sufficient time left for your personal or family life
2. have challenging tasks to do, from which you can get a
personal sense of achievement
3. have little tension and stress on the job
4. have good physical working conditions (good ventilation and
lighting, adequate work space, etc.)
5. have a good working relationship with your direct supervisor
6. have security of employment
7. have considerable freedom to adopt your own approach to the
job
8. work with people who cooperate well with one another
9. be consulted by your direct superior in his/her decisions
10. make a real contribution to the success of your company or
organization
11. have an opportunity for high earnings
12. serve your country
13. live in an area desirable to you and your family
14. have an opportunity for advancement to higher level jobs
15. have an element of variety and adventure in the job
16. work in a prestigious, successful company or organization
17. have an opportunity for helping other people
18. work in a well-defined job situation where the requirements are
clear
19. have training opportunities (to improve your skills or learn new
skills)
20. have good fringe benefits (material advantages other than
cash salary)
21. get the recognition you deserve when you do a good job
22. fully use your skills and abilities on the job
1.have sufficient time left for your personal or family life
2. have challenging tasks to do, from which you can get a
personal sense of achievement
3. have little tension and stress on the job
4. have good physical working conditions (good ventilation and
lighting, adequate work space, etc.)
5. have a good working relationship with your direct supervisor
6. have security of employment
7. have considerable freedom to adopt your own approach to the
job
8. work with people who cooperate well with one another
9. be consulted by your direct superior in his/her decisions
10. make a real contribution to the success of your company or
organization
11. have an opportunity for high earnings

1112
12. serve your country
13. live in an area desirable to you and your family
14. have an opportunity for advancement to higher level jobs
15. have an element of variety and adventure in the job
16. work in a prestigious, successful company or organization
17. have an opportunity for helping other people
18. work in a well-defined job situation where the requirements are
clear
19. have training opportunities (to improve your skills or learn new
skills)
20. have good fringe benefits (material advantages other than
cash salary)
21. get the recognition you deserve when you do a good job
22. fully use your skills and abilities on the job

1113
Cross Cultural Management: Understanding the Implications of Malaysian Work Culture
Che Su binti Mustaffa,chesu402@uum.edu.my
Maznah Abu Hassan,maznah@uum.edu.my
Faizah Ahmad, a.faizah@uum.edu.my
University Utara Malaysia
Wan Rafaei Abdul Rahman, rafaei@uum.edu.my
International Islamic University

Abstract
This study investigated the influence of work culture on organizational effectiveness in Malaysia. Based on The Twelve
Pillars, a structured questionnaire was developed and self-administered to two uniformed organizations in Malaysia.
The Twelve Pillars specified twelve fundamental values that should guide the conduct of all Malaysian civil servants,
namely valuing time, perseverance, pleasure of working, dignity of simplicity, character, kindness, influence of examples,
obligation of duty, wisdom of economy, patience, improvement of talent, and innovativeness. The results showed that
there was an association between work culture and organizational effectiveness. The findings also identified dimensions
of work culture that influence organizational effectiveness. This means that certain type of work culture could facilitate
commitment and satisfaction among workers in uniformed organization. The implications of this research were also
discussed.

Introduction

The idea of organization or corporate culture has been identified as an important aspect of organizational behavior
and as a concept that is useful in helping to understand how organizations function, (Kristof, 1996). In addition,
culture helps determine how well a person “organization cultures” within a particular organization because the
“organization culture” includes feeling comfortable with the culture (O' Reilly, 1989). Research has indicated that
the degree of organization culture between a person and the organization is related to both productivity and
employee turnover (Rousseau and Parks, 1992; Ryan and Schmit, 1996).
While the study of these concepts has been primarily limited to Western and in particular American
organizations, there has been some research in other cultures. Hofstede et al. (1993) studied organizational culture in
several national cultures and found that individuals' values and organizational practices need to be integrated and
that demographic variables, such as age and gender, have an impact the degree of organization culture. Elizur et al.
(1991) examined the relative importance of work value items and organizational structure in eight different
countries. While some cultural differences in value ratings were found, these differences were actually relatively
small in the context of organizational structure differences. Calori and Sarnin (1991) examined the relationship
between organization cultural traits and economic performance and between strength of corporate culture and
economic performance in France and concluded that economic performance of the organization is directly tied to the
strength of the corporate culture particularly the work-related values of employees and the cultural traits.
The related concepts of work culture and organizational effectiveness are important to organizational
success. However, there has been little attention paid to the interaction of work culture with such concepts as job
satisfaction and organizational commitment and the application of this concept in non-western cultures. Douglas
(1988, 389) notes that: “The western model may provide an ideal for organizational development, and its classical
use may help less developed countries (L.D.C.s) achieve goals they have set for themselves, but the model rests on
certain normative assumptions about society, man, motivation and time not found in non-western societies…”
Douglas (1988, 375) further observes that:
“Each country has a unique value system which is relevant to it alone; this places a premium on administrators who
understand and accept the indigenous value system... It is nearly impossible to transfer cultural values without
provoking inconsistencies in the environment into which they are introduced…”

1114
 The research in Malaysia on work culture and organizational effectiveness is also limited. In all aspects of
Malaysian life attempts are made to identify indigenous values which are cherished by the people. These values are
then elaborated, particularly through the speeches of national leaders in all types of leadership roles. When crucial
and necessary, these various values are articulated as policies, for instance, Malaysia Incorporated and Privatization
Policies, the Look East Policy or the policy of a Caring Civil Society.
In Malaysian context, among the management concepts which are receiving wide and popular usage are the
following: consultation (musyuawarah), collaboration (cooperativeness), excellence (al falah), personal refinements
(adab), accountability (amanah), etc.. Many of the concepts being explored are indigenous concepts but Islamic in
origin. This is because Malay culture is essentially Islamic and the Malay language itself has a large number of
“loan words” from the Arabic language in matters pertaining to history, philosophy and spirituality. Likewise, in the
domain of the sciences and technology, the Malay language expands its terminology by incorporating “loan words”
from the English language or from Greek and Latin roots. The Islamic worldview is fostered primarily by three
principles. These principles are, tawhid (unity), khalifah (vicegerent) and al ‘Adl (justice). Universal values held by
Islam and considered to be applicable in all situations and in all societies include the following:
• every act should be accompanied by intention (niyat);
• conscientiousness and knowledgeable in all endeavors (itqan);
• proficiency and efficiency (ihsan);
• sincerity (ikhlas);
• passion for excellence (al falah);
• continuous self-examination;
• forever mindful of the almighty - piety (taqwa);
• Justice (‘Adl); truthfulness (amanah);
• patience (sabar);
• moderation;
• promise keeping;
• accountability;
• dedication;
• gratefulness;
• cleanliness;
• consistency;
• discipline; and
• co-operation.
An example of a collaborative indigenous effort to identify the sets of relevant values to be upheld by civil
servants and Malaysians as a society is what is known as the “Twelve Pillars”. Seminar participants and experts and
other knowledge and opinion leaders have come together and identified values worth knowing and disseminating.
After a series of seminars and discussions the Twelve Pillars were accepted and widely distributed nationally to
encourage individuals to emulate such values so that the organizations they serve in will be productive and uphold
high ideals. The Twelve Pillars are:
• the value of time;
• the success of perseverance;
• the pleasure/joy of working;
• the dignity of simplicity;
• the importance/worth of character;
• the power of kindness;
• the influence of positive examples;
• the obligation of duty;
• the wisdom of economy;
• the virtue of patience;

1115
 • the improvement of talent; and
• the joy of creativity/invention/origination.
Each of these ideas was explained clearly with examples in the public service sector. The intention of
disseminating these ideas together with such other notions as “zero defect” was to ensure that managers at all levels
share a collective managerial memory to achieve the goals of providing services that are excellent and of world-class
quality. In the formulation of these ideas, generic concepts are drawn from the literature and from examples
elsewhere but are then adapted and made relevant to the Malaysian situation.
Thus, the objectives of this paper are to discuss the relationship between Malaysia work culture,
organizational commitment and job satisfaction. Work culture refers to the current practices by the Malaysian
employees who work in uniformed organizations. Whereas, organizational commitment is a work attitude that is
directly related to employee participation and intention to remain with the organization and is clearly linked to job
performance (Mathieu and Zajac, 1990). Organizational commitment includes the three components of affective
(desire to remain), continuance (perceived cost of leaving) and normative (perceived obligation to remain) (Meyer
and Allen, 1991). A study of Japanese employees found that organizational commitment could be viewed as a
multidimensional construct that applied in Japan and that the organizational commitment questionnaire (OCQ) is an
effective cross-cultural tool for measuring organizational commitment (White et al., 1995). Job satisfaction is a
general attitude that the employee has towards their job and is directly related to individual needs including
challenging work, equitable rewards and a supportive work environment and colleagues (Ostroff, 1992). It is also
related to personality-job organization culture, one of the components of the Organization culture (Kristof, 1996).
Job satisfaction has also been linked to productivity (Katzell et al., 1992). Greater productivity implies that many
non-material costs will remain the same while output and proorganization cultures should increase (Stiles et al.,
1997).

Work Culture and Organizational Effectiveness

In a case study of the China Steel Company, Chao (1990) discussed the Confucian tradition and ethos and their
implications for management and worker performance in Asian societies and found that the management philosophy
and corporate culture were rooted in and guided by Confucianism in the Chinese character and approach to work.
Another study in Taiwan investigated organizational structure and managerial assumptions, values, and other socio-
demographical features of senior managers (Jou and Sung, 1993). The results indicated that four different
managerial patterns exist in Taiwanese organizations. Two of these, labeled mainlander and grass roots, were said to
represent an approach characteristic of traditional Chinese value orientations. A third type of managerial pattern was
labeled the specialist type and this was said to assimilate the Western logic of rationalism as its basic value. The
fourth type of managerial pattern, transition, was considered a hybrid of the traditional Chinese values, Japanese
management style and Western rationalism.
An individual learns to perform in an organization through socialization (Schein, 1980). Individuals come
to appreciate the values, the expected behaviors, and social knowledge that are essential for effective organizational
behavior. Since work culture serves many purposes including establishing the norms for employees behavior, it has
a direct impact on the Organization culture. In trying to improve effectiveness, companies look to engaging the
employees more in the organization and the goal of this research was to explore issues relating to the influence of
Organization culture and culture on organizational commitment and job satisfaction.
Culture consists of some combination of artifacts (also called practices, expressive symbols or forms),
values and beliefs and underlying assumptions that organizational members share about appropriate behavior
(Gordon and DiTomaso, 1992; Schein, 1992; Schwartz and Davis, 1981). Although there are many definitions of
culture, work culture has been viewed as holistic, historically determined, and socially constructed. Culture involves
beliefs and behavior, exists at a various levels, and manifests itself in a wide range of features of organizational life
(Hofstede et al., 1990). As such, work culture refers to a set of shared values, belief, assumptions, and practices that
shape and guide members’ attitudes and behavior in the organization (Davis, 1984; Denison, 1990; Kotter and
Heskett, 1992; O'Reilly and Chatman, 1996; Wilson, 2001).

1116
 From past research, studies on corporate culture focused on its relationship with performance (Denison,
1990; Denison and Mishra, 1995; Gordon, 1985; Kotter and Heskett, 1992; Peters and Waterman, 1982; Ouchi,
1981), cultural change (Harrison and Carrol, 1991; Ogbonna and Harris, 1998; Sathe, 1983; Silvester and Anderson,
1999), strategy (Choe, 1993; Schwartz and Davis, 1981) and the relationship between work culture and industry
characteristics (Christensen and Gordon, 1999; Gordon, 1991; Hofstede et al., 1990; Spender, 1989;). Despande and
Farley (1999) studied the relationship between corporate culture and market orientation in Indian and Japanese
firms. They found that the most successful Indian firms had entrepreneurial culture, while the Japanese firms had
entrepreneurial and competitive culture.
Work culture has also been recognized to have an important role in assuring efforts in organizational
change (Ahmed, 1998; DeLisi, 1990; Lorenzo, 1998; Schneider and Brief, 1996; Silvester and Anderson, 1999;
Pool, 2000). Herguner and Reeves (2000) investigated Turkish work culture change in higher education. Between
1991-1994, the Turkish culture was more consultative, but by 1998, it was more toward participative. This means
that over a period of time, there was a change in the work culture. Since work culture also described the part of the
organization's internal environment (organizational climate and culture), which incorporates a set of assumptions,
beliefs, and values that organizational members share and use to guide their functions (Kilmann et al., 1985; Schein,
1992), therefore it could be expected that these assumptions, belief, and values might guide and shape people's
attitudes toward organizational change.

Method
This study employs a quantitative method that applies cross-sectional exploratory mode utilizing questionnaire
survey. This method has been chosen due to its strengths from the perspective of cost and it is able to gather
enormous data within a limited time frame.

Measures
A questionnaire was designed to address the research questions of this study. A questionnaire booklet was
assembled consisting several scales. Questionnaire items included demographic questions relating to gender, age,
ethnicity, and academic qualification.
The Malay Work Values scale was developed based on items in The Twelve Pillars and was adapted by
the researchers based on dimensions introduced by Deal and Kennedy (1982) and O’Reilly, Chatman and Caldwell
(1991). The instrument was designed using the method of interater reliability. A total of 3 coders were involved.
Each coder was required to categorize the characteristics found in Twelve Pillars based on organizational cultural
dimensions founded by Deal and Kennedy (1982) i.e. strictness, meticulousness, results orientation, comfortable
working environment, stability, innovation, humanistic orientation, aggressiveness, emphasis on reward, group
orientation, and working as part of good deed. The dimensions introduced by the researchers were cooperativeness
(working cooperatively), dignity, hierarchy/courtesy, and religious values. . A five-point Likert-type scale ranging
from 1 = Strongly Disagree; 2 = Disagree; 3 = Seldom; 4 = Agree; and 5 = Strongly Agree. This scaling is similar to
that recommended by Nunnally (1978).
From the aspect of reliability, Table 1 shows the alpha value for the whole instrument on Malay Work
Culture developed by the researchers based on the main values in The Twelve Pillars (Table 1). The whole alpha
value for the instrument on Malay work culture instrument is 0.79. Each dimension in the instrument shows a
satisfactory alpha value. It can be concluded that the instrument used is reliable and acceptable.
Organizational commitment was measured using instrument developed by Meyer and Allen (1990)
Organizational Commitment Questionnaire (OCQ). This questionnaire is composed of twenty four items. A five
point scale ranging from 1 (strongly disagree) to 5 (strongly agree) was employed.
Job satisfaction was measured using 24 items adopted from the Minnesota Satisfaction Questionnaire
(MSQ) developed by Weiss et al (1971). A five point scale ranging from 1 (strongly disagree) to 5 (strongly agree)
was employed. All of the scales were translated from English into Malay using the double translation method unless

1117
already available in Malay Language. The instruments have been validated for use in the US and the reliability and
validity for Malay Language use were established using the sample from the pilot study.

TABLE 1: ANALYSIS OF RELIABILITY ON THE INSTRUMENTS

Dimension Alpha Value

Work culture .79

.71
Strictness
.70
Meticulousness
.71
Results orientation
.71
Comfortable working environment
.71
Stability
.71
Innovation
.72
Humanistic orientation
.70
Aggressiveness
.71
Emphasis on reward
.72
Group orientation
.72
Working as part of deed
.70
Cooperativeness/Cooperativeness
.71
Observing one’s dignity
.72
Courtesy
.71
Religious values
.76
Organizational Commitment
.81
Affective
.77
Normative
.79
Continuance
.79
Job Satisfaction
.82
Intrinsic
.90
Extrinsic

Analysis

Data were analyzed using the Statistical Package for Social Sciences (SPSS) version 10.0 for Windows software.
Descriptive statistics, which include frequencies and percentages, were utilized to present the main characteristics of
the sample and the profile of work culture and organization effectiveness.
Participants
The population for this study consisted of workers in uniformed organizations. A total of 2,264 respondents were
randomly selected from the population. A total of 59.65% of the respondents were male and 40.35% female.
Regarding marital status, 87.66% of respondents were married, 9.91% single, and 2.43% divorcee/Widow. The
majority of the respondents were Malays (86.40%), Chinese (7.54%), Indian (5.30%) and other races (0.6%). The
majority of the respondents were aged between 30-49 (71.8%) In terms of academic qualification, duration of
service and income. From the total, 53.18% of the respondents had Malaysian School Certificate or lower, 23.86%
Malaysia High School Certificate or equivalent, 7.48% diploma, 10.28% bachelor’s degree, and 3.34% other
qualifications.
On the total of respondents based on duration of service, 63.39% had served more than 15 years, 8.69% 3-6
years, 8.99% 3 years or less, 4.45 % 7-9 years, 8.39% 10-12 years and 4.95% 13-15 years. A total of 19.00% of the

1118
respondents earned a monthly income of RM1001-RM1500, 5.96% RM1000 or less, 29.32% RM1501-RM2000,
16.99% RM 2001-2501 and 13.75% earned more than RM2501-RM3000. A total of 82.00%respondentts were from
the support staff and the remaining (412.74%) were from the professional groups.

Findings
Descriptions Analysis of Work Culture Practices among Staff in the Prison and Custom Department Based On Dimension
The following part is the descriptive analysis of the Work culture practices which is divided into two parts, Work
Culture 1 and Work Culture 2. Variables of work culture 1 consists of fifteen dimensions. The dimensions are
strictness, dimension meticulousness, results orientation, comfortable working environment, stability, innovation,
humanistic orientation, aggressiveness, emphasis on reward, group orientation, working as part of deed, dimension
cooperativeness, observing one’s dignity, hierarchy and religious values. Work Culture 2 on the other hand, consists
of 8 dimensions. They are innovation, strictness, aggressiveness, cooperation, meticulousness, encouragement,
result orientation and emphasis on reward. The two work culture were analysed using mean and standard deviation
value.
Strictness
Table 2 indicate mean and standard deviation value for dimension strictness. Item punctuality shows the highest
mean followed by sympethasie to other’s difficulty and problems and quality cannot be sacrifice.

TABLE 2: DIMENSION STRICTNESS

Item n Mean SD
Punctuality 2262 3.38 .58
Symphatise with other’s difficulty and problems 2261 3.20 .55
Quality can be sacrifice 2260 2.20 .83
Lacicadaisikal 2263 1.74 .88
Total participants 2254*
* Exclusive of non-respondentts

Meticulousness
The highest mean value is following work manual. This is followed by Hardwork and emphasis on result
compatible to effort as indicated in Table 3.

TABLE 3: METICULOUSNESS
Item n Mean SD
Following work manual 2259 3.34 .57
Hard work 2260 3.25 .72
Emphasis on reward 2263 2.79 .83
Priority 2258 2.05 .72
Total participants 2249*
* Exclusive of non-respondentts

Results Orientation
The Table 4 shows the highest mean value for the Result Orientation Dimension. The highest is Hardwork followed
by Feeling Happy to Give Suggestions and Work and Punctuality.

1119
 TABLE 4: RESULTS ORIENTATION
Item n Mean SD
Hard Work 2262 3.39 .55
Feeling happy to give idea and suggestion 2262 3.25 .60
Punctuality 2261 2.93 .77
Total participants 2257*
• Exclusive of non-respondent

Comfortable Working Environment

The highest mean value is the Work Equally Shared By All followed by Friendliness, and Able To Leave The Office
On Personal Matters.

TABLE 5: COMFORTABLE WORKING ENVIRONMENT

Item n Mean SD
Work equally shared by all 2260 3.42 .58
Friendliness 2264 3.35 .55
Able to leave office on personal matters 2259 2.29 .85
Total participants 2255*
• Exclusive of non-respondent

Stability
In the dimension of stability, Work For Allah/God shows the highest mean value followed by Clear Work
Procedures At The Workplace and Opposing Others Opinion Without Giving Constructive Suggestions.

TABLE 6: STABILITY
Item n Mean SD
Opposing Others Opinion Without Giving Constructive Suggestion 2261 3.55 .59
Work For Allah/God 2260 3.02 .69
Clear Work Procedures 2258 2.00 .84
Total participants 2252*
• Exclusive of non-respondent

Innovativeness
Table 6 indicates Emphasis on reward if one is creative in his work as the highest mean value. This is followed by
to inform through a third party and praiseworthy job.

TABLE 7: INNOVATIVENESS
Item n Mean SD
Emphasis On Reward If One Is Creative In His Work 2256 2.58 .82
Inform Through A Third Party 2261 2.27 .85
Praiseworthy Job.
2262 1.74 .71
Total participants 2251*
• Exclusive of non-respondent

1120
Humanistic Orientation
Cooperation shows a high mean value of 3.24 followed by teamwork and vague instructions (Table 8).

TABLE 8: HUMANISTIC ORIENTATION

Item n Mean SD
Cooperation 2263 3.24 .61
Work As Group Member/Teamwork 2261 3.17 .74
Vague Instructions 2258 2.26 .75
Total participants 2254*
• Exclusive of non-respondent

Aggressiveness
Table 9 shows the aggresiveness dimension. The highest mean value is God’s Will, followed by Work Punctuality
and Temperamental.

TABLE 9: AGGRESSIVENESS
Item n Mean SD
God’s Will 2259 3.11 .83
Work Punctuality 2262 3.10 .68
Temperamental 2262 2.03 .88
Jealousy 2258 1.79 .92
Dislike People’s Success 2264 1.74 .75
Total participants 2249*
* Exclusive of non-respondent

Emphasis On Reward
Table 10 shows the following items which record the highest mean value. The are work for Promotional Reward,
Failures To Recognize People’s Success, and Procastination. Procastination is a negative item.

TABLE 10: EMPHASIS ON REWARD

Item n Mean SD
Work For Promotional Reward 2258 2.53 .86
Failure To Recognize People’s Success 2261 2.26 .81
Procastination 2264 1.85 .82
Total participants 2256*
* Exclusive of non-respondent

Group Orientation
Table 11 indicates the mean values and standard deviation for group orientation dimension. The highest mean value
is cooperation and respectful of others. This is followed by It’s Okay Attitude If Being Late which is a negative
item.

1121
 TABLE 11: GROUP ORIENTATION
Item n Mean SD
Cooperation And Respectful Of Others 2259 3.37 .63
It’s Okay Attitude 2260 2.04 .78
Total participants 2255*
* Exclusive of non-respondent

Working As Part Of Deed

Table 12 shows the mean values for the items in Working As Part Of Deed dimension. The highest mean value is
Work Must Have Aims. This is followed by Work Quality and Follow Instructions.

TABLE 12: WORKING AS PART OF DEED

Item n Mean SD
Work Must Have Aims 2260 3.45 .84
Work Quality 2263 3.21 .74
Follow Instructions 2262 3.01 .80
Total participants 2257*
* Exclusive of non-respondent

Cooperativeness
This dimension has five items. The highest mean value is Work Completion Priority, followed by Happy Working
and Working Alone Is Better.

TABLE 13: COOPERATIVENESS

Item n Mean SD
Work Completion Priority 2260 3.38 .54
Happy Working 2263 3.07 .77
Prefer To Work Alone 2255 2.06 .74
Busybody 2260 1.73 .88
Snobbish 2261 1.64 .89
Total participants 2245*
* Exclusive of non-respondent

Observing One’s Dignity

Table 14 indicates Observing One’s Dignity Dimension. The highest mean value is Like Helping Others followed
by Conducive Work Place and then Difficult To Make A Suitable Decision.

TABLE 14: OBSERVING ONE’S DIGNITY

Item n Mean SD
Helping Others 2264 3.28 .55
Condusive Workplace 2261 3.12 .76
Dificult To Make Suitable Decision 2262 2.25 .78
Total participants 2259*
*Exclusive of non-respondent

1122
Courtesy
Table 15 indicates the mean value and standard deviation for courtesy dimension. Working as part of deed show the
highest mean value among the items. This is followed by Meticulousness and the Vague Procedures For Work
Promotions.

TABLE 15: COURTESY

Item n Mean SD
Work as part of deed 2264 3.50 .58
Meticulousness 2262 3.24 .63
Vague procedure for work promotions 2261 2.60 .84
Total participants 2259*
*Exclusive of non-respondent

Religious Values
Table 16 shows that Hardwork has the highest value, followed by New Innovations and Bragging About One Self .

TABLE 16: DIMENSION VALUE RELIGIOUS VALUES

Item n Mean SD
Hardwork 2264 3.38 .57
Encouragement for new innovation 2260 3.05 .65
Bragging about oneself 2264 1.81 1.00
Total participants 2260*
*Exclusive of non-respondent

Correlation Between Work Culture and Job Satisfaction

There is a significant correation between work culture 1 and work culture 2 and overall job satisfaction. The
dimensions for work culture which have highest correlations with job satisfaction are result orientation, observing
one’s dignity and comfortable working environment. The dimensions which have low correlations with job
satisfaction on the other hand, are Innovativeness, Emphasis On Reward and Agrresiveness. Eventhough work
culture 1 has a significant relationship with job satisfaction, there are dimensions which show negative correlations
such as innovativeness, and emphasis on reward. This indicates that greater emphasis on reward and innovativeness
will result lower level of job satisfaction. As for work culture 2, the dimensions which show high correlations with
job satisfaction are encouragement, strictness, emphasis on reward and value. Dimensions which have low
correlation with job satisfaction are aggresiveness, meticulousness and innovativeness. Therefore, these findings
support the hypotheses designed.
In term of the relationship between Work culture and job satisfaction, research findings indicate that there
is a significance and positive correlation and positive between both variables (p<0.01) as in Table 17. This findings
support the hypotheses. This indicate that the more positive work culture among employees, the higher their job
satisfaction.

1123
 TABLE 17: CORRELATION WORK CULTURE AND JOB SATISFACTION
Work Culture Job Satisfaction
.29**
Work Culture 1:
Strictness .11**
Meticulousness .23**
Result orientation .32**
Comfortable working environment .26**
Stability .19**
Innovation -.06**
Humanistic orientation .20**
Aggresive .03**
Emphasis on reward -.06**
Group orientation .14**
Working as part of deed .24**
Cooperativeness (Gotong-royong) .09**
Observing one’s dignity .31**
Courtesy .16**
Religious values .23**
.42**
Work Culture 2:
Innovation .29**
Strictness .39**
Aggresive .23**
Cooperativeness (Gotong-royong) .36**
Attention to detail .28**
Encouragement .42**
Result orientation .34**
Emphasis on reward .39**
** Correlation significance at level .01 (2-tailed)

Correlation Between Work Culture and Organizational Commitment

There is a significant, moderate and positive correlation level between work culture and organizational commitment.
This further supports the hypothesis designed. The findings indicate positive workculture practices in an
organization will result in high value of work culture among staff/workers as incated in table 18. Table 18 also
indicates significant and positive correlations between work culture and organizational for all variables. There is no
relationship between innovativeness and emphasis on reward and work culture. Other dimensions in work culture 1
have significant relationshoip with work culture. For work culture 1, results orientation, observing one’s dignity and
meticulousness are highly correlated. In contrast, aggresiveness, cooperativeness and group orientation has low
correlation. As for work culture 2, on the other hand, there is a high value of correlations among dimension like
strictness, encouragement, and result orientation. However, dimensions which show low correlation value are
aggresiveness, meticulousness and innovativeness. As a whole, the findings support the hypotheses designed by the
researchers

1124
 TABLE 18: CORRELATION BETWEEN WORK CULTURE AND ORGANIZATIONAL COMMITMENT
Work Culture Organizational Commitment
.330**
Work Culture 1:
Strictness .119**
Meticulousness .274**
Results orientation .312**
Confortable working environment .245**
Stability .222**
Innovation .022
Humanisti orientation .245**
Aggresive .056*
Emphasis on reward .002
Group orientation .118**
Working as part of deed .226**
Cooperativeness (Gotong-royong) .108**
Observing’s one dignity .301**
Courtesy .204**
Religious values .212**
.43**
Work Culture 2:
Innovation .313**
Strictness .409**
Aggresiveness .258**
Cooperating .352**
Attention to detail .296**
Encouragement .406**
Results orientation .384**
Emphasis on reward .371**
** Correlation significance at .01 (2-tailed)
* Correlation significance at .05 (2-tailed)

Discussion

This part discusses the mean values for the items in Work Culture 1 and work culture 2. Work culture 1 has 15
dimensions. Participants have put high mean value for dimension like strictness; punctuality, and sympathize with
people’s problems. For dimension like meticulousness, the mean values are high for items like hardworking and
always strive hard and happy to give ideas and suggestions. Participants also have put high mean values for
dimensions like comfortable working environment, work wholly shared by everybody and friendliness. For
stability, the mean values are high for items like Work for Allah/God and clear work procedures at the workplace.
As for innovativeness, emphasis on reward if one is creative in carrying out his job and to inform through a third
party show high mean values. Furthermore, for humanistic orientation dimension, willing to cooperate and
teamwork have recorded high mean values. However, the high mean values for aggresiveness are God’s will and
work punctuality.
For dimensions which emphasizes on reward, the mean value are high for items like work promotion and
difficult to praise for other people’s success. As for group orientation, the mean values are high for items like
cooperation , respect for one another and it is okay if you arre a little bit late. For dimension like working as part of
deed, work must have aims, and work quality show high mean values. As for cooperativeness, work punctuality and
feeling happy to work show high mean values. For observing one’s dignity, the mean values are high for items such
as like to help others and conducive workplace. For courtesy, work as part of deed and meticulousness show high
mean value. This is followed by religious values, which record high mean values for hardwork and innovativeness.

1125
 Work culture 2 has 8 dimensions,. Participants has put high mean values in dimensions like
innovativeness for items able to follow instructions and able to suit oneself. For dimension like strictness, items
which show high mean values are follow the procedures, and no conflict at the work place. As for aggresiveness,
the mean values are high for items like to grab any opportunities, and like challenging work. However, in
cooperation, the mean values are high for respect for people’s rights, tolerence and fair. For dimension like
meticulousness, the mean values are high for items like spirit of hardwork, and making the right decision. As for
encouragement, the mean values are high for items like easy sharing information and have clear principle of life.
Another interesting dimension is result orientation, which show high mean values for items like hoping for high
performance and job security. Lastly, emphasis on reward, show high mean values for items like oppurtunity for
success and able to suit oneself.
The findings of this study showed that work culture is associated with attitudes toward organizational
effectiveness. Different types of work culture have different levels of acceptance on attitudes toward organizational
change. Overall, the sample in this study showed that the respondents have a positive or strongly positive attitude
toward work culture practices by the organization.
One major implication of this finding is that work culture has an effect on job satisfaction and
organizational commitment. This study has provided empirical evidence and suggested that certain types of Islamic
values have an effect on attitudes toward organizational commitment. which was not known earlier. Second, this
study showed how the cultural dimension was related/associated with job satisfaction and organizational
commitment. This demonstrated the importance of each type of culture and organizational effectiveness. Finally,
the findings of this study support the previous studies on the importance of culture in organizational effectiveness in
non-Western context, which is not widely known in the literature.
The present research has several implications for managers. The findings showed that local culture have
strong positive attitude toward job satisfaction and organizational commitment. Therefore, as managers, the local
culture in an organization can ensure effective and efficient management of organizational goals and objectives.
This type of culture will ensure that people will work hard, make things happen and hit the targets that were set. The
largest percentage of employees in this type of culture suggests the need to ensure achievement of organizational
goals and objectives. As such, some managers may be ruthless in handling the situation and have negative effects on
other employees or organizations. On the contrary, this type of culture is most appropriate in a rapid changing
business environment that required immediate action.
As mentioned earlier, the concept of work culture has received attention from a number of theorists.
However, there has been little attention paid to the interaction of this work culture to such concepts as job
satisfaction and organizational commitment. The results indicate that Organization culture is key in both the level of
job satisfaction that employees experience and also in their level of organizational commitment whether measured
by turnover rates or an OCQ. Specifically, the research tested the hypothesis that work culture impacts job
satisfaction. Clearly work culture can play an important role in the level of job satisfaction of employees.
A second key issue is the impact of the work culture on employees. This was explored by looking at the
impact of work culture on job satisfaction and organizational commitment and the results indicate that work culture
plays an important role. The better the work culture the higher the level of job satisfaction will be. This is an
important finding since it indicates that culture plays an important role in attracting or keeping employees and the
maintenance of the good work culture is essential for maintaining job satisfaction.
These results indicate that a good work culture is a powerful variable within the organization and that it has
a positive impact on job satisfaction and organizational commitment. The better the work culture the higher the job
satisfaction, the higher the organizational commitment. More importantly, these effects occurred in both work
cultures. While the culture may provide a framework within which the influence of the work culture occurs, a good
work culture is important in all work cultures implying that sharing information about the culture before hiring
employees and using culture to guide the selection process and criteria will result in a better work culture and hence
higher job satisfaction and organizational commitment.
The results reinforce the findings from earlier research (Chatman, 1989) that the concept of work culture
plays an important role for employees in a variety of organizational settings. The results also indicate that although
the impact of organization culture is consistent across work cultures, there are differences in levels of job

1126
satisfaction and organization commitment between cultures. Finally, this research provides support for the
importance of indigenous values in work culture in organizations in Malaysia.
This study also has limitations. First, the sample size (n=) is relatively small compared to the total number
of public sector employees in Malaysia. Further, the findings are focused on public sector employees, and did not
include the private and other sectors. This might constrain the generalizability of the findings and conclusions.
Second, the use of questionnaire to collect data regarding employees’ attitude toward organizational change might
not fully capture the dynamic nature of organizational change. A questionnaire followed by series of interviews
might better capture individuals’ attitude toward work culture.
For further research, a few suggestions are recommended. First, a longitudinal study of the relationships
between various dimensions of work culture, job satisfaction and commitment might better capture the dynamic
nature of work culture. Second, a study on the relationship between work culture and its impact on job satisfaction
and organizational commitment may also provide potential implications on organizational performance. This is
particularly important as the fundamental issue in organizations is to meet its proorganization cultureability
expectations or shareholders' return on investment. Further research could also be considered by considering the
impact of organizational size, age of the organization and the type of industry/sector of the firms.

Conclusion
This paper is an attempt to clarify and articulate the need to understand and search for indigenous perspectives of
work culture. Notes that any understanding of an indigenous perspective requires a real understanding of the
theoretical bases of the subject, and an understanding of the particular indigenous environment or setting. In order to
differentiate culture free and culture bound content in Malaysia organizational management, the core management
theories, concepts and terminology have to be identified; the culture specific ways of knowing must be examined;
and unique categories made identifiable. This paper uses the Malaysian experience as an example of the quest for an
indigenous perspective of work.

References
[1] Ahmed, P.K. (1998), "Culture and climate for innovation", European Journal of Innovation Management,
Vol. 1 No.1, pp.30-43.
[2] Bajunid, I.A. (1995), "The educational administrator as a cultural leader", Journal of the Malaysian
Educational Manager, Vol. 1 No.1, .
[3] Chao, Y.T. (1990), "Culture and work organizations: the Chinese case", International Journal of
Psychology, Vol. 25 No.5/6, pp.583-92.
[4] Choe, M.K. (1993), "An empirical study of corporate strategy and culture in Korea", Quarterly Review of
Economics and Business, Vol. 21 No.2, pp.73-92.
[5] Christensen, E.W., Gordon, G.G. (1999), "An exploration of industry, culture and revenue growth",
Organization Studies, Vol. 20 No.3, pp.397-422.
[6] Christensen, E.W., Gordon, G.G. (1999), "An exploration of industry, culture and revenue growth",
Organization Studies, Vol. 20 No.3, pp.397-422.
[7] Davis, S. (1984), Managing Corporate Culture, Balinger, Cambridge, MA, .
[8] Deal, T.E., Kennedy, A.A. (1982), Corporate Cultures: The Rites and Rules of Corporate Life, Addison-
Wesley, Reading, MA, .
[9] DeLisi, P.S. (1990), "Lessons from the steel axe: culture, technology, and organizational change", Sloan
Management Review, Vol. 32 No.1, pp.83-93.
[10] Denison, D.R. (1990), Corporate Culture and Organizational Effectiveness, John Wiley & Sons, New
York, NY,.
[11] Despande, R., Farley, J. (1999), "Executive insights: corporate culture and market orientation: comparing
Indian and Japanese firms", Journal of International Marketing, Vol. 7 No.4, pp.111-27.

1127
[12] Douglas, A. (1988), "Administration in less developed countries: considerations for educators", Journal of
Educational Administration, Vol. 26 No.3, pp.367-81.
[13] Gordon, G.G. (1985), "The relationship of corporate culture to industry sector and corporate performance",
in Kilmann, R.H., Saxton, M.J., Serpa, R. (Eds),Gathisng Control of the Corporate Culture, Jossey-Bass,
San Francisco, CA, pp.103-25.
[14] Gordon, G.G., DiTomaso, N. (1992), "Predicting corporate performance from work culture", Journal of
Management Studies, Vol. 29 No.6, pp.783-98.
[15] Harrison, J.R., Carrol, G.R. (1991), "Keeping the faith: a model of cultural transmission in formal
organizations", Admeanistrative Science Quarterly, Vol. 36 pp.552-82.

Note: Contact author for the list of references

Appendix
Description of Respondents

Item Description Frequency Percent

______________________________________________________________________________
Gender Male 587 59.65
Female 397 40.35
Ethnicity Malay 848 86.40
Chinese 74 7.54
Indian 52 5.30
Others 7 0.70
Education SPM/MCE 526 53.18
STPM/HSC 236 23.86
Diploma 74 7.48
Bachelor’s Degree 104 10.28
Masters/PhD 16 1.62
Others 33 3.34
Field Specialization
Economy/Accounting/Law 35 7.0
Computer Science 28 5.6
Finance/Banking/Marketing 67 13.49
Public Administration 34 6.8
Engineering/Physic/Chemistry 230 46.09
Others 105 21.04
No Answers/Not related 490
Job position Professional 126 12.74
Support staff 811 82.00
No answer 52 5.25
Marital States Married 867 87.66
Single 98 9.91
Divorcee/Widow 24 2.43
Age
Less than 20 years 5 0.5
20-29 years 133 13.44
30-39 years 161 16.28
40-49 503 50.86

1128
 More than 50 years 179 18.10
No answer 8 0.81
Length of service
Less than 3 years 89 8.99
3-6 years 86 8.69
7-9 years 44 4.45
10-12 years 83 8.39
13-15 years 49 4.95
More than 15 years 627 63.39
No answers 11 1.11
Income
Less than RM1000 59 5.96
RM1001-RM1500 188 19.00
RM1501-RM2000 290 29.32
RM2001-RM2500 168 16.99
RM2501-RM3000 136 13.75
RM3001 and above 136 13.75
No answer 12 1.2

1129
 Strategic Human Resource Management and Development of Competitive Advantage

Jan Rudy, jan.rudy@fm.uniba.sk

Comenius University, Slovak Republic

Abstract

Business companies today operate in a frequently changing environment. Companies tend to extend their sales, ownership
and manufacturing to new markets abroad. They go global. Most of organizations today must achieve high performance
in the context of a competitive and complex global environment. The competitive advantage is the challenge the company
management has to meet in order to survive. The competitive advantage can take many forms. People are regarded as an
organization’s most important assets because they have a potential to become the company’s sustainable competitive
advantage. Accordingly, the traditional role of human resource management in the organization should be changed.
The paper deals with the traditional and new role of human resource management, analyses approaches to strategic
human resource management and describes the key requirements and ways how human resource can become the
company’s competitive advantage. Based on the author’s first-hand experience as a former CEO in a large state-owned
company the paper provides some suggestions and managerial implications.

Traditional and New Role of Human Resource Management

About one hundred years ago Frederick W. Taylor came up with sensational changes known as a system of scientific
management. Among his contributions were instituting job analysis, time-and-motion studies, and standardization of
processes, efficiency techniques, and productivity measurements to systematically track labor costs. He introduced
worker rest periods and the idea of training employees including managers. All these activities are typical human
resource management activities today. Managers and organizations today operate in a completely different business
environment but still there is even higher expectation for productivity and low costs - all in a social context of
ethical behavior and social responsibility. What has been changed since the Taylor’s era is in reality a history of
human resource management approaches evolution. Personnel management people in the organizations first took
over hiring and firing from line managers and administered wages and salaries including benefit plans. This is the
point where the term personnel management comes from. Personnel management role in the organizations has been
enlarged as well as enriched after the emergence of trade union legislation. The primary role of personnel
management was to protect the organization as a response to unions’ intention to protect workers. Collective
bargaining as a personnel management function is a typical example of this development. Later it was recognized
that a company’s competitiveness depends on its people. Human resource professionals realized the fact that people
are the most important assets of the organization. The term human resource management reflects the changing role
of people in the organization. Human resource management systems were introduced and their primary role was
modified as a two-fold: First, to get an appropriate number of people, second, to provide positive behavior of people
in the organization. This is done through human resource management functions ranging from job analysis and to
safety and health protection. Human resource today is shifting from its traditional role as a protector to strategic
partner. As a consequence the new role of human resource management is associated with strategic human resource
management.

Strategic Human Resource Management

What is strategic human resource management? This question seams to be very easy if we take into account a huge
number of publications related to strategic human resource management and strategic management in general.
Unfortunately, the answer is much more difficult. There are several reasons for that. For example there are

1130
thousands of textbooks and other study materials dealing with strategic management but still there is confusion even
about the strategy definition. There are just a few examples:
• According to Oxford Pocket Dictionary the strategy is the art of war, especially the planning of
movements of troops and ships etc. into favorable positions; plan of action or policy in business or
politics etc.
• Strategy is the company’s long-term plan for how it will balance its internal strengths and weaknesses
with its external opportunities and threats to maintain a competitive advantage. [2]
• Strategy guides organizations to operate in ways that outperform competitors. [4]
• Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the
adoption of courses of action and the allocation of the resources necessary for carrying out these goals.
[1]
• Strategy is a choice between the possibilities how to reach the target.
This list, of course, could be much longer. The result of this confusion is that managers talk about their company
strategy, consultants advise how to develop strategy and universities run courses about business strategy knowing
what strategy could be but they are not sure what in reality it is. It looks like Chinese syndrome as Europeans used to
say: After having a lunch in a Chinese restaurant you still feel hungry.
A similar situation is in the case of strategic human resource management. Based on the definitions in the
literature managers know that strategic human resource management is at least one of the following:
• The linking of human resource management with strategic goals and objectives in order to improve
business performance and develop organizational cultures that foster innovation and flexibility, or
• Vertical integration between human resource practices and an organization’s business strategy, in order
to enhance performance, or
• Formulating and executing human resource systems, human resource policies and activities that
produce the employee competencies and behaviors the company needs to achieve its strategic aims.
All these definitions of a strategy as well as strategic human resource management are acceptable most of all from
the academic discussion point of view. The only issue is that human resource managers in companies are
practitioners not scholars. Of course they cannot expect to get a “ready food” because they operate in different
business environments and organizational cultures. But probably, and just probably, they need more specific “ready-
to-cook” product.
In case of strategic human resource management there could be another part of the reason for this
confusion. It is about one hundred years long history of personnel or human resource management. During all this
time human resource management activities were viewed as strictly operational staff activities providing support to
line managers. For example almost 45% out of 150 top and mid-level managers interviewed in a large (almost
17,000 employees) state-owned company operating in the area of Central Europe believe that strategic human
resource management is just a “new fashion” but from the practical point of view it is supposed to do what it used to
do before. This is the typical example of well-known “old wine in new bottles” approach that is often associated
with strategic human resource management. As a result of that, in general, there are three groups of companies that
could be identified according to their approach to strategic human resource management.
The companies where human resource activities are done in a way “as our fathers did it” are the first group.
Managers in this group of companies believe that strategic human resource management is just the rhetoric and
nothing more or less. There are also companies that focus on the strategy implementation phase. The human
resource professional’s role is the strategy implementation in this case. They do not participate in the entire process
of strategic management but they are “given” tasks – not objectives - for implementation in the area of human
resource management. This could be the second group of companies. Finally, there are companies that do not
pretend the strategic role of human resource management and try to get the competitive advantage through people.
In this case human resource professionals play an active role in the entire process of strategic management. The
active role means that they participate in the strategy formulation phase, strategy implementation as well as in
strategy evaluation phase.

1131
 Now there is a logical question: What is strategic human resource management and why companies should
implement it into their managerial practice? To answer this question we should start with the role of people in the
organization. People create organizations because this is the only way how to reach certain specific goals. In this
sense the organization makes room for the synergy effect achievement by combining activities of individuals.
People also run organizations that are aimed for the specific goal achievement. Finally, the organization’s products
serve to satisfy the needs of people. If we take into account just these attributes of organizations it is clear how
important the role of people in the organization is. But people in the organization are not just the work force. In
reality it never was so even we did not realize it. The term human capital as the economic value of people with job-
relevant abilities, knowledge, ideas, energies and commitments describes the unique role of people in the
organization. Human capital is turned to intellectual capital that includes competencies, creativity, commitment and
performance potential of people. Material resources such as money, technology or raw materials can be effectively
utilized only through human efforts – through people. This is the reason why human resources are the most valuable
resource of the organization. At the same time this is the reason why human resources are the strategic assets of the
organization.
Based on this we can state that strategic human resource management is the involvement of human
resources in strategic management process. The word involvement is used intentionally to differentiate it from
linking or vertical integration. Vertical integration is a link between business strategy and the performance of every
individual in the organization. [3] It can be explicitly demonstrated through the linking of a business goal to
individual objective setting, to measurement and rewarding of that business goal. Majority of strategic human
resource management models are based on vertical integration. However, vertical integration refers most of all to the
strategy implementation phase. What is more, there are some traditional approaches to the goal setting, for example
management by objectives approach (MBO). MBO approach has been applied in managerial practice for several
decades and business goals could be integrated with individual goals by this approach as well.
Human resource management involvement in strategic management process means that human resource
professionals will participate in the entire strategic management process. There are two basic reasons for that. First,
they are supposed to be very well informed about the present stage of the company employees from their
competence point of view. This helps to get more realistic strategic plans and strategic goals. Second, based on their
first-hand information they can manage necessary changes in the human resource management system more easily.
It helps the company to become more flexible in its reaction to the changed needs. A flexible response of the
company to the changed needs is important particularly from the human resource as a competitive advantage point
of view.
Strategic management and business strategy is associated with the executive level. Is it enough to “invite”
the human resource professional to become the strategy-making body member? This is a very frequent question that
human resource professionals ask because they are interested in earning a seat in such a body. The answer is -
certainly not. There are several reasons for that.
First of all, we should keep in mind that human resource management is not an exclusive issue of human
resource professionals. Line managers should be involved in the human resource management process as well. The
reason is very clear - selection of candidates, performance appraisal, compensation systems, etc. cannot function
effectively without the line manager’s participation and involvement. On the other hand, existing human resource
management skills do not necessarily guarantee the conceptual and other skills that strategy makers possess. There
are two issues that should be resolved in this context. Human resource professionals cannot persuade the company
executives about strategic role of human resources. This initiative should come from the company top management
level. However, human resource managers will have to acquire some additional skills. They should break down the
borders of narrow specialization and become more generalists. They will need a better understanding of the business
they are involved in. Management development On-The-Job practices and particularly rotation technique in
Japanese companies could be a good example how this can be achieved.

1132
Competitive Advantage through People
The most common understanding of a competitive advantage is the ability of the company to add such a value to its
products or services that competitors cannot. A competitive advantage is the factor that allows the company to
differentiate its product or service from the competitors’ products or services. The company needs at least one
competitive advantage to keep or increase its market share. The factors that allow the company to get a competitive
advantage could be technological, economic, social, cultural, and potentially other. Accordingly, a competitive
advantage can take many forms. For example, a typical technological competitive advantage is the technology or
product innovation. Low costs could be an economic competitive advantage. The work force of a high educational
level could be taken as a social competitive advantage. Ethical behavior as a competitive advantage is associated
with cultural factors, etc.
There is a number of competitive advantage models described in literature. For example, some of them
focus on the idea of strategic choice and are related to the very well known Porter’s model. The other models
describe the company’s human resource as a competitive advantage through the framework of value, rarity,
inimitability and organization.
The basic issue that should be resolved in getting the competitive advantage through people is its
sustainability. For example, the technological competitive advantages are usually short-term advantages because
technology can be imitated easily. The same or similar is true in other cases of competitive advantage. On the
contrary, human resources have a potential to become the sustainable competitive advantage. However, we should
remember that a competitive advantage through people does not mean getting the advantage due to the company
employees and at the same time to get it ”for ever”. Managers more or less recognize that competitive advantage can
be obtained with a high quality workforce. The workforce quality is usually viewed through the product and service
quality, differentiated products, market responsiveness, technological innovation, etc. All this makes sense because
it creates a basis for the company’s competitiveness. In order to reach the workforce high quality level, managers are
advised to value people as human assets, mobilize teams, thrive on learning, empower all members to fully use
talents, etc. They are advised to bring out the best of people and create high-performance organizations.
However, there is another issue that should be remembered in this context. Do the employees have a good
reason to become a high-quality workforce or do just the managers want them to do so? In order to get a competitive
advantage through people both parts of the question should be answered “yes”. Only well-motivated people work
effectively. People do not have to do it but they should want to do it. The way to get such a positive behavior of
people in the company leads through the value creation. Value creation is the extent to which a company satisfies
the needs of strategic partners. These are the owners, customers, suppliers, communities, local government, and last
but not least, the employees. All these partners have a good reason to be sustainable strategic partners only if the
company satisfies their needs. The company creates value for employees through wages, satisfaction, career
opportunities, development, etc. Strategic management is about the company’s multiple responsibilities for value
creation. Human resources are an integral part of this process.

Conclusion
Human resources as company’s key stakeholder should be an integral part of the strategic management process.
They should be involved in the entire process, not in the implementation phase only. This is so because they are
involved in all activities that contribute to value creation for all stakeholders. They help to fulfill the company’s
multiple responsibilities for value creation. Human resource professionals involved in the strategic management
process should acquire some new skills. They should cross the borders that are linked by specialization and they
need more understanding of the value creating process. Of course, they cannot persuade top management to involve
them in the strategy-making process as the strategy-making body members. This “need” should come from the top
management level. Human resources have a potential to become the company sustainable competitive advantage if
they work under the leadership that is aware of the role of strategic human resource management. This is probably
the most important task that strategic human resource management is facing today.

1133
 References
[1] Beardwell, I., Holden, L., Claydon, T. (2004: 35) Human Resource Management, Pearson Education.
[2] Dessler, G. (2005: 72). Human Resource Management, Pearson Education.
[3] Robbins, S. P., Judge, T.A., (2007: 441-448). Organizational Behavior, Prentice Hall, N.J.
[4] Schermerhorn, J. R., Hunt, J., G., Osborn, R., N., (2005: 7). Organizational Behavior, John Wiley& Sons,
Inc.

1134
 The Effect of Affirmative Action on Motivational Factors in the SANDF
Nieuwoudt G., NieuwoudtG@tut.ac.za
Tshwane University of Technology
Smit P.K.
South African National Defence Force, South Africa

Abstract
Affirmative action is usually introduced where other mechanisms has failed to reduce discrimination and ensure a diverse
workforce. Acceptance of affirmative action and its outcomes namely diversity, cultural differences and equal
employment opportunities, is the responsibility of the manager. The organisation however can assist in this acceptance by
understanding that although the implementation of affirmative action can be regarded as the first step in the right
direction, it cannot stand on its own but it should be supported by interventions based on the effective management of
diversity. Intervention by the organisation, on an urgent basis, is critical in order to ensure effective group dynamics and
teamwork from the human resources available, to the joint advantage of the individual and of the organisation. The
organisation and its management need to be competitive on a quality basis in order to survive, and should also ensure
growth and motivation within the team, as well as in the character of its individual members. It is therefore the
responsibility of management to facilitate the assimilation of individuals into the organisation and create a culture
supportive of individual differences. There is a strong link between the implementation of affirmative action on the one
hand, and the psychology of the diverse groups of people involved. Attention should be paid to steadiness of their
attitudes, motivational factors and their productivity.

Introduction to – and Purpose of the Study

On 27 April 1994, with the Freedom Celebrations in South Africa, the concept of affirmative action was officially
introduced into many South African organisations. Against the background of the former Apartheid regime, the
application of affirmative action was important in order to ensure that all the population groups in South Africa
would be represented demographically in the workforce of all organisations. The constitution was amended in order
to enforce this factor in the management of diversity in all companies, including the public service. This introduction
of Affirmative Action is in line with world wide trends once there are perceived discriminatory barriers that limit
opportunities for certain minority groups, including the Equal Employment Opportunities for Women act that was
implemented in 1986 in Australia (Sheridan A 1998 p 243) and Affirmative Action programmes that were
implemented in India for scheduled castes in scheduled tribes in the sphere of employment.
The main purpose of this study is to measure the attitude of individuals towards affirmative action and also
the effect of an affirmative action programme on that which motivate individuals. The study would search for
indications whether affirmative action decrease and or increase motivation and interest for both targeted and non-
targeted groups. This study suggests that affirmative action programmes may have positive, negative, or both
positive and negative motivational consequences for recipients and non recipients. Proposed recommendations are
offered based on the outcome of the study. These recommendations can benefit individuals, teams and the greater
organisation.

Literature Review
Affirmative Action
Human (1993:35) states that affirmative action is a mechanism whereby competent previously disadvantaged/
underrepresented individuals can be recruited and developed. It also links to the process of managing diversity and
ensuring the development of human resource potential. Cheminais (1998:255) states that if properly implemented,
an affirmative action programme can lead to improved human resource management. Managers and supervisors are

1135
forced to be sensitive to, and to become involved in, the development of human resources. Training and
development occur according to the needs of individuals and not according to the needs of groups. From this it can
be deduced that affirmative action programmes, if properly implemented and managed, can raise the standard of
performance in the workplace.
Affirmative action is a process of eliminating discrimination, rather than a process of furthering the
interests of a particular group or groups, according to Pillay (1998: 9). Innes (1993: 14) states that management
should use any means available to provide opportunities, which the newly transformed workforce can utilize for
their own advancement. Management’s decisions regarding promotion or job advancement must be determined
largely on the basis of merit.
Bayat and Meyer (1994:283) view affirmative action as an important strategy, which is necessary in order
to achieve the following utilitarian and moral objectives:
● Restitution for past discrimination,
● Combating racism,
● Equitable distribution of public service job opportunities.
Various models of affirmative action provide different ways of implementation. The success of an
organisation in implementing affirmative action depends largely on the type of model chosen by the organisation.
Since organisations differ, the success of the chosen model will also be determined by the particular organisational
culture and structures (Masiloane, 2001:62).
Experience throughout the rest of the world clearly indicates that affirmative action cannot stand on its own
and although it can be regarded as the first step in the right direction the implementation of an affirmative action
programme would inevitably necessitate interventions based on the principles of effective management of change
and management of diversity (Cassel 1996: 51).
In the search for a new approach in order to manage the challenges of affirmative action, both during
transition and afterwards, and to adapt to a democratic environment, Van Rooyen (1994:198) and Bayat and Meyer
(1994:263) feel that a new management model needs to:
● be sensitive to the values of individuals and groups and be responsive to problems, needs and values;
● ensure programme efficiency and effectiveness in an open system where civil service is in equilibrium with the
environment and functions in harmony with the general and particular values and wishes of the communities;
● strive for social equality and justice with an ethical content; and deploy efforts on behalf of others.
Management should therefore recognize that sharp divisions in respect of views and perceptions will
inevitably occur in a diverse organisation; and that they should be prepared to deal with managerial challenges
during this new era in which affirmative action is the order of the day.
Motivational Factors
Bredell (2000: Summary) states that an individual’s job performance mainly depends on two aspects, namely ability
and motivation. Ability refers to the individual’s potential to successfully complete a task or job. Motivation is an
internal driving force which activates and energizes an individual and which directs his/her behaviour in such a way
that goals may be achieved.
Kanter (1997:169) states that four closely related concerns are currently driving employers to rethink the
meaning of “worth” and to look beyond job assignments in determining pay, namely, equity, cost, productivity and
the rewards of entrepreneurship. Kanter (1997:132) argues that when people are empowered to contribute, they want
to be specifically rewarded for their results.
Individuals’ Expectations
Sundstrom and Associates (1999:11) state that for a work team to be a viable unit, individuals need to be motivated
to channel their efforts and ideas towards the achievement of goals. This should comprise a sufficiently satisfying
experience to make them want to continue working. Furthermore, in terms of the expectations of individuals, the
organisation should provide some intrinsic and extrinsic motivators; it should also provide the help and resources
necessary to maintain conditions conducive to work and to congenial relations among co-workers. It is therefore of
the utmost importance that management should understand these expectations and address them. With guidance,
support and the involvement of individuals, members gain individual and collective confidence in their capacities.
This will contribute to promoting both self-sufficiency and optimal performance.

1136
 According to the expectancy theory of motivation (Nelson & Quick 2006 p 168) people’s motivation
increase along with their belief that effort leads to performance and performance lead to reward. It is important to
note that it is a person’s belief about the relationship between the performance-reward constructs that are important
and not the actual relationship between the constructs. During volatile times in the organisation, the performance-
reward link may become confusing.
Johnson and Redmond (2000:88) point out that the individual is most likely to be motivated when he/she:
● Receives praise for a job well done;
● Appreciates belonging to a successful team;
● See how his/her work fits into the overall picture;
● Considers him-herself to be properly informed about the organisation and the future; and
● Feel that his/her work is valued.
Targeted and Non-targeted Groups
Johnson and Redmond (2000:91) make it clear that people need to know the basis on which promotion is granted, so
that they can work towards this goal, and in this way they acquire information through other channels than the
formal sources. People from minority groups may not be part of this in-group, nor the conversations that take place
within it; and therefore often do not get to know what exactly is expected of them.
Several studies have been done on the psychological effects of affirmative action on the targeted
individuals (Society for Industrial and Organisation Psychology, 1996). It is important to realise that there can be a
negative psychological impact on those that benefit from affirmative action. When people feel that they have been
appointed for reasons other than competence, it could have a negative effect on self image and motivation. These
members can also find themselves on the receiving end of a backlash from those excluded from the target group.
One of the many sad effects of colonialism and apartheid in South Africa is the fact that the majority of the
population was disadvantaged. Affirmative action therefore in this country is designed to uplift the majority. The
non-targeted individuals are thus becoming the minority which increase the chances of marginalisation of the non-
targeted individuals. According to Johnson and Redmond (2000:91). People who share the same culture and
background and other common attributes, tend to form cliques or “in-groups” in the organisation. When cliques of
targeted individuals are formed, formerly empowered individuals may not be included. Reactions to this
marginalisation may vary from withdrawal from group and work activities to resignation. The expediency of these
reactions is arguable but the loss of expertise and experience will eventually impede organisational effectiveness.

The Design of the Research

From a theoretical perspective, this research aims to use information gleaned from the questionnaire and compare it
to information obtained from the literature study and, on the basis thereof, to identify possible positive aspects, as
well as any negative areas of concern with regards to the attitude of individuals and their motivation to perform,
during and after the implementation of affirmative action.
The study was conducted in specific geographical area of the South African National Defence Force
(SANDF). The objective was to determine how a sampled group of individuals are experiencing the implementation
of affirmative action within the SANDF and in addition the study aimed to test how affirmative action is impacting
on perceptions of targeted and non-targeted individuals on extrinsic motivators and intrinsic motivators. This was
done by means of a questionnaire.
The target group for this research included individuals from different racial groups, as well as both genders.
Members falling within the different rank levels within the SANDF were targeted, in order to ensure an overall
viewpoint in the interpretation of the results.
Compilation of the Questionnaire
To investigate the attitudes and perceptions of the employees of the SANDF, a questionnaire was used.
Respondents were provided with a series of descriptive statements in respect of job-related opinions. A five-point
Likert-type scale was used. In the Likert scale each statement entails five possible reactions, ranging from totally
true to totally false. The questionnaire measured two major areas of concern namely:

1137
● to determine the attitudes of employees regarding the implementation and application of affirmative action,
● to determine the difference in motivational factors for targeted and non-targeted groupings within the
organisations.
Compilation of the Random Test Sample
Approximately four thousand members were identified in military units in the Bloemfontein region. In order to
enhance the randomised test sample, a proportional allocation was carried out in respect of each stratum (rank
group), in order to determine the test sample of that stratum (rank group). In order to ensure consistent results in this
study, a minimum of ten percent of the target group, must partake in this research. See Table 1 for an illustration of
the compilation and participation of the test sample.

TABLE 1: ILLUSTRATION OF THE COMPILATION OF THE TEST SAMPLE

Participants Total members in Minimum of 10 %
Military Unit participation required
from the Military Unit
School of Armour 565 56
1 South African Infantry 550 55
44 Parachute Regiment 650 65
1 Special Service Battalion 897 89
Army Support Base 1450 145
Bloemfontein
Total 4110 411
Distribution of Test Sample per Race
Figure 1 indicates the distribution of the test sample in terms of race. This distribution refers to members who
completed the questionnaire.
It is important to note that The Broad-Based Black Economic Empowerment Act of 2003 defines "black
people" as a generic term that includes "Africans, Coloureds and Indians". According to the Act, "broad-based black
economic empowerment" refers to the economic empowerment of all black people including women, workers,
youth, people with disabilities and people living in rural areas.
The issue of affirmative action is slightly different where the term Historically Disadvantaged Individuals
(HDIs) are used, which indicates black ownership and managerial empowerment levels in a business and includes
white women in its empowerment measurement.

70 White
60
Percentages

50
40
Coloured
30
20 Asian
10
0
Race Black

FIGURE 1: DISTRIBUTION OF TEST SAMPLE BY RACE

1138
Figure 1 indicates that 25% of the sample was White, 4% was Coloured, 1% was Asian and 70% was Black.
Distribution of Test Sample by Gender
Figure 2 indicates the distribution of the test sample in terms of gender. The distribution refers to members who
completed the questionnaire.

100
80 Male
Percentages

60
40
20
0 Female
Gender

FIGURE 2: DISTRIBUTION OF TEST SAMPLE BY GENDER

Figure 2 indicates that 82% of the sample was male and 18% was female.
Findings
Because of the fact that affirmative action in South Africa is based firstly on race and secondly on gender the
importance of theses results lies mainly in the difference in attitudes between these racial and gender groups.
Because of the respondent’s race and gender he/she would either perceive him/herself as a targeted individual or
beneficiary of affirmative action or as a non-targeted or non-beneficiary even “victim” of affirmative action. In
analysing the results it is important to realise that the same response by individuals can have different meanings
depending on the racial - or gender group of that individual. This is specifically true for the part of the questionnaire
that measures motivational factors.
Targeted and non-targeted individuals’ attitudes towards affirmative action are reflected positively in terms
of the following factors:
• The majority of the respondents agreed with the general concept that opportunities should be created for
people who were previously discriminated against, regardless of race or gender;
• Targeted and non-targeted individuals are positive that structures that have been put in place to facilitate
affirmative action would promote democracy;
• On the whole, the respondents are positive that the approaches adopted in the implementation of affirmative
action are sufficiently transparent and inclusive;
• A majority of the respondents are supportive of the notion that affirmative action should be a long-term
project, with training and development as the first priority;
• The respondents also agreed that the group who were favoured in the past should assist target members who
were disadvantaged in the past.
Targeted and non-targeted individuals’ attitudes towards affirmative action reflected negatively and/or
differed in terms of the following factors:
• Targeted individuals agreed that career progression opportunities should be created for targeted individuals
regardless of experience or qualifications where non-targeted individuals feel that career progression
opportunities should not be created for targeted individuals regardless of experience or qualifications
• A majority of the respondents do not understand the envisioned end result of affirmative action within the
SANDF and do not support the implementation thereof, although the female members prefer to remain
neutral in this regard;

1139
• The majority of the respondents reacted negatively to the question of whether the current laws and policy
statements that apply in the SANDF are successful in facilitating affirmative action; and
• White males felt that affirmative action is a witch-hunt that is advancing discrimination.
Targeted and non-targeted individuals felt the same about the following personal motivational factors:
• Over 90% of all respondents irrespective of race or gender feel that they are good enough to be promoted and
that they deserve to be promoted;
• All the members of the different groupings indicated that a more senior position is important to them
although the Chi-Squared test by gender shows a probability of <.0001, which indicates a high significance
between gender and this item. Female members irrespective of race are less concerned than male members
about the likelihood of obtaining a more senior position;
• From the respondents, 97.64% of all races and both genders agree that recognition, growth and responsibility
are important to them in their work situation. They also indicated that it would make them negative if all of
these are absent in their workplace. It is thus clear that all respondents consider these aspects important;
• From the respondents, 82.12% agree that, if their performance is above average and they do not receive
promotion, they will stop doing good work. Members of all the racial groups, excluding 42.72% of the white
members, agree that, if their performance is above average and they do not receive promotion, they will stop
doing good work.
Regarding perceptions of individuals that the SANDF would provide incentives to perform the following
results were shown:
• Targeted and non-targeted individuals disagree that hard work (performance) and showing responsibility in
their job will lead to promotion in the SANDF;
• Non-targeted individuals felt that the SANDF do not regard them as individuals who are important enough to
be promoted. Targeted individuals preferred to remain neutral in this statement.
Targeted and non-targeted individuals differ significantly in their expectations of opportunities within the
SANDF.
• Targeted individuals are convinced that even though they are just as good as their colleagues, they are not
going to be promoted. Non-targeted are less cynical and they do not feel that even though they are just as
good as their colleagues, they are not going to be promoted.
Although targeted and non-targeted individuals felt equally strong about having intrinsic motivators present
in their jobs, targeted individuals also indicated that they would feel negative if the extrinsic motivators are
not present, while non-targeted individuals feel that as long as intrinsic motivators are there they would be
satisfied with there jobs. Examples are:
• Targeted individuals indicated that they do not agree with the statement that if the tasks they perform in their
current job make sense to them, they do not mind if they do not receive promotion. Non-targeted individuals
agree that if the tasks required by their current job make sense to them, they do not mind if they do not
receive promotion.
• Almost the same distribution could be seen in the statement that if their employer makes their job interesting,
they do not mind if they do not receive promotion. Targeted individuals disagreed with the statement whereas
non-targeted individuals mostly agreed with the statement.
The latter findings correspond with the viewpoint of Bloisi, Cook and Hunsaker (2003: 183) which is based on the
assumption that a person’s current circumstances determine which level of need will be acted upon. Figure 3
explains this theory

1140
MASLOW MASLOW ALDERFER HERZBERG McGREGOR
(hierarchy) (revised)

Self Growth- Growth Motivators Theory Approach

Actualisation aspiration needs (satisfiers) Y behaviours

Esteem

Belonging Relatedness
needs

Safety

Physical Deficiency Existence Hygiene Theory Avoidance

needs reduction needs factors X behaviours
(dissatisfiers)

FIGURE 3: PARALLELS AMONG POPULAR THEORIES OF MOTIVATION

Source: Bloisi, Cook and Hunsaker (2003: 182)

The needs at the top of the model lead to approach behaviours, while those at the bottom lead to avoidance
behaviours if not adequately obtained. Those in the middle (Maslow’s belonging and Alderfer’s relatedness) are
potentially unstable and can direct behaviour, in either direction, depending on the circumstances.

1141
Change Support System
TANGIBLE CULTURE CHANGE
COMPONENTS SUPPORT SYSTEMS SYSTEMS

PHASE 1 • Need for • Top management /

AWAKENING OF fairness Line management • Climate Studies
NEED • Policy support • Communication (formal
• Strategy • Professional human & informal)
integration with resource department
management
systems

PHASE 2 • Strict recruitment & • Manage & appreciate

AFFIRMATIVE • Equalisation of selection diversity
ACTION opportunities • Training & • Flexible in
• Targets development normsystems
• Targeted vacant • Performance appraisal • Support groups
positions • Mentor programmes • Integration in
• Integrated human informal networks
resource systems • Sesitising training

• Normalised working
• Reach equal environment • Normalised working
opportunities • Phase 2 support environment
PHASE 3 • All races integrated systems are • New set of norms &
CONSOLIDATION in the total system supposed to work values
effective and is
adapted to a
situation of equal
opportunities
FIGURE 4: INTEGRATION OF CHANGE SUPPORT SYSTEMS

Awakening of Need
Much has been expressed about the reason why the presence of cultural diversity is linked to improve organisational
performance. At this stage the applicable components are strategic planning (forming of vision, mission ect.)
development of policies and the integration thereof with management systems.
Tangible support systems applicable at this stage are strong support from top and middle management and
a professional human resource department, culture change climate studies and intensive two-way communication.
During this communication process, important principles, values and mind-sets, which underpin all activities, must
be clarified. It is important to understand that true culture change only take place if the following principles holds
true.
• Never lose sight of the business case for change.
• Engaging the entire organisation (targeted and non-targeted individuals), in ways that lead to ownership of
and commitment to a shared future.
• Creating community amongst employees.
• Building a common understanding of strategic issues in order that all decisions are aligned with these
issues.
• Creating a collective “image of potential” for the future which forms the basis of today’s action.
• A continual focus on the simultaneous and, sometimes conflicting, realities within the organisation’s
internal and external environments.
Affirmative Action
The equalisation of opportunities must take place during this phase. It is also important to set measurable targets so
that individuals understand the goals of their organisation’s affirmative action strategy. Tangible support systems at
this point consist of integrated and focused human resource systems which ensure the desired performance of

1142
targeted individuals. These systems also serve as a source of continuous encouragement whilst measuring the
achievement of objectives.
Consolidation
Although this stage can be regarded as the desired outcome, where the true integration of all cultural groups has
taken place and equal opportunities exist, continuous follow-up is necessary to ensure that the organisation remains
in the proximity of the expressed desired outcome.
Recommendations
It is crucial that diversity (the outcome of affirmative action) is observed as making business sense and that it is not
merely regarded as a case of fairness, justice or group parity. It is therefore important to link it to the overall
strategic direction of a company. A model which was developed to illustrate this integration is shown below. The
model shows there are two types of support systems that must work in a co-ordinated fashion in order to support the
components in the implementation and management of diversity.

References
[1] Bayat, M.S. & Meyer, I.H. (Eds). (1994). Public administration: Concepts, theory and practice. Halfway
House: Southern Book Publishers.
[2] Bloisi, W; Cook, C.W. & Hunsaker P.L. (2003). Management and Organisational Behaviour. Berkshire:
McGraw Hill.
[3] Bredell, D. (2000). An industrial psychological study establishing the relationship between career self-
management and job performance. Thesis presented in partial fulfilment of the requirements for the degree
of Master of Arts at the University of Stellenbosch
[4] Cassel, C. (1996). A Fatal attraction? Strategic HRM and the business case for women’s progression at
work. Personnel Review. Vol.25 No 5,pp 51-56
[5] Charlton, G. (1993). Leadership: The human race: A guide to developing leadership potential in Southern
Africa. Kenwyn: Juta & Co.
[6] Cheminais, J. (1998). The fundamentals of public management. Kenwyn: Juta & Co. Ltd.
[7] Human, L. (Ed.). (1993). Affirmative action and the development of people. A Practical Guide. Kenwyn:
Juta & Co. Ltd.
[8] Innes, I. (1993). Affirmative action: Issues and strategies. Reversing discrimination: Affirmative action in
the workplace. Oxford University Press. (The Innes Labour Brief.)
[9] Johnson, R. & Redmond, D. (2000). Managing people for success in a diverse world. London: Pearson
Education Ltd.
[10] Kanter, R.M. (1997). Frontiers of management. USA: A Harvard Business Review Book. 306p.
[11] Masiloane, D.T. (2001). Affirmative action within the South African Police Service with specific reference
to the SAPS in Soweto. Dissertation submitted in fulfilment of the requirements for the degree of Master of
Arts in the subject Police Science at the University of South Africa
[12] Nelson, D.L.& Quick, J.C. (2006). Organizational Behavior: Foundations, Realities and Challenges. USA.
Thomson South-Western.
[13] Pillay, Y.S. (1998). Developing a process for the implementation of affirmative action at SAFRIPOL.
Potchefstroom. Applied dissertation submitted in fulfilment of the requirements for the degree of Master of
Business Administration at the Post-Graduate School of Management, PU for CHE.
[14] Sheridan, A. (1998) p 243 Patterns in the policies: affirmative action in Australia. Women in Management
Review Volume 13 Number 7 pp. 243-252
[15] Sundstrom, E. & Associates. (1999). Supporting work team effectiveness. San Francisco: Jossey-Bass Inc.

Contact authors for complete list of references.

1143
Some Lessons in Creating (Not Creating) Entrepreneurship through Affirmative Action: A
Case Study

Anthony Shome, A.Shome@massey.ac.nz

Massey University, New Zealand

Abstract

Malaysia’s affirmative action, introduced as the New Economic Policy (NEP) in 1971 to redress Malay economic setbacks,
failed in its objective of acquiring, for Malay entrepreneurs, 30 percent equity of public companies by 1991. The
Government believed that affirmative action, boosted by Malay political primacy, was a recipe for the creation of
entrepreneurship. While not minimizing the role it justifiably plays for marginalized societies, affirmative action for the
creation of entrepreneurs is questionable. This paper attempts to explain that state assistance to an economically-
challenged society does little to create entrepreneurship, and because of its dependency ethos, it is more likely to inhibit
the survival instinct and the tenacity required to face the challenges of entrepreneurship. It offers a proposition: in the
context of Malaysia, selective assistance under affirmative action invites cronyism which non-Malay entrepreneurs resent
and react with even higher competitive resilience by organizing themselves more collaboratively and optimizing their
resources.

Why Affirmative Action?

Affirmation action is ‘affirm to act’ against perceived social imbalances and is essentially based on the principle of
non-discrimination (Findley, H. et al., 2004). To put it another way, it means assistance to the underprivileged.
Whichever we look at it, it is not new as various ways of asserting affirmative action have been with us since time
immemorial. But its institutionalization is quite recent. India can be said to be the first country to introduce
affirmative action policies when it extended special treatment to its untouchable castes following independence in
1947. But, of course, India never called it affirmative action.
For more intense studies of affirmative action, we should take a leaf from the USA since it was there where
the term was introduced. President John F. Kennedy first applied the term officially in an Executive Order in 1961
which established the President's Commission on Equal Employment Opportunity (Sowell, 2004, p.4). Though
Kennedy said in that landmark speech that the Government "will take affirmative action to ensure that applicants are
employed, and employees are treated during their employment, without regard to their race, creed, color, or national
origin", the order did not advocate preferential treatment of affected groups, rather it called for employees be treated
without regard to their ethnic or national differences and sought to eliminate discrimination. When Kennedy’s
pronouncement subsequently became law during President Lyndon Johnson’s tenure, under The Civil Rights Act
(1964), courts were empowered to order an organization to adopt “affirmative action as may be appropriate as both
punishment and correction for a finding of discrimination (Crosby, 1994).
Since then there have been several edicts that reinforced the requirements of equal employment opportunity
and affirmative action. In defining affirmative action, it means to affirm action to ensure that ethnic-minority groups,
women, people with disabilities, and other underrepresented groups are fairly represented in the colleges and in the
workplace (Miller, et al., 1997). This includes preference for qualified and employable ‘target groups’ identified by
the US Code of Federal Regulations as ethnic-minority groups (African American, Hispanic American, Native
American, and Asian American) and women, and as those bearing the brunt of discrimination (Crosby, 1994).
But definitions of affirmative action are not entirely satisfactory as there are tensions applying it between
equal employment opportunity and equal opportunity policy. Basically, affirmative action seeks to address historical
injustices or avoid the wrongs of the past. It is proactive and looks to public policy for redress. Whereas, equal
opportunity is reactive and focuses on the individual or what he or she considers it to be equal. There is also the
paradox of inequality as either can perpetuate tyranny. Affirmative action policies are applied in a variety of ways;

1144
employment, workplace issues, and minority quotas in colleges were given the most prominence in the US. But,
there is no escaping the fact that an underlying objective of affirmative action must accrue in the general economic
upliftment of marginalized communities. In the case of Malaysia, this is the focus through which entrepreneurship
development is given special attention. What does affirmative action mean in Malaysia?

Malaysia Background

Malaysia has a population of 25 million comprising 50 percent Malays, 24 percent Chinese, 11 percent Indigenous,
7 percent Indians (mostly Tamils), and 8 per cent others. The Chinese have been in the Malay States since the
fifteenth century, that by 1930 there they were over a million in number. Most Chinese came as traders but their
biggest presence was in the tin industry. The Indians too came as traders from as early as the fifteenth century but
the majority were brought in by the British as indentured rubber tappers at the turn of the last century. Indians were
later brought in to fill positions in the civil service, teaching professions, and the railways. The Chinese, in the
meanwhile, as they have always been, concerned themselves with business. The armed forces and the police were
mainly filled by the Malays but most confined themselves in the rural areas working as fishermen or growing rice.
With the economy dominated by the Chinese and the civil service by the Indians, the Malays felt left behind.
Malay dissatisfaction came to a head at the 1969 parliamentary general elections when riots broke out
between the Malays and the Chinese. The event (hereinafter referred to as the “Riots”) precipitated the far-reaching
reforms of the New Economic Policy (NEP) which was primarily a policy to address Malay grouses (Yoshihara,
1988, p.60; Crouch, 1992, p.23). The NEP was justified not only on economic but also political grounds. A major
event that followed the Riots was the establishment of Barisan Nasional (BN), a multi-party grand coalition that
combined all the major ethnic parties. The brainchild of incoming prime minister Tun Razak, the establishment of
the BN was heralded as the most successful political event and has been the government continuously since. Tun
Razak immediately set out to address Malay dissatisfaction and initiated the Government's Report on the Riots (in a
White Paper entitled Towards National Harmony) which stressed that political and psychological factors had
contributed to the conflict. The Report and public comments of Government leaders also emphasized economic
causes: they cited the failure of earlier economic policies to address the 'relative deprivation' of the Malays in
comparison with non-Malays. Expert commentaries at the time, while accepting that the Malays still lagged the
Chinese economically, did not, however, subscribe to 'relative deprivation' as a reason for the conflict (Means, 1991,
p.23). Yet theories of 'relative deprivation' continued to be ascribed to the Riots by the Razak administration to
justify certain policies. Resting on the notion of Malay dissatisfaction as the cause of the 1969 unrest, Razak
embarked on an aggressive economic agenda that was primarily directed to correct the perceived inequities of Malay
underdevelopment.
To allay anti-Malay cynicism, he assured non-Malays that their wealth and jobs would not be expropriated
to hasten Malay aspirations as his economic policies 'will be distributed in a just and equitable manner'. Underlying
this assurance, he promoted the slogan of Masyarakat Adil (Just Society) in his launching of the NEP in the Second
Malaysia Plan on 11 July 1971.

The New Economic Policy (NEP)

The NEP, metaphorically an affirmative action reform, was designed basically to reform the economy to meet
Malay expectations for a greater share in the economy (Shome, 2002, pp.98-101). The NEP prioritized its objectives
by tending first to the needs of rural Malays whose plight was identified with stagnated rural projects, lower
production yields, and rising poverty in their rapidly increasing population. Recommendations in the NEP included
the rapid modernization of rural development, facilitating the more efficient access and use of state-sponsored land,
and the reducing of stringent requirements for state loans. Along with these facilities the Government also stepped
up its drive to improve public amenities in the rural areas, and training opportunities for the high number of
unemployed rural youths. The second measure was for the progressive reduction of Malay dependence on the
diminishing agriculture subsistence. In line with this policy, the NEP recommended a concerted drive for greater

1145
Malay exposure in the urban sectors of commerce and industry to be steered by such public enterprises as the Majlis
Amanah Rakyat (MARA), Perbadanan Nasional Berhad (Pernas - the National Corporation Ltd), the State
Economic Development Corporations (SEDCs), the Urban Development Authority (UDA), and the Malaysian
Industrial Development Finance Ltd (MIDF).
Razak set a range of goals for the next two decades to measure the success of the NEP recommendations.
One of those goals was to target 30 percent of the country's corporate wealth for Malay ownership by the year 1990.
To achieve this, the Government adopted a highly corporatist 'Government-in-business' strategy to fulfil its
‘bumiputra’ (literally ‘son of the soil’ applies to indigenous peoples of Malaysia but often to Malays) ownership of
public corporations. The Government's deft acquisitions and equity holdings in major public companies through
Pernas, UDA, and the SEDCs though growing steadily, did not immediately address the more pressing needs of
general upliftment for most ordinary Malays. To overcome this problem the NEP bolstered its objectives with a
range of measures that were designed to accelerate Malay participation in the reform process. Included in these
measures were the retrospective expansion of Malay special rights in the form of land rights, subsidized education,
generous recruitment quotas for the civil service, and certain business prerogatives that were already protected in the
Constitution and had been gradually expanded in the past decade. The NEP re-formulated the system of job quotas
and Malay special rights for greater privileged access to higher paying jobs, management positions, the professions,
tertiary education admissions, and equity stakes in companies. NEP restructuring targets were also extended to the
private sector. Companies were asked to submit plans for employing, training, and promoting Malays at all levels of
their operations, and to adhere to the Malay employment quotas that were generally set at 40 percent of the total
labour force of the company. Many companies however chose to ignore this directive for the obvious impracticality
of it and the absence of effective monitoring of their compliance. But for new foreign companies there was no
escape from this policy, as Malay employment was a condition for their acceptance of the licensing and tax
concessions that were available to them.

The Outcomes of the NEP

The implementation of the NEP coincided with a buoyant Malaysian economy during the years from 1970 to 1974.
Politically, the environment presented Razak with a most propitious time to push through with relative ease many of
the provocative NEP recommendations as it made the task of managing opposition dissent and racial cynicism easier
to handle. The vitality of the NEP in the Second Malaysia Plan 1971-5 was manifested by a real GDP growth rate of
7.1 percent per annum that was achieved against the target growth rate of 6.8 percent per annum. While the
industrial sector doubled its share of growth since 1961, agriculture declined by a third underscoring a successful
policy shift towards industrialization (Bowie, 1991, p.93). Due to a world-wide recession, the hiatus in 1975 was
cushioned by the high growth rates of earlier years. The rapid recovery that followed in 1976, meant that little or no
adjustment was necessary to alter either the pace or strategies of the NEP. In the early seventies, the Government
acquired multinational companies that had their major business interests in Malaysia such as London Tin (by whose
acquisition Malaysia controlled the world tin market) and rubber giants, Sime Darby and Socfin (Yoshihara, 1988,
p.22). By 1975 Malay ownership of capital increased to 7.8 percent from 2.4 percent in 1970 but still fell short of the
target of 9 percent. Within three years of the NEP implementation, 98 percent of all those recruited for government
service were Malays, a percentage that far exceeded the 4:1 Malay ratio (Means, 1991, p.26). During the period of
the Second Malaysia Plan, Malay employment in the commercial and industrial sectors rose rapidly to parallel the
rate in the public service. Similarly, Malay admissions to institutions of higher education also increased
dramatically. Malay student numbers at the University of Malaya, for instance, increased from 49.7 percent to 66.4
percent between 1970 and 1979 and in about the same period Government expenditure per student rose from
MR3,700 to MR12,900 underscoring the NEP policy for greater access and privileges to Malay students. Of the total
of 4,930 scholarships offered in its 1974/5 calendar year, the University of Malaya offered 3,505 to Malay students.
The Government also actively participated in funding Malay students for overseas studies.
The Razak Administration's efforts to eradicate poverty did not match the impressive growth in the
economy. It managed to reduce poverty by a paltry 5.4 percent of the 49.3 percent households that were listed to be

1146
living in poverty (Means, 1991, p.70). Part of the problem was attributed to the Government's policy of winding
down agriculture that caused untrained rural Malays to look for work in the cities where they soon established
themselves in the notorious squatter colonies of Kuala Lumpur - the subject of constant jibes by cynics of the NEP.
The Second Malaysia Plan had also experienced a widening gap in income disparities between the rich and the poor,
a phenomenon that not only called into question the inequality of Razak's reforms but was also a perennial
embarrassment which successive Governments were simply unable to redress. While the NEP was generally positive
to the overall well-being of the Malays, it did not give to them benefits at the speed which Razak had intended. One
of the reasons for the slower than expected growth was the Government's acquisitive policy of corporate ownership
that muddled fiscal policy and foreign investment. First, inordinate Government spending in infrastructural and non-
productive sectors caused revenue deficits and increased borrowings. Funds were also being drained for an equity
buying spree to meet corporate ownership objectives. Second, rising inflation, ambiguities in acquisition policies,
and interventionist regulations as well as repressing private sector expansion compounded by capital outflows,
frightened away foreign investments.
Investors also found it hard to reserve bumiputra preferential shareholding since bumiputra capital was
acutely scarce. Capital was of no issue if the Government was itself the equity partner as funds could be allocated
from state budgets or from borrowings from state boards which too had been set up with state endowment. But for
the average private individual, the option was often straight Government loans through either state loan agencies or
banks such as Bank Pembangunan, Bank Rakyat, and Bank Bumiputra whose liquidity in the main was also tax-
resourced. The shares were often enough for the collateral required for the loans and interest could be nothing or
minimal. Sometimes shares were gifted at absolutely no cost to the beneficiary bumiputra director especially in
instances where the benefactor was of such prestige that his name (always male) alone carried enormous commercial
value to the investor. If access to loans was impossible and if the investor wanted a bumiputra partner badly enough,
a company advance was usually arranged for the partner and repayments were offset against future dividends or
other remuneration. This system could alternatively have a complex 'buy back' arrangement where the shares could
only be resold to the investor at a pre-determined price (Shome, 2002, p.101). Although bumiputra equity obliged no
further contribution from the partner, the company would normally utilize the services of its Malay partner in largely
public relations roles. The performance and the day-to-day running of the company rested exclusively with the
investor and the prohibition on the repatriation of foreign capital negated debt-recovery by liquidation.
Though the NEP managed only 20.4 percent Malay ownership of public companies in 1990 against the
target of 30 percent (http://www.epu.jpm.my) it was a well-conceived policy anchored by its main objectives of
poverty eradication and the reduction of inequality of wealth. On the face of it everyone ought to be happy with it as
the NEP was not race-specific and sought equal treatment across all ethnic groups. But implicit in its objectives was
its intention to boost Malays participation in the commercial activity of the nation that was dominated by the
Chinese, the second largest ethnic group (Milne & Mauzy, 1999: 51-53; Korff, 2001). The policy has been seen as
successful in attaining its first objective of poverty eradication but less successful in attaining the second objective
of wealth distribution (Yusof, 2001: 74-92; Baharin, 2006). Granted that under the NEP the Malays had been
exposed to all the tools of modern business (Mahmud, 1981, pp. 30-31; Ahmed, Mahajar & Alon, 2005), but that
alone would not be enough to catch up with the Chinese. First there had to be equity in the employment market to
get some sense of what the commercial world is about. It is well known that the Malays were faced with difficulties
to obtain employment in business organizations mainly owned by the Chinese and foreigners (Md.Said, 1974, pp.
37, 46; Gullick, 1981, p. 149). This may be attributed to the lack of confidence among by the foreigners of Malays’
entrepreneurial and managerial skills and the inclination by the Chinese to employ Chinese workers (Mahathir,
1970, pp.39-40, 82-83).
The NEP also provides an avenue for the Malays to mobilise their capital and increase their savings. This
was achieved through the establishment of agencies such as the Pilgrims Fund Board or Lembaga Tabung Haji and
National Equity Corporation or Permodalan Nasional Berhad (PNB). Traditionally, the Malays, being Muslims,
shunned saving money at banks due to the usury associated with investment activities of banks (Gullick, 1981, p.
148; Mahmud, 1981, p.36). In addition, unlike the Chinese who were more sophisticated with money dealings
(Yoshihara, 1988, p.56; Freedman, 1959, as cited in Mackie, 1992, p.164), the Malays were seen as less capable to
manage their money competitively (Mahathir, 1970, pp.167-169). The Chinese also have a strong and organized

1147
network to mobilise their capital and this has served as their competitive advantage over the Malays in business
activities (McVey, 1992, pp.20-21; Othman, Ghazali & Cheng, 2005). Therefore, concerted effort by the
Government to strategically mobilize Malay capital and to encourage investment among them, has helped the
Malays to build their commercial acumen as well as to increase their savings.
Another advantage of the NEP is that it provides the Malays with an opportunity to obtain better
qualifications (Shamsul, 1997) with the assumption that it will create entrepreneurial savvy. By 1990 it did create an
enlarging Malay middle-class and professionals (Kessler, 1992, p.145) so that by 2004 there were, in fact, more
Malay doctors than Chinese doctors (Sowell, 2004, p.70). The presence of these Malays in various professional and
employment sectors has, in some ways, helped to restore Malay confidence and the perception that the NEP has
helped the Malays to improve their standard of living and economic position (Sloane, 1999, pp.54, 119-120). A
significant outcome under the NEP was the creation of government-owned entities that became directly involved in
the commercial activities of the nation. These public and state enterprises became proxies of Malay wealth,
supposedly on behalf of the Malay population (Jesudason, 1989, pp.72, pp. 86-100; Searle, 1999, pp. 58-78).
Therefore, even though Malays corporate ownership had increased during the period of NEP, this ownership was
mainly concentrated in public enterprises rather than in the hands of individual Malays (Gullick, 1981, p.147), a
situation the Malays find unacceptable. Another major setback of NEP is that it gave too much attention to the
economic aspect of Malays capital building and too little attention to the psychological and sociological aspects of
enterprise creation. For example, the Government was accused of providing Malays with easy access to large capital
(Mahmud, 1981, pp.30-31; Gomez, 1999, p.35) without instilling and nurturing an entrepreneurial spirit among the
Malays as well as providing a conducive environment for their entrepreneurship development (Md.Said, 1974,
pp.206-210; Tan, 2006). Finally, while NEP has been successful in containing Malays discontent towards other
ethnic groups in Malaysia, the policy, however, created dissatisfaction with the non-Malays (Tan, 1992, p.194;
Milne & Mauzy, 1999, p.54). The non-Malays, in particular the Chinese, felt that they have been discriminated
against under the policy and this then created feelings of insecurity with regards to their business investment in the
country (Gullick, 1981, pp.146,149, 250) and, as a result, there had been massive movements of capital overseas
(Gomez & Jomo, 1999, p.44).
This foregoing discussion has illustrated the advantages and disadvantages of Malaysia’s NEP. While the
NEP has been successful in eradicating poverty and reducing inter-ethnic income disparities by providing Malays
with better access to education and employment opportunities, its success in promoting and providing conducive
environment for Malay entrepreneurial development is questionable. Even though the NEP has been successful in
restoring Malay confidence in the Government and reducing their discontent towards other ethnic groups in
Malaysia, the policy has been seen as discriminating against the non-Malays.

NEP on Entrepreneurship Development

Before we begin to discuss this issue, we should explain, at least briefly, what we understand by entrepreneurship in
the context of the NEP. First, what is entrepreneurship? Despite a mass of literature, scholars are still not able to
come up with a clear and consistent definition of entrepreneurship. Part of this difficulty is due to a failure to
integrate the two main approaches in defining the term: the functional approach and the indicative approach
(Casson, 2003). The functional approach is quite abstract and it simply describes what an entrepreneur does. On the
other hand, the indicative approach provides a description of the entrepreneur by which s/he may be recognized. The
former approach has been adopted mainly by the economic theorist whereas the latter by the economic historian.
One can find almost as many definitions of the entrepreneur as there are literatures. Generally, the entrepreneur can
be defined as:

One who creates a new business in the face of risk and uncertainty for the purpose of achieving profit
and growth by identifying opportunities and assembling the necessary resources to capitalize on them
(Foley, 2003, p.135).

Enterprising individuals who dare to be different and risk envy and ostracism to reap possible personal
gain from the exploitation of opportunities, (Kalantaridis, 2004, p.39).

1148

Individuals, who innovate, identify and create business opportunities, assemble and coordinate new
combinations of resources so as to extract the most profits from their innovations in an uncertain
environment (Swierczek & Quang, 2004, p.134).

any member of the economy whose activities are in some manner novel, and entail the use of
imagination, boldness, ingenuity, leadership, persistence, and determination in the pursuit of wealth,
power, and position (Montanye, 2006, p.555).
Most scholars are agreed that entrepreneurship is about vision, innovation and change, but there are those
like Schumpetar (1934) who will not accept the often-touted quality of risk-taking (Schumpetar, 1934) while others
such as Knight (1921) thinks uncertainty is a significant element in the making of an entrepreneur. Schumpeter
detaches the entrepreneur from risk bearing. He says “risk taking is in no case an element of the entrepreneurial
function. Even though [the entrepreneur] may risk his reputation, the direct economic responsibility of failure never
falls on him” (Schumpeter, 1934, p.137). Schumpetar makes a clear distinction between entrepreneurship and
invention. To him, inventions are economically irrelevant if they are not being put into practice. He accepts that
entrepreneurs could well be inventors but proposes that they are inventors, not by nature of their function, but by
coincidence and vice versa (Schumpeter, 1934, pp.88-89). Schumpeter further argues that the typical entrepreneur is
more self-centred and relies less on tradition and connection (Schumpetar, 1934, p.92).
Schumpetar associates entrepreneurship to creating and the entrepreneur as a resourceful innovator
(Kirzner, 1973). To Schumpeter, the entrepreneur is the bold leader who was willing to break through a wide array
of ordinary constraints which set him apart from the manager (Kalantaridis, 2004). Schumpeter (1934) advances the
view that the entrepreneur is motivated by first, “the dream and the will to found a private kingdom”. Second, by the
will to prove oneself superior to others; third, for the challenge of creating. (p.93). But he does not seem to think that
entrepreneurship is necessarily a life-long pursuit rather, he says as the market becomes more cluttered and
competitive, the rate of profits will deteriorate and the innovative activity will diminish (Kalantaridis, 2004).
Schumpeter is no different to other theorists who see the entrepreneur as one strongly motivated by pecuniary profit,
who is a sociologically distinct creative innovator unafraid to break away from established routines (Kirzner, 1973,
Montanye, 2006).
Frank Knight’s work appeared about the same time as that of Schumpeter. One of Knight’s main
contributions is attributed to his well-known theory of profit (Knight, 1921). He says profit is the reward for those
who are willing to bear the cost of uncertainty. What distinguishes entrepreneur from non-entrepreneur is their
“capacity by perception and inference to form correct judgments as to the future course of events in the
environment…of special importance is the variation in the power of reading human nature, of forecasting the
conduct of other men” (pp.241-242).
Another important aspect of Knight’s contribution to entrepreneurial studies is his detailed distinction
between risk and uncertainty as an economy-wide feature affecting all economic agents (Grebel et al., 2003). Knight
argues that uncertainty cannot be treated as risk because one cannot formulate a risk distribution for unique events
such as the likelihood of a singer losing his voice (Khalil, 2003). Hence, unlike risk, uncertainty cannot be estimated
and therefore it cannot be insured. Knight (1921) further emphasizes that the only risk that leads to profit is a unique
uncertainty resulting from an exercise of ultimate responsibility which in its very nature cannot be insured nor
capitalized nor salaried” (p.310). Knight asserts that the major effect of uncertainty follows with the establishment
of enterprises where the great mass of population, who provide productive services to the entrepreneurs, are offered
the certainty of employment and income.
For Knight, the entrepreneurs are distinguishable from the others due to their willingness to bear the
uncertainty with control and social responsibility. The entrepreneurs are ultimately in control of the venture and are
ultimately responsible for all receipts and outlays (Kirzner, 1973). In return, they will be justly rewarded if they
succeed.

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The Implications of the NEP on Entrepreneurship Development
In discussing the implications, we should look at some of the elements of entrepreneurship and their relevance to
Malay entrepreneurial development on the back of the NEP. In her study on early Malay entrepreneurialism, Li
points out the differences in the migrating patterns of the Malays and Chinese, saying that the former were more
dispersal than the waves of the collectivist Chinese bands (Li-Murray, 1998, p.150). By this, Li-Murray posits that
the Malays were inclined to individualistic pursuits and supported themselves as independent wage earners since
there were few Malay businesses. Li-Murray also says that the personalization of commercial relationship
contributed to Chinese business success. While it is true that the Malays lacked the kind of organizations or kongsi
the Chinese had, they were no less entrepreneurial as observed by such eminent Malay World historians as Reid
(1993), Andaya (1982), and Ricklefs (1993). However, in modern Malaysia, not only did Malay enterprises remain
small and traditional, independent trading scarcely survived. Malays were drawn into the kind of productive services
Knight (1921) talks about where the certainty of employment was better than the uncertainty of business. The risk of
uncertain income also meant that the Malays were aversed to venturing into business. Kalantaridis (2004) says it
takes a certain amount of dare to venture into business. Malay entrepreneurs, especially in the rural areas, were look
upon with hostility for their apparent obsession with money and profit (Wilder, 1982, Bank, 1983, as cited in Li-
Murray, 1998, p.159). This probably explains their reluctance to go into business. Besides, religious virtuousness
frowns upon the exploitative nature of business as it is sometimes perceived to be. The Schumpetar (1934) thesis of
the entrepreneur as the “bold leader looking to found a private kingdom” too does not go down well with the Malay
egalitarian psyche.
The Islamic concept of the ummah or community has reinforced the Malay spirit of gotong-royong or
cooperative work; together they inspire the laudable giving nature of the Malay. From this we can infer that
individualism and competitiveness, that are demanded in entrepreneurship, are traits less likely admired and
pursued. This maybe true of those more religiously-inclined particularly in the rural and semi-urban areas where
traditions and religions are strong, the Malay trader in the urban centres, though, is more likely to be the
individualist who is forced to go it alone since there is a lack of community network to organize businesses as
successfully as the Chinese as observed by Li-Murray, (1998). But there are many independently-run Malay
businesses all over urban centres but they are mostly very small and unspecialized and whose businesses are not
exactly built upon the qualities of innovation, boldness and wealth creation that identifies the classical entrepreneur
(Schumpetar, 1934, Swierczek & Quang, 2004, Montanye, 2006). The lack of growth of sole proprietorships and
family businesses, that characterize most Malay businesses, to medium and small-sized enterprises (SMEs
underscores this point.
Therefore, with this in mind, entrepreneurial development based on the objectives of the NEP seem a
tortuous task. The major objective of the NEP that 30 percent of all corporate stock would be owned by Malays by
1990 (Sowell, 2004, p.61) was assumed on the basis that the Malays would be sufficiently entrepreneurial by then.
The Government had believed that if the Malays were attracted by generous financing and preferences for licences,
permits, and public tenders, that would give rapid birth to a generation of entrepreneurs who would have the
experience to garner the 30 percent corporate equity. What was not anticipated was that the Malays were lacking in
adequate skills and know-how to develop a large enough base of Malay enterprises that had the liquidity to acquire
equity in public companies. What was disturbing was that the Malays, who had been recipients of various
concessions, such as timber mining, or licensed government contractors, or given access to cheap financing, bartered
their privileges to the Chinese in return for silent partnerships or company board seats.
Former Prime Minister Tun Mahathir said, “the vast majority regarded the opportunities given them as
something to be exploited for the quickest return … became sleeping partners … learn(ed) nothing … became less
capable of doing business” (Straits Times, 1 August 2002). Termed the “Ali-Baba” syndrome, where the former, Ali
the Malay, sold off to the Chinese, the Baba. This has been alleged for many years and repeated even more recently
by former Deputy Prime Minister Tun Musa Hitam (Star, 23 March 2007). The NEP has also been exploited by
‘fake entrepreneurs’ or what some called the ‘rent-seekers’ (Yoshihara, 1988, p.68; Searle, 1999). The main activity
of this group of people was not entrepreneurial in nature but merely to take advantage of their political connections

1150
and access to government resources (Yoshihara, 1988, p.68). To some extent, the politicized nature of Malaysian
businesses has discouraged many Malays to get involved in business as they feel that they are at a disadvantaged
position to compete with the more politically-connected businesspeople (Gomez & Jomo, 1999, p. 49). There were
allegations that the 20-odd percent that was achieved went to Malay elites whose political support was important to
UMNO (Crouch, 1996, pp.37-38). Of this, only 5 percent of Malays benefited from the NEP (Sowell, 2004, p.74).
One of the major setbacks of NEP is in fact its policy of dependency that equates to a “crutch-mentality”
according to former Prime Minister, Tun Mahathir said this when he addressed the UMNO General Assembly in
June 2003. He said it was he and his Government “who provided the crutches. The NEP was meant as a leg-up but it
consigned the Malays to permanent disability” (Far Eastern Economic Review, 23 June 2003). What this is saying is
that the Government cannot create a class of Malay entrepreneurs if it continues to give out assistance and provide a
superficial safe and comfortable environment for them. This goes against the grain of risk taking, innovativeness and
autonomy, the elements that are crucial in the development of entrepreneurship. Another problem with the NEP, like
any other affirmative action, is that once in place, it is very difficult to put an end to it. Instead, it is likely to grow
and create a subsidy mentality with the Malays (Khoo, 1992, p. 65; Gomez & Jomo, 1999, p. 25). In this respect, the
Malays were inclined to expect more regardless of whether the Government is capable to meet their demands or not
(Md. Said, 1974, p. 203; Milne & Mauzy, 1999, p. 54). They would feel that it is within their right to be favoured
and any attempt to question or put an end to this right, would very likely cause a stir and anger with the Malays
(Mahathir, 2002c, as cited in Khoo, 2003, pp. 194-195). A government handout, that some analysts alleged as yet
another example of the dependency culture, was shown in February 2000 when the Government announced a
RM300-million (USD87 million) fund to help ethnic Malays survive in business. Analysts supportive of the
initiative described the central bank fund as a necessary lifeline following the 1997 Asian Financial Crisis. Bank
Negara Malaysia Governor Ali Abul Hassan Sulaiman said the Bumiputra Entrepreneurial Project Fund was aimed
to help bumiputra entrepreneurs of small and medium-sized companies with financing at reasonable costs to enable
them to undertake new or existing projects (Straits Times, 11 February 2000).

The Proposition
The proposition: Selective assistance under affirmative action invites cronyism which non-Malay entrepreneurs
resent and react with even higher competitive resilience by organizing themselves more collaboratively and
optimizing their resources.
To address this proposition, we need to recap briefly some of the earlier points. The NEP was formulated in
response to a political crisis, of a disgruntled electorate who felt they were left out in the economic process. The loss
of several Malay seats in 1969 general elections to the Chinese further fuelled the emotion of estrangement. The
reaction of the Government, controlled by the United Malays Organisation (UMNO) the principal in the ruling
coalition, was to appease to the Malays. And the result was the NEP. When it failed to meet Malay equity objectives
to build a core of budding entrepreneurs, changes were put in place to put less emphasis on setting targets for ethnic
restructuring and income distribution. The reality is that it continued very much on the path of the original NEP.
This was due to the political pressure that was brought to bear on UMNO by its grassroots. The Government by then
Prime Minister Dr Mahathir took a number of Malay entrepreneurs under his wing to stimulate Malay stewardship
in a number of enterprises which had government interests. Some of these entrepreneurs were Halim Saad of
Renong, Tajuddin Ramli of Malaysia Airlines, businessman-lawyer Diam Zianuddin, and Syed Mokhtar Al-Bukhary
to name a few (Balfour, 2002). All went well until the bubble burst with the 1997 Asian Financial Crisis and the
mantle of cronyism was cut wide opened with several bailouts that included Mahathir’s son.
The Government’s sponsorship of Malay entrepreneurs was received with understandable resentment by
non-Malays and equally by Malays who saw this as betrayal of the objectives of affirmative action which was about
narrowing income gaps not on enriching the elite class. The non-Malays, more significantly the Chinese, had always
grouped themselves in cartels under the aegis of the guanxi (or kongsi as it is known in Malaysia) that ensured a
system of self-help (Gomez, 1999, Mackie, 1992, Jesudason, 1989, Heng, 1992). The Chinese kongsi has a very
long tradition in Malaysia that dates back from their earliest arrivals in the country. It is clan-based and till today

1151
Chinese businesses can be identified by their clan affiliations. The system has served them well to the extent that
they are virtually self-supported with their own welfare services, schools, temples, and a source of financing.
Mackie (1998) attributes Chinese success over other indigenous rivals to their stronger socialization process and
family patrimony characteristics (pp.142, 142). In their pioneering days they enjoyed a high degree of autonomy and
had a free rein in involving themselves in any business. That was until the NEP when a system of preferences for the
Malays precluded them from many businesses. Even then, under the Ali-Baba relationship, Chinese were able to
circumnavigate around the restrictions. But, over time, Chinese business influence eroded, firstly by their dwindling
population numbers, secondly by the absorption of their businesses into public conglomerates that are no longer
ethnically distinguishable. As the Government tightens its policing of Ali-Baba business, Chinese reach into new
businesses are curtailed. But far from weakening, Chinese entrepreneurship is still formidable and are now more
vocal in their resentment of NEP policies.

Testing the Proposition

This paper undertook a small survey to test the proposition. Twenty-five former Malaysian Chinese business people
now resident in New Zealand were surveyed. I asked questions about a) the degree of helpfulness of policies of the
Malaysian Government b) if they consider government policies racially discriminatory c) if unfavourable
government policies made them more determined d) their views on affirmative action, cronyism and corruption.
Most were divided on the question of helpfulness. On government policies, only about a quarter thought
they were racially discriminatory; the majority did not think they impacted much on their businesses. This was
tempered by question three in which most think that unfavourable government polices had something to do with
their determination to succeed.
On the last question, their responses were more forthright. What came across quite strongly was that they
were ever mindful and unhappy with Malay preferential rights which they blamed excluded them and other non-
Malays from new business opportunities. But, despite this, they do not believe they are racially discriminated against
by the Government or the Malays. Most have very good Malay friends and find Malays generally honest, caring and
easy to work with. Most believed affirmative action had worked better for political and business elites than for
ordinary Malays. They believe affirmative action was responsible for creating an environment of cronyism but
thought much of it has abated since the 1997 Asian Financial Crisis. Still, they are disturbed to see too many plum
projects being concentrated in the hands of a few elites.
From the survey I draw an impression that the Chinese have a dogged ‘can do’ attitude in their business
pursuits. They are most comfortable doing business with their own kind; in many cases, a preference for their own
dialect groups. They can be clanish and even chauvinistic and owe their successes to Confucian and other Chinese
values. Their tendency to work within their racial community is not only for the purpose of optimizing kinship but
also to create a protective curtain for their continuing survival. This I see as a reaction against outside forces and
defence against policies inimical to their interests.
From this, I believe Malaysia’s affirmative action has contributed to an impetus for greater Chinese resolve
in their entrepreneurial endeavours. However, these findings, from a pilot study of a much bigger survey planned,
are by no means conclusive. But it provided a sampling of a view of a population now removed from their former
environment. I had expected some bias from disgruntled immigrants but there was none. Responses were not quite
as acerbic as I had expected, if anything, they had undertones of nostalgia.

Conclusion
In summarizing, this paper has offered definitions of affirmative action and entrepreneurship and applied them in the
Malaysian experience. The NEP was also examined to see in what ways it has assisted in entrepreneurship
development. The NEP has had many successes but in its role for entrepreneurship development, it did not measure
up. This is based on its benchmark of 30 percent Malay ownership of public companies. While there is some

1152
justification in pursuing a policy of affirmative action to redress economic imbalances, it is hard to see how it can
create entrepreneurs.
One could argue that the state could hold hostage to power by its culture of preferential treatment of the
electorate. Would the state then consciously and purposefully perpetuate such a dependency culture? But then, we
assume the state has more noble aims and would not be self-serving. The reality is: governments always aspire to
rule forever and would buy gratitude if that is what it takes. So, is there a will by the Malaysian Government to do
anything less with the NEP if its political survival depends on it? Probably not. The hard question is, why should it?
The economy has ticked along very well but is that good enough justification for holding on to the NEP at the
expense of entrepreneurship under-development?
The NEP reaffirmed Malay preferential rights and this aggregated mostly with jobs in the civil service and
in the uniformed and armed services, preferential treatment of Malay businesses for public projects, and tertiary
admissions. With the security offered in their employment, there is the question whether this has inhibited the
Malays to strike out on their own? Paradoxically, affirmative action could be seen as the Malays’ worst enemy as it
has the potential of ‘uncreating’ entrepreneurship because it takes away the psychological element of risk-taking.
And, with no burden of risks, there is little pain should the business fail. Rather than making the Malays more
entrepreneurial, government assistance can be seen as indirectly contributing to the greater resiliency, of the non-
recipients, the Chinese and the Indians, which breeds a stronger resolve for survival and the prudent use of capital
and resources. But there is also the moral question of equity: NEP budget is funded by taxpayers, many of whom are
poor, is it conscionable to see their money enriching others?
There is no cultural baggage that inhibits Malay entrepreneurship. It should be noted the lack of
entrepreneurial drive by the Malays cannot be attributed to their strict adherence to religious precepts because Islam
does not prohibit business. In fact, Islam was propagated throughout the Malays isles by the entrepreneurial
endeavours of Muslim traders in the spirit of their ummah (Ricklefs, 1993).
If we do away with affirmative action, since evidence points to it stifling creativity, innovation and
competition, we will still have to find yet another way to deal with the difficult questions of racial estrangement and
inequality that spawned affirmative action in the first place. Simple answers will be to apply selective application
and exacting preconditions. That could work where marginalized communities are demographically small and where
the political cost is minimal. It is more problemmatic and politically unfeasible where the majority are the
beneficiaries. Such is the case with Malaysia.
There is already talk about clipping the perks of the NEP (Star, 23 March 2007). Former Deputy Prime
Minister Tun Musa Hitam, who sits on the advisory council of the huge Iskandar Development Project in the
southern state of Johor, said investors will not be constrained by NEP policies of local partnerships, capital
structures, Malay employment quotas and other pro-bumiputra policies (Straits Times, 24 March 2007) This is an
incremental step but all the same a major step back for the NEP. It does manifest a willingness to re-visit the NEP.
How it will pan out eventually and if it would pervade to the rest of the country is a political minefield the
Government will have to tread very carefully indeed. And doing away with it is therefore not an immediate option as
there is still much to be done to redress Malay economic unhappiness and entrepreneurship under-development.
There are also the consequences of losing grassroots support of rural Malays who regard affirmative action as their
inviolable right and a symbol of national ownership. That said, Malaysia’s non-Malay constituents are not exactly
demanding the abolition of the NEP and will continue to tolerate it if it promises further political stability, growth
and ethnic harmony. For the longer term, a watered down version of the NEP, cleared of the more obvious inequities
and one that is inclusive of all economically marginalized communities, would be a more palatable and sustainable
proposition.

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Contact author for the full list of references

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 Employee Satisfaction: The Impact of Benefit and Reward Policies
Hooi Lai Wan, hooilw@hotmail.com
University Technology Malaysia, Malaysia

Abstract
The paper is an analysis of the impact of benefit and reward policies on employee satisfaction in the chemical companies
in Malaysia. Analysis was done on four companies, which were selected based on equity ownership. It is hypothesized
that foreign-owned multinational companies (MNCs) being more globalized and technologically advanced would have
better benefit and reward policies, and employees in these companies are more satisfied with the benefit and reward
policies. However, findings show that not all foreign-owned MNCs are giving better benefit and reward packages.
Companies that have some Malaysian interests seem to have better benefit policies though this is not the case for rewards.
As far as rewards are concerned, the respondents in the Malaysian-owned company experienced the lowest level of
employee satisfaction among the four companies. On the contrary, respondents in European-owned MNCs felt that they
are better rewarded than those companies with Asian equity. Benefit packages in all the companies are in line with global
trends, with much emphasis on flexible benefits though standard and voluntary benefits are available. Keywords:
benefits, rewards, employee satisfaction, standard, flexible, voluntary, recognition

Introduction
Benefit and reward policies are recognized as being critical to the delivery of an organization’s business strategy and
change initiatives, motivating and mobilizing staff to achieve these goals. Organizations that maintain effective
benefit and reward policies have a sustained competitive advantage, as key employees are effectively locked into
their careers and employment costs are minimized. What then are the benefits and rewards policies most desired by
company employees? This study aims to understand the current benefit and reward policies in the chemical and
petrochemical industry in Malaysia and its effect on the satisfaction of the employees. The chemical and
petrochemical industry was selected for this research to understand what drives employees to stay on in these
companies despite the perilous nature of the job.
In this research, case study analysis was done on four companies - identified based on the equity ownership
to see if different ownership has an impact on the benefit and reward policies of the company. For the purpose of
this research, it is hypothesized that employees in foreign-owned MNCs are more satisfied with the benefit and
reward policies of their companies as compared to locally-owned MNCs. Foreign-owned MNCs being more
globalized and technologically advanced would have better benefit and reward policies for its employees. Hence,
employees in the foreign-owned MNCs are expected to be more satisfied with the benefit and reward policies.

Literature Review
Employee benefits package such as tuition reimbursement, paid leave policies (bereavement, examinations, etc.),
paid personal time off, enhanced health insurance, retirement plans, paid vacations/holidays and overtime
multipliers that are competitive and attractive would increase employee satisfaction. Giving long-service awards,
visit/send cards to sick employees, baby blankets/gifts, picnics/holiday parties and family day would also engender
employee satisfaction. Acknowledging employees for excellence among their peers through an announcement in the
company newsletter, an employee recognition award or a perk such as a special parking space, also serves to
enhance a sense of satisfaction. Similarly, recognition and rewards that are given fairly and adequately according to
job performance have a positive effect on employee satisfaction. Ongoing feedback about performance from
superiors in the form of praise/recognition also tends to stimulate employee satisfaction. Employees are also more
satisfied with flexible benefit options.

1155
 Parents, for example, are opting for companies offering home working or flexi-time, as well as private
medical insurance, pension contributions or critical illness cover. Workers living in rural areas are more likely to
favour a company car or subsidised travel. In a survey conducted by William M. Mercer Inc., where 25,000
employees at nine large companies were asked their opinions of 65 potential benefit programs, the benefits
identified as the most important for productivity are flex time (90%), clear sense of organizational purpose (89%),
employee provided or subsidized office equipment for work at home (87%), a comfortable, attractive workspace
(86%), telecommuting (84%), on-site fitness center or subsidized health-club membership (78%), work schedule
compatible with school calendar (75%), career planning and appraisal (74%), child care center at or near work site
(73%) and job sharing (72%) (Smith, 2005).
Most surveys carried out showed that, businesses are increasingly turning to rewards and benefits packages
to recruit and retain staff. According to the CIPD, around 50% of businesses it surveyed this year now offer benefits
or rewards in addition to base salary. One fifth of respondents intended to improve their existing benefits in 2005,
adding new policies rather than phasing any out.1 Similarly, Day (2005) reiterated that with potential employees able
to take their pick of the jobs in a buoyant market, employers need to offer the right bait to land the best talent. But
paying the right salary is only part of the story (Day, 2005). Jardine Lloyd Thompson, a benefits provider found that
in small and medium-sized firms, nearly half used benefits schemes to keep up with market rates and another 37%
used them purely to attract and retain staff.2
Benefits offered by companies vary enormously in terms of quality and variety. Generally, there are three
styles of benefits: standard (share plans, pensions and holiday entitlement); flexible (cars, dental insurance, life and
disability insurance, discounted services, financial planning, give-as-you-earn charitable contributions, home phone
packages, pensions, life assurance and concierge benefits); and voluntary (services such as health care schemes).
The CIPD found that the top 10 employee benefits were still rudimentary incentives such as sick pay, 25 days paid
leave, on-site parking, private healthcare, a party at Christmas or tea and coffee. To retain or attract new staff, the
companies need to keep up with the trend to provide flexible packages. Flexible benefits packages provide added
extras to staff and allow them to pick and choose between the type of benefits package they want. Hewitt
Associates, a human resources firm found that, in nearly half of all the companies it had surveyed, their chief
executive officers were now involved in setting up flexible benefits schemes.3
A study focusing on companies that employ 100 or more workers released by The Families and Work
Institute has the following findings on the trends in employer benefit offerings: allow workers to take time off to
attend school events (90%), flextime (67%), let workers stay home with mildly ill children without using vacation or
sick days (50%), provide dependent care assistance plans (50%), hold supervisors accountable for sensitivity to their
employee’s work/family needs (44%), offer maternity leaves longer than 13 weeks (33%), offer elder care resources
and referral services (23%), and offer childcare at or near the workplace (9%) (Smith, 2005).
Company rewards are just as important as pay and benefits. Today, organizations acknowledge the
important role reward programs play in contributing to business success. Put simply, an effective total rewards
strategy enables organizations to deliver the right amount of rewards, to the right people, at the right time, for the
right reason (Cornish and Gilbert, 2005). Besides monetary rewards, recognition and appreciation are integral
components of a winning strategic reward system. Though comparatively less costly, these two elements rarely
receive the attention they deserve from business owners. Showing appreciation to employees by acknowledging
excellent performance and the kind of behavior desired is best done through a personal note, stopping by the
employee's desk to convey your appreciation, a public statement of thanks in front of the employee's co-workers or
team, citing specific examples of what they've done that has positively impacted the organization (Sarvadi, 2005).
Instantly rewarding and recognizing a good job has a major impact on improving morale and motivation. A
motivated worker will contribute vigor and dynamism to the organization, instilling the organization with
remarkable productivity and a competitive edge - all the while providing a valuable service or product for the
business and its customers.
Heathfield (2006), emphasizes on quality of work life rewards, in addition to traditional increases to base
pay, and variable rewards, such as bonuses, profit-sharing and gain-sharing. Recommendations include payment of
a one-time, lump sum payment for a result or outcome that deserves recognition; payment of smaller rewards with
“thank you” notes for above the call of duty contributions; increased emphasis on additional benefits such as pre-

1156
paid legal assistance, educational assistance, and vision insurance; increased opportunity for flexible work
arrangements and job-sharing; an organizational emphasis on the training and development of employees; and clear
career paths so employees see opportunities within your organization. In short, forward thinking organizations are
emphasizing “quality of work life” rewards and recognition to add to the value of the total compensation package.

Methodology
The main method used for this research is primary data survey collected through a questionnaire survey as well as
in-depth interviews with the human resource director or manager and some employees of each company. The four
companies are given the fictitious names of GMCC, JCC, BCC and MCC to preserve their anonymity. GMCC is a
joint venture between a local and European company (about 800 employees); JCC is wholly Japanese owned (about
400 employees); BCC a European company (about 300 employees); and MCC a local company (about 500
employees). At GMCC, two senior HR managers and two HR executives were interviewed. At JCC, the Assistant
HR Manager, a HR executive and the Quality Manager provided information. At BCC, the Senior HR Manager and
two HR Advisors were interviewed while at MCC the Senior HR Manager and two HR executives participated in
the study. As for the employee satisfaction survey, 100 questionnaires were given to each participating company
and distributed randomly to the employees in different departments within the organization. Respondents were
given two weeks to return the questionnaire. The data collected from the questionnaire was analyzed using the
SPSS Version 11.0 for Windows software program.
After contacting the HR department of each of the companies by telephone, a meeting with the HR director
was arranged and a general outline of this research's aim and methodology (the theme, the purpose, general outline,
method, and details of this study) was mailed to them in advance. At the first meeting, permission was obtained to
administer the questionnaire and privately interview company employees. Subsequent meetings involved
interviews, which were carried out in a private room and lasted for an hour to an hour and a half. A summary of
each interview was drafted based on the tape recordings and notes taken during the interview. The drafts were then
sent back to the interviewees for verification. Follow-up discussions were carried out electronically through e-mails,
facsimile and telephone. The responses to the interviews were tabulated to identify key trends. Summaries were
then developed for each variable.

Results
(a) Demographic Data
(b) The demographic data covers sex, race, age, age of entry, education level, job category, type of employees,
years of working experience, and length of service with the organization, income group and number of
previous jobs held. The majority of the respondents in all the four companies are young male Bumiputras
with an average age of between 32 – 35 years. Majority of the respondents have 7 - 12 years of working
experience, with MCC having more experienced staff as compared to the other companies. Length of service
ranges from 1 – 25 years and MCC has more senior employees as compared to the other companies. 60.5% of
the respondents in MCC have more than 10 years of service with the company. This is also reflected in the
high percentage of respondents (63.2%) in MCC not having any previous jobs before joining the organization.
Table 1 is a summary of the demographic data of the respondents of the four companies.
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
(k)

1157
 (l)
(m)
(n)
(o)
(p)
(q)
(r)
(s)
(t) TABLE 1: DEMOGRAPHIC DATA
(u) (v) GMCC (w) JCC (x) BCC (y) MCC
(z) Number of respondents (aa) 62 (bb) 56 (cc) 62 (dd) 38
(ee) Sex: Male (gg) 64.5 (ii) 64.3 (kk) 75.8 (mm) 73.7
(ff) Female (hh) 35.5 (jj) 35.7 (ll) 24.2 (nn) 26.3
(oo) Race: Bumiputras (ss) 75.8 (ww) 82.1 (aaa) 64.5 (eee) 94.7
(pp) Chinese (tt) 21 (xx) 17.9 (bbb) 29 (fff) 2.6
(qq) Indians (uu) 1.6 (yy) - (ccc) 4.8 (ggg) 2.6
(rr) Others (vv) 1.6 (zz) - (ddd) 1.6 (hhh) -
(iii) Age: Age range (lll) 25 – 48 (ooo) 21 – (rrr) 25 – (uuu) 23 – 49
(jjj) Average age (mmm) 35 47 49 (vvv) 35
(kkk) Mode (nnn) 30, 40 (ppp) 32 (sss) 34 (www) 36, 45
(11.3%) (qqq) 29 (ttt) 28 (21%)
(14.3 (16.1
%) %)
(xxx) Entry age: Entry age range (aaaa) 20 – 46 (dddd) 19 (gggg) 20 (jjjj) 20 – 36
(yyy) Average age (bbbb) 31 – 42 – 39 (kkkk) 26
of entry (cccc) 30, 34 (eeee) 26 (hhhh) 26 (llll) 23, 25
(zzz) Mode (11.3%) (ffff) 26 (iiii) 24 (31.6%)
(14.3 (14.5
%) %)
(mmmm) Working experience: (pppp) 5 – 27 (ssss) 1 – 24 (vvvv) 3 – (yyyy) 1 – 25
Range in years (qqqq) 12.42 (tttt) 8.93 30 (zzzz) 12.11
(nnnn) Average (rrrr) 10 (uuuu) 7 (wwww) 11. (aaaaa) 12
(oooo) Majority (14.5%) (12.5 8 (23.7%)
%) (xxxx) 8
(24.2
%)
(bbbbb) Length of service: Range in (eeeee) 1 – 7 (hhhhh) 1 – (kkkkk) 1 – (nnnnn) 1 – 25
years (fffff) 4 10 10 (ooooo) 9.63
(ccccc) Average (ggggg) 5 (iiiii) 5.07 (lllll) 7.36 (ppppp) 12
(ddddd) Majority (32.3%) (jjjjj) 4 (mmmmm) (26.3%)
(25%)
(33.9
%)
(qqqqq) Number of previous jobs held: (sssss) 1.6 (uuuuu) 23. (wwwww) (yyyyy) 63.2
None (ttttt) 75.8 2 5.5 (zzzzz) 31.6
(rrrrr) 1–3 (vvvvv) 67. (xxxxx) 54.
8 8
(aaaaaa)
Current Benefits and Reward Policies
In all the companies surveyed, the compensation package includes various benefits and rewards as well. Though

1158
there are differences, all the companies surveyed state that the benefits are very attractive and include housing loan,
vehicle loan, medical benefits, insurance, staff development program (company sponsors staff to go for further
education), stock option scheme, petrol allowance for senior management staff, transfer allowance, compassionate
leave, and so on. Some of the employees interviewed opined that besides the pay, which is rather competitive, it is
the benefits that made them stay on in the company. The following section will trace the current trends in benefits
and rewards offered by the various companies.
(bbbbbb) Medical and Dental Benefits
One of the benefits that all the companies boast of is the very good medical benefit, which is extended to the
immediate family too. Employees in GMCC agree that the company’s medical benefits are one of the best in the
area. In BCC, each family member is allowed to seek treatment at medical clinics for up to 30 times a year at the
company’s expense. However, there is no limit as to the medical bill. If they seek medical treatment at specialist
hospitals, the maximum medical expenditure allowed is RM500 for each family member though there is no limit for
the employee. As for hospitalization fees, the company bears up to RM12,5004 for each family member each time.
If it exceeds the amount the company has a co-insurance scheme to cover the extra expenditure. In this case, the
employee will pay 20% and the balance covered by insurance. For dental allowance, employees can claim up to
RM300 a year. Similarly in JCC and MCC, medical benefits cover both the employee and their families (up to 5
children). Executives in MCC can also claim up to RM500 for dental care. Non-executives are eligible up to
second-class ward at general hospitals.
(cccccc) Housing and Vehicle Loan Interest Subsidy
Interests for both vehicle and housing loans in GMCC are subsidized by as much 50%, with maximum limit at
RM5,000. In JCC, the company encourages all staff to have their own vehicle. The amount that an employee can
loan from the company depends on their job grade and salary.5 For example, for grade 5 and below, the maximum
loan is RM35,000. For grades 6 to 9, the company allows up to RM45,000, for grades 10 to 13, it is up to
RM60,000 and for grade 14 and above RM80,000. The company charges 4% interest on all motor vehicle loans. It
is calculated on the balance of the loan, that is, the flat rate is about 2%. The company also encourages employees
to own houses. For this, the company provides interest subsidy for housing loans. The company subsidizes 5% of
the amount of interest that the employee has to pay back to the bank for the housing loan.6 This is calculated for the
duration of the loan and it would be credited back to the salary on a monthly basis. This amount is calculated based
on a certain formula set by the company. All interest subsidies are taxable.
In BCC, employees are given vehicle allowance if they buy a car. Only employees with more than one year
of service are eligible for this allowance. The company actually subsidizes 4% of the interest rates on car loan. If
the actual interest rate for the loan is less than 4%, the balance will be credited back to the employee. In short, the
employee actually gains if he takes a car loan that charges less than 4% interest. Employees tend to change cars and
a glance at the parking lot in the plant actually confirms this.7 Similarly, for the housing loan subsidy, the company
reimburses 6% of the interest rate. About 90% of the employees have benefited from this attractive interest
allowance. For a monthly housing loan installment of RM1,300, as much as RM800 comes from the company.
Most prefer to buy rather than rent because the company does not subsidize the rental for the house. Though the
payment is the same for rental and loan installment, the buyer can claim ownership of the property after paying off
the loan. Thus, if the employee does not take the housing loan, he/she loses the benefit.
All employees in MCC are eligible for the housing loan. The eligibility for housing loan for each employee
depends on which job grade he/she is in. The employees repay the loan in monthly installments, which is deducted
from the salary. However, not everyone is entitled for the vehicle loan. Vehicle loans are charged 3.5% interest and
the amount for executive starts at RM60,000. The amount of the loan depends on the job grade as well, but the
difference from one job grade to another is not that great. A difference that can be found in MCC is that the
company does not provide company cars for those in higher management. Instead, every five years, senior
managers and above are given a grant to purchase a vehicle of their choice. After five years, they are allowed to keep
the car as their own. But if they resign within the five years, they have to pay back or return the car to the company.
On top of that, they are given a certain amount for vehicle maintenance and paid smart card for petrol. For the
Managing Director/Chief Executive Officer, besides the grant, he is given a driver’s allowance. It is a cash
allowance. In general, the higher one is in the job grade, the higher the benefits. For example, those in higher

1159
management are also eligible for utility allowances.
(dddddd) Education Grant
GMCC’s education grant allows staff to sign up for certificate, diploma or degree programs. An application for
study grant is normally approved if the study is within the job scope or future job scope of the employee. The
company does not grant long-term study leave for staff to attend courses and therefore, staff has to go for part-time
courses that are conducted outside their office hours. Though no study leave is given, the company permits its staff
to take leave for examinations. Course fees will only be reimbursed to the employee on successful completion of
the course. The company subsidizes 50% of the cost of the course up to a maximum of RM10,000. No bond is
attached to the education grant and staff is free to leave the organization after finishing their studies. There is also
no revision in pay on gaining an extra qualification. Upon graduation, one can discuss with management on a pay
revision but this is rarely granted. Despite that, the executives do not seem deter and many pursue the courses for
self-actualization rather than hoping for a promotion or pay revision.
In JCC, there is no study grant for its employees though the company encourages its staff to go for
further studies. The company is still unclear as far as this policy is concerned. It is still at the drafting stage. The
cost involved is high and the company is unsure of its returns. In the past, employees have been sent to Japan for
training. Though there is a bond attached, some left after the bonding period. Because of this, the company is quite
hesitant in implementing the study grant policy. No bonds are attached to local external training and bonds are only
for mid- to long-term overseas training. As for BCC, financial assistance is given to employees to pursue Masters
degree, Bachelor degrees, diplomas and special certificates. For example, those who sign up for the MBA course
are provided 85% financial assistance for course fee and study materials. There is a two-year bond for the financial
assistance taken which is interest free.
MCC also encourages its staff to go for self-development and sends its staff for further education. For
example, four employees were sent for a Masters program – two abroad and two locally. Many more were sent for
diploma programs conducted by local universities on a part time basis. The company pays for everything during the
whole duration of the course. Employees who are sent for further education are selected based on their potential.8
On completion of the course, they have to serve the bond set by the company.9 If they breach the contract, they are
required to reimburse the company. Most who do not serve the bond are normally given better offers elsewhere.
For example, after serving two years, the employee may be offered a salary, which is double or triple that of what
he/she is getting in the current company. So, it is better to leave and pay back the amount owed to the company.
(eeeeee) Insurance
One important benefit provided by JCC is the group insurance for all employees. Besides covering death and total
permanent disability, the group insurance covers hospitalization fees as well.10 Families of employees are not
covered by this insurance but by other packages. There is the outpatient package where single non-executives are
covered up to RM1,200 a year. Those with families are covered up to RM1,700. For executives, there is no limit
for outpatient treatment. However, the company sets a limit for their families, that is up to a maximum of RM1,700
while for Assistant Managers and above there is no limit for their families. In BCC, all employees are also covered
by the personal accident (PA) scheme for death and total permanent disability. The payment for death as a result of
an accident at the plant is 72 times that of the employee’s salary. For normal death, it is 36 times of the salary. In
MCC, executives are covered by personal insurance of RM250,000 and for non-executives up to RM150,000.
(ffffff) Outstation Allowances
In all the companies surveyed, allowances are given for accommodation, food and traveling when they are out for
official duties. In JCC, staff working outstation can either use the company car or claim for traveling allowance.
For food allowance, the company pays the actual amount spent if it is for entertaining clients but if it is for personal
expenses on official duties, the employee is paid the amount that he/she is eligible. As for accommodation, it is paid
based on the actual amount spent or the maximum that the employee is eligible. In BCC, petrol allowance is only
for heads of departments. Some staffs are also eligible for entertainment allowance but they claim based on the
actual amount spent. As for traveling abroad, all executives in MCC can go for business class as long as the journey
is more than six hours.
(gggggg) Stock Option Scheme
As far as GMCC is concerned, there is no stock option scheme and there are no plans to implement share option

1160
scheme in the near future. Similarly, in JCC there are no stock option schemes as it is not a public listed company.
Employees in BCC, however are allowed to participate in the stock option scheme known as “share match”. This
scheme depends on the group performance and the average salary for the year. Every year the group performance
will be compared with the performance of six other petrochemical groups. Results for the past three years will be
compared and if the company ranks first or second globally, it is placed in the first tier, which is 5% of the average
salary. For the second tier, it is 4% and for the third tier 3%. For every share bought by the employee, it will be
matched by another share given by the company, that is, ‘buy one, free one’. In MCC, all permanent staffs are
eligible for the stock option scheme.
(hhhhhh) External Training Allowances
In all the companies surveyed, staffs that are sent for external training are eligible for official outstation allowances,
such as traveling and accommodation allowances. The training package is paid for by the company and on
completion of the course they are expected to conduct in-house training. No extra allowance is given to those who
conduct such in-house courses. There is also no incentive to encourage them to share the knowledge with others.
However, in MCC, employees who carry out non-routine tasks are given some credit during assessment.11 In
GMCC, for line managers who are called to conduct courses outside, they are given time off during office hours.
For this, prior permission is necessary and the purpose for conducting a course outside has to be justified.
(iiiiii) Other Benefits and Rewards
Other benefits provided by GMCC include an annual Family Day for the employees and their family. There is also
an annual dinner in October where all staff and their spouses are invited. There is also the long service award but so
far none of the employees has achieved that, as it requires a minimum of 10 years of service. Other rewards include
cash paid out when they successfully rectify whatever the cause of a plant’s shut down. There is also the low injury
benefit whereby if there is no injury for a certain period of time; vouchers will be given out to the staff concerned.
The emphasis is on safety in the organization. There is also the Employees’ Suggestion Scheme for ideas
contributed by the employees.12 The company has a special committee to sift through the suggestions and give the
reward accordingly.
In JCC, loyal employees are given a certificate of long service and bank certificate premiums, which they
can cash back later after their fifth and tenth year of service with the company. At the end of the year during the
annual dinner, various awards will be given out including ‘Employee of the Year’ award. Family Day is carried out
every year and every employee and their family are invited to join. It is normally held at some resort and the
company pays for all the expenses. The main purpose is for the employees to mingle with each other but employees
tend to stick to their own family. It has become so routine that employees are no longer more motivated after
Family Day. The Japanese expatriates too do not mix much with the local staff.
Benefits provided by BCC are free golf membership and sports club membership for executives. The
company rewards employees for outstanding performance in two ways. Firstly, is the annual pay increment, which
is performance-based and determined by the ratings during the performance appraisal? Secondly, is the rewards and
recognition program that rewards employees for outstanding work? A reward is also given for excellent suggestions.
The company does not have the ‘Employee of the Month’ or ‘Employee of the Year’ award. To give recognition to
those with long service in the company, a ‘Service Award’ is given for every 5 years of service.
In MCC, long service award is handed out to employees who are loyal to the company.13 Besides this, the
company shows its appreciation in other ways, such as giving them dinners or tokens at the end of the year. Tokens
are also given out to those who do not take any medical chits (MC) in the year. The company also rewards children
of employees who have shown excellent results in public examinations. The company also allows maternity leave
with full pay for up to 5 children. Paternity leave for every child is also given - one day for executives and three
days for non-executives.
For senior managers and above, subscription for sports club are paid by the company. However, they must
get approval from the company before joining the club. The company also carries out a lot of recreational activities
to maintain industrial harmony - annual dinners, Family Day, Quality Day, Health, Safety and Environment Day,
and so on. Besides that, free meals are given to those who break fast at the workplace during the fasting month. All
these somehow have a positive impact on the company in the sense that employees accept the yearly increment
given to them without much grouses. Besides, turnover is low.

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The Impact of Benefits and Rewards Policies on Employee Satisfaction

The following section analyzes the impact of benefits and rewards policies on employee satisfaction in the
companies surveyed. The satisfaction level of the employees in each of the companies is first analyzed and a
comparison is then made in an effort to determine the practices desire by the employees. HR practitioners could use
the outcome of the findings to consider the most appropriate policies for their organization.
The respondents in GMCC are generally satisfied with the benefits and rewards policies of the
organization. Most of the statements that are directly related to the benefit package of the organization have a mean
of more than 3 except for respondents’ satisfaction with the retirement plan, which has a mean of 2.87. The mean
for respondents’ satisfaction with the benefit package is 3.61 and a mode of 4. The average mean for respondents’
satisfaction with the benefit policies based on the six questions related to the benefit package is 20.97.14
Categorizing them according to their level of satisfaction, the analysis shows that more than half of the respondents
(53.2%) said that they are satisfied while another 43.5% state that they are very satisfied with the benefit policies.
Only 3.2% of the respondents are dissatisfied with their benefit package.
As far as recognition and rewards are concerned, most of the respondents in GMCC are satisfied with the
company’s policies. All the questions show a mode of 4 except for one on whether enough recognition was given
for the amount of work they do, which has a mode of 3. Based on the analysis of the five questions, the average
mean for the rewards policy of the organization is 16.53. Thus, respondents are generally satisfied with the reward
policies of the organization.15 Analyzing the level of the respondents’ satisfaction with the reward policies, 87.1% of
the respondents are satisfied with the reward policies. 27.4% of the respondents are very satisfied and 59.7% state
that they are satisfied. 12.9% are dissatisfied with the reward policies. However, none of the respondents showed
that they are very dissatisfied.
As in GMCC, the mean for most of the items used to measure the benefits policies of JCC is more than 3.
However, respondents are not satisfied with the retirement plan (2.84) of the organization. Though the mean for “I
am satisfied with the benefit package’ is 3.09, the average mean for all the items used to measure respondents’
satisfaction with the benefits policies of the company is 18.59, indicating that respondents are not too satisfied with
the benefits policies of the company. A mode of 3 was obtained for all the items except for the item where they
could access information easily and have a good understanding of their benefits, which has a mode of 4.
Categorizing them according to their level of satisfaction, the analysis shows that the majority of the respondents
(71.4%) said that they are satisfied while another 14.4% state that they are very satisfied with the benefit policies.
Though no one in the company is very dissatisfied, 14.3% of the respondents are dissatisfied with their benefit
package.
Analyzing the reward system of the company, there is no clear-cut indication that the respondents are
satisfied with the reward policies of the organization. Of the 5 items to test this, 2 have a mean of less than 3. As
for the other three items, though a mean of more than 3 is obtained, it is rather low. Among the items with a mean of
less than 3 is whether recognition, rewards and bonuses are given fairly, which has a mean of 2.96. Respondents
also felt that they did not receive enough recognition for the work they do (2.95). Thus, the average mean for this
part of the survey is 15.52, meaning that respondents are not too satisfied with the reward policies of the company.
Analyzing each item individually, the highest mean recorded is 3.32, where respondents agreed that employees in
the company are rewarded according to their job performance. While a mode of 4 for ‘recognition employees
received is appropriate for the level of accomplishment’ was obtained, a mode of 3 was recorded for all the other
items. The level of the respondents’ satisfaction with the reward policies shows that 17.9% of the respondents are
very satisfied and 69.6% are satisfied. 5.4% are dissatisfied with the reward policies and 7.1% of the respondents
said that they are very dissatisfied.
Analysis on the satisfaction of the respondents in BCC with the benefits of the company showed a mean of
more than 3 for all the statements that are directly related to the benefit package. The mean for respondents’
satisfaction with the benefit package is 3.18 and a mode of 4. The average mean for respondents’ satisfaction with
the benefit policies based on the six questions related to the benefit package is 19.44. Categorizing them according
to their level of satisfaction, more than half of the respondents (53.2%) are satisfied while another 25.8% are very

1162
satisfied with the benefit policies. However, about a quarter of the respondents (21%) are dissatisfied with their
benefit package.
As far as recognition and rewards are concerned, a mean of more than 3 was recorded for all of the five
statements used to the measure the level of the respondents’ satisfaction with the reward systems of the company.
This shows that most of the respondents are satisfied with the company’s policies. Based on the analysis of the five
questions, the average mean for the rewards policy of the organization is 16.19. Analyzing the level of the
respondents’ satisfaction with the reward policies, 90.3% of the respondents are satisfied with the reward policies.
25.8% of the respondents are very satisfied and 64.5% said that they are satisfied. None of the respondents showed
that they are very dissatisfied while 9.7% are dissatisfied with the reward policies.
Similarly for MCC, the mean for all the items used to measure the benefits policies of the company is more
than 3. The average mean for all the items used to measure respondents’ satisfaction with the benefits policies of the
company is 20.39, indicating that respondents are generally satisfied with the benefits policies of the company. A
mode of 4 was obtained for four out of the six items indicating a relatively high level of satisfaction with the benefits
policies. As to their level of satisfaction with the benefit policies, the analysis shows that half of the respondents
(50%) said that they are satisfied while another 36.8% opined that they are very satisfied with the benefit policies.
Though no one in the company is very dissatisfied, 13.2% of the respondents are dissatisfied with their benefit
package.
Analyzing the reward system of the company, most of the items have a mean of more than 3, though rather
low. Respondents felt that the company does not highly reward those who acquire skills for themselves and later
teach their fellow workers (2.87) and that they do not receive enough recognition for the work they do (3.03). The
overall average mean at 15.34 shows that respondents are not too satisfied with the reward policies of the company.
The highest mean recorded is 3.21, where respondents agreed that recognition employees received is appropriate for
the level of accomplishment. The level of the respondents’ satisfaction with the reward policies shows that 79% of
the respondents are satisfied, including 23.7% very satisfied. More than half of the respondents (55.3%) are
satisfied while 10.5% are either dissatisfied or very dissatisfied with the reward policies. The findings of the impact
of benefits and reward policies on employee satisfaction in the four companies are summarized in the Table 2 below.
(jjjjjj)
(kkkkkk)
(llllll)
(mmmmmm)
(nnnnnn)
(oooooo)
(pppppp)
(qqqqqq)
(rrrrrr)
(ssssss)
(tttttt)
(uuuuuu) TABLE 2: EMPLOYEES’ SATISFACTION WITH THE BENEFIT AND REWARD POLICIES
(wwwwww) (xxxxxx) (yyyyyy) (zzzzzz) MCC
MCC CC CC
(aaaaaaa) (bbbbbbb)
(ccccccc)(ddddddd)
(eeeeeee)(fffffff) (ggggggg)(hhhhhhh)
(vvvvvv) Benefits
e e e e
a a a a
n n n n
(iiiiiii) I have a good (jjjjjjj) (kkkkkkk)
(lllllll) (mmmmmmm)
(nnnnnnn)(ooooooo) (ppppppp)(qqqqqqq)
understanding of my . 2 . 2 . 9 . 0
benefits at my company 5 . 2 . 6 . 5 .
including retirement 2 9 3 9 0 7 0 5
benefits and can access
information easily

1163
(rrrrrrr) I am satisfied with the (sssssss) (ttttttt) (uuuuuuu) (vvvvvvv) (wwwwwww) (xxxxxxx) (yyyyyyy) (zzzzzzz)
benefit package . 9 . 5 . 2 . 2
6 . 0 . 1 4 .
1 3 9 7 8 5 6
(aaaaaaaa) The employee (bbbbbbbb) (cccccccc) (dddddddd) (eeeeeeee) (ffffffff) (gggggggg) (hhhhhhhh) (iiiiiiii)
benefits I received are . 9 . 2 . 3 . 7
attractive and competitive 7 0 . 1 . 5 .
4 0 1 9 6 8 9
(jjjjjjjj) I am satisfied with my (kkkkkkkk) (llllllll) (mmmmmmmm) (nnnnnnnn) (oooooooo) (pppppppp) (qqqqqqqq) (rrrrrrrr)
retirement plan . 1 . 6 . 7 . 4
8 8 . 0 . 3 .
7 4 1 3 5 9 8
(ssssssss) Overall, I think (tttttttt) (uuuuuuuu) (vvvvvvvv) (wwwwwwww) (xxxxxxxx) (yyyyyyyy) (zzzzzzzz) (aaaaaaaaa)
the amount of money I pay . 0 . 4 . 1 . 2
for my benefits is a good 5 2 3 . 2 .
value 0 0 1 9 9 1
(bbbbbbbbb) Benefits (ccccccccc) (ddddddddd)(eeeeeeeee)(fffffffff)(ggggggggg) (hhhhhhhhh) (iiiiiiiii) (jjjjjjjjj)
available are appropriate for . 5 . 1 . 3 . 0
my needs and those of my 7 . 2 . 1 . 1
family 3 8 3 1 3 6 8
(kkkkkkkkk) Average Mean (lllllllll) (mmmmmmmmm)(nnnnnnnnn)(ooooooooo) (ppppppppp) (qqqqqqqqq) (rrrrrrrrr)(sssssssss)
0 8 9 0
. . . .
9 5 4 3
7 9 4 9
(ttttttttt) Very satisfied (uuuuuuuuu) (vvvvvvvvv)(wwwwwwwww)(xxxxxxxxx) (yyyyyyyyy) (zzzzzzzzz) (aaaaaaaaaa) (bbbbbbbbbb)
3 4 5 6
. . . .
5 4 8 8
(cccccccccc) Satisfied (dddddddddd)(eeeeeeeeee)
(ffffffffff)(gggggggggg)(hhhhhhhhhh) (iiiiiiiiii) (jjjjjjjjjj) (kkkkkkkkkk)
3 1 3 0
. . .
2 4 2
(llllllllll) Total (mmmmmmmmmm)(nnnnnnnnnn)
(oooooooooo)
(pppppppppp) (qqqqqqqqqq) (rrrrrrrrrr)(ssssssssss) (tttttttttt)
6 5 9 6
. . .
7 8 8
(uuuuuuuuuu) Dissatisfied (vvvvvvvvvv)(wwwwwwwwww)
(xxxxxxxxxx)
(yyyyyyyyyy) (zzzzzzzzzz) (aaaaaaaaaaa)(bbbbbbbbbbb)(ccccccccccc)
. 4 1 3
2 . .
3 2
(ddddddddddd) Very dissatisfied (eeeeeeeeeee) (fffffffffff)
(ggggggggggg)
(hhhhhhhhhhh)(iiiiiiiiiii)(jjjjjjjjjjj)(kkkkkkkkkkk) (lllllllllll)
(mmmmmmmmmmm) Total (nnnnnnnnnnn)
(ooooooooooo)
(ppppppppppp)
(qqqqqqqqqqq)(rrrrrrrrrrr) (sssssssssss)(ttttttttttt)(uuuuuuuuuuu)
. 4 1 3
2 . .
3 2
(vvvvvvvvvvv) Rewards (wwwwwwwwwww)
(xxxxxxxxxxx)
(yyyyyyyyyyy)
(zzzzzzzzzzz)(aaaaaaaaaaaa)(bbbbbbbbbbbb)
(cccccccccccc)
(dddddddddddd)
(eeeeeeeeeeee) Recognition (ffffffffffff)
(gggggggggggg)
(hhhhhhhhhhhh)
(iiiiiiiiiiii)(jjjjjjjjjjjj)(kkkkkkkkkkkk)
(llllllllllll)(mmmmmmmmmmmm)
employees received is . 3 . 3 . 3 . 0

1164
 appropriate for the level of 3 . 1 . 2 . 2
accomplishment 5 2 3 9 7 5 1
(nnnnnnnnnnnn) Recognition, (oooooooooooo)
(pppppppppppp)
(qqqqqqqqqqqq)
(rrrrrrrrrrrr)
(ssssssssssss)
(tttttttttttt)(uuuuuuuuuuuu)
(vvvvvvvvvvvv)
rewards and bonuses are . 4 . 2 . 8 . 4
given fairly where I work 3 . 9 . 0 . 1 .
7 8 6 2 5 7 3 7
(wwwwwwwwwwww) In this (xxxxxxxxxxxx)
(yyyyyyyyyyyy)
(zzzzzzzzzzzz)
(aaaaaaaaaaaaa)
(bbbbbbbbbbbbb)
(ccccccccccccc)
(ddddddddddddd)
(eeeeeeeeeeeee)
company people are . 4 . 1 . 3 . 0
rewarded according to their 5 . 3 . 5 1
job performance 5 5 2 8 2 1
(fffffffffffff) My company (ggggggggggggg)
(hhhhhhhhhhhhh)
(iiiiiiiiiiiii)
(jjjjjjjjjjjjj)
(kkkkkkkkkkkkk)
(lllllllllllll)
(mmmmmmmmmmmmm)
(nnnnnnnnnnnnn)
highly rewards those who . 0 . 1 . 7 . 1
acquire skills for 0 . 1 2 . 8 .
themselves and later teach 6 3 6 3 1 7 6
their fellow workers
(ooooooooooooo)I receive enough (ppppppppppppp)
(qqqqqqqqqqqqq)
(rrrrrrrrrrrrr)
(sssssssssssss)
(ttttttttttttt)
(uuuuuuuuuuuuu)
(vvvvvvvvvvvvv)
(wwwwwwwwwwwww)
recognition for the work . 8 . 5 . 5 . 4
that I do 1 . 9 1 . 0 .
9 7 5 3 4 3 2
(xxxxxxxxxxxxx) Average Mean (yyyyyyyyyyyyy)
(zzzzzzzzzzzzz)
(aaaaaaaaaaaaaa)
(bbbbbbbbbbbbbb)
(cccccccccccccc)
(dddddddddddddd)
(eeeeeeeeeeeeee)
(ffffffffffffff)
6 5 6 5
. . . .
5 5 1 3
3 2 9 4
(gggggggggggggg) Very (hhhhhhhhhhhhhh)
(iiiiiiiiiiiiii)
(jjjjjjjjjjjjjj)
(kkkkkkkkkkkkkk)
(llllllllllllll)
(mmmmmmmmmmmmmm)
(nnnnnnnnnnnnnn)
(oooooooooooooo)
satisfied 7 7 5 3
. . . .
4 9 8 7
(pppppppppppppp) Satisfie (qqqqqqqqqqqqqq)
(rrrrrrrrrrrrrr)
(ssssssssssssss)
(tttttttttttttt)
(uuuuuuuuuuuuuu)
(vvvvvvvvvvvvvv)
(wwwwwwwwwwwwww)
(xxxxxxxxxxxxxx)
d 9 9 4 5
. . . .
7 6 5 3
(yyyyyyyyyyyyyy) Total (zzzzzzzzzzzzzz)
(aaaaaaaaaaaaaaa)
(bbbbbbbbbbbbbbb)
(ccccccccccccccc)
(ddddddddddddddd)
(eeeeeeeeeeeeeee)
(fffffffffffffff)
(ggggggggggggggg)
7 7 0 9
. . .
1 5 3
(hhhhhhhhhhhhhhh) Dissati (iiiiiiiiiiiiiii)
(jjjjjjjjjjjjjjj)
(kkkkkkkkkkkkkkk)
(lllllllllllllll)
(mmmmmmmmmmmmmmm)
(nnnnnnnnnnnnnnn)
(ooooooooooooooo)
(ppppppppppppppp)
sfied 2 . . 0
. 4 7 .
9 5
(qqqqqqqqqqqqqqq) Very (rrrrrrrrrrrrrrr)
(sssssssssssssss)
(ttttttttttttttt)
(uuuuuuuuuuuuuuu)
(vvvvvvvvvvvvvvv)
(wwwwwwwwwwwwwww)
(xxxxxxxxxxxxxxx)
(yyyyyyyyyyyyyyy)
dissatisfied . 0
1 .
5
(zzzzzzzzzzzzzzz) Total (aaaaaaaaaaaaaaaa)
(bbbbbbbbbbbbbbbb)
(cccccccccccccccc)
(dddddddddddddddd)
(eeeeeeeeeeeeeeee)
(ffffffffffffffff)
(gggggggggggggggg)
(hhhhhhhhhhhhhhhh)
2 2 . 1
. . 7
9 5
(iiiiiiiiiiiiiiii) Level of (jjjjjjjjjjjjjjjj)
(kkkkkkkkkkkkkkkk)
(llllllllllllllll)
(mmmmmmmmmmmmmmmm)
(nnnnnnnnnnnnnnnn)
(oooooooooooooooo)
(pppppppppppppppp)
(qqqqqqqqqqqqqqqq)

1165
 Satisfaction*
(rrrrrrrrrrrrrrrr) Benefit Policies (ssssssssssssssss)
(tttttttttttttttt)
(uuuuuuuuuuuuuuuu)
(vvvvvvvvvvvvvvvv)
(wwwwwwwwwwwwwwww)
(xxxxxxxxxxxxxxxx)
(yyyyyyyyyyyyyyyy)
(zzzzzzzzzzzzzzzz)
. . . .
4 0 0 2
0 0 5 4
(aaaaaaaaaaaaaaaaa) Rewar (bbbbbbbbbbbbbbbbb)
(ccccccccccccccccc)
(ddddddddddddddddd)
(eeeeeeeeeeeeeeeee)
(fffffffffffffffff)
(ggggggggggggggggg)
(hhhhhhhhhhhhhhhhh)
(iiiiiiiiiiiiiiiii)
d Policies . . . .
1 9 0 9
5 8 6 2
*A mean of more than 2 indicates satisfaction.
(jjjjjjjjjjjjjjjjj)
Based on the above findings, respondents in GMCC seem most satisfied with the benefit and reward
policies of the company. Respondents in MCC are satisfied with the benefit policies but not too satisfied with the
reward policies. Among the four companies, the level of satisfaction of the respondents in MCC with the reward
policies is the lowest. However, the level of satisfaction with the benefit policies in MCC is higher than that in BCC
and JCC. The level of satisfaction of respondents in BCC with the benefit and reward policies is higher than that of
JCC.
A conclusion that can be drawn from this is that foreign-owned MNCs in Malaysia may not be providing
the best benefit and reward policies for their employees. Although more globalized and more exposed to the
different policies are available, the benefit and reward policies of these organizations are not as motivating as those
drawn up by companies with some Malaysian interests. Companies with some Malaysian interests seem to have
better understanding of the benefits and rewards desire by the employees. In general, much depends on what the
company can offer its employees. Lucrative offers would definitely enhance the satisfaction level of the employees
with the benefit and reward policies.

Implications for Human Resource Practitioners

As far as benefits are concerned, good and flexible benefits would not only entice potential recruits but also help in
retention. Though the benefit packages in all the four companies differ from one another, they are generally
lucrative enough to attract talent workers as well as retain current employees. This is rather encouraging as more
long-term plans could be carried out to improve the competitiveness of the companies. As skills are so much in
demand due to technological advancement, these companies can now embark on continuous human capital
development programs to boost the capabilities of the employees. If returns on investment in employees are certain,
companies are more willing to proceed with training and development. With more capable workers, companies
would be confident in taking up challenges in the global market. Moreover, training and development improves
employees’ motivation and efficiency, as training adds variety to their jobs and enhanced skills expedite the work
process.
The provision of education grant for employees supports the government’s call for lifelong education. It
encourages employees to constantly upgrade their skills making them more competent workers in the long run. It
also promotes healthy competition and knowledge sharing among workers. Besides, some of the companies
subsidized the cost of the course without any bond attach. As there is no increment or promotion on completion of
the course, some employees may choose to leave. This is a setback for the company as there would be no returns for
the investment made. Thus, companies should have clear and specific criteria in evaluation so that employees do
not feel that it is useless going for self-development. For example, though an extra academic qualification may not
warrant a promotion or increment in pay, skills transferred to the workplace may be taken into consideration. The
reimbursement of fees on successful completion of the course ensures that employees are serious when they applied
for the grant. If there is no such ruling, those who have signed up may drop out half way through the course, which
would be a loss to the company.
A pre-requisite for some employees who attend external training is the need to conduct in-house training on

1166
completion of the program. This promotes transferring of skills and knowledge gained from external programs
which may be rather costly. Besides, it is also a form of evaluation of training and helps justify if indeed learning
has taken place. Moreover, by conducting in-house training, the employee may improve on his training skills and in
the long run a pool of qualified and experienced trainers may be created. Eventually, in-house trainers may run
programs for other employees and thus help cut training costs. In addition, it boosts the employee’s morale for the
recognition given. Trainees, on the other hand may also feel more comfortable having an in-house trainer rather
than an external trainer running the program. This will help them settle in faster and get on with the learning. The
ice-breaking session could be minimized if both trainers and trainees are familiar with each other.
None of the companies have a golden parachute contract for their top executives. This would be really
devastating for senior management if they were forced to leave in the event of a merger or acquisition. Being key
players in the organization, they should be given the recognition, especially in their twilight years. During
recession, a lot of uncertainty will set in and in recent years many major corporations in Malaysia have introduced
the voluntary separation scheme (VSS) where employees are given an option to leave the company. Capable
workers who are able to market themselves will not hesitate to leave. But senior management may find it difficult to
adapt to a new work environment. Other problems may set in and the expertise of these personnel may not be fully
utilized. However, with the golden parachute contract, top executives would be able to contribute to the
organization without having to worry about their future if they were asked to leave. Companies should give this
some consideration.
The policy to reward employees for rectifying a problem in the company is a positive move to encourage
innovativeness. This should be encouraged to get workers involved in the affairs of the organization. Employee
involvement and empowerment would enhance employees’ commitment. Besides, it boosts employees’ morale if
the company adopts their suggestion, as they would feel that they have contributed to the betterment of the
workplace. The acknowledgement of suggestions given by employees also encourages employees to help solve
certain problems faced by the companies. In the process, a pool of ideas is generated. In some of the companies,
employees’ suggestions are reviewed quarterly and vouchers are given for outstanding suggestions. Besides this,
incentive in the form of bank premium certificates is encouraging. Giving credit to employees who carry out non-
routine tasks during assessment is also a positive move to enhance employees’ motivation. Giving tokens to
employees who do not take any medical chits would also encourage employees not to absent unnecessarily.
Allowing employees paid leave to represent the company at national functions also improves patriotism among the
employees.
Social programs seem to be in place for all the companies, as evidenced by Family Day, annual dinners,
and other less formal gatherings. It helps promote harmony and encourages social interaction among staffs. Team
working and knowledge would be enhanced and it encourages networking among staffs, especially if the functions
are held jointly with other companies in the group. Recognition and rewards giving out during such functions also
has a motivating effect on the employees.
Analyzing the satisfaction of employees in the four companies with the benefits and rewards policies, it can
be concluded that the majority of the employees are satisfied. However, focus should be given to certain aspects
that employees are not so satisfied so as to improve on the current policies. To improve retention rate, it is essential
for management to look into these grouses and make the organization a more attractive place to work in. If the
employees’ discontentment were not noted, dissatisfied employees would not be totally committed to the
organization and this will have a negative effect on the organization.
As far as benefits are concerned, employees in GMCC seem most satisfied with the benefits package and
feel that the package is attractive and competitive. Many also opine that the benefits available are appropriate for
their needs and those of their family. Employees in MCC are of the same opinion and are generally satisfied.
However, less than half of the respondents in BCC and JCC are satisfied with the above policies. Employees in JCC
have the lowest level of satisfaction with benefits package. Except for JCC, employees in all the other companies
have a good understanding of their benefits including retirement benefits and can access information easily.
However, only employees in GMCC think that overall, the amount of money they pay for the benefits is good value.
As for retirement plans, less than half of the respondents in all the companies are satisfied with the retirement plans.
This shows that the employees are concerned about life after retirement and are apprehensive about the current

1167
retirement policies. Companies ignoring this will lose competent workers to competitors with more comprehensive
retirement plans. The benefit programs offered by the companies should also be reviewed, as most of the employees
feel that the money that they pay for the benefits is not good value. Continuing such programs would lead to further
dissatisfaction if employees do not see the benefits that these programs could offer. This could have a spiraling
effect, which may be detrimental to the company in general.
Most of the employees in all the companies are of the opinion that they are rewarded according to their job
performance. However, they also opine that they do not receive enough recognition for work that they do and are
not highly rewarded for acquiring skills and later teaching those skills to fellow workers. Among the four
companies, only employees in GMCC feel that recognition, rewards and bonuses are given fairly. As to whether
recognition employees received are appropriate for their level of accomplishment, about half of the respondents in
GMCC and MCC thought so. The lack of recognition in these companies would affect the morale of employees and
if measures are not taken to acknowledge the efforts of the employees, employees may not see the need to strive for
the company. Besides, the companies need to tackle the problem of unfairness, especially when companies are
dealing with a multi racial workforce. More objective measures should be introduced to ensure transparency in
awarding recognition, rewards, and bonuses.

Conclusion
Based on the findings of the research, it can be concluded that the benefit and reward policies of all the companies
surveyed are relatively similarly in terms of variety. The difference is in the quality – some companies giving better
terms and conditions as compared to others. However, companies offering better benefit and reward policies seem
to have more satisfied employees. GMCC, for example, which has comparatively more lucrative benefit and reward
policies record the highest level of satisfaction among the four companies. JCC, on the other hand, has relatively
less competitive benefit and reward policies and therefore a lower level of satisfaction. As all four companies are
located in the same industrial area and are of about the same size, employee dissatisfaction may set in if there is a
vast difference in the benefit and reward policies among the companies.
In all the companies surveyed, the benefit and reward policies include both the standard and flexible plans.
Standards plans are relatively the same for all companies except for share option schemes and pension plans. While
MCC has both, BCC has a share option scheme, thereby creating employee ownership in the company. However,
both these options are not available in GMCC and JCC. While all the other companies provide housing and vehicle
loan interest subsidy, MCC gives out housing and vehicle loans to its employees. The former seems to be a better
option for employees. Though maternity leave is quite common among the companies, MCC seems to be the only
company that has introduced paternity leave as well. Rewarding those who do not take any medical chits is also
something new, as most companies have not introduced this. Education grant too is relatively popular and helps
promote employee development. JCC lacks behind in not having this option for its employees.
An attractive benefit and reward policy undertaken by all companies is the insurance coverage for its
employees. Though medical benefits are relatively good in all the companies, the availability of an insurance
scheme to cover excess expenditure is definitely a welcome move. Other insurance policies to cover death and
injury at the workplace also help cushion unexpected trauma and relieve employees of unnecessary worry. Besides
being highly subsidized by the companies, the benefits offered by the insurance coverage are relatively competitive.
This is all the more important as it is rare for private companies in Malaysia to provide pension for their employees.
Except for MCC, employees in all the other companies are not satisfied with the retirement plans but it is imperative
that good retirement plans should be available if employees’ satisfaction were to improve.
Other benefits and rewards vary widely from company to company though there are similarities in some.
But in all the companies surveyed, allowances are not paid to those who acquired skills and transfer them to fellow
workers. As there is no incentive to teach others, to a certain extent it will impede human resource development. If
such an incentive is given, perhaps employees will take the initiative to learn, unlearn and relearn. Knowledge
sharing would be enhanced.

1168
 As far as the satisfaction level of the employees with the benefit policies of their companies are concerned,
the respondents in GMCC seemed most satisfied and JCC the least. Respondents in BCC are also not as satisfied as
the respondents in MCC with the benefit policies of the company. Similarly, respondents in GMCC are most
satisfied with the reward policies of the company. Respondents in MCC are least satisfied while respondents in
BCC are more satisfied than respondents in JCC.
In conclusion, it cannot be said with much confidence that respondents in foreign-owned MNCs are more
satisfied with the benefit and reward policies of their companies. As far as benefit policies are concerned, employee
satisfaction seems to be higher in companies that have some Malaysian interests. On the other hand, respondents in
MCC are least enthusiastic with the reward policies of the company. It is anticipated that foreign-owned MNCs
being more globalized and contemporary in their approach would have a benefit and reward package that is not only
globally consistent but at the same time competitive vis-à-vis the local market. However, the findings of the
research have shown otherwise. A general conclusion that can be drawn is that ownership does not seem to have an
effect on employees’ satisfaction with the benefit and reward policies. Regardless of ownership, companies that
offer attractive benefit and reward packages have more satisfied employees. As employee satisfaction has an
impact on productivity, benefit and reward policies that meet employees’ needs are crucial to the competitiveness of
the company.

References
[1] Cornish S. and Gilbert K. (2005). Aligning Total Rewards Strategy with Business Success, Mercer
Human Resource Consulting (http://www.ceoforum.com.au).
[2] Day K. (2005). Employee benefits special: catching the best recruits, Accountancy Age,
(http://www.vnunet.com).
[3] Heathfield S.M. (2006). Salary and Compensation Trends for Forward Thinking Organizations, Your
Guide to Human Resources (http://humanresources.about.com).
[4] Sarvadi, P. (2005). The Best Ways to Reward Employees: Having an effective reward program in place
can help solve many of your HR issues. (http://www.entrepreneur.com).
[5] Smith, G.P. (2005). Transforming Workers to Winners: Taking your Workforce to Higher Levels of
Performance, (http://www.westga.edu).

End Notes
1
http://www.vnunet.com
2
http://www.vnunet.com
3
http://www.vnunet.com
4
USD1 = MYR3.56947; \100 = MYR3.25631 (as at 15 May 2006).
5
Job grades range from grade 1 for general workers to grade 20 for managing director. Senior managers are in
grade 16, managers in grade 15, assistant managers in grade 14 and executives in grade 13. Non-executives are in
grade 9 and below. Clerical staffs are classified as non-executives.
6
The company will provide this subsidy for the entire duration of the loan as long as the employee is still in the
company’s payroll. Once the employee leaves the company, he/she loses the benefit. However, the company does
not ask an employee who has left to pay back the subsidies given during his/her service with the company.
7
An executive who owns a year old car was contemplating changing his car and a week later, he was on the road
with a brand new car. Besides new cars, there are also a number of luxury cars in the compound.
8
The ratings during performance appraisal carry much weight. It also depends on their interest in attending the
course.
9
For bachelor degree courses, the bond is 10 years for those enrolled in overseas universities and 7 years for those
who studied in local universities. However, the company has not decided on the number of years that Masters
scholars have to serve. Those who attend courses for 3 to 6 months have to fulfill a bond of two years.

1169
10
Non-executives and executives are covered up to RM30,000 in hospitalization fees a year and for grade Assistant
Managers and above the coverage is RM60,000. This includes follow-up treatment for serious diseases.
11
Such employees normally get a rating of at least 2 during the performance planning assessment at the end of the
year, thus qualifying for the merit allowance.
12
Every valid suggestion that is considered is paid RM10. A suggestion could be as simple as “It is too cold in here.
Could we have a heater installed?” If a suggestion is implemented but incurred cost, then the reward is RM30. But,
if it saves cost the reward is higher depending on how good the suggestion is. To date, the company has paid out as
much as RM800 for a single suggestion.
13
Employees who have served at least 15 years will be given a plaque and a token of RM1,000. Those with 20 years
of service will get a plaque and a token of RM1,500. Similarly, those with 25 years (RM2,500) and 30 years of
service will get a plaque and a token that is worth more. A brochure will be handed out to these employees to
choose the product that they would like to have depending on the amount of the token. Gifts that were given out to
these employees range from jewelries to pewter and household products.
14
A mean of more than 15 shows that the respondents are satisfied with the benefit policies of the company.
15
An average mean of more than 12.5 indicates satisfaction with the reward policies.

1170
Factors Affecting Motivation, Safety, Absenteeism & Turnover in Malaysian Construction
Industry

Shahrol Aman Ahmad, shahrol@uum.edu.my

Ab Wahab Bin Ma, ab.wahab@uum.edu.my
Universiti Utara Malaysia

Abstract
The research focuses on employment-related situations in the construction industry. This study investigated the
qualitative factors affecting constructing industry in Malaysia. This research is concerned with findings factors affecting
motivation, safety, absenteeism and workers turnover as perceived by the managers in the Malaysian construction
industry. What makes this research a bit different is that it tries to look into factors affecting motivation, absenteeism,
safety and workers turnover rather than looking on how these variables affect performance. By understanding the impact
of these factors, managers can develop their interpersonal skills and apply such knowledge toward improving an
organization’s effectiveness. Largely all the managers involved, acknowledged the importance of these factors in
enhancing the performance of workers in their companies but nevertheless no emphasis has been given to make them
workable and be used as alternative to other performance factors.

Literature Review
There are many different perspectives on factors that contribute to the increase in performance. In the construction
industry, these factors are enormous and are a problem to the measurement of performance. Traditionally the
measurement of performance in this industry has been grounded to the commonly used quantitative factors while
ignoring the qualitative factors. Many studies had provided evidence on how factors such as motivation, employee
turnover, absenteeism and safety affect performance in the construction industry. (Huges et al. (2004); Business
Roundtable (1982); Borcherding et al. (1981) ; Hinze, J., and Parker, H. W. (1978); Oglesby et al. (1989))
Motivation
Robbins (1993) defined motivation as the willingness to exert high levels of effort toward organizational goals,
conditioned by the effort’s ability to satisfy some individual need. For this research, motivation is operationally
defined as the inner force that drives individual to accomplish personal and organizational goals.
Construction project is a labour intensive process which results in the performance of a construction task
becoming a function of the motivation of the construction worker performing the task (Smithers and Walker, 2000).
They labelled the construction process as largely a "people' management business within an industry which is
complex, dynamic and uncertain and requires highly motivated workers. The importance of employee motivation
has been substantiated by the Business Roundtable (1982) findings which indicated that a highly motivated
workforce enhances productivity and project effectiveness while a lack of worker motivation appears to be a factor
in reduced productivity, increased absenteeism and increased turnover. Rabey (2001, cited in Amaratunga and
Baldry, 2002) quoted from various research into motivational theories showed the role of motivation in influencing
performance, reduces absenteeism and turnover, influences commitment to the organisation, leads to job satisfaction
and attracts people to the organisation. The role of worker motivation in improving productivity is very important in
construction. Haliggan et al. (1994) alleged that worker motivation in conjunction with or in the absence of other
factors can play a significant role in determining the productivity experienced on any particular project. He further
reiterated it will often be insufficient to consider any one factor in determining productivity without also
investigating the impact of worker motivation.
Safety
The construction industry is considered one of the most dangerous industries on the basis of accident frequency
(Kumar, 1991; Salminen, 1995). Haliggan et al. (1994) suggested that motivation and productivity can be further

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reduced by unsafe working conditions. Based on the Business Roundtable (1983) report in the United States, it has
been estimated that poor safety practices increase construction costs by roughly 6.5%. Industry professionals have
recognized that safety performance can be the primary determinant of success on some project especially of the
government construction market (Huges et al 2004). Safety in the construction industry is an important factor
because injury and illness incidence rates for construction are historically higher compared to other industry. Safety
considerations directly impact a company’s performance through lost man hours and other related cost affect. A safe
work environment and a display of management concern for the well being of their employees may increase their
performance while unsafe conditions and unnecessary injuries can result in decreased worker morale and high
absenteeism and turnover (Business Roundtable, 1983).
Absenteeism and employee turnover
Many factors play a role in influencing productivity. Absenteeism and turnover can have a major impact on
performance in the construction industry. Absence is defined as employee non-availability for work when work is
available. When employees are physically absent and not working, they do not contribute to the productivity of an
organization. Employee turnover is the rate at which employees leave an organization. Employee turnover
represents a costly disruption to an organization’s work flow. The cost of employee turnover increases when
employees are more specialized, more difficult to find and require more training. Many studies had indicated that the
hidden costs of employee turnover can be significant. A high rate of absenteeism is also costly to an organization.
Construction industry leaders agree that absenteeism and turnover contribute significantly to the decline. High rates
of turnover and absenteeism add to the cost of construction (Business Roundtable, 1982).

The Malaysian Construction Industry

From the late 1980s to the mid-90s the construction sector had played an important role in development of the
Malaysian economy. The Malaysian construction industry is generally separated into two areas. One area is general
construction, which consists of residential construction, non residential construction and civil engineering
construction. The second area is special trade works, which comprises activities of metal works, electrical works,
plumbing, sewerage and sanitary works, refrigeration and air-conditioning works, painting works, carpentry, tiling
and flooring works and glass works.
The construction industry constitutes an important element of the Malaysian economy. Under the Seventh
Malaysia Plan (1996 to 2000), besides the manufacturing sector, the government has also emphasised construction
and tourism as the two other important sectors for SME ventures (Hashim and Wafa, 2002, p.66). Although it
accounts for less than 5 per cent of GDP, the construction industry is a strong growth push because of its extensive
linkages with the rest of the economy. In particular, the industry has extensive linkages with construction related
manufacturing industries such as basic metal products and electrical machinery. In 2004, the industry shares 3.3
percent of the countries GDP and employs over 500,000 workers in some 54,500 local companies. 80 percent of
these firms are small and medium sized companies. The industry’s contribution to employment is about 8.0 percent
of total employment in the country in the year 2003 (Malaysian Ministry of Finance, 2003).
According to CIDB Malaysia (Construction Industry Development Board), the Construction Sector is
widely regarded as a catalyst for growth, where it often serves as an indicator of a nation’s economic performance
where brisk construction activities indicate a booming economy and sluggish construction activities inevitably pose
indications of economic depression. Construction industry is a very segmented and fragmented where various
players were implementing and carrying out their own programs and activities without proper direction and
guidance. This situation has resulted in challenging issues that involved the significant decline in construction
quality, acute shortage of skilled and unskilled labour, leading to an over-dependency on foreign labour and lack of
pertinent statistics and information required for planning, monitoring and decision-making (CIDB, 2004).
Productivity in the Malaysian Construction Industry has been stagnant since the 1980's. The productivity
figure has been about RM 7,000, and has remained constant whilst all other sectors have been showing increases in
productivity during this period (CIDB, 2004). Even in Singapore, a neighbouring country to Malaysia, productivity
in its construction industry lags behind that of most of the other economic sectors as in other countries (Business

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Roundtable, 1989; Ofori, 1990 cited in Debrah and Ofori, 2001, p.191). In Malaysia, according to CIDB the
contributing factor lies in within a situation where the construction industry is not optimizing the usage of resources,
coupled with the fact that construction processes are not very efficient. The most pressing issue faced by the industry
is the low level of productivity and contributing factors include heavy reliance on a large number of unskilled
foreign workers, multi-layered subcontracting system involving many small firms and segregation of activities in the
industry (CIDB, 2004).
Most of the issues are also being faced by the Singapore construction industry as summarized by the Task
Force for Construction Productivity of Singapore (TFCP) (Debrah and Ofori, 2001). The construction productivity
in Singapore is adversely affected by poor HRM, including lack of attention to HR planning, inadequate
documentation of HR requirements or productivity, little attempt to coordinate the overall construction process, as
much of the work is subcontracted, and delegation of direct supervision to subcontractors. These practices prevailed
owing to the low cost and ready availability of foreign construction workers. (Chong et al. 1996 cited Debrah and
Ofori, 2001, p.192)
As can be seen from the experience of the construction industry in Singapore, the problem that is being
faced by the construction industry in Malaysia is likely to be in the same situation. With a majority of the
construction firms in Malaysia consists of SMEs firms, there is a lack of training culture because of the firm size and
it is not cost-effective for the firms to invest in their training and development. As for the problem of subcontracting,
many of the labour subcontractors are individuals, who lack the expertise and resources to undertake HR planning
and they also do not encourage skill development. On the other hand the main contractors do not consider these
subcontractors workers as their employees. The poor social image of careers in construction also contributes to
decline of interest especially among the locals in the construction industry. Due to the preference of locals to work
in other sectors which is more comfortable, better paying job and socially better image has led to an acute shortage
of workers. The industry has to acquire an increasing numbers of foreign workers to overcome this problem.

Performance
Performance is broader indicator that can include productivity as well as quality, consistency and other factors.
Performance measures can include results, behaviours, relative measures, education and training concepts and
instruments, including management development and leadership training for building necessary skills and attitudes
of performance management. Productivity is a ratio depicting the volume of work completed in a given amount of
time. Productivity measures are typically considered in results oriented performance evaluation (Richard, 2002).
Nevertheless, there are a number of reasons why productivity has proven to be a popular indicator amongst
researchers as a measure of organizational effectiveness. First, productivity is a crucial organizational outcome. The
connections between human capital and productivity, especially labour productivity are relatively direct and the face
validity for this measure of firm success is also relatively high (Dyer & Reeves, 1995).
According to Boxall and Purcell (2003), it is better to focus on labour productivity as a measure of human resource
management in the firm rather than profitability. Although profitability is inevitably critical to the shareholder,
nevertheless, it can be affected by financial factors not connected to workforce management. Herbsman and Ellis
(1990) stated that the most important application of accurate productivity rates in the construction industry is in the
area of resource management. The construction industry is different from others such as manufacturing industry.
One of the most important factors for increasing production in the construction industry is through labour
motivation. It is highly difficult to measure motivation using a direct scale. However, this factor can be measured by
using indicators such as the rate of turnover of employees, the rate of demand for new positions or some other
indicator (Herbsman and Ellis, 1990).

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Research Problem
The construction industry has long been facing serious problem when productivity is concerned. During the past two
decades productivity, quality, safety, employee morale and other common accepted performance measures have
shown little or no improvement (Arditi and Mochtar, 2000). In assessing construction works performance, the
construction sector adopts various performance indicators. Performance indicators are the methods management
uses to evaluate employee performance of a particular task and can be defined by either the quantitative results of a
construction process or by qualitative measures (Cox et al., 2003). The most commonly accepted performance
indicators or the traditional indicators are the quantitative units of measurement that can be physically measured
such as completion time, cost and quality of construction projects (Belassi and Tukel, 1996; Hatush and Skitmore,
1997; and Atkinson, 1999).
Hughes et al.(2004) has indicated that there are more subjective considerations that, while being difficult to
quantify, can have an important impact on perceptions of project success in the construction industry. Cox et al.,
(2003) point out that although qualitative performance indicators are not commonly accepted as reliable
performance and productivity evaluation tools due to their perceived difficulty or inability to be measured,
nevertheless these indicators play an important role in practically every area of construction process and their impact
on project costs are very real. Warren (1989) suggests that managers that do not incorporate these qualitative
indicators may fail to recognize one important area that can have an impact on performance evaluation.
Although subjective productivity measures have been used actively in studies, not many of them have been
conducted in the construction industry because the construction companies look first and foremost to areas which
show a change in the amount of revenue generated. In other word, the most commonly accepted performance
indicators are those that can be physically measured by dollars, units, or man-hours. There are only a few
experiences regarding the use of subjective productivity measures and not many of them are from South East Asia in
general and from Malaysia in particular. In view of the importance of looking into this dimension of factors as a
relevant performance measurement which seems to be a neglected area, there appears to be opportunities to make
valuable contributions in this area. There is therefore further need for more empirical studies in the construction
industry to explore and establish the usage of qualitative indicators on performance apart from using the basic
quantitative indicators. This research explored some qualitative factors that can be used by construction executive
and project managers in enhancing construction performance at the project level. Empirical research on these areas
would provide more empirical evidence on the impact of qualitative factors on construction firms in the Malaysian
context.

Aims
There are many different perspectives on factors that contribute to increase in performance. In the construction
industry, these factors are enormous and are a problem to the measurement of performance. Traditionally the
measurement of performance in this industry has been grounded to the commonly used quantitative factors while
ignoring the qualitative factors. Qualitative performance factors such as safety, employee turnover, absenteeism and
motivation as suggested by Cox et al, (2003) and other considerable research have the potential to influence the
behaviours of workers on the job site which, in turn will have an impact on performance. The main aim of this study
is to investigate what are the factors affecting motivation, absenteeism, safety and employee turnover in the
Malaysian construction industry. Utilizing a sample of construction companies, the study attempts to identify what
are the factors affecting motivation, absenteeism, and safety and employee turnover and to encourage the usage from
these findings to enhance the performance of the construction company. It is also hope that these findings can be a
complement to the quantitative indicators traditionally used in the industry.
The effect of these qualitative performance factors will be investigated in the context of Malaysian
construction industry. This industry is chosen based on several reasons. First, it is an important contributor to the
general health of the economy as it acts as a catalyst for, and has strong linkages with a wide range of economic
activities in the country. It complements other sectors in the economy by providing a basis for generating output,

1174
income and employment, all necessary ingredients for promoting economic growth. Second, it is perceived as low
productivity sector due to multi layered subcontracting system involving small firms and visible employment of a
large number of foreign workers. Third, there is little or no empirical research being done on factors affecting
motivation, absenteeism, and safety and employee turnover in the Malaysian construction industry.

Objectives
This study is believed to be useful in the sense that it would be able to generate the following opportunities:
1. This study attempts to improve understanding of what are the factors affecting motivation, absenteeism,
employee turnover and safety in construction firms, specifically in the Malaysian context.
2. The study could provide information concerning the current standing of factors affecting performance
among construction firms in Malaysia.
3. It is hoped that this study will provide construction owners, managers and policy makers on the insight into
the factors for improving their performance.

Research Framework
Following the views presented in the literature, this study present a model which seek to identify of factors affecting
motivation, safety, absenteeism and employee turnover in the Malaysian construction industry through the
managers’ and employees’ perceptions. The information gathered from managers’ and employees’ will then be
cross-analysis to gain some insights of the causes affecting the dependent variables. The following Fig.1 presents the
research model of the study.

EMPLOYEES
Characteristics Motivation

Absenteeism

Turnover
MANAGERS/SUPERVISORS
Characteristics Safety

FIG. 1: FACTORS AFFECTING MOTIVATION, SAFETY, ABSENTEEISM & EMPLOYEE TURNOVER IN MALAYSIA
CONSTRUCTION INDUSTRY

Methodology
The aims of this stage of research were to collect information on factors affecting motivation, safety, absenteeism
and employee turnover together with subjective views from managers’ and employees’ concerned. This study used a
case study methodology. Questionnaires and structured interviews were used to get the data from the managers,
supervisors and employees. Letters of intent had been sent to 16 construction firms based in the state of Perlis which
comprise of 11 Grade G7 and 5 Grade G6. The listing of 16 companies of Grade 7 and Grade 6 are obtained from
the CIDB 2003-2004 directory. All the construction firms are registered with the Construction Industry
Development Board Malaysia (CIDB) and also with Contractors’ Services Centre (CSC) for contractors who
undertake to carry out and complete any construction work in the public sector.
This study used the classification provided by CIDB in which there are seventh grade of contractors. Small
capacity contractors from Grade G1 to G3 undertake contracts valued below RM500,000. Intermediate or medium

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capacity contractors from Grade G4 to G5 undertake contracts valued below RM5, 000,000 and bigger capacity
contractors from Grade G6 to G7 undertake contracts valued over RM5, 000,000. This study focused on Grade G7
and Grade G6 as it is believed that only the larger construction firms have the right structure with adequate data and
information to be investigated.
By using a structured questionnaire, the data were collected from 10 companies. The ten companies were
the only ones which access to interviews were granted. Personal interviews were conducted with owners or
managers, supervisors and workers in the construction firms. Although the sample size is small, the number of
companies surveyed is considered a fair representation of the intended sample in the state.
On questions about motivation, the managers were asked about their understanding on motivation and also
their views on motivation in their companies. For the workers and supervisors, they were asked to choose needs
relating to their current status from a list and they were also asked to rank motivators they perceived could increase
their job satisfaction. Factors influencing the motivation from these two groups were collected and then the
perceptions will be compared. Comparing perceptions of the managers with the workers and their supervisors will
be carried out to see factors that were significantly different or similar in perception.
For the questions on safety, the research questions try to investigate how the different levels of respondents
in construction industry perceived safety at their workplace. This research investigated what the owners or
managers, supervisors and the workers were doing for safety and what they thought about safety. Their views will
be cross-analysis to find out the real safety condition faced by the workers and the managers on the job site.
Incidence rates which are a safety performance indicator are used to measure workplace perceptions toward safety.
On absenteeism and employee turnover, this research tries to identify what causes employee absenteeism
and turnover in these construction companies. Types of absence were investigated through ranking of factors most
influential causes. Both the managers and workers were asked to rank their perception on factors most influential
causing absenteeism using a likert scale from very influential to the least influential. These factors will then be
compared to reveal the most influential factor as perceived by the parties involved. As for turnover, employee
turnover are identified through their intention of turnover while the managers were asked on their perception of
turnover in their companies in general.

Results
This report presents the preliminary findings from the interviews with the managers and owners. The first part of
this result is the subjective accounts from managers or owners perception on motivation, absenteeism, employee
turnover and safety. There will be a further analysis on the employees’ view of the factors affecting their
performance. A fuller analysis of these results will then be combined to form a complete view on how and why these
findings affect motivation, absenteeism, employee turnover and safety.
Ten firms participated in this research. In each firm, the owner or manager or equivalent is being
interviewed. Each interview followed a similar format using a set of structured questions. The interviews were
aimed at understanding the managers’ perception on factors affecting their companies’ performance. Factors such as
motivation, safety, worker turnover and absenteeism were asked and their answers recorded.
Out of the ten interviewees, six are owners running the firm as general manager while the other four are
project managers employed by the respective companies. The interviewees in this research consist of 9 males and 1
female. This proportion clearly shows that this industry is still being dominated mainly by male. Another reason that
discourages women to venture into this sector is the 3Ds tag associated with the industry that is dirty, difficult and
dangerous. Most of the respondents are in the middle age between 30 to 41 years old. Out of the 10 respondents, 4
are in their thirties while another 5 are in the forties. One of them is the oldest with the age of 76 years old. The
current group which dominates the construction projects in the state are of middle age group which has good ties
with ruling parties of the state.
The respondents are all of Malay’s origin. Although Malaysia is a multi-racial state, the Malay’s who is
also indigenous people is the majority of the population. This research is being conducted in Perlis, one of the
northern states in Malaysia. Here the Malay’s are the dominant race totalling 79% of the state population followed

1176
by Chinese with 5% and Indian of about 3%. Another interesting fact is that although there are no Chinese
construction companies in this state as listed on the list provided by the CIDB and CSC, almost all the major
construction tasks in the state are being done by Chinese sub-contractors. The Indians are not actively involved with
the construction industry in this state. Another reason of the Malay’s dominance in the construction industry in the
state is because of the close rapport between the contractors and the ruling party, which control the distribution of
contracts in the state.
Most of the interviewees, 7 of them have a higher degree qualification. Their academic degrees are mostly
related to construction industry. Two of them only completed high school while one of them only completed his
primary school. Most of the managers have been involved in the construction between five to sixteen years. There is
one manager whose involvement in this sector span for about 40 years. Based on their academic qualification, the
companies nowadays are being run by professional or white collar workers with wider knowledge about the
industry. This is a different situation compares to the 1980’s and 1990’s where construction companies are usually
being run by managers or owners whom do not possess higher academic qualification relevant to the construction
industry.
As for the background of the companies, 7 companies operated in residential building, non-residential
building and civil infrastructure while another 3 companies only operated in non residential building and civil
infrastructure. On type of business, all the companies were main contractors. Eight of the companies employed
between 5 to 12 non manual workers or administrative staff and have no manual workers of their own. All of the
companies interviewed, used sub-contractors which has their own manual workers to complete the project tasks. The
usage of sub-contractors is a common current practice in construction industry. Main contractors are moving away
from employing large labour force themselves in order to reduce costs. The contractors in this research are not
exceptional on this matter. Most of them have about a dozen administrative or technical and support staff. They are
dependent to the sub-contractors on their workers to do the wet trades.
The dependency of foreign workers in the Malaysian construction industry is already acknowledged. A
decade age the influx of foreign construction workers is something rare in the industry. The invasion of foreign
workers started in the mid 1990’s where the economic growth was booming and the demands for construction
projects were high. In addition, the prime minister at that time favoured many expensive infrastructure projects.
Now the dependency of foreign workers in the Malaysian construction industry is so prevalent that any action taken
by the government to eradicate illegal foreign workers will cause major disruption at the construction sites. Most of
the companies in this study used the services of sub contractors whom had foreign workers in their workforce. These
foreign workers usually come from Indonesia, Thailand, Myanmar, Bangladesh and Vietnam. The majority of
foreign workers are from Indonesia which has similarities in language and culture. However the companies in this
research were not totally dependable on foreign workers as there are lots of local workers around and the sizes of
projects undertaken by these companies are moderate.
Currently there are two companies that are dominant in the state. Their dominance is based on numbers of
government project being awarded for them to undertake. These two companies are a bit different from the rest as
they have their own manual workers. One company has about 35 administrative staff and 150 local manual workers
while the other company has about 12 administrative staff with 60 local manual workers. Some of the companies
interviewed mentioned that they have not got any project for the past two years. The reduction in government
projects since the new prime minister came into office in 2002, has dampened the industry. These Malay’s
contractors are being too dependent on government for projects instead of venturing into non-government project or
the private sector.
When asked on the formal process of measuring company’s performance, half of the interviewees said that
they have some kind of performance evaluation. Their performance evaluations are based on the financial
transaction such as cost of overheads and payment received. All of the respondents do agree that the most used
indicator to gauge performance of work performed by their respective company is through work completion. This
makes sense as work completion is closely related to the cost of overheads incurred and payment received. Table 1
shows the managers perception on the usefulness of indicators of performance. The managers are asked to rank the
usefulness of performance indicator as they perceived. These scores were then averaged for each option and the final

1177
score provides a guide to their overall usefulness based on the following likert scale: 1= most influential and 5= least
influential.

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 TABLE 1: USEFULNESS OF INDICATORS OF PERFORMANCE
Indicators Usefulness
Job cost 1.0
On time completion 1.6
Safety 3.1
Employee turnover 3.2
Absenteeism 3.2
Motivation 3.7
n=10

When asked about indicators of performance, the managers ranked job cost and on time completion as the
two most useful indicators of performance out of the six indicators provided. This finding did not come as a surprise,
as lots of research evidences do suggest these indicators as the most used indicators of performance (Belassi and
Tukel, 1996; Hatush and Skitmore, 1997; and Atkinson, 1999). The rest of the indicators such as safety, employee
turnover, absenteeism and motivation are being ranked as useful to less useful. Once again it is proven that
qualitative or subjective indicators are not popular amongst the managers as their measurements are still being
viewed as unreliable.
In terms of factors that might affect company’s performance, the respondents gave varieties of answers
such as cash flow, time completion, reliable workers, number of projects involved and also few exogenous factors
like the weather and availability of materials. All these answers are exclusive and unique to the respective
companies. One of the managers even cited political involvement as one of the factors that can have a bearing to the
company’s performance. When asked to rank the performance indicators that are relevant and useful in monitoring
performance, all the managers agreed that cost and time completion are the two most useful indicators based on their
experience and practice. Indicators such as safety, motivation, absenteeism, workers turnover are deemed to be
insignificance as what matters the most to these managers is to complete the tasks within the time limit and not to
incur additional overhead costs.
All the managers agreed that motivation is relevance and useful in the construction industry. Their overall
perception on motivation is that it is a method to increase performance, productivity and morale among employees.
Most of the respondent suggests internal motivation such as financial incentives are suitable and are the most
appropriate form of incentive to initiate better performance among workers. This can be related to the fact that
money is still the main motivator for the workers involved in the construction industry. These managers also,
suggested that good management of cash flow is important for their companies’ survival and would have an
influence on workers motivation. Workers can judge the effectiveness of their companies through the punctuality in
paying their wages on time. Factors such as financial problems for example late in paying salaries to the workers
and mismanagement of fund are being seen as factors that could de-motivate workers.
Apart from the financial incentives, a few of the managers suggested that good management practices by
the company administrators and empathy could also motivate employees. From the managers’ point of view, they
perceived that the ways the workers are being treated with contribute to workers motivation. Factors such as
fairness, respect and friendly did matters to the workers motivation. The managers also perceived that benefits given
to the workers such as free medical benefits could motivate the workers. As a conclusion, except for one of the
managers, the rest of the interviewees claimed that motivation is good in their companies. Eight managers’ admitted
that their companies did not have specific method to motivate employees. Two of the managers’ used motivational
talk in the form of briefing and meeting as a technique to motivate workers.
All the managers advocated the importance of safety in the construction industry. Nevertheless, seven of
the managers also mentioned that safety is not the most important indicator of performance. Another three managers
however agreed that safety is an important indicator of performance in their companies. For these three managers,
their remark is based on the fact that construction is considered as a dangerous work and the safety of the workers
are crucial to the project and hence to the performance of the company. Four managers said that their companies
have programs or activities to promote safety in the work place. The rest of the managers said that their companies

1179
do not have any kind of programs or activities in promoting safety as they are not required by the law to have such
programs. They further explained that workers working at the site had to undergo a safety program conducted by the
relevant authorities such as CIDB before being granted access to the site. Most of the managers agreed that
workplace safety is the responsibility of all the parties involved in the construction process.
On question about the effectiveness of inspection being carried out by the relevant authorities in monitoring
workers safety on site, six managers claimed that it was effective while another four managers said that was not
effective. The ineffectiveness of the inspection is based on the fact that the relevant authorities did not have the
manpower to really implement the safety procedures throughout the whole project. Enforcement is a complementary
component to regulation and government enforcement needs to be comprehensive in order to be effective.
The large number of construction companies in Malaysia that need to be overseen makes it nearly
impossible, for the relevant authorities to regulate the entire construction industry. The managers perceived that a
comprehensive enforcement will contribute greatly to the workers safety on site. The managers also claimed that
lack of attention to personal safety by workers also affect their safety. According to the managers the ignorance of
safety among construction workers occurred because the workers will perform their task in a manner that allows
them to experience the least inconvenience. Unfortunately, to these workers, safety is seen as an inconvenience. The
reasons for workers underestimation on the importance of safety can be linked to the lack of appropriate safety
training, their low education level and also to their attitude.
Another reason given by the managers on factors affecting workers safety is the cost of implementing
safety procedure to the contractor’s budget. If the cost of safety procedure is included in the contract, the
contractors will be more obliged to ascertain that workers follow the safety procedures. These managers also
believed that lack of compliance to safety procedures by sub-contractors, which is common and widespread do
affect the workers safety.
All the managers claimed that their companies have a very low accident record. When asked whether they
are satisfied with the safety and health performance of their site, half of the managers felt neither satisfied nor
dissatisfied. Two of the managers said they are very satisfied with the safety and health performance of their site
while another two just feel satisfied. The result shows that the managers although felling satisfied with the no
accident cases, they themselves realized that the lack of safety awareness amongst the workers are prevalent.
On workers turnover, almost all the managers involved said that they are not facing any serious employee
turnover. However, half of the managers said they do face a bit of problem regarding employee turnover with their
administrative and non manual workers. The number of employee turnover in the companies that have this problem
is not acute. The number of workers leaving is small, just between one to three workers annually. According to these
managers; most of the workers left their respective companies for a better pay job. As for the manual workers, these
people are not working directly under the company and it is the sub-contractors responsibility to make sure that
shortages of workers do not ensue. As at present, all the companies do not face any shortages of manual workers.
Six of the managers agreed that their company performance might be measured through the impact of change in
employee turnover. They said that the higher the number of people leaving a company indicates that there is
something not quite right with the company and hence have an impact on the company’s performance. On the other
hand, the rest of the managers did not agree that company performance may be measured through the impact of
change in employee turnover simply because there are lots of other factors that might affect company performance.
When asked on factors most associated with the cost of worker turnover, all the managers agreed that financial cost
in terms of training new employees and delayed in work progress are the two main factors.
On the managers’ perception on factors affecting their employees’ turnover, most of them cited the
availability of job as the main factor. The decreasing numbers of projects available have led to stiff competition
among the construction companies. When these companies face difficulties in getting job contracts, this will have a
direct impact on workers turnover. The way that these companies managed their financial also have an impact on
workers turnover. If the companies faced prolong financial difficulties and the workers salary are affected then the
workers turnover is inevitable. Another reason given by the managers as having an effect on workers turnover is on
how the company‘s is being managed, in other word, how much do the workers trust the companies. If the workers
have faith in the company, they are willing to compromise for the benefits of both parties.

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 Half of the managers interviewed said that the current absenteeism in their respective companies is
decreasing while the rest of the managers said that absenteeism in their company is at a moderate level. Eight out of
the ten managers said that their companies have an absence policy to deal with recurring and frequent absence while
the remaining two managers said they used their own discretion to resolve recurring and frequent absence. All the
managers realized the impact of absenteeism to their company. Most of them cited delayed in work progress as the
main result caused by severe workers absenteeism.
Table 2 shows the managers perception on the most influential causes of absence among their workers. The
managers are asked to rank the causes of absence as they perceived. These scores were then averaged for each
option and the final score provides a guide to their overall usefulness based on the following likert scale: 1= most
influential and 5= least influential.

TABLE 2: INFLUENTIAL OF DIFFERENT CAUSES OF ABSENCE

Causes Influential
Health 1.9
Family needs 2.1
Proximity to weekend or holiday 2.1
Worker’s attitude 2.2
Job condition 3.3
Location 3.6
Overtime 3.9
Volume of work 4.0
n=10

From table 2 above, the top three reasons for workers absence as perceived by the managers’ are all related
to worker’s personal problems rather than the workplace problems. Causes such as health, family needs, proximity
to weekend or holiday and worker’s attitude are factors controllable by the workers. The managers’ perception on
reasons for absence given by workers over here is totally the opposite from the result of findings in the Business
Roundtable (1983) report for absenteeism which the workers of the survey in United States cited the top five reasons
for absence is related to the workplace rather than the personal reasons. Workers in the Business Roundtable survey
rated personal or family illness as last in order of importance while the managers’ perception in this research showed
that illness is considered as the top reason given by workers for their absence. The reason perceived by the managers
in this research is parallel with CIPD (2003) report stated that the most important cause of absence in the United
Kingdom is minor illness.
Overall, the managers perceived that culture and attitude play important part in affecting workers
absenteeism. On cultural and attitude issues, they said there are differences between the local and foreign workers.
The most obvious difference between the local workers and the foreigners are their commitment to the family. Local
workers are more attached to family ties compare to the foreigners who are more focus with their tasks. Generally,
all the managers agreed that differences in cultural and attitude among local and foreign workers do have an impact
on absenteeism in the company.
In the final section of the interview, the managers were asked on their opinion of the construction
industry’s image. When asked about the difficulties concerning the project that they have completed or currently
undertaking, various exogenous factors crop out such as late payment by the project owner. In most cases,
bureaucracy in government agencies are prevalent and been cited by these managers as the cause of delayed
payment. Other factors such as shortages of materials, labour, relationship with suppliers, weather and government
regulations are among the factors that can disrupt work progress. Although these factors are all unique to the
respective companies, all the managers concerned agreed that good financial management in general and
management of cash flow in particular is of utmost important to the running of a construction company. All the
managers are associated with a least one or more association and the benefits for being a member of these

1181
associations varies from attending seminars to getting support or recommendation for new projects. There are two
managers who claimed that being a member of association do not bring them any benefits.
For overall opinion of the construction industry’s image, three managers are confident of a bright future.
Two managers are a bit pessimistic of the industry as some of them don’t even have a project for the past two years.
The rest of the managers still believe that this industry is viable but needs a lot of effort from all parties involved to
make it more attractive and safe. One of the manager even suggested the non political involvement in tendering for
project would make this industry healthy from politician who has the power in determining which contractor will get
the projects. All things considered, four managers said that their overall satisfaction can be expressed as good,
another four managers overall satisfaction is neutral and only one manager feel his overall satisfaction is bad.

Conclusions
This report is completed with limitations. The limited sample sizes means that the result should be treated with
caution. This research begins with a quest in findings factors affecting motivation, safety, absenteeism and workers
turnover as perceived by the managers and workers in the Malaysian construction industry. What makes this
research a bit different is that it tries to look into factors affecting motivation, absenteeism, safety and workers
turnover rather than looking on how these variables affect performance. By understanding these factors it is hope
that this study will provide construction owners, managers and policy makers on the insight into the factors that will
increase workers performance. Largely all the managers involved, acknowledged the importance of these factors in
enhancing the performance of workers in their companies.
Although all the managers recognized the importance of motivation, initial steps are not being taken to
promote and develop motivation as significance tools in increasing workers performance. Most of these managers
used financial incentives such as bonus as encouragement to the workers. The other forms of motivation techniques
are not widely used. Overall most managers had taken motivation factors as granted and did not bother to exploit
them to the utmost.
On safety all the managers generally agreed that it is very important considering the nature of the industry.
Lack of enforcement by all parties concerned and ignorance of safety among construction workers are common on
the worksite. There is a need for greater and more comprehensive enforcement by all the parties involved. There is
also an urgent need to educate and train the workers to be aware of workplace safety. For absenteeism and workers
turnover, the problems are not serious that need immediate attention from the managers. Although the managers
admitted that they knew the impact of absenteeism and workers turnover, unfortunately they did not have policies
that would tackle these problems when they occur. The ignorance on these matter could be related to the fact that
there are abundance of cheap workers around.
Finally, all the managers agreed that these factors are important but nevertheless no emphasis has been
given to make them workable and be used as alternative to other performance factors. Emphasis and effort should be
concentrated towards proper management and governance in dealing with the construction industry.

References
[1] Amaratunga, D., and Baldry, D. (2002). Performance measurement in facilities management and its
relationship with management theory and motivation. Facilities. 20, (10), 327-336.
[2] Arditi, D. and Mochtar, K. (2000). Trends in Productivity Improvement in the US Construction Industry.
Construction Management & Economics. 18, 15-28.
[3] Atkinson, R. (1999). Project management: cost, time and quality, two best guesses and a phenomenon, its
time to accept other success criteria. International Journal of Project Management. 17,(6), 337-42.
[4] Banik, G. (1999). Construction Productivity Improvement, in ASC Proceedings of the 35th Annual
Conference. California Polytechnic State University – San Luis Obispo, California, 165-178.
[5] Belassi, W. and Tukel, O. I. (1996). A new framework for determining critical success/failure factors in
projects. International Journal of Project Management. 14, (3), 141-51.

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[6] Borcherding, 1. D., and Garner, D. F. (1981). Workforce motivation and productivity on large jobs.
American Society of Civil Engineers, Journal of the Construction Division. 107(3), 443-453.
[7] Business Roundtable, (1982). Absenteeism and turnover. Rep. C-6, , New York, N.Y.
[8] Business Roundtable, (1983). More construction for the money. Summary Rep. of the Construction
Industry Cost Effectiveness Project. New York, N.Y.
[9] Chartered Institute of Personnel and Development, (CIPD, Oct 2003), Employee Absence 2003, A survey
of management policy and practice, CIPD House, Camp Road, London, SW194UX.
[10] Construction Industry Development Board Malaysia, (CIDB, Feb 2004), Construction Industry Survey
2001-2002, Malaysia.
[11] Cox, R.F., Issa, R.A., and Ahrens, D. (2003). Management’s Perception of Key Performance Indicators for
Construction. Journal of Construction Engineering and Management. 129, (2).
[12] Boxall, P. and Purcell, J. (2003). Strategy and Human Resource Management. Houndsmills, Palgrave-
Macmillan.
[13] Debrah, Y, A., and Ofori, G. (2001). The state skill formation and productivity enhancement in the
construction industry: the case of Singapore. International Journal of Human Resource Management. 12,
(2), 184-202.
[14] Dyer, L. and Reeves, T. (1995). Human resource strategies and firm performance: what do we know, where
do we need to go? The International Journal of Human Resource Management. 3,(6), 656-70.
[15] Hatush, Z. and Skitmore, M. (1997). Evaluating contractor prequalification data: selection criteria and
project success factors. Construction Management and Economics. 15, (2), 129-47.

Please contact the author for a complete list of references

1183
 Patterns of Community Business Management: Aspect of Cooperative Women Group:
Case Study in Thailand1

Phichit Thepphawan, phichit@northcm.ac.th

North-Chiang Mai University, Thailand

Abstract

This research is to investigate the members of cooperative women group concerning of group status and their group
demand; problems and opinions of the members through group operation and to examine the conditional factors
influencing the development of pattern, structure, and cooperation of group management activities. This research is
limited to Baan Ton pheung Cooperative Women Group as a case study in Thailand. Participatory Action Research
(PAR) is used. It is found the main objective of the cooperative establishment is to cooperate and implement the
transfiguring of agricultural products, such as longan, and honorable economized activities through carrying on and
sharing benefit together. However, the members’ role in-group management is rare. Consequently, many kinds of
problems are raised, such as the lack of member’s understanding in group and business operation: marketing,
production, human resource management, finance and accounting. The cooperation of members in conducting research
has created the suitable pattern, structure, product innovation and activities for community business; such as cooperating
in group management, practicing leadership, demonstrating products, sharing skills, creativity and knowledge. It
suggests that the community and the cooperative women group participate in management group via learning together to
gain community strength and sustainability, implement the advantages of group management and community business
management in the pattern of cooperative women group in global business.
Keywords: Business, Management, Cooperative Women Group

Background and Significance of Problems

After facing economic crisis in 1997, community business has been crucial strategy of Thailand since it is formed by
people in a community to cooperate in different forms such as women group, cooperative group, savings group,
cooperative group, and cooperative women group. These groups operate their businesses based on community
sufficiency economy. The purpose of group forming is to encourage people in their community to manage local
resources for production, processing, and marketing while considering the appropriateness regarding the
environment of the community. This can result in purchasing, trading, employing, and effectively using of
resources, which are considered a foundation of stable economic mechanism development of the country.
Cooperative Women Group is formed by people in a community of which the members are women who
join in a community cooperative. The cooperative members’ offspring and relatives voluntarily gather to form a
business to earn a living. Though community business contributes to the development in a community and the
nation, certain problems can still be found. Currently, community business tends to be operated more commercially
and there are still some weaknesses such as lack of significant factors: capital, leaders, effective business
management system, proper technology, unawareness of roles and ethical aspect of helping each other, as well as,
government policies that are not truly facilitating the development of community business. Apart from these
problems, more can be found. Certain agencies that support community business tend to focus on their own goals
and lack cooperation from other related government agencies. If Cooperative Women Group lacks effective
management in terms of organization management, participation of group members and related authorities, and
business management including marketing, finance and accounting, human resource and labor management, there
might be some conflicts in the group and related agencies and it is likely to be difficult that products and service can
compete in the market.
The problems mentioned above become a source of inspiration of this research, which aims to study status,
problems, opinions of members regarding group operation, and methods, patterns, structure, and proper activities in
developing group management. This study also includes factors affecting the development of patterns, structure, and

1184
participatory activities in group management. An advantage of this research is that a community and Cooperative
Women Group can participate in group management by exchanging and learning together in order to strengthen
their community. The methods of group management and community business management can be applied for
further effective and systematic management, which will be able to generate income, benefits, and opportunity for
Cooperative Women Group and the community itself. As a result, Cooperative Women Group will truly be self-
reliant in a sustainable manner in this globalization era.

Research Question
With differences in group members, how can we create participation in management and direct the group operation
through the participation process from every member, which will lead to effective and systematic business
management and learning process and problem solving by community business members?

Literature Review
Cooperative Women Group Concepts
Cooperative Women Group has been formed to solve problems and create an option for people in a community.
Indonesia, for instance, faced economic crisis since 1980s to the financial crisis in the mid of 1997. To overcome the
economic problems and poverty, Indonesian government initiated community protection system, which is a form of
cooperative that a person or group of people, or even business operators cooperated with each other. Cooperative
Women is an effective cooperative in which women can access and are provided a chance to operate business
activities as they desire. Through experiences and accumulated knowledge, successful Cooperative Women Groups
were influenced by activities they participated such as Jimpitan and Tanggung Renteng. Jimpitan is a system based
on participation from people in a community to support each other. Tanggung Renteng is communal responsibility
on the basis of sincerity and trust among group members. These two concepts can be combined to develop a
business to achieve its goal successfully and effectively (Johanna and Titing, 2001).
Concept of Community Business and Enterprise
A community business is a generic term. There are a number of other similar terms used to describe this type of
undertaking; social enterprise, community enterprise, community co-operative, community interest local company,
community benefit corporation, and local development trust.
A community enterprise is a specialized form of community-based organization that has both commercial
and social aims and objectives. The commercial objectives of a community enterprise mean that business methods
and practices drive its organizational functions and determine its operating style. This sharply distinguishes a
community enterprise from the predominantly representative and often informal operating pattern of most other
forms of popular community-based organization. However there are some features which it shares in common with
popular community-based organizations. In particular, it is owned and controlled by the people who live in a defined
locality or who share other forms of common interest.
There are a range of particular functions (DTTR,1999) for which community enterprises are established
some of which exist in combination while others are pursued on a single purpose basis; to own and administer
community assets and resources such as land, buildings, equipment and machinery; to undertake business and
trading activities in a commercially sustainable and socially responsible ways on behalf of the community; to act as
a comprehensive focus for local economic development by providing ideas, information, training and consultancy
services; and to provide financial services such as managing revolving loans within a community and attracting
outside capital.
Community and Social enterprise Enterprise: an International and Local Experiences
The impacts of community and social enterprise have received varying levels of attention in a number of different
areas of the world in recent times. The following discussion focuses on the experiences in several nations. To the
extent that social enterprise has been established in these countries as a form of local governance in the face of
extreme disadvantage, their experiences are also a potentially important source of learning.

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 Community and Social Enterprise in the United Kingdom. The UK has a distinct historical tradition of
social enterprise. The modern cooperative form was established by a group of weavers in the Rochdale area in 1844,
and the British consumer cooperative movement subsequently went on to become a key driver behind the
establishment of the International Cooperative Alliance, which remains active today. The 1970s saw a new wave of
consumer cooperation in line with new social movements of the times. In the 1980’s, worker cooperatives and other
forms of community enterprise were initiated, sometimes with the support of local government, as a response to
local employment creation (Pearce, 2003). More recently, social enterprise has played a significant role in the
reform of public services in a number of policy areas. The most notable of these is social housing, where a major
amount of public housing stock has been transferred to representative housing associations and cooperatives. There
are also a growing number of social enterprises emerging, with government support, in areas of social welfare such
as aged care, disability services and childcare
Community and Social Enterprise in Europe. Continental Europe comprises a range of countries with
diverse cultural, political, and economic histories. While it is impossible to speak of a singular “European
experience”, regional governance institutions and the academic community have supported a sustained research and
policy effort around European social and community enterprise for over a decade. From 1989 to 2000 a Social
Economy. Unit existed within the European commission “in recognition of the need to take account of co-
operatives, mutual societies and associations in the internal market”.The DG XII of the European Commission, as
part of its Targeted Socio-Economic Research (TSER) program, has provided support for the initiation of the
thematic network, EMES (L’emergence des enterprises socials), which focuses on the emergence of social
enterprises as a response to social exclusion in Europe (Simons, 2000). In July 2000, the responsibilities of the
Social Economy Unit were integrated into Unit B3 of DG Enterprise "Crafts, Small Enterprises, Co-operatives and
Mutuals" (Europa, 2007). The objectives of this unit include mainstreaming support for and recognition of social
enterprise organizations into relevant EC policies and programs, establishing a supportive regulatory framework,
and maintaining a research effort around the nature and scope of cooperative, mutual and associational activities in
the region.
Community and Social Enterprise in the United States. The United States has a long cultural history of
individualism, which provides a backdrop for valuing entrepreneurship and corporate and individual philanthropy.
As Salamon (1999) has described, historical resistance to government intervention in the US has led to an intricate
‘mixed economy’ of welfare that involves public, corporate and third sector provision, with the third sector playing a
relatively larger role in welfare provision that in many other developed countries. A mix of earned income,
government funding and private philanthropy has traditionally characterized financing of third sector welfare and
development efforts. Declining rates of government funding and the relative instability of philanthropic assets in the
face of global economic activity have affected the operating environment of the US nonprofit sector. The growing
interest in social entrepreneurial activity in the US since the early 1990s reflects some nonprofits’ response to this
changed operating environment, as well as academic and government interest in the importance of cross-sectoral
partnerships in the mixed economy of welfare, and a renewed focus on revitalizing distressed urban and urban fringe
communities. The US experience has involved a dual emphasis on developing individual social entrepreneurs with
significant support from university business and management schools and building resilient nonprofit organizations
with a focus on self-sufficiency through earned income and innovation. With regard to urban revitalization, regional
nonprofit networks in areas such as Seattle and Pittsburgh have utilized social and community enterprise as a
mechanism to stimulate local economies, generate employment and provide essential services. In the USA, there are
some specific examples of government involvement in social enterprise activity, through partnership, funding
provision, and service purchasing. The federal government and some state governments have initiated purchasing
arrangements that give priority to purchasing certain products from social enterprises (Pomerantz, 2003). Direct
local government involvement appears limited, although there are exceptions, such as the City of Seattle, which
played a significant role in establishing the Seattle Social Investors Forum that has been instrumental in stimulating
social enterprise in that region.
Community and Social Enterprise in Canada. Canada has a strong social history of collectively driven
social and economic activity, although the nature of this activity has differed across provinces. The north American
credit union movement was established in Quebec in 1900 and building cooperatives to establish housing were

1186
popular in Canada from the 1930s to the 1960s. Worker cooperation has been a traditional form in the agricultural in
industry and, more recently, cooperatives have played a significant role local economic development, through the
establishment of niche markets and value adding in areas where traditional primary industries are in decline
(Barraket, 2001). The revival of social enterprise as a distinct feature of community strengthening occurred in the
1990s in Montreal, with the support of a range of civil society organizations and the Quebec Government. In the
early 1990s, several third sector organizations were working with the communities of south-west Montreal, amongst
other regions, to develop local economic development responses to significant loss of jobs in the manufacturing
industry and a 30% decline in local population (Richard, 2004: 21). In 1996, the Quebec Government called a
Summit on the Economy and Employment in the province, and consequently established the Chantier de l’economie
sociale (taskforce on the social economy), which is led by civil society organizations, including local economic
development, community service, and social movement groups (Neamtan, 2004). In the past seven years, more than
4000 social and community enterprises employing 65,000 people across a range of essential and non-essential
services have been established in the Quebec province (Lewis, 2004: 10). Public policy support for social enterprise
has included the integration of local and regional development policies to support collective enterprise, equal access
to the development incentives available to for-profit enterprise, establishment of new training and funding tools and
changes to the regulatory environment. At the regional level, local government has been involved as a partner in
activities and governance systems essentially led by the third sector. Recent reforms to the Quebec government have
seen responsibility for local and regional development devolved to local government. It is not yet to be seen what
effect this will have on regional development efforts.
Community and Social Enterprise in Australia. The nature and scope of social enterprise in Australia has
yet to be extensively mapped. However, there has been an emerging public discussion about social entrepreneurship
and social enterprise in this country since the late 1990s. This discussion reflects a number of different priorities and
perspectives, including: interest from some parts of the third sector in social enterprise as a mechanism for sector
innovation and financial sustainability; interest from across sectors in the role of social entrepreneurs in establishing
partnerships to respond to complex social, environmental and economic challenges; renewed interest in cooperative
and collective forms as vehicles for local development and employment creation; and calls for a renegotiation of the
nature and scope of welfare delivery. In broad terms, there is a division within this general discussion between those
who view social enterprise as a strategy for large charitable organizations to mobilize resources through
entrepreneurial activity, and those who see social entrepreneurship as a new way of organizing to address social and
economic need using the venture capital model (Lyons, 2004). The debate has also attracted critics of the notion of
social entrepreneurship, who argue that it is neither an adequate nor an appropriate replacement for government
provision of welfare services and promotion of social justice (Cook et al, 2003). Fairly broad cross-sectoral interest
in the notion of social entrepreneurship in Australia led to the establishment of the Social Entrepreneurs Network
(SEN) in 2001. In 2002, Australia’s first venture philanthropy organization, Social Ventures Australia, was
established by the Benevolent Society, the Smith Family, Work Ventures and AMP Foundation, with the aim of
using the venture capital model to “integrate the Australian public, corporate and social sectors to create
entrepreneurial, innovative and results-driven solutions to Australia’s social problems” (SVA, 2007). Further,
specific initiatives such as the Cape York Partnerships described earlier are, in part, modeled on principles of social
entrepreneurship and have been identified by practitioners and policy makers as innovative approaches to intractable
social, economic and environmental problems. For a number of reasons, including the broad conceptual division
about social enterprise discussed above, SEN was wound up in 2003. Some people involved in SEN have recently
established Social Enterprise Partnerships as an alternative organization.
Community and Social Enterprise in Thailand. For Thailand, forming of people in a community to operate
business has been done for many years. Since there is no governing law to certify the group forming, many groups
face problems in terms of operation in various activities, which concern rules, regulations, and law. Communities at
the same time might not receive support and promotion from the governmental sector that can respond their
demands since governmental organizations participate by considering their readiness. This process affects
community business and forming of members in a community. As a result, community business is not strengthened
and sustainable. Community networks nationwide then discuss with Ministry of Agriculture and Cooperatives so
that the Ministry is informed of problems in community, and that leads to law drafting and issuance of Act of

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Community Enterprise Promotion 2005. This Act is stipulated by genuine demands of people in community. The
community enterprise will be promoted to establish and provide knowledge concerning proper use of village fund
and cooperation of people in community so that community becomes stronger and self-reliant. The community will
also be supported to develop products, maintain quality, and conduct research on technology and marketing. The
community will learn how to create creditability in business, safety for consumers, and how to coordinate and
manage fund sources in order to become small and medium entrepreneurs. Community enterprise and its networks
that need those supports will have to register with Department of Agriculture Promotion, Ministry of Agriculture
and Cooperatives. Currently, there are 38,267 cases and 87 networks of community estate with 626,549 members.
(OSBECPT, 2007)
Concept of Community Business Management of Cooperative Women Group
The study of community business management of Cooperative Women Group emphasizes methods and activities
related to community business operation in different aspects:
Management is the process of coordination between personnel and other resources to achieve an
organization’s goals. (Pride,Hughes and Kapoor,1996) In managing community business of Cooperative Women
Group, the responsibilities include planning, organizing, commanding, coordination, and controlling.
Human Resources Management is a process of managing human resource to perform and achieve the
purposes of organization. There are 6 functions, which are human resource planning, human resource recruitment
and selecting, human resource development, compensation and benefits, health and safety, and research on human
resources. (Mandy and Noe, 1996) Therefore, effective human resource management is a way to support the
community business to operate successfully.
Marketing Management requires the application of 4 marketing mixed proportions, which are product,
price, place (channels), and promotion to serve the products of community business. (Kotler, 2001) This could result
in expanding sales, market shares, and potential to market competition. When products reach the maturity stage and
become saturated, community business has to present new products to respond and increase the purchasing demand.
However, developing new products is considered a risk for business. Developing new products then requires
research on consumer behavior and marketing.
Production Management is a process of transforming manufacturing factors including raw material, capital,
and labor to products through manufacturing process by adding value in them to achieve the desired products.
(Meredith, 1992) Production management includes operation plan, material requirement planning, location selecting,
transportation, and quality management. If community business can effectively manage the production, quality
products will be launched and satisfy customers as well as services provided. This can lower the operational capital
and increase more profit.
Financial and Accounting Management. Financial report that must be done is a balance sheet, (Lawrence,
1997) which is profit and loss, and cash flow, to show the financial status and operational result of the business.
Budgeting is also a tool in making a short-term financial plan. Financial responsibility includes revolving asset
management; capital management, cash management, liability management, and inventory management. Business
community can seek for short-term capital from commercial credits. Short-term loan can come from Saving Group
for Production and from the village funds. Long term capital can be loans from commercial Banks or owners.
Concept of Communal Participation
Participation from a community means the participation in decision making along with the process of
implementation that concerns benefits and evaluation in developing activities. (Cohen and Uphoff, 1977)
Components of participation from people should consist of decision-making; identify problems, making decision,
and implementing. Implementation can be done through resources support, administration, and efforts. People can
participate in sharing benefits, which can be material, social benefits, or personal benefits. They can participate in
the evaluation process to control and monitor the whole activities.

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Research Methodology
This qualitative research is based on Participatory Action Research (PAR) principle, which emphasizes the
cooperation from researcher, assistants, and members to find out problems and obstacles in doing research, setting
objectives, collecting data, analyze data, selecting alternatives in group management, and organizing proper
activities, which will lead to mutual learning process and finding solutions. (Kemmis and McTaggart, 1988)
This research is divided into 3 stages. The first stage studies condition of groups and members, status of
group demand, problems and opinions of members towards the operation. The second stage studies methods,
patterns, structures, and suitable activities for developing the administration of participatory management. The third
stage studies conditions and factors affecting the development of patterns, structures, and activities, which concern
participatory management. This study focuses on Baan Ton Phueng Cooperative Women Group, Muang Nga Sub-
District, Muang District, Lamphun Province, Thailand as a case study.
The population in this research is members of Baan Ton Phueng Cooperative Women Group, professional
groups, organizational community groups, related government agencies that support the operation in the area such as
Sub-District Administration Organization, Provincial Public Health, Provincial Agriculture Office, Provincial
Cooperative Office, and Provincial Community Development Office.
Primary data is obtained by both formal and informal inquiry and interviews with group members,
observations of relevant people who manage businesses effectively in the current context. Activities that are set up
include training activities to find out proper business management approach in the current context, field trips that
bring advantages and disadvantages from each area to adjust and apply with a community, workshops that
demonstrate group administration and suitable business management that can solve the group’s problems, and
creating models of group administration and analysis of factors affecting the development of group administration.
Secondary data is obtained from journals, researches, and related academic textbooks.
Data is collected and analyzed in different aspects. Data is categorized in area conditions, population, group
operation, organizing activities, and application of data. The collected data will be interpreted, compiled, and
summarized.

Research Findings
Finding in the First Stage: Condition of Group and Members, Demands of Members Concerning Problems and Opinions
about Cooperative Women Group’s Operation
There are currently 368 members of Baan Ton Phueng Cooperative Women Group. Most of them are over 50 years
old and work as employees. The group was formed to support the operation in a self-reliant manner, to help
members in their careers, to increase family incomes under the group’s principle, which focuses on mutual helps, to
generate just benefits, and to promote social activities. The project can become a model for youths in the
community. The group’s activities can be divided into 2 types; deposit money as savings, and process agricultural
products such as dried longan, ginger instant drink, black galingale instant drink, bel fruit drink, chamomile drink,
instant powdered soy bean milk, and instant powdered longan drink.
When studying group administration and management, it is found that the group committee consists of
chairman, vice chairman, secretary, and treasurer, who were chosen by members to manage the group. The members
proposed the names and voted for the committees with the 4 years term. Since only one meeting will be held
annually, members have different understandings about the operation and they do not understand roles and duties of
being members. This causes communication problems between members and committees. The members do not
know about problems of the operation. Committee meeting lacks clear agendas. Almost all of people who are
responsible for different positions are old. Other committees do not show clear performances, as they should. The
structure of the previous administration is redundant and not associated. Business management and administration
including organization management, production management, finance and accounting management, and human
resources and labor management are not effective yet. This problem results from a lack of participation from

1189
members, supporting agencies, and local organizations causing slow development despite the fact that potential and
products are still greatly wanted by consumers.
The finding in the Second Stage: Methods, Structure, and Suitable Activities for Participatory Group Management of
Cooperative Women Group shows that:
Group Administration and Management. Status of Cooperative Women Group as an organization has not yet been
accepted by governmental or non-governmental organizations. As a result, the group was not well protected and
supported. The operation then has a slow growth since there is not relevant governing law. From the meeting of
committees and members, there is a resolution to change the status by registering as Baan Ton Phueng Community
Enterprise, which will enable it to obtain support and legalize the group status. Administrative structures are
changed and the responsibilities are divided into different sections suitable for current operation. The same board of
committee still functions and is well accepted resulting in more effective administration.
From at least 2 meetings a year as the group members requested, they learn about the operation and
activities that the group has done or will be doing in the future. The members also have an opportunity to suggest
their opinions about the operation, which strengthens understanding among group members and committees.
Apart from looking for methods of management in a sustainable manner, continuous learning process can
be enhanced by additional knowledge about management skills through various activities such as drafting plan and
modern projects. The members can submit a proposal for sponsors from governmental and non-governmental
organizations. Some activities can serve as a forum for exchanging opinions and participatory group management
between Cooperative Women Group and sponsoring organizations. Through these activities, the group members can
exchange knowledge and opinions concerning directions of management, problems and obstacles occurred from
various means of support from governmental and non-governmental organizations including money, materials,
equipment, or related seminars. They can review roles of supporting organizations so that they respond to the
group’s demand.
Computer training activities enable members to learn about modern business management and how to keep
data of members, products, finance and accounting, as well as local wisdom in a much more effective way.
Teamwork and team management provide a chance for members to learn about management systems and team
working, which will enhance efficiency. Leader development training helps the members to understand that without
good leaders their operation will never be smooth and successful. Systematic thinking activity will enhance the
operational process, as the members know how to plan and operate schedule. This helps them to find out what
appropriate solutions they need when facing with problems. The research also finds that strengthening members
potential can be done by exchanging experiences among group members, assigning responsibilities, and
participation that everyone can share and learn together. This will be advantageous for assignments and participatory
management, which will create trusts.
Financial and Accounting Management. The group is still facing the insolvency of capital at a certain
period and more revolving capital is needed for developing and improving standard of products. Another problem is
the accounting. Committee or responsible people still do not understand accounting, resulting improper account.
Only one person who makes mistake can cause inaccurate data.
Financial and accounting training activities help group members to learn how to solve problems about
revolving capital and insolvency. From these activities, the group can obtain necessary financial and accounting
plans including members working statistics, income-expense notebook, individual liability record, and check record
that all members can prepare themselves and show to the group members. The members also understand the
principles of simple recording and examining financial and accounting. This can save 50% of the time they used to
do. The remained time can then be used for other works. Another important advantage is that regular accounting
update can be used for decision making and planning.
Human Resource and Labor Management. The members took field trip activities in successful community
businesses and learnt that having determined leaders, skilled teamwork, and effective management can generate
income to group members in all statuses. Elders can support the group by participating in activities that do not
require high skill of craftsmanship to generate income such as weaving carpets and making artificial bouquets. They
can do these works in their free time in the evening, or after their regular orchard works. With this strategy, the
group members will earn more income.

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 Learning Center is established to maintain valuable local wisdom since most of laborers in this group are
elders. This activity supports the members to create network and teach their skills to younger generations in different
forms such as training children of the by members themselves and students in the village or its vicinity. The learning
center can be a model project that visitors in the country and abroad can come to observe.
Marketing and Public Relation Management. Marketing training activities provide the group with suitable
marketing patterns to respond the demand of customers. The group also has a participatory marketing concept to
improve products, set prices, calculate costs to find out suitable prices, categorize groups of customers into 3
different levels of their income, which helps them offer products needed by customers. The first group is lower level
(income less than 5,000 Baht) which has the ratio of 20%. Suitable products are instant soy bean milk, shrimp paste.
The second group is the middle level (income between 5,000-15,000 Baht), estimated around 60%. Suitable
products are instant drinks such as ginger, longan, bel fruit, and chamomile. The last group is the high level (income
more than 15,000 Baht), 20% of the customers. Selected products for this group are dried longan and black galingale
instant drink.
In addition, when initiating participatory research, an obvious change found is that the sales of each
products increase and dried longan won the first prize in the provincial longan festival of OTOP Thailand 2005.
Product development and packaging of pioneering products such as instant ginger drink are also in high
standard and modern style. The products are then distributed domestically and internationally. The patterns of
packaging are from marketing survey. The group has surveyed similar patterns, sizes, and prices so they can design
suitable packages and set the price close to the market price.
Demonstrating Center and product exhibition help the members learn about how to exhibit products in an
attractive style and create trust in products in terms of safety and quality. It is also found that Demonstrating Center
will even serve as a trading network that can expand marketing channels.
Production Management. Production training activities improve the production system of the group.
Producers are changed every day to respond the quantity demand. Daily wages can be increased. The group
members learn how to increase products from hiring laborers and how to assign works that are suitable for different
fields of expertise.
Training about using technology for production enables the group members to learn about techniques in
boosting products by using related technology. They can learn how to prioritize production processes, which can
remove unemployment or bottom neck. They obtain technological principles that the group adopted for making
decision and that can support the operation. They become aware of selecting technology by considering experiences
of group members as well as skills in assigning people by their potential.
The Findings from the Third Stage: Conditional Factors affecting the Development of Patterns, Structures, and
Participatory Management Activities
Suitable patterns are drawn from participatory business management, and patterns that are suitable for each product
are: in terms of organization management, the group restructures the organization and realizes different duties.
Committee members including Chairman, responsible for general management; vice chairman, manage, control, and
monitor in case the chairman is absent, purchasers, responsible for purchasing and finding quality raw material as
well as maintaining instruments and equipment in good condition. Finance and Accounting prepares income-
expense account. Marketing is responsible in finding markets, test markets, and promote the group’s products.
Production is mainly about manufacturing products and processing. Quality Control includes control of
manufacturing process started from purchasing raw material, manufacturing, packaging, and coordinating with
people who control quality of products. Personnel in different sections are selected from approval of the group
members and are assessed their performances to increase the capability of work. It is also important to consider the
supporting agencies in terms of budget, equipment, machinery, and equipment. All of these factors must be
considered to move the group in the same direction.
In terms of member management, the group considers the significance of participation of members in terms
of fund raising, production, and selling products or becoming consumers themselves. The participation also includes
sharing annual benefits, holding meeting when needed, presenting the demands of members which helps reducing
conflicts among members, and organizing training to increase skills and ability in management by providing
supporting careers such as basketry, weaving carpets, which will increase income for the group members.

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 In terms of finance and accounting, the group prepares accounting system which is convenient for
presenting and being examined by the members such as balance and profit and loss balance. Financial and
accounting data can be used for ordering raw material every month. Data can serve for designing short-term plan.
The group makes balances including sales budget, production budget, laborer budget, expenses for production,
management expenses. It also realized the significance of revolving asset by providing enough cash, managing
debtor cases by considering their credits, managing products by manufacturing as being ordered and pending for
sell. The management in different aspects mentioned above contributes to the solvency of the group.
In terms of human resource and labor management, the group attempts to create an opportunity for
members to learn production skills by job rotation such as changing from production to quality control. The roles are
also changed so the members can learn about other responsibilities, assignment, and empowerment by becoming
heads of each section. The heads should be selected from their expertise and abilities and should be provided with
fair compensation and welfares such as free lunch for members who participated in production, health-up, training
about quality control and production technology.
In terms of marketing management, the group considers the mixed proportion markets to respond the
demands of customers. For products, most of the products are instant dried herb drinks, which are produced from
local materials. The products must be in good quality, packed in standard and modern packages, and approved by
Food and Drug Association. Selling information should be used as guidance for production and promotion. For
price, the group considered the products’ prices from the costs or season or festival. For place, products are sold in
the community and to outside customers both retail and wholesale. The group considers delivery, discount, and
commission for members (middle person) who sell the products. For promotion, the group has advertisements and
promotes products by members through words of mouth. Local administrative organizations also support the group
by advertising through leaflets and flyers. Exhibitions organized by governmental or non-governmental
organizations aim to introduce and sell products domestically. Those events include OTOP Thailand and exhibitions
in Vietnam, China and others countries.
In terms of production management, the group selects raw materials from the low cost source. Those
materials include longan, ginger, black galingale. The group also monitors quality production and manages hygiene
in a factory. The members must wear protective gloves and hats and check all instruments and machinery. After the
manufacturing process is completed, the products must be examined for the quality before bringing to sell.
Consequently, the group is certified by Food and Drug Association, GMP, Community Product Standard for all
products. This can create trust for consumers.
To analyze the factors that affect the group management, from workshops, it found that members of
Cooperative Women Group participate in different aspects including economic system development by changing
production. The group selects local raw materials such as longan to produce longan candy and chilly longan paste.
In terms of natural resources and environment conserving, the group manufacture products that are environmentally
friendly such as basketry made from used papers. Body and mind improvement activities include providing health
check-up for laborers and members, hygienic working environment, and health information. Society and community
development activities consist of religious and local cultural activities such as fund raising for constructing religious
buildings, teaching knowledge and local wisdom to people, teaching professional skills for students in community,
and strengthening the network cooperation in community. These mentioned factors must be considered and
harmoniously operated. If one of these factors is inefficient, it might affect the living condition and understanding or
perception of members, and conflicts might be inevitable.

Discussion
Although there are differences among members in terms of age, education, and occupation, they are able to create
efficient and suitable participation in management and direction of the group. In order to solve problems occurred in
the group, they must have participatory management, which responds to their products. The management has to
include organization administration by adjusting appropriate structures. Committee board is important and
responsibilities must be from members’ approval. The group also pays attention to organizations which support

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finance, tools and machinery, and equipment. Member management must consider participation from members in
terms of investment, production, selling, and sharing fair benefits. (Cohen & Uphoff, 1977) The annual or bi-annual
meeting should be or as appropriate to report the result and progress of operation, and to present the demands of
members. This can reduce problems, conflicts, and misunderstandings of the members. Regarding financial and
accounting management, the group must have accounting system that is convenient for presentation and auditing
and those accounts include balance sheet, profit and loss, and cash flow balance. (Lawrence, 1997) Financial and
accounting information is used to consider the purchasing of raw material and as tools for the group in making
financial short term plan. The information is also important for managing assets, cash, liability and stock, which will
enhance the solvency of the business. In terms of human resource and laborer management, providing knowledge
and skills about production, job rotation, roles adjusting, duties and responsibilities assignment, empowerment, and
provision of proper wages and welfares, will reduce problems regarding lack of laborers. For marketing
management, marketing mixed must be suitable and must respond to the demands of customers. (Kotler, 2001)
Products should be in high quality and produced from local materials. Packaging should be attractive, modern, and
should show the certification of Food and Drug Association. Products must be priced by considering the costs or
seasons or festivals. The group should create and expand distributing channels by selling to customers in the
community and to outside customers either in retail or wholesale equipped with delivery services. Members who
work as middle people are given discount and commissions. The members and related organizations should promote
products. The promotion can be done by participating in exhibitions or product display organized by governmental
and non-governmental organizations. For production management, it can be done by selecting low cost raw material
and produced by adding value method. (Meredith, 1992) It is crucial to look into standard manufacturing process
and products must be examined before selling and also approved by Food and Drug Association, GMP, and
Community Product Standard to create consumers trust. This can lead to effective and systematic business
management and the members can learn how to solve problems themselves.
Apart from suitable business management pattern mentioned above, factors that affect participatory
management pattern of Cooperative Women Group consist of economic development activities including selection
of local raw materials for agricultural products, cooperation in selling and purchasing products manufactured by the
group, and support supplementary career to generate income. Natural resources and environmental conservation
activities include improvement for water supply in community and environmental friendly production. Body and
mind improvement activities include health check-up, provision of health knowledge, and support for sports. For
social and community development activities, the group emphasizes on responsibilities and trust among members,
which include fund raising for building stadium for youths and the elders, provision of local wisdom and knowledge
by creating an environment that facilitates professional learning process for school children in community, and
promotion of network in community through participation by members in community. These factors can lead to
effectiveness and sustainability of Cooperative Women Group. (Johanna and Titing, 2001)

Conclusion and Recommendation

Forming of people in a community to operate business in different forms to produce and provide products is
considered a fundamental mechanism to develop economic system of the country. With high competition in
commerce affected by globalization, community business has to be able to adjust and be prepared for such
competition. People need to learn together to solve problems in terms of capital, leaders, business management
system and technology. All members in a community must participate and understand their roles and duties. It
requires effective cooperation with related organizations and policies of government that promote community
business to respond people’s demands. If these factors are considered and implemented in a dynamic way, they will
strengthen community business in terms of operation and capability of competition in a sustainable manner.
Suggestion in terms of policy, this research shows effectiveness and potential of business management in a
community. It requires cooperation from related organizations to support and push the business forward.
Community business management is foundation to strengthen economy of the nation and to create sustainability.
The related organizations must realize the significance and constantly monitor the operation.

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 Recommendation: Cooperative Women Group and related organizations should take a serious role in doing
research on participatory management in order to be able to effective tackle problems. Furthermore, activities should
be created on the basis of demands from people in a community. Constant support for different fields of knowledge
about community business is also crucial that the community can gain ultimate benefits.

References
[1] Barraket, J. (2001). Building Sustainable Communities: Co-operative Solutions to Rural Renewal (Report
prepared for the NSW Fair Trading Advisory Council). Sydney: Australian Centre for Cooperative
Research and Development.
[2] Cook, B., C. Dodds, & W. Mitchell (2003). Social Entrepreneurship False premises and Dangerous
Forebodings. Australian Journal of Social Issues, 38(1) 57-72.
[3] Department of the Environment, Transport and the Regions (1999) Community Enterprise – Good Practice
Guide, London, pp. 6-8.
[4] Europa (2007). Commission support to the Social Economy enterprises (Cooperatives,mutual, associations,
foundations). Retrieved January 15,2007, from
http://europa.eu.int/comm/enterprise/entrepreneurship/coop/social-history/social-history.htm
[5] Juran, M., Gryna,M. (1993).Quality Planning and Analysis: From product development thoughuse.3rd ed.
New York: McGraw-Hill.
[6] Kemmis, S. and R. Mc Taggart (1988). The Action Research Planner.3rd ed, Geelong: Deakin University.
[7] Kotler, Phillip (2001)Marketing Management. The millennium ed. Upper Sadler River, New Jersey:
Prentice-Hall..
[8] Lawrence J. Gitman (1997). Principles of Managerial Finance. 8th ed. Addison Wesley Longman, Inc.
[9] Lewis, M. (2004). The End of the Beginning: CED & the social economy break through onto the federal
agenda. Making Waves 15(1) 2-3.
[10] Lyons, M. (2001) Third Sector: The Contribution of nonprofit and cooperative enterprises in Australia
Crows Nest. Allen & Unwin.
[11] Meredith, Jack R.(1992). The Management of Operations: A Conceptual Emphasis. New York: McGraw-
Hill Book Company.
[12] Mondy R. Wayne and Noe M. Robert. (1996). Human Resource Management.6th ed ,Upper Sadler River,
New Jersey: Prentice-Hall.
[13] Neamtan, N. (2004). The Political Imperative: Civil Society & the Politics of Empowerment. Making
Waves 15(1) 26-30.
[14] Office of Secretary to Board of Community Enterprises Promotion Thailand (2007). Community Enterprise
Registration (December,2006). Retrieved January 20,2007, from
http://sceb.doae.go.th/Fdownload_C1.html
[15] Pomelantz M. (2003). Social entrepreneurship in the northwest, Communication to the Coleman
Symposium on Social Entrepreneurship, United States Association for Small Business and
Entrepreneurship Annual Conference, Hilton Head (South Carolina USA), January.

Contact author for the full list of references

End Notes
1
Research Funding by Thailand Research Fund (TRF)

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 Diluting the Cache? Employment Experiences of Minority Migrant Women

Edwina Pio, edwina.pio@aut.ac.nz

AUT University, New Zealand

Abstract
Embraced permanently by their ethnicity many minority women have succeeded in negotiating their own spaces in the
host country. Yet, their journey to success has been marked by challenging experiences in the world of work as nations
struggle to deal with issues emerging from the perceptions and politicisation of ethnicity. This paper highlights the
perceptions of University Business students with reference to ethnic minority women and employment. Through a study
of various databases and the construction of parables on ethnic minority women in New Zealand, the experiences of
recruitment, selection, diversity management and career progression emerge as themes in the perceived experiences of
these women. The paper argues for the need to highlight narratives of ethnic minority women in order to sensitize
business students and future managers to the consequences of migration and the intelligent utilization of human resources
in a world that is increasingly multicultural.

Introduction

Women in the workforce have been increasing over the last few decades with part-time and contractual work,
flexible timings and dual career households. In a similar fashion the numbers of ethnic minority women in the
workforce have soared, yet their employment experiences are frequently quite different from those of white women
or women of the majority culture. Many ethnic minority women face the prospect of being differentiated on the
basis of their visible diversity discriminators such as skin colour and physiological appearance and find it a
challenge to secure work in line with their skills and qualifications. With growing numbers of ethnic minority
migrants globally, both for higher education as well as job prospects there is a continuing need to understand the
perceptions of these women as well as the complexities encountered by them in employment. Carr (2004)
graphically notes that the zone of work through which migrants realize their aspirations in the host country is likely
to be the place where migration promises are most likely to be broken.
A number of countries, such as New Zealand (NZ) for example, actively seek migrants in order to reduce
skills shortages. Some of the long term skill shortage occupations listed are: early childhood education teacher,
secondary teachers, social worker, general practitioner for rural areas, anaesthetics technicians, nurses, midwifes,
pharmacist, electricians, plumbers, orchard managers, system analysts, programmers, film animators, management
and project management staff, and chef (Immigration NZ, 2007). Besides migrants, NZ also takes in refugees as part
of its international policy and humanitarian ethos. In the last two decades the number of migrants from non-
traditional source countries or non-European countries has increased dramatically in NZ with changes in the
immigration act of 1987. Many of the new migrants are from Asia, with a number of refugees from Africa, Iraq and
Iran. Historically NZ is a country of immigrants though these were primarily from the Anglo-Saxon countries and
were Caucasian. However there were a small number of migrants from India and from China who came to NZ as
manual workers in the gold mines of Otago, as scrub cutters, fruit and vegetable hawkers and servants of wealthy
British settlers.
Employment is the site where individuals encounter the wider society and its impact on their lives. This is
particularly relevant for ethnic minority migrants who experience host country individuals and the opportunity to
utilize their qualifications, skills and experiences through their employment experiences. This article engages with
the perceptions of national and international Master of Business Administration (MBA) students in a NZ University
through the construction of parables on ethnic minority women and their employment experiences in NZ. While
there is an abundance of literature on ethnic minority women in countries such as the USA and UK, there is a dearth
of research on the employment experiences of ethnic minority migrant women in NZ. This article seeks to add a

1195
multifaceted layer to the burgeoning interest in ethnic minorities and the intelligent use of their skills globally. To
this end, the conceptual background and theory on ethnic minority women and employment will be presented
followed by the context of this study. Next the research approach is discussed along with the research findings. The
article concludes with implications for research, pedagogy and HRM.

Conceptual Background and Theory

Numerous studies relate to how the careers of ethnic minority women are affected by their ethnic categorization, as
well as various forms of discrimination (Greenhaus, Parasuraman and Wormley, 1990; Ross, 2004; Goldman,
Gutek, Stein and Lewis, 2006). For example, in the UK ethnic minority women tend to face higher unemployment
rates than white women with Black African women and Pakistani women experiencing the highest rates of
unemployment (Kelly, 2004). While countries tend to have legislation to prevent discrimination on various grounds
including in employment, regulation alone does not necessarily ensure fair opportunity (Barnum, Liden and
Ditomaso, 1995), and ethnic minority women tend to be disadvantaged not only by gender but also by race
(Bagilhole and Stephens, 1999). Moreover whether ethnic minority women are born in the host country as well as
the timing of their settlement are also influential factors in their employment patterns as well as demographic and
family structures of different ethnic groups (Lindley, Dale and Dex, 2004).
A number of studies focus on the cognitive barriers ethnic minority women face in their careers primarily
due to their lower self-efficacy which is recurrently due to the messages they receive and take-into their systems as
part of their employment experiences (Hacket and Byars, 1996; Betz, 2000; Luzzo and McWhirter, 2001). Thus
ethnic minorities “may internalize the racist beliefs of the dominant culture which might then lead to a lowered
sense of self-efficacy, or their confidence in their ability to perform the tasks necessary to attain a satisfying career”
(Flores and Heppner, 2002, p. 198). In fact prejudices and stereotypes of ethnic minorities can principally be seen as
emanating “from the environments within which the organizations are embedded rather than from the organizations
themselves” (Brief, Butz and Deitch, 2005; p. 133).
Career detrimental stereotypes still prevail for ethnic minority women in organizations as they struggle to
fit into white Western organizations (Kamenou and Fearfull, 2006), where there is a stalling of women and
minorities in management (Corsun and Costen, 2001). And despite the model minority image, Asian immigrants in
the USA “have severe labour market disadvantages compared to white Americans” (Min and Kim, 2000, p. 739). In
the UK even with higher-level qualifications, women from Pakistan and Bangladesh have high levels of
unemployment and face considerable barriers (Dale, Shaheen, Fieldhouse and Kalra, 2002). Research indicates that
in the area of recruitment and selection, adequate minority representation can be achieved by carefully choosing the
message and the media to attract sufficient numbers which can include the presence of successful minority
employees to create positive organizational images among minorities (Arthur and Doverspike, 2005; Ng and Burke,
2005). It is also important to alter the behaviour of majority group employees, including the conduct or the
interview, which could functionally operate “like an orally administered and scored objective test” and
“organizations should strive to maximize the perceived fairness and validity of selection systems” (Arthur and
Doverspike, 2005, pp. 313-314).
Cox (1993) writes that careers as well as job involvement can be affected when individuals feel that they
are not valued due to their race or gender. Women of colour are habitually underemployed and overused by
departments and institutions and they are often assigned services to meet institutional needs but for which there is no
institutional reward system (Turner, 2002). Moreover, retention of women of colour is positively related to the kind
of supportive behaviour experienced from their supervisors, but they are at a disadvantage as they have to negotiate
stereotypes in their work environments and have less access to influential others or mentors and hence are less
optimistic about advancement prospects (Giscombe and Mattis, 2002; Cocchiara, Bell & Berry, 2006; Fearfull &
Kamenou, 2006).
Dipboye and Colella (2005) suggest that “discrimination results from the interrelationships among many
factors in a dynamic, complex system, which can become self-perpetuating and in which the victim can become an
unwitting contributor to his or her own plight” (p. 426). They write that while open bigotry is hardly seen, other

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subtle forms of discrimination exist and they raise the following question: “Laws and rules can deal with blatant
racism and sexism, but what can be done to deal with exclusion from informal networks, ambivalent feelings,
joking, and negative nonverbal behaviour?” (p. 426). In some instances, minority women benefit from their double
jeopardy or status but this is strongly linked to their higher performance evaluations (Hurley and Giannantonio,
1999), and the way they access their bicultural life structure to develop strategies to maintain successful careers
(Alfred, 2001). It is important in managing diversity and career progression to provide training programs as well as
reduce the within-occupation earnings discrimination for ethnic minority women who experience increasing
inequality in workplace power in different degrees and through different mechanisms (Howland and Sakellariou,
1993; Elliott and Smith, 2004; Konrad, Prasad and Pringle, 2006).
Research by Pio (2005, 2006, 2007a) on ethnic minority women in New Zealand indicates that they take
approximately 18-24 months to find work somewhat equivalent to their skills and qualifications. She notes that in
their initial job search they go through frustration in being repeatedly rejected and thus take entry level jobs in order
to contribute to the family income. Research from The Department of Labour (DOL) shows that while migrants’
employment rates improved between 6-18 months after arrival, people from the UK, South Africa and North
America did better in the job market than those from Asia (Dunstan, Boyd & Crichton, 2004).

Context of the Study

NZ is the geographical site of this study which delves into and investigates the ethnic minority women in NZ and
their employment experiences. The NZ Federation of Ethic Council’s 2001 Conference declaration “accepts that
employment is the key to successful integration into, and participation in all aspects of NZ life…and acknowledges
the significance of business community commitment to recognising the skills of migrants and providing meaningful
work for them” (Carter, 2002, p. 40). NZ is also party to all the major international human rights instruments
through which the Government is obliged to ensure that the rights of individuals are safeguarded through gender,
colour, race, ethnic and national origin blindness, through for example New Zealand’s Race Relations Act 1971, Bill
of Rights Act 1990 and the Human Rights Act 1993. In entering the labour market, ethnic minority women present
challenges of ethnicity and power in the host society as they compete for employment.
The DOL observes that as a nation NZ is getting older and more ethnically diverse and a critical challenge
for NZ businesses will be to find good staff (DOL, 2004). In fact one in five people in NZ are overseas born and NZ
has one of the highest overseas born populations in the OECD (DOL, 2006a). The Pacific peoples arrived in large
numbers in the 1960s and 1970s due to severe labour shortages in NZ and in the last two decades migration from the
following countries has increased: Afghanistan, China, India, Iran, Iran, Iraq, Japan, Korea, Singapore, Somalia,
South America, Taiwan and Zimbabwe (Pio, 2007). The NZ population clock records 4,179,437 people as on 8th
April 2007 (Statistics New Zealand, 2007). Although 80% of New Zealanders (2,868,000 people) identify with
European ethnicity, this group has grown only slowly over the past decade. 14.7% of the population identified as
Māori (526,300), 6.5% as Pacific peoples (231,800) and 6.6% as Asian (237,500) in 2001 (Statistics NZ, 2006). The
Asian population has more than doubled since 1991 and while less than 1% of New Zealanders (24,900 people)
identify with the ‘Other’ ethnic group category; this group has increased by almost 300% over the decade (Statistics
NZ, 2006). Despite immigration, NZ will continue to have a small population and with approximately 600 New
Zealanders going overseas every week for long term work, the future of the country will be determined in large part
by the quality and level of workforce and the strategic decisions made with reference to employment (Future of
Work, 2006; Pio, 2007b).
While NZ was the first country in the world to give women suffrage in 1893, currently women receive
incomes equivalent to 82% of their male counterparts (Focusing on Women 2005). In NZ, the lowest median annual
income is for Asian women ($8900), followed by Pacific women1 ($13,000), Maori women2 ($13,200) and for
European women3 ($15,000) (Focusing on Women, 2005). Regarding unemployment, Europeans have the lowest
rate at 6%, Asians 13%, 18% for Maori and Pacific women, and for those from other ethnic groups it is 21%
(Focusing on Women, 2005). Jayne (2005) writes that while there is sense of dynamism and a breath of fresh air
with ethnic minority women entering the management ranks, yet many talented new migrants are clobbered with the

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need to have the Kiwi4 experience, despite the fact that they have just entered the country and very few minority
women have broken through both the racial roof and glass ceiling. However, younger ethnic minority women tend to
fare better than their mothers in the employment market (Pio, 2004).
In view of the above context within which ethnic minority migrant women’s employment experiences are
embedded the author-researcher choose to explore the work experiences of such women through the construction of
parables in an HRM paper by MBA University students in a NZ University. The educational philosophy of the
university focuses on the belief that knowledge and understanding are constructed by the learner, and there is need
to foster excellence, equity an ethics in learning, teaching, research and scholarship, and in so doing serve our
regional, national and international communities.
The MBA is a generalist post graduate degree, providing a tool box of models and techniques for all the
core functions of management. The target group for the MBA are students aspiring to general or divisional
management or CEO positions – with University/Graduate degree, or graduate diploma, or professional qualification
in a relevant discipline. In particular, the MBA seeks to provide a link to professional practice, to enable the
development of people wanting to gain advanced management knowledge and capability. The MBA is a 180 point
programme consisting of 24 (7.5 point) papers normally completed within 18 months of full time study. Each paper
involves 18 hours of class time spread over six weeks and typically requires an additional 60 hours of personal study
time.
Parables as an assessment form were used as part of the HRM course at the MBA and followed the work
done by Pio and Haigh (2007) on the use of parables as an assessment form. They write that parables are
characterized by layers of meanings are similar to short stories about human beings and their behaviour but with an
ethnical dimension and a searching interpretive process. HRM is a mandatory/core papers for MBA and the paper
gives an overview of theory and practice at strategic and operational level. Topics include recruitment and selection,
retention, managing performance, developing human wealth, contemporary issues with HRM.
The next section describes the research approach utilized for this study.

Research Approach

The research approach is qualitative and the core building block is that reality is socially constructed and hence
requires various forms of inquiry that could involve a micro or macro analysis to explore the lived-in and lived-
through employment experiences of ethnic minority migrant women. Furthermore, “it is the array of
epistemological, theoretical, and methodological choices made by qualitative researchers that sets qualitative
research apart as a particular and fruitful way of understanding social phenomena” (Hesse-Biber and Leavy, 2004,
p.1). Hence in an attempt to engage students in a thought provoking assignment in the area of HRM and diversity,
the author-researcher who is a scholar of colour and sees herself as a passionate engaged and committed agent for
change, formulated an assessment which required students to construct parables based on their academic database
research and their own experiences. The assignment was a group assignment and students formed their own groups.
The task instructions were the following:
Your group will develop a booklet of inspirational parables on ethnic minority women in the NZ workplace.
The booklet (approximately 2500 words) will contain the following:
 Two parables constructed by your group based on your research
 The reason for your choice of parables in the context of an HR Manager who seeks to understand
diversity management in NZ. This must include at least 10 references which are sourced from
scholarly peer reviewed articles and academic / research oriented publications.
 You are welcome to display your creativity in the size, layout and formatting of your booklet.
 Due date: The booklet is to be submitted in Week 4 in the first 10 minutes of your HRM class.
 Each group will make a presentation of ten minutes during which they will narrate their two
parables to the class. Your creativity will be welcomed in this presentation.

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  Group presentations will be scheduled in Week 4, during the break midway between the 3 hour
HRM classes. However depending on the number of groups, it may be necessary to have some
presentations in Week 5, again scheduled during the break.
 It is important that all group members participate in the presentation.
 The booklet will have a weighting of 25% and the group presentations 5%, hence a total of 30%
 All students in a particular group will receive the same mark
The Marking guide in Table 1 gave students an indication of how their assignment would be assessed.

TABLE 1: MARKING SCHEDULE

MARKING SCHEDULE Marks MAX
Awarded MARKS
1 Content of the parables 15
• Relevance to New Zealand
• Focus on diversity
• Inspirational

2 References 5
 Relevant
 Academic / scholarly
 Current
 APA format

3 Format and presentation of booklet 5

 Creative
 Spelling and grammar
 Cohesion and logical flow

4 General organisation of the presentation 5

 Time management (10 minutes)
 Clarity of speech
 Minimal use of notes
 Creativity
 Interest and enthusiasm
 Use of presentation media

TOTAL 30

The participants in this study consisted of 30 students from seven countries who were registered at the MBA
paper in HRM in a university in NZ. Please see Table 2 for participant profile.

1199
 TABLE 2: STUDENT PROFILE
Numbers Gender Country of Origin
n=30 Males Females
5 3 2 China
14 8 6 India
2 2 0 Malaysia
5 2 3 New Zealand
2 2 0 Pakistan
1 0 1 Taiwan
1 0 1 Thailand

Sixteen parables pertaining to women from nine countries were constructed by eight groups of students. The group
size varied from two to five students. The data were analyzed by searching for themes (Denzin, 2004) pertaining to
employment in each parable. The coding categories used in this instance related to recruitment, selection, diversity
management and career progression. Next a comparison between the sixteen parables was made in order to surface
emergent themes and the lessons learned from each parable. The analysis, interpretation and writing of the data from
this study involved an “immersion in the text until themes, concepts, or dimensions of concepts emerged from the
data” (Hesse-Biber and Leavy, 2004, p. 411). Such data analysis facilitated careful interpretation and served as a
passageway for the message that each of the parables sought to articulate in the voices of the ethnic minority migrant
women. Thus parable pedagogy (Pio and Haigh, 2007) functioned as a methodology to explore the employment
experiences of minority individuals though the eyes of a group of international students many of whom were ethnic
minority individuals themselves.

Research Findings
The parables constructed by the groups of students revealed the various intricacies that are a part and parcel of the
employment experiences of ethnic minority women in NZ. It is pertinent to mention here that while all the students
had to ensure that they went through academic databases based on which they created their parables, a number of
students shared their own personal experiences, or those of their family members and close friends. The research
findings are presented with relevant extracts from the parables in order to illustrate the research findings. Appendix
1 consists of two parables selected as exemplars. Table 3 displays the parable data.

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 TABLE 3: PARABLE DATA
Student Parable Title Country of Take away Lesson
Ethnicity/Country of origin/ethnicity of
Origin woman in Parable

3 Chinese Dragon and the Phoenix Chinese Break stereotypes.

1 NZ (European) The journey of 1000 Chinese Overcame fears and reach
miles out/step out.

2 Indian Keeping the hopes high India Keep hoping.

The un-responsive ladder India Change perception and focus on
to success this within one’s span of control.

5 Indian The Parable of Sheela India Uphold EEO. Equality is a right,

Sharma but is it a fact?
The Parable of Sandra Jordan The first impression is the last
Nasa impression.

1 Chinese Lillian’s Story Samoan Work hard, be professional and

1 NZ (from the Pacific ethical
Islands) Susan’s Story Chinese (born NZ) Work hard, be professional and
ethical.

2 Indian Mirage India (Muslim) Proactive hard work. Manager’s

1 Chinese support for cultural beliefs.
1 NZ (Maori) Searching for solutions Ethiopia (Christian) Migrants can misjudge the host
country’s perception of them.

2 Pakistani Tania Morocco (Muslim) Re-qualify, keep your self respect.

1 Indian Sushma Indian Post-immigration training and
linkages between various
departments in NZ such as
immigration, department of
labour, business and industry.

4 Indian Nikki Indian Agonising to find contracts

1 Malaysian breached despite good faith and
fairness.
The preferred candidate Indian (Muslim) Anglo-Saxon name helps to get an
interview for Muslim woman of
traditional garb.
Importance of the HR Manager.
1 Malaysian Providing the courage Indian Importance of the HR Manager.
1 NZ (European) Enlist help and development
1 Taiwan relationships among co-workers.
1 Thailand Sticks and Stones Venezuela Lean the language and reach your
goals.

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 Interestingly and tellingly 80% of the parables constructed noted that the women did not walk directly into
a job suitable to their skills and qualifications. Rather these parables have examples of challenges that the women
encountered. As ‘The parable of Sheela Sharma’ succinctly notes: “When you belong to a minority, you have to be
better in order to have the right to be equal”. For example: Victoria from Venezuela is married to a New Zealander
whom she met when he was on business in her country. She found it difficult to get a job and “although she has not
been directly subjected to racism or sexism, she has been told that her qualifications is not up to standard – even
thought it is recognized by the NZ Qualifications Authority, and that her English ability is not good
enough…Victoria found this situation made her feel as though she was in some way unworthy and that she is being
viewed as an ethnic women who is a housewife and who therefore could not possibly cope in a fast paced
commercial environment”. Victoria enrols in an English language course and “knows that her task will not be easy
but she is determined that it will not be long before she has that dream job”.
Another parable is about a doctor who could not get work for after listening to her accent they said the
position was filled or that she was overqualified. But finally she managed to get employment as a security officer in
a hospital. One day she tried to stop a Maori woman from entering the ward after visiting hours and was told by the
Maori woman “you are the visitor, I am not and I belong to this soil and this is our country”. This made her ponder
about her sense of deprivation and her self respect and she re-qualified and is now employed as a doctor in the same
hospital where she initially was a security officer. These parable extracts point to the challenges faced by ethnic
minority women in employment, similar to the issues of discrimination in recruitment and selection raised by
previous studies (Corsun and Costen, 2001; Dale et al., 2002; Kamenou and Fearfull, 2006; Pio, 2006)
In the area of recruitment some of the parables noted that “sometimes the dress code gives mental agony”
and this would frequently be the case when the women chose to wear ethnic clothing. The parable of ‘The preferred
candidate’ illustrates how the best candidate based on a telephonic interview and CV was called for a face-to-face
interview, and the organization was rather surprised that she was an ethnic minority women. A number of the
women struggled because of language skills. Others had the requisite language skills and qualifications, but “despite
being praised and appreciated during the interview she would not hear from them.” For a number of women in the
parables not being able to get work after repeatedly trying lead to conflict at home and a deterioration of personal
relationships with the family as they were under stress and on edge.
In many instances both recruitment and selection were interwoven in the employment experiences as for
example: Sushma who had a job but was disturbed as her earnings did not match her qualifications and despite
applying to many places could not get work that appropriately recognized her skills and qualifications, though in
many instances she was offered volunteer work with no paid wages. Many employers were not willing to take risks
and give minorities a chance, despite legislation to prevent discrimination (Barnum et al., 1995; Bagilhole and
Stephens, 1999; Ng and Burke, 2005).
With regard to diversity management, the parable on ‘Providing the Courage’ is about an Indian girl
Yasmin who felt “felt uncomfortable and unworthy through racial remarks and sexist jokes”, demonstrates the
situation faced by ethnic minority women and their HRM managers. Yasmin was wrongly accused of stealing and
though found innocent became fearful about going to work. However through the good offices of the HRM manager
who organized a mediation session, “new workplace ground rules have been established stating the company’s
policy against racial discrimination, sexual and verbal abuse”. Another example is that of Fatima a Muslim woman
from India whose manager Steeve “was compassionate and understanding” and who complimented her for “her
excellent team work attitude and love for work”. This extract underscores the significance of access to influential
others and the need for supportive behaviour from superiors (Cox, 1993; Giscombe and Mattis, 2002; Cocchiara et
al., 2006; Fearfull and Kamenou, 2006).
In ‘Searching for Solutions’ the parable shows how Mariam a Christian Ethiopian Refugee woman had
misjudged her superior who was actually quite understanding about different religious and cultural customs and how
Mariam was relieved by her superior’s compassionate approach. A number of the parables which portrayed Muslim
woman described the problems encountered by these woman from their colleagues particularly due to the effect of
the 9/11 bombings in New York. However, some of the women were delighted in their more or less equal treatment

1202
as women in New Zealand which was unlike their experiences in their country of origin, though their ethnicity
continued to be a challenge. Some women choose to “replace the burkha5 with exclusive business suits” and cover
their hair with a scarf, while still retaining their values and roots. In some parables the colleagues of the ethnic
minority woman support her and this usually leads to a rethinking by management of their treatment of the ethnic
minority woman. Other women stayed in the job despite problems with co-workers because they wanted their
families to be proud of them as in the parable ‘Lilian’s Story’ and ‘Susan’s Story’. Here it is probable that the
women sought to derive strength from their families as well as their own sense of self (Alfred, 2001).
In the area of career progression it is the sheer grit and determination of the women who manage to get
over their tears, depression and lowered self-esteem which makes them gradually advance in their careers. Many
women went back to study, and pursued language classes, university or professional qualifications and this helped
them to progress in their careers. In some of the parables the persistent belief of the ethnic minority woman that she
cannot let herself be beaten down ensures that she slowly but surely climbs up some of the rungs of the career
ladder. Some of the women after their employment experiences chose to give up work and started their own
business. In ‘The unresponsive ladder to success’ the parable graphically illustrates how the woman stood out
because of her skin colour and accent and despite being proud of her achievements and well qualified, she had “the
stress of being ostracised and ignored on a personal and professional level” and her hard work and accomplishments
were not recognized, and though “she got some of the things she aspired for, but they came with a terrible price”.
She gradually decides to closely examine herself and learnt to make some changes for “she couldn’t change the
world and what happened in it, but she could change how it affected her or how she perceived it. This did not make
the problems go away, but gave her a way to cope and change situations to her benefit…and so began the climb up
the next rung of the ladder”. This extract elucidates the ambivalent feelings, the exclusion from networks and the
ongoing subtle discrimination (Hurley and Giannantonio, 1999; Dipboye and Colella, 2005; Konrad et al., 2006),
which makes ethnic minority women go through much reflection and as in this parable change in perceptions and
abilities to cope over a period of time (Dunstan et al., 2004; Pio, 2005, 2007).
In more than 90% of the parables, it was the HRM Manager or a superior who was crucial in facilitating the
acceptance and career progression of the ethnic minority woman. Where neither the HRM Manager nor superior
were helpful, it was the co-workers who made a difference by supporting the ethnic minority woman. However,
where none of these three constituencies choose to support the ethnic minority woman, she felt quite alone and
despite her hard work, skills and qualifications found work in NZ extremely challenging and a consequence of these
challenges, in a number of instances, led to conflicts within their home.

Conclusion

In seeking to engage students with aspects of diversity management in an HRM paper in NZ University, parables as
an assessment form were used to uncover and surface issues pertaining to employment in the lived-in and lived-
through experiences of ethnic minority women in NZ. Student groups shared their own life experiences and accessed
academic databases in order to research the literature on ethnic minority women and employment to facilitate the
construction of their parables. From the parable perspective on ethnic minority women the conclusions might read as
follows:
1. Acceptance of skills, qualifications and experiences, irrespective of visible diversity discriminators – this
will facilitate recruitment and selection procedures and policies.
2. Inclusion in workplace activities and appreciation of hard work and contribution where relevant with
programs on diversity management for adaptation and change among both ethnic minority woe and host
country members.
3. Provision for feedback, mentors, networking and support for career progression – acknowledging that
ethnic minority women want career opportunities and learning.
4. The HRM Manager is a crucial resource and plays a vital role in the employment experiences of ethnic
minority women.

1203
 Parable construction was a novel way of approaching the issue of diversity in an HRM paper. The
pedagogical implications for educators would be to seek to approach relevant but sensitive issues through the many
layers inherent in parable construction. Parable pedagogy also tend to give students the choice to explore various
levels of depth in the issues involved (Pio and Haigh, 2007).
Another implication pertains to the area of HRM whereby relevant parables can be used for training
programs in order to sensitize HRM personnel to issues faced by ethnic minority women and solutions for the same.
These implications encompass recruitment and selection, diversity and career management. Such parables may also
serve to make participants in a training program aware of their own mindsets and possible prejudices when
encountering ethnic minority women. The other side of the coin would be to facilitate ethnic minority women to
explore their perceptions of the majority ethnic group within their own organization.
Research implications involve the comparison of parables constructed by HRM personnel and those
constructed by ethnic minority women in organizations and the possibility of making procedural changes in
organizations based on some of the learning emerging from such parables. Individuals from the majority host culture
could also share their own encounters with ethnic minority women and the advantages and disadvantages of
employing such women. Further research can explore the extent to which the organizational environment sustains
the advantages of employing ethnic minority women and for the disadvantages, it is possible to explore what creates
such disadvantages and how they can be remedied.
Limitations of this research include the fact that the parables were constructed by students and hence some
of situations and conclusions in them are likely to be fictional despite the fact that students were requested to
construct the parables based on their academic research. A further limitation could be that the instructor was an
ethnic minority woman herself and it is possible that parables constructed when the instructor was from a majority
group may provide a different picture.
A recent study by DOL (2006b) on employer perspectives on skilled migrants brought into NZ through the
Skilled Migrant category and the long term skill shortage list and talent work to residence policies indicates that
these migrants positively benefit employees. These migrants according to their employers contribute to the
organizational knowledge; possess skills that NZ residents did not have, raised their organization’s level of
expertise, contributed to organizational growth and innovative practices. 26% of the migrants under study came
from Asia and 9% from the Pacific countries. Such reports hold promise and need wide publicity to urgently change
the implementation of HR policies and practices for ethnic minority women. Furthermore over one-third of NZ’s
foreign trade is with Asia, Asian visitors generate one-third of all tourism revenues and Asian students account for
80% of the international education sector in NZ, and significantly, one in fifteen New Zealanders is of Asian descent
(Asia NZ, 2004). In a very real sense, considering NZ’s population and skills shortages it would be foolhardy not to
appropriately utilize the skills, experiences and qualifications of ethnic minority migrants and there is a compelling
need to ask: Can NZ afford to dilute its cache of migrants? There is no easy answer. Yet innovative educators,
employers and HRM Managers can be the front runners in implement ting changes to enhance the employment
experiences of ethnic minority women and thus ensuring that the cache of migrants remains undiluted.

References
[1] Alfred, M. V. (2001). Expanding Theories of Career Development: Adding the Voices of African
American Women in the White Academy. American Association for Adult and Continuing Education.
51(2), 108-127.
[2] Arthur, W. and Doverspike, D. (2005). Achieving diversity and reducing discrimination in the workplace
through HRM practices: Implications of research and theory for staffing, training and rewarding
performance. In R. Dipboye and A.Colella (Eds.). Discrimination at Work: The psychological and
organizational basis. London: Lawrence Erlbaum Associates Publishers, pp. 305-327.
Asia NZ (2004). Seriously Asia. Retrieved on 11th April 2007 from
http://www.asianz.org.nz/files/seriouslyasia_finalreport.pdf

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[3] Bagilhole, B. and Stephens, M. (1999). Management responses to equal opportunity for ethnic mionoirty
women within an NHS hospital trust. Journal of Social Policy, 28 (2), 235-248.
[4] Barnum, P., Liden, R., and Ditomaso, N. (1995). Double Jeopardy for women and minorities: pay
differences with age. The Academy of Management Journal, 38 (3), 863-880.
[5] Bell, M. P., Cocchiara, F., & Berry, D. P. (2006). Latinas and Black women: key factors for a growing
proportion of the US workforce. Equal Opportunities International, 25(4), 272-284.
[6] Brief, A., Butz, R. and Deitch, E. (2005). Organizations as Reflections of their Environment: The Case of
Race Composition. In R. Dipboye and A. Colella (Eds.). Discrmination at Work: The Psychological and
Organizational Bases. London: Lawrence Erlbaum Associate Publishers, pp. 119-148.
[7] Carr, S.C. (2004). Globalization and Culture at Work: Exploring their combined Glocality. Boston: Kluwer
Academic Publishers.
[8] Carter, C. (2002). Ethnic Perspectives in Policy. Wellington: Office of Ethnic Affairs.
[9] Corsun, D. and Costen, W. (2001). Is the glass ceiling unbreakable? Habitus, fields and the stalling of
women and minorities in management. Journal of Management Inquiry, 10 (1), 16-25.
[10] Cox, T. (1993). Cultural Diversity in Organizations: Theory and Practice. San Francisco, CA: Barret-
Kohler.
[11] Dale, A., Fieldhouse E., Shaheen, N., & Kalra, V. (2002). The Labour Market Prospects for Pakistani and
Bangladeshi Women. Work, Employment & Society.16(1), 5-25.
[12] Denzin, N. (2004). The art and politics of interpretation. In S. Hesse-Biber and P. Leavy (Eds.).
Approaches to Qualitative Research. New York: Oxford University Press, pp. 447-472.
[13] Dipboye, R. and Colella, A. (2005). The dilemmas of workplace discrimination. In R. Dipboye and A.
Colella (Eds.). Discrmination at Work: The Psychological and Organizational Bases. London: Lawrence
Erlbaum Associate Publishers, pp. 425-462.
[14] Dunstan, S., Boyd, S. & Crichton, S. (2004). Migrant’s Experiences of New Zealand. Wellington: New
Zealand Immigration Service.
[15] Elliott, J. and Smith, R. (2004). Race, Gender and Workplace Power. American Sociological Review, June
(69), 365-386.

Note: Contact authors for the full list of references.

Appendix

Parable Examples
Parable One: Parable of Sandra Nasa
(by M. Chugh, B. Gujarathi, H. Patel, A. Prabhu and R. Rodrigues)
Shaherira Nassaier was disillusioned. It had been three weeks since she came to New Zealand from Jordan in early
September, 2001. She had migrated to New Zealand after a lot of thought and soul searching. This 23-year-old girl
was trapped in the regimented, conservative and male dominated society of her native Amman. She had read at the
university library that New Zealand was a land of opportunity. God Zone or God’s Own, depending on which books
you read. Women were the majority of the population, women were great politicians, women were treated equally,
women got the vote for the first time there, and women could do basically anything they liked in this land. It
sounded good and it was mostly all true, except for the same old “Sorry … how do you say your name my dear?”
She got to wear short pant in public, play sports, and most exciting of all, talk to men freely. It was good. Equality
of the sexes, equal opportunity and access to the power of the law of the land. Allured, she probed further.
Shaherira had a bachelor’s degree with honours from Amman University. She had two years of work
experience in her field. She spent a lot of time searching for jobs in Auckland. To her delight, there were a lot of
advertisements in the New Zealand Herald, for job vacancies in her field. She met with the criteria required to
obtain most of the jobs advertised. Finding a job would not be a problem she felt, with her adventurous spirit and

1205
determination. It was after all these same qualities that had led and enabled her to migrate to New Zealand. With a
clear focus, she sent out her curriculum vitae to a lot of companies. She waited anxiously. And then she waited
some more. To her dismay, all she got back was letters of rejection. Undeterred, she still pursued her goal. At last,
came an interview call. She was ecstatic. She chose an exclusive “Burkha” and prepared for the interview.
Unfortunately for Shaherira, the World Trade Centre and the Pentagon terrorist attacks had just taken place
in the United States of America. In the aftermath of these horrific attacks, the world’s perception of the Middle East
had changed dramatically. There was a lot of anger directed at all persons originating from that part of the world.
The interview lasted all of five minutes. She was rejected, again, Why was she being rejected? She
introspected. She replayed her interaction with the prospective employers. What emerged was the familiar,
“Sorry… how do you say your name my dear?” Did her name, accent, nationality or attire influence her prospects
for a job?
The more she dwelt on it, the more convinced she was that she stuck out as a sore thumb in New Zealand.
When in Rome, do as Romans do. She decided to assimilate into the place she now considered home. She legally
changed her name to Sandra Nasa, replaced her “burkha” with exclusive business suits, covered her hair in a blue
scarf and started working on her accent. Her accent changed and her views on life slowly leant towards the Kiwi
mindset. Despite her new look, she retained her values, her roots. “You can take a girl out of Jordan, but you can’t
take Jordan out of the girl!”
With grit and determination, she began her job search again. A minor change in the name section of her
CV and a different accent got her interviews with 5 companies within a week. Not surprisingly, she managed to get
herself a job in her field of work. Co-incidence or not, she did not ponder much more. She had arrived.
A migrant woman, in spite of coming from such a conservative background and who was forced to deal
with overwhelming change, and derision, made of someone else’s fault, was able to adapt and integrate into a
culture so different from her own while at the same time maintaining the basic vestiges of her culture.
“The first impression is the last impression.”
Parable Two: The Dragon and the Phoenix
(by C. Crisan, X. Guo, A. Wong and Y. Xing)
John Price sighed when he reviewed the latest applicant’s details. Not only was the applicant a female, she was
Chinese. John, as the Project Manager of one of New Zealand’s power line companies, know that the high-tension
cable business is still very much a man’s world. But Melanie An Ziao Lian’s qualifications were impeccable,
having graduated with high marks from a local university in the electrical field. Company protocol states that he at
least interviews her based on that alone. However, he has very serious doubts about her ability to fit into the
company’s culture, particularly amongst the more rough and tumble linesmen.
His first impression of Melanie An only deepened his doubts. To say that the young Chinese woman was
petite is an understatement. Should could not be more that 5 feet tall, and probably weighed only ninety pounds
soaking wet. John simply could not envision her climbing a pylon with the full gear needed to repair and maintain
the power-lines. When she spoke however, John Price was handed his first surprise of the day. Melanie An spoke
flawless English, with on a hint of an accent from her native China. As the interview continued, John Price asked
her point blank about her views on her ability to do the job and to fit into the culture of the company. He explained
his reservations about her capacity to do either. Melanie was silent for a while and then said, “There is an ancient
Chinese story of a master swordsman named Hsien Tjen who fell in love with the daughter of a Japanese envoy to
the Chinese Emperor’s court. They were married and for a while, their lives were happy. Then, as was usual in
those days, conflict loomed, a rebellion against the Emperor. Tsien Tjen, being the Emperor’s champion, was sent
to put down that rebellion.”
“As he was getting ready to go to war, his wife, Tomiko, requested that she accompany him. In ancient
China, this was not a done thing, and so he refused. They quarrelled, but he prevailed. He left her with ill-feelings
between them. It was something that he felt could be patched up later, when things were more peaceful.”
“But things did not go as planned. The rebellion was larger than they had realised and the small force the
Emperor assigned to him was not enough. What was supposed to be a quick victory turned into a long retreat for the
Emperor’s forces? On this retreat, Tsien Tjen was cut off from his troops and had to take refuge in an abandoned
farmhouse. There, despite all his skill, he was eventually by a group of rebels.”

1206
 “As one of the rebels raised his spear for the deathblow, he stiffened and fell to one side. The man was
obviously dead. Another and then a third dropped, and the superstitious rebels fled, crying out about foul magic and
evil spirits. Tsien Tjen examined the first rebel and found a needle in the man’s neck. When he looked up again, a
familiar figure was standing quietly by his side.”
“In your society, women do not fight,” Tomiko said quietly. “But in my society women are as deadly as
men.”
John Price sat in his office after Melanie had departed. The young woman had given him a lot to think
about.

End Notes
1.
Pacific women or those from the islands around NZ such as Samoa and Tonga.
2.
Maori women or the indigenous peoples.
3.
European women or those NZers of European descent also referred to as Pakeha and NZ European.
4.
Kiwi is a term that is synonymous with New Zealand
5.
Burkha or the traditional head scarf and long gown worn by some Islamic/Muslim women

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 Postcolonial Careers: Ethnic Minority Women in New Zealand
Edwina Pio, edwina.pio@aut.ac.nz
AUT University, New Zealand

Abstract

Diverse demographic components internationally have resulted in an emerging awareness and urgency in the
management of ethnic minorities. In New Zealand, Indians, an ethnic minority, constitute 1.7% of the population. Based
on qualitative research methodology and a post-colonial framework, this research study explores the careers of Indian
women in New Zealand through in-depth interviews with fifty participants. Noble prize winner Amartya Sen writes about
the British colonial rulers and three categories through which they viewed people: the magisterial or the exercise of
imperial power on the colonized subject, exoticist or the exotic aspects of the colony and the curatorial approach which
focused on the diversity in the territory and sought to be free from preconceived notions of the subjects. This study seeks
to promote dialogue and expand the literature on careers by focusing on ethnic minority women in a postcolonial context
who have had to deal with soft-wares of colonialism.

Introduction

Population mobility has increased tremendously over the last few decades with individuals moving country in search
of a better life including job prospects as well as fleeing from famine and wars. With its sizeable population of over
two billion, Asia is a storehouse of potential migrants. Asians in New Zealand (NZ) arrived in the late eighteenth
century and worked in the gold fields in NZ’s south island, and in NZ’s north island in work such as scrub cutting,
drain digging, hawkers of fruits and vegetables and as servants of the wealthy. Indians in NZ account for 1.7% of the
population and both Indian and NZ have had a colonial legacy from the British. While the colonists have departed
both geographically and politically, their legacy has an amazing tenacity and is evident in structures and behaviours
reminiscent of the mother country Britain. While there is voluminous work in the area of post colonial (PC) studies
which is interdisciplinary in nature, it is only more recently that research with a PC slant is evident in management,
organizations and the world of work. For example Prasad (2005, 2006) writes about the jewel in the crown and the
linkage of diversity practices and the perseverance of a system of hierarchical binaries and closely linked to issues of
power. Frenkl and Shenhav (2003) draw upon postcolonial studies and the close ties between Americanization and
colonialism and the similar logic that both processes follow in the case of Israel and stress the need for management
studies to examine postcolonial thought.
In the current context of Indians in NZ, there is both a political and ethical engagement involved in writing
about the work experiences of ethnic minority women and viewing their experiences as embedded within the
societies within which they have migrated, or the host country. This is in keeping with the call of various scholars
for example Mir and Mir (2002) write about the need for both a political and intellectual purpose in the work of
scholars and Turner (2002) argues for the need to bring the worlds of ethnic minority women into the foreground of
scholarship. It is pertinent to note here that the researcher in the context of the current work is an ethnic minority
migrant woman, who to paraphrase Spivak (1988) seeks to write so that scholars and practitioners will listen and act.
Careers are embedded within the societies in which they seek operationalization and manifestation and this study
highlights the tenacity of PC and its expression in employment and organizational life. To this end the theoretical
prisms of both post colonial theory and the work experiences of ethnic minorities are utilized to provide a review of
literature. This is followed by a description of NZ’s colonial context and Indians in NZ. Next the methodology of
this study is explained. The final section presents the findings and discussion and ends with concluding comments.
This study adds an important thread to the literature on careers by contextualizing the experiences of ethnic minority
migrant women in New Zealand through a PC framework.

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Theoretical Prism

The theoretical review supporting this study encapsulate two interlocking areas: firstly post colonialism (PC) and
secondly the careers of ethnic minority women. The first prism within which this study is embedded is that PC and
the tenacity of its manifestation in employment and organizational life. To this end, six themes follow which have
relevance to PC careers.
Organizations and Societies are Intertwined with their Histories
Prasad (2003) and Prasad (2005, 2006) write about the relevance of alternative historical explanations to
management and organization through studying business practices which may have their roots in colonial structures.
In this context, Said (1978) notes that history needs to be understood in terms of the forces and configurations of
power that precede it. Moreover, it may only be through an informed critique of imperialism that the subaltern can
be heard (Spivak, 1988, 1991). Hence, it is crucial to understand the history of societies in order to contextualize the
behaviours of organizations and hence the responses to ethnic minority women and their careers in a post colonial
society such as New Zealand.
Strands of Domination and Resistance along with other Behavioural Manifestations may be perceived in Organizational
Life through Recognition of the Colonial Imprint
Ahluwalia (2001) suggests that other narratives need to be recovered besides that of the colonial masters. It is in this
vein that strands of domination and resistance can be viewed in organizations through the realisation of the stamp of
the historical colonizer. Prasad (2005, p. 280) writes that “...the PC tradition compels recognition of global
(frequently imperialist) dynamics into management and organization studies, thus contextualizing contemporary
workplaces within wider political situations…restores a stronger sense of historical cultural awareness to our
understanding of contemporary organizations and is useful in identifying patterns of hierarchical reproduction that
are grounded in colonial dynamics”.
Colonialism has had Varied Encounters in different Geographical Regions hence it is not a Monolithic Process despite
Commonalities in a Eurocentric View
While colonialism was rampant between the 16th and 20th century, it was expressed differently based on the
particular royal charters and rules as well as their influence in various terrains and on peoples with varying histories.
Young (2001) proposes that different geographical regions have had varied encounters with the colonial rulers and
this has accordingly influenced countries differently in terms of their systems as well as their images of the other.
Hence Prasad (2005) writes that “One of the many problems of Eurocentrism lies in its blindness about the flaws
and limitations of Western culture, while simultaneously being unable to recognize the strengths and contributions
of non-Western cultures”. Yet the imperial masters were unable to see the natives or the other as cultural equals with
themselves. Thus while colonies were inferior their specific inferiority varied (Ahmed, 1992) as did the exclusionary
practices of white settlers (Ahluwalia, 2001; Mishra and Hodge, 1994). Thus Desai and Nair (2005) note the
importance of the historical parameters of colonialism and its multiple legacies and common genealogies. This
superiority of the colonial masters needs to be situated not as an unreflective consciousness towards the West, but
rather as a studied and situated contextual exploration and understanding of the legacy and reflections of colonialism
in post colonial times.
Patterns of Thinking and Imagining have been institutionalized in representing the other or the Colonial Native
Said (1978, 1994) discusses how the views on the orient are a result of institutions – administrative, cultural and
scholarly - which have operated through colonialism and the resultant stereotypes in imagining and representing the
orient. To put it slightly differently, someone else defines how a certain people should be viewed and that is held up
as a mirror image of these people are supposed to be. This ideological hegemony was based on an imperial agenda
(Beverley, 1999) and such patterns were and continue to be pervasive in this century’s thinking and conversations
(Chakrabarty, 2000). Sen (2005, 2006) writes of three distinct categories through which Western approaches sought
to understand India. He calls the first of these the magisterial or the exercise of imperial power on the colonized
subject, the second is the exoticist or the exotic aspects of the colony and finally the third is the curatorial approach
which focused on the diversity in the territory and sought to be free from preconceived notions of the subjects. Sen
maintains (2005) that these ideas and images of India “have quite distinct roles in the Western understanding of the
country and also in influencing the self-perceptions of Indians” (p. 141).

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Colonialism is more than Political and Geographical Domination but also Involves Psychological and Cultural Effects
Based on the notion that patterns of thinking and imagining have been institutionalized, it flows on that colonialism
also involves effects which are psychological and cultural. Hence Prasad (2005) writes about the “continued
presence of Western imperialism in global institutions and relationships today” (p. 262). Thus PC has an amazing
psychological tenacity even years after its political and geographical demise (Gandhi, 1998) and sometimes results
in a nexus which creates and yet obliterates the oriental (Said, 1978). Thus the baggage of imperialism still resonates
along with power dynamics (Desai and Nair, 2005). The reformulation of the landscape of languages, cultures and
imaginations through European imperialism often involved subjugation of the other (Smith, 1999). This is clearly
illustrated in the large numbers of English speaking Indians who are the inheritors of Maculay’s minute on Indian
Education in 1835, which encouraged the education of the native to serve as interpreters between the rulers and the
ruled, with English made the official language in India (Maculay, 1972). In this instance, and today’s e business, this
has almost two centuries later resulted in Indian as a powerhouse for back office services and software.
Hybridity implies Fusion, Deculturation, Mimicry and Assimilation of the Dominant Culture with the Other
Migration of various kinds whether through refugee or immigrant status, through colonial domination or through
expatriation and multinational organizations tends to create hybridity and often reaffirms cultural differences. Such
hybridity helps to disrupt the imperial dictates (Appadurai, 1996; Bhabha, 1984, 1990). As Bhabha (1984) succinctly
observes that one can be almost the same but not quite and almost the same but not white. Yet differences are more
than binaries (Hall, 1999) and identity formation is complex and hybridity foregrounds these complexities
(Ahluwalia, 2001). This hybridity involved identity transformation between the conquerors and conquered. In a
number of cases there was and exists a sense of agency united by the colonial yoke as both parties sought to survive
and thrive in changed environments. In other words the “cultural and psychic factors of identity formation can never
fully be separated from the material and historical realities” (Desai and Nair, 2005, p. 252).
The theoretical prism for the second area spans the careers of ethnic minority women. In the literature on
career theory, early research focused almost exclusively on white males, followed by scholarship on women where
one finds emphasis not only on white women but gradually also on minority women. In this context see for example
the work of Super (1957), Erikson (1968), Arthur and Rousseau (1996), Levinson and Levinson (1996), Arthur,
Inkson and Pringle (1999), Marvin (2001) and Pringle and Dixon (2003).
In focusing exclusively on the careers of ethnic minorities and more specifically the work experiences of
ethnic minority women, six themes are of importance in the context of this study.
Ethnic Saliency over Gender
Being categorized as an ethnic minority can hinder an individual’s career in personnel (Ross, 2004), though
ethnicity can also function as a resource, particularly if the organization wishes to employ and develop ethnic
minority individuals. However in her study on personnel departments in British organizations, Ross (2004) also
found that other criteria such as past experience, gender, age, qualifications, and “being known to the person with
power over personnel careers” (p. 477), impacted the career of ethnic minority individuals. In a UK based study
(Dale, Fieldhouse, Shaheen and Kalra, 2002), findings suggest that “Pakistani and Bangladeshi women with UK
qualifications on a par with white women are experiencing much greater difficulty in finding jobs” and “respondents
raised many instances where they felt that they had been treated differently because of their race or ethnic identity”
(p. 22). Being a minority and a female for women academics hampers career success due to the interlocking effects
of race and gender bias and the domination of Western European notions (Turner, 2002). Yet in some cases access
discrimination may work in favour of the individual being recruited though this appears to be limited and does not
extend into later career moves (Ross, 2004).
Experiencing Stereotypes, Prejudice and Discrimination
Discrimination occurs at the point of entry into a job in the recruitment process and then further into selection or
access discrimination, as well as treatment discrimination which takes place after one has entered the organization
(Greenhaus, Parsuraman and Wormley, 1990; Min and Kim, 2000). In fact overt, covert and subtle forms of
discrimination are often the experience of ethnic minority individuals (Ross, 2004). Lack of credibility based on
stereotypes of ethnic minorities which create career barriers as well as exclusion from challenging tasks and
retaining group exclusivity are further challenges which confront ethnic minorities (Greenhaus et al., 1990; Ross,
2004). Flores and Heppner (2002) in the context of career counsellors write of the importance of being “aware of the

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host of barriers that exist for racial and ethnic minority clients who are seeking to find a place in the world of work.
Many of these barriers are external or environmental and include racial harassment and racial
discrimination…which might then lead to a lowered sense of self-efficacy, or their confidence in their ability to
perform the tasks necessary to attain a satisfying career” (p. 197-198).
Brief, Butz and Deitch (2005, p.133) note that “negative stereotypes of Blacks and prejudice toward them
principally were seen as arising from the environments in which organizations are embedded rather than from the
organizations themselves.” These authors write that while racism has declined racial prejudice in a mutated form as
a residue from early histories and learning continues to be displayed in covert forms that are subtle and rationalized
and may affect personnel decisions. Hence workplace discrimination continues particularly since “organizations are
reflections of the environments in which they are embedded” (p. 119). Dipboye and Colella (2005) argue that
today’s workplace discrimination is more subtle and complex that that of past years, for in its proximal form it
occurs in recruitment, selections, performance management, compensation and day-to-day interactions and in its
distal form it occurs through the systems, policies, practices and structures which may perpetuate discrimination.
They further add that “the victim can become an unwitting contributor to his or her own plight” (p. 426). Due to our
human nature these authors reason that all humans discriminate, since the “dynamics associated with discrimination
are deeply ingrained in how people construe their social world, how they view themselves as individuals, and how
they deal with one another… (yet) the basis for discrimination is historically bound…with the passing of time and
laws…discrimination…will decline” (p. 456).
In a study on the interactive effects of age, gender and race in the USA (Hurley and Giannantonio, 1999),
women and minorities experienced lower career attainment than white males, but age was not related to career
attainment, and older Asian-Americans achieved greater career attainment, perhaps because they had proved
themselves in the company and were thus rewarded. In a study on women of colour which included the unique
experiences of African-American, Hispanic and Asian-American women, it was found that such women experience
‘double marginalization’ for they have to negotiate both negative stereotypes regarding their gender as well as their
ethnic group (Giscombe and Mattis, 2002). Women of colour tend to be both underemployed and overused, hence
while there is little opportunity for valued work, there is much demand for work that is not rewarded despite the fact
that service may be assigned to meet institutional needs, resulting in emotional drain (Turner, 2002).
As Fearfull and Kamenou (2006) note in the context of the UK and the career experiences of ethnic
minority women, that “despite three decades during which legislation has been in place to outlaw unfair
discrimination, and when organisations have policies purporting to support and serve that legislative framework,
ethnic minority women continue to struggle for corporate acceptance and progression” (p. 883). Selvarajah (2004)
writes about the frustrations of overseas-trained immigrant medical professionals who were subject to structural
discriminator practices in New Zealand.
Identity Challenges
Scholars in the area of identity have varying points of view including the concept of multiple identities which
facilitate the adoption of appropriate identities for a given circumstance (Banton, 2000; Kamenou and Fearfull,
2006; Min and Kim, 2000; Pilkington, 2003; Pio, 2005a). Alfred (2001) writes of the problems that black women
experience in white institutions since “their values and ethnic group cultural orientations are not recognized as
significant and whey they are forced to deny their own culture and adopt the majority culture” (p. 110). She notes
that such experiences often result in living with two world views, a double consciousness and a bicultural life.
Creating positive images of self and rejecting stereotypical images, through “implicit and explicit messages about
Black self-worth” increase the chances of ethnic minority women’s career success, as well as “finding a safe space
where they could reaffirm themselves as Black women” (Alfred, 2001, p. 117). Alfred’s study shows that “the
bicultural life structure is the nucleus from which people of colour evoke the power to contest the terrain of
differences that contribute to their marginal positions in White-dominated organizations. Because of the fluidity of
life structure…people of colour develop the ability to navigate environments of cultural dominance and build
successful careers” (p. 123).
Migrant Expectations
In ‘living with multiple marginality’ Turner, a scholar of colour (2002) writes that she “was so easily ‘defined out’
rather than ‘defined in’” (p. 74), and she writes how faculty women of colour have their energy drained in

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confronting situations controlled by discourses which do not address their lived realities and the ambiguous
empowerment that such women experience. Carr (2004) writes that skilled migrants suffer from broken promises as
their potential may not be fully realized as “they are not always accepted as bona fide candidates for the jobs that
suit their talents, and for the jobs that were promised in the first place” (p. 156). Pio (2005b, 2007) in her
interpretation of diversity in NZ maintains that ethnic minority migrant women find it very difficult to enter into the
workforce particularly if they do not have Kiwi1 experience and a Kiwi accent.
Access to Mentors/Role Models and Developing/Utilizing Networking
Giscombe and Mattis (2002) note that the retention of ethnic minority women was positively correlated with
supportive behaviour of supervisors, but that such women are at a disadvantage in accessing influential others and
having mentors, and are “less optimistic than white women about advancement opportunities” (p. 117). Homosocial
reproduction or the subconscious comfort of having similar others in one’s surroundings tend to limit the networks
and power of minorities and women (Corsun and Costen, 2001).

New Zealand’s Colonial Context

New Zealand was the last habitable land mass in the world to be discovered around the 13th century by the Maori
(Wilson, 2007a). Its rediscovery by the Dutch captain Abel Tasman in 1642 and by the British captain James Cook
in 1769, led to it being an economic and cultural outpost of Australia’s New South Wales and whalers and sealers
settled in this country (Wilson, 2007a). Samuel Marsden, a Sydney chaplain founded the first Christian mission
station in New Zealand. Due to increasing lawlessness, as well as the possible ascendance of the French in this
country, the British government decided to send James Busy as the British Resident in 1833 and in 1840 William
Hobson the country’s first Governor, invited the Maori chiefs to sign the Treaty of Waitangi resulting in British
sovereignty.
British settlers had been sent to NZ before the signing of the Treaty through the New Zealand Company
promoted by Edward Wakefield. The New Zealand Constitution Act was passed by the British Parliament in 1852
but the colonial office in London through the Governor kept control of policy. In the 1870s the colonial treasurer
Julius Vogel’s program of assisted immigration increased the number of white settlers in NZ. Most immigrants came
primarily from Europe with the majority from England, Scotland or Ireland though there was a smattering of people
from Scandinavia, Italy, India and China in the 19th century (Wilson, 2007b). NZ census statistics (2006) indicate
that the country has a population of four million, with 69% New Zealand Europeans, Maori or indigenous people
15%, Pacific peoples 7%, Asians (inclusive of Indians) 7% and 1% which includes individuals from countries like
Afghanistan, Iran and Iraq.

Indians in New Zealand

Indians form 1.7% of the population of NZ. The majority of early settlers came from rural areas in India’s Gujarat
(Navsari and Surat) and Punjab (Jalandhar and Hoshiarpur) regions and while they were not noted in the census,
their presence was recorded. While it was the Australian Gabriel Reed who is credited with the discovery of gold in
Otago, it was an Indian Peter Edward known as Black Peter who arrived around 1853, who told where it could be
found (Swarbrick, 2007). The early settlers worked as servants of wealthy settlers who had probably lived in India,
as well as working as flax and scrub cutters, bottle collectors, drain diggers, brick layers and hawked fruits and
vegetables. The 1881 census records six Indian men, and by 1896 there were 46. In 1916 there were 181 Indians
including 14 women (Swarbrick, 2007).
There was racism and official opposition to the early settlers as evidenced by the NZ Immigration
Restriction Amendment Act of 1920 which required subjects of British colonies to have British birth if they choose
to come to NZ. However, resident Indians were allowed to bring their sons and a number of Indian males came to
NZ under this category. With the establishment of the White New Zealand League, Indian market growers in the
1920s were subjected to racist campaigns as they were seen as a threat to the racial integrity and economic
prosperity of the European settlers. In fact until the late 1950s, Indians in Pukekhoe - where there were many Indian

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vegetable growers – were excluded from barbers, balcony seats in cinemas, private bars and could not join the local
growers association. In the 1930s Indians moved into dairy farming and market gardens. The 1951 census records
2425 Indians, and with changes in the immigration policy, the 1980s onwards saw a surge of Indians. Indians are
known for their dairies or convenience stores and keep them open for extended hours and this tends to be the image
that many New Zealanders have of Indians. In 2001 Indians numbered 62,646. Indians in NZ are employed in
various professions including medicine, information technology, advertising and education.
Research on Indian women in work and enterprise in NZ indicates that those women over 40 years take
approximately 18 to 24 months to find work that is somewhat appropriate to their skills and qualifications though
this is usually at the bottom of the organization (Pio, 2005a, 2005b). A number of such women migrants start their
own small businesses as they prefer to avoid the discrimination which they perceive and experience within
organizations (Pio, 2006, 2007). However, younger women particularly those who have studied in NZ rarely find
that ethnicity is an issue in entering the workforce (Pio, 2004).

Methodology

In the tradition of the interpretive approach, the individual’s lived experience forms their reality. Mir and Mir (2002)
write of the necessity “to make linkages between history, structures, and individual lives in the service of an
intellectual and political purpose” (p. 121), and that intellectuals have an obligation to connect scholarship, struggle,
analysis and transformation. Our analysis of the participant interviews is interpretive keeping in mind that the
context is defined by the researcher and the context can be defined at varying levels of comprehensiveness (Prasad,
2002) and that the “act of critical unveiling” (Prasad, 2002, p. 25) is informed by PC.
It is pertinent to mention that the researcher is of the same ethnicity and gender of the sample in this study
and this similarity facilitated access to participants, while at the same time the researcher has been consciously
critical of her research as a site of struggle. Turner (2002), a woman scholar of colour writes: “Acknowledging who
we are and how that affects our approaches to research as well as what we find of scholarly interest may result in a
more viable work environment …by brining ourselves through the door and supporting others in dong so as well, we
can define ourselves in and claim unambiguous empowerment, creating discourses that address our realities, affirm
our intellectual contributions and seriously examine our worlds” (p. 89).
Aim of the Research
The research falls within the qualitative genre and utilized semi-structured in-depth face-to-face interviews with
participants. The primary aim of the research was to explore the lived-through and lived-in experiences of these
ethnic minority Indian women with reference to their careers in NZ. Of significance was the concern with how these
women perceived their career trajectory in the host country New Zealand. To explore these perceptions, the
participants were asked a number of open ended questions pertaining to the nature of their employment experiences
when they joined the organization and their subsequent career movement. The research questions shaping this
inquiry were:
1. How do ethnic minority migrant Indian women enter the world of work in NZ?
2. What is the challenging and facilitating processes experienced within the world of work?
3. How do the women see their career growth in NZ?

A central focus of this exploration was to view the historical context within which the reality of the women was
experienced and to move beyond their words to an interpretive analysis to account for their career experiences.
Participant Profile
A total of 50 women of Indian ethnicity participated in this study. Information-rich cases were sought through snow-
ball sampling as well as the researcher’s contacts with the Indian community in NZ. All the women were legally
resident in New Zealand and none came in as refugees. Please see Table 1 for participant details.

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 TABLE 1: DETAILS OF PARTICIPANT PROFILE
Age in years Number (total 50) Number of participants and the
Nature of Employment
16-30 15 2 Administration
2 Creative/Advertisement
9 Fast food service/shop sales
1 Legal
31-45 20 8 Administration
3 Banks
1 Beauty services
1 Doctor
7 Nurses
46-60 15 9 Administration
2 Counselling/Psychology
4 Teaching profession

All the participants were overseas born with the majority being born in India, one in the Middle East and one in
South Africa. While the range of years that participants had lived in NZ varied between 30 years and one year at the
time they were interviewed, 80% of the participants had lived in NZ for between 5 and 7 years. The majority of
participants in this sample or 38% were employed in administrative work (n=19), 18% were employed in Fast food
and sales services (n=9) and 14% were employed as nurses (n=7). See Table 2 for nature of employment.

TABLE 2: NATURE OF EMPLOYMENT IN TOTAL SAMPLE

Number (total 50) Nature of Employment Description
19 Administration Personal assistant, secretary,
receptionist, executive assistant,
data entry operator
1 Beauty profession Providing beauty services
3 Banks Tellers
2 Creative/Advertising Creative/copy department in
advertising
2 Counselling/Psychologist Mental health matters
1 Doctor Medical profession
9 Fast food/Shop sales Waitress/Casher/Manager in fast
food, sales assistant
2 Legal services Legal aid
7 Nurses Medical profession
4 Teachers Teaching aide, Teacher in
school, Lecturer in University

All the participants were fluent in spoken and written English having had their education in the English language
with English as the medium of instruction particularly for their post-school qualifications. See Table 3 for country of
education.

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 TABLE 3: COUNTRY OF EDUCATION
Age Number Country
16-30 12 New Zealand (secondary schooling)
3 India (secondary schooling with further schooling
in NZ)
31-45 19 India
1 Middle East
45-60 13 India
1 South Africa
1 Kenya, UK

Conduct of the Interviews

The interviews were conducted at a mutually convenient time and place. The venue was usually the participant’s
home; sometimes the venue was the university where the researcher worked or her home. An interview guide was
used to facilitate the process of information gathering, and consisted of open-ended questions constructed to address
the following issues: a) entry into the world of work; b) experiences and qualifications before and after entering the
host country; c) experiences in the world of work that were facilitating; d) experiences in the world of work that
were challenging; and d) perceptions on careers.
The interviews varied from 100 minutes to 40 minutes with an average of 55 minutes for each interview.
The interviews were tape recorded along with extensive note taking. Notes were also made immediately after the
interviews to record the researchers own comments and personal observations. All the participants were happy to be
interviewed and were very interested in sharing their work experiences. There was a high level of openness in the
sharing of their experiences and for some women it served as a catalyst to their emotional experiences at work where
as for others the important aspect was that the people of NZ should be aware of the work experiences of Indian
ethnic minority migrant women. The women often commented that the researcher was one of them and hence they
could share their experiences knowing that they would be understood. This resonates with Rhodes (1994) who
observes that shared ethnicity results in enhanced information during data collection.
Data Analysis and Interpretation
Transcriptions were done either immediately after the interviews or within one week of the interview in order to
ensure that the ambience of the interviews was documented. The notes made immediately after the interview were
incorporated into the final transcripts, along with a summary of each participant’s work experiences. The next step
involved an in-depth analysis of the transcripts in order to locate themes. This was followed by searching for
patterns and variances in the transcripts across the fifty participants. The patterns and themes formed the building
blocks for the interpretation. Member checks through participant contact were initiated to ensure that the data was
appropriately interpreted.

Findings and Discussion

The findings emerging from this study are grouped according to the three research questions shaping this inquiry on
ethnic minority women and their careers, namely entry into the world of work, challenging and facilitating processes
within work and finally the perceptions of these women on their career growth in NZ.
Entry into the World of Work
The women in this study all came to NZ with the expectation of a better quality of life. This was echoed even by the
younger women whose parents were the primary applicants in the migration process. While getting exactly the
same kind of work or exactly the same level in the hierarchy was not an expectation, there was definitely an
expectation to get work somewhat appropriate to their skills, qualifications and experience. As one participant
pointed out: “Being told that Kiwi experience was essential was a catch 22 situation…I am new to the country how
can I have this so called Kiwi experience…tell me is being a data entry operator in one country and doing this as
part of my administrative job so different from another country…” (Age 46-60, Administration)

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 Drawing from the interview data the participants in this study subscribed to the view that it was their
ethnicity which overshadowed their gender. All the women in this study acknowledged the tremendous influence of
their ethnicity in their career, though this saliency could function as both a positive and negative factor in their
careers. The following three extracts are indicative of this saliency:
“As soon as they see me, and realise that I am an Indian, the job that was available is suddenly filled, despite
having spoken to the agency that same morning and being told to come in for an interview…no doubt my name
is not a typically Indian one and it is difficult to place my accent over the telephone…” (Age 46-60,
Administration).
A teacher with ten years experience in India stated: “I was always told that my experience in India was not
relevant…the authorities did not even want to explore my capabilities or talk about them…in the initial years my
ethnicity was treated by employers as a major disadvantage…” (Age 46-60, Teacher).
“I find it so strange that while the rest of the world realises the potential and skills of Indians, here in
this country, they think that we are sort of second class…we struggle to get appropriate jobs…yes its
tough…but it’s a better life for my children…” (Age 46-60, Psychologist).
These three women are representative of the sample over 45 years as also those above 31 years who had
similar experiences. Such access discrimination supports previous research (Dale et al., 2002; Greenhaus et al.,
1990, Pio, 2005a, Turner, 2002). Moreover the women seem to be the subjects of institutionalized ways of thinking
and perceiving about Indians, which tends to fall into Sen’s (2005) magisterial category. This translates as seeing the
colonial native, in this case the Indian woman as ‘inferior’ (Ahmed, 1992) resulting in a continuity of the
psychological and cultural effects of colonialism (Prasad, 2005).
An exception was the nurses in this cohort of women aged 31-45 years who found that their ethnicity was
an advantage. As one nurse explained: “…this patient told me that she was happy to be cared for by an Indian
because we respect elders and have more patience than others…so being Indian in this care facility meant that the
authorities and patients knew that we are very competent in our work and will go that extra mile…” This was
echoed by all the nurses who were proud of their ‘Indianess’ and their training and hence found that their ethnicity
was a positive indicator of competence. These findings, though on nurses, are different from Selvarajah (2004) who
found that doctors in New Zealand had to face discrimination.
Those younger women (aged between 16 and 30 years) who were educated in New Zealand found that
ethnicity was less of an issue as compared to the remaining women in this cohort aged between 31 and 60 years. A
young woman participant stated: “I think it’s great to be both Indian and Kiwi …yes I am Indian and this is evident
from my colour, but then I have been educated here in New Zealand…which means I know the ‘Kiwispeak’…so
really I don’t think ethnicity is a big factor in my work.” (Age 16-30, Legal). It is highly likely that the younger
women with NZ education found it easier to adapt accept and display behaviours which were more in keeping with
the NZ Europeans. Such fusion, deculturation or hybridity (Appadurai, 1996; Bhabha, 1984, 1990) resulted in a
disruption of how an Indian is viewed. The consequence was an easier acceptance of skills and qualifications as well
as an endorsement of behaviour required to enter work. Viewed as ‘interestingly different’ they would fall into Sen’s
(2005) exoticist category.
Challenging and Facilitating Experiences within the World of Work
Organizations and societies are intertwined with their histories and in the case of NZ as shown by this study; it is
conceivable that the colonial imprint is still alive. Thus a participant, in reminiscing about the challenging
experiences at work said: “I was badly treated and despite the fact that the evidence showed that I was doing a good
job…I have had to work twice as hard as the others…but it still boils down to the fact that I am different…and when
push comes to shove, well then being Indian is not an advantage in this country” (Age 46-60, Teacher).
It appears that all participants experienced various forms of discrimination, however “we just accept that
we are different and that other will also see us as different…it is we who have to make the changes…after all we are
the migrants…we choose to come here…once we accept that we will be treated differently at least initially, this
gives us the strength to move on and focus on our work and our settling into this new life style…” (Age 16-30,
Creative). And a participant had this to say: “Yes, I am different, but then we all are…I just enjoy myself at work…”
(Age 46-60, Administration).

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 Strands of domination are clear in these two excerpts as well as being underused and disrespected: “There
was no one to go to for guidance…who do you talk to…after all they are there to point fingers at you and I have had
to face ridicule…so how can I bare my heart and talk about my areas of problems…they could then just throw these
things in my face” (Age 31-45, Administration); and the second excerpt: “They bring us here and make us pay for
our qualification to be certified …I mean we do not just walk into this country without going through an application
process with the immigration department…and then when I am a qualified teacher, I am told to get this Kiwi
experience by working in a fast food joint…it just appalling…but this was more than seven years ago…today things
have changed for the better…but its still not easy and I wonder if we will ever be treated on par…(Age 46-60,
Teacher). Thus experiences of stereotypes, prejudice and discrimination are evident in the lives of these women, and
can be seen as residues of the past colonial times. These extracts are in line with the research of Brief et. al (2005)
and Dipboye and Colella (2005) who note that today’s workplace discrimination is less blatant that in the past
though it continues to be expressed through both proximal and distal forms.
Facilitating experiences are generally when the women were confident in themselves, as in this excerpt: “I
had my own strength and confidence and some of the women were so helpful and we have become such good
friends…I serve as a mentor for my students and some of them tell me that they feel they can do it, because they see
me as a sort of role model” (Age 46-60, Teacher).
Perceptions of Career Growth in New Zealand
For the women 31+ years, their career growth seemed to be dominated by their ethnicity which in general was not
seen as an advantage based on their work experiences. “I have so much of experience and have dealt with over a
hundred patients in India…but being Indian is sort of something negative in the eyes of Kiwis…it takes ages and so
much of emotional turmoil to keep on proving oneself…(Age 31-45, Doctor). And regarding promotions, this is
what one woman had to say: “Sure I get passed over for promotion, despite my loyalty to the organization and being
given work that is not strictly in my job description…but then I have a job…and at my age and being Indian in this
country…I just count my blessings” (Age 46-60, Administration).
Some women found solace in their ethnicity, particularly when they had decided that they were not going
to get anywhere in terms of their careers: “Yes I am proud to be Indian, this is who I am…you can take India away
from me, but you can’t take India out of me.” (Age 46-60, Teacher). Some found that having the capacity to take on
more than one identity helped the process of career growth, for example: “I think my strength is my capacity to
negotiate the worldviews of both Pakeha and Indian…so dependent on the circumstance I can choose how I want to
be…so I see this as a big benefit in my work” (Age 31-45, Administration). Another woman shows her resistance to
the imperial imprint by saying: “It’s their problem if they want to slot me into a category… I am more than only an
Indian woman…and they just have to learn to get beyond my non-white skin” (Age 36-60, Teacher).
Overall the women in this study perceived the benefits of residing in NZ, particularly because their gender
was not an issue: “Oh yes, it has been very tough…but here there is no discrimination based on me being a
woman…I can do so many things which I could not do back home in India and there is more respect for
women…the only thing of course is that being Indian means I have to take lower sort of jobs.” (Age 31-45, Bank).
When women were able to access mentors this proved to be a source of much learning and facilitated their
career growth (Kamenou and Fearful, 2006). For example one woman’s positive experience is explained thus: “She
liked me and was so helpful and kept insisting that I could do it and could overcome the obstacles necessary to get
my certification…I felt I could go and talk to her whenever I needed to and she sort of took me under her wing…I
would have had to struggle much more otherwise” (Age 46-60, Counsellor). Such women were the exception rather
than the rule in this cohort. Thus another woman displays the tentative nature of her approach in saying: “Are there
places we can go to for help…who knows us…here we are nobody and initially know no one…I mean besides
Indians…I think we need to develop networks with the Pakeha2, because in that way we can learn exactly where we
are deficient…I mean what we thought was appropriate is now no longer so (Age 31-45, Beauty services). This
shows how the impact of being unequal is reinforced for it is perhaps the belief in the superiority of the colonial
masters or the employers in this instance, which is still deeply entrenched and continues to be exhibited in
organizational life. Yet over 60% of the women in this study, over a period of between 5 to 7 years had moved up in
their careers from the initial entry level positions when they first came to New Zealand.

1217
Concluding Comments

In this study the career experiences of ethnic minority migrant Indian women in New Zealand have been presented
utilizing a post colonial framework for their challenging experiences including access and treatment discrimination
within organizations. Six themes from a PC lens were applied to add a new thread to the work on careers of ethnic
minority women and to explain why these women were defined out, with the exception of nurses who were helping
a particularly vulnerable group and younger women who had fused their Indian and Kiwi lives through behaviours
considered appropriate in organizations and hence for their careers. It is a distressing comment on society that the
colonial imprint continues to be so strong and displays itself in road blocks for ethnic minority women and their
careers. But all is not lost for the younger women continue to do well and the determination and grit of the women
31+ continues to ensure that they too make an impact on the society of their host country. It is plausible that future
research on ethnic minority Indian women who have been born in New Zealand may show that they have more
positive experiences than the majority of women in this study, as also the fact that over time and with experience of
ethnic minority women, employers will start viewing them not just as the other, but also as individuals in their own
right who can contribute both economically and socially to this island nation, and in the process blur the boundaries
between the colonizer and the colonized.

References
[1] Ahluwalia, P. (2001). When Does a Settler Become a Native? Citizenship and Identity in a Settler Society.
Pretexts: Literary and Cultural Studies, 10 (1), 63-73.
[2] Ahmed, L. (1992).The Discourse of the Veil. Women and Gender in Islam: Historical Roots of a Modern
Debate, 144-168.
[3] Alfred, M. V. (2001). Expanding Theories of Career Development: Adding the Voices of African
American Women in the White Academy. American Association for Adult and Continuing Education.
51(2), 108-127.
[4] Appadurai, A. (1990). Disjuncture and difference in the global economy. Public Culture, 2, 15-24.
[5] Arthur, M. and Rousseau, D. (1996). The Boundaryless Careers: A New Employment Principle for a New
Organizational Era. New York: Oxford University Press.
[6] Arthur, M.B., Inkson, K. and Pringle, J. (1999). The New Careers: Individual Action and Economic
Change. London: Sage.
[7] Banton, M. (2000). Ethnic conflict, Sociology, 34 (3), 481-498.
[8] Beverley, J. (1999). Our Rigoberta? I, Rigoberta Menchu, Cultural Authority, and the Problem of Subaltern
Agency. In G. Desai and S. Nair. (Eds.) (2005). Postcolonialisms: An anthology of cultural theory and
criticism. New Brunswick, USA: Rutgers University Press, pp. 427 – 447.
[9] Bhabha, H. (1984). The location of culture. London: Routledge.
[10] Bhabha, H. (1990). Nation and Narration. London: Routledge.
[11] Brief, A., Butz, R. and Deitch, E. (2005). Organizations as Reflections of their Environment: The Case of
Race Composition. In R. Dipboye and A. Colella (Eds.). Discrmination at Work: The Psychological and
Organizational Bases. London: Lawrence Erlbaum Associate Publishers, pp. 119-148.
[12] Carr, S.C. (2004). Globalization and Culture at Work: Exploring their combined Glocality. Boston: Kluwer
Academic Publishers.
[13] Chakrabarty, D. (2000). Provincialising Europe: Postcolonial thought and historical difference. Princeton,
NJ: Princeton University Press.
[14] Corsun, D. L., & Costen, W. A. (2001). Is the Glass Ceiling Unbreakable? Habitus, Fields, and the Stalling
of Women and Minorities in Management. Journal of Management Inquiry, 10(1), 16-25.
[15] Dale, A., Fieldhouse E., Shaheen, N., & Kalra, V. (2002). The Labour Market Prospects for Pakistani and
Bangladeshi Women. Work, Employment & Society.16(1), 5-25.

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 End Notes
1
. Kiwi the common way of referring to a person from New Zealand
2.
Pakeha or NZ European, or those of European ancestry

1219
 Linking Mentoring Experience to Organisational Commitment and Intention to Stay: The
Mediating Role of Perceived Organisational Support
Yin Teng Chew, pinnacle5007@yahoo.co.uk
Monash University, Malaysia
Marco Wong Sai Kong
Universiti Tunku Abdul Rahman, Malaysia

Abstract
Building on social exchange perspective and organizational support theory, this study examined the relationships among
employees’ received mentoring, perceived organizational support (POS), organizational commitment (OC) and intention
to leave. Using hierarchical regression analyses on a sample of 100 employees in 5-star hotel chain in Malaysia, it was
found that, consistent with past research, POS and career mentoring are highly interrelated and yet have unique
behavioural outcomes. POS has significant relationships with all the variables in this study. However, POS did not
mediate the effects of career mentoring, OC and intention to leave. While career mentoring has a medium correlation
with intention to leave, it did not significantly predict intention to leave. Career mentoring predicts two of the three
dimensions of OC. These findings have implications on how organizations might change different outcomes. They also
indicate that organizational efforts (POS) may be further emphasized to influence employees’ intention to leave.

Introduction
Human behaviours have been considered as a vital issue that is quite difficult to deal with due to the extremely
complicated human attitudes, behaviours and relationships. Numerous studies have been conducted to test the
significance of human resource efforts to organizational effectiveness that may lead to demonstration of
behavioural outcomes desirable to employers (Becker & Gerhart, 1996; Wayne, Shore, Bommer & Tetrick, 2002;
Takeuchi, Wakabayashi & Chen, 2003; Scandura & Williams, 2004).
One of the most investigated areas of research on behavioural outcomes is organisational commitment. In
general terms, organisational commitment can be defined as the level of attachment felt toward the organisation in
which one is employed. A large number of studies have found that employees who are emotionally committed to the
organisation demonstrate improved productivity, reduced absenteeism, a less likelihood to quit their job and
enhanced extra-role performance (Mathieu & Zajac, 1990; Meyer & Allen, 1997; Mowday, Porter & Steers, 1982).
Some researchers believe that by providing employee with meaning and purpose, aiding employee development and
providing training opportunities, are keys to gaining commitment from the organization’s workforce (Hall & Mirvis,
1996; Bartlett, 2001; Rhoades, Eisenberger & Armeli, 2001; Scandura & Williams, 2004). Such efforts by
organisations may be perceived by employees as indicative of the organisations’ care and concern.
Much of the research into organisational commitment and POS has focused on perception of justice, pay
policies, job condition and leader-member exchange as antecedents (Wayne, Shore & Liden, 1997; Rhoades &
Eisenberger, 2002; Loi, Ngo & Foley, 2006). Surprisingly, few studies in the current literature have empirically
examined what forms of human resource (HR) activities create a sense of obligation or indebtedness in employee-
organisation relationships (Shore & Shore, 1995). In particular, training and career mentoring activities (Scott &
Meyer, 1991; Bartlett, 2001) which has importance in affecting work attitudes and behaviours as well as
contribution to competitive advantage (Snell & Dean, 1992; Delery & Doty, 1996; Rush, 1996; Becker & Huselid,
1998; Guthrie, 2001; Takeuchi, Wakabayashi & Chen, 2003).
To fill the gap in research, this study build on a social exchange perspective and organisational support
theory to develop a model to first, examine how career mentoring is related to the creation of a sense of obligation in
employee-organisation relationship, and second, how both career mentoring and POS may influence organisational
commitment and intention to leave. Another purpose of the study is to examine the unique moderating effects of

1220
POS on the relation between career mentoring and organisational commitment and intention to leave, controlling for
the difference in age and tenure. Finally, we attempt to address the generalisability of a Western theoretical
framework in a non-Western context.

Literature Review
Social Exchange Theory and Organisational Support Theory
Social exchange theory (Blau, 1964) has recently been applied extensively in the organisation settings to
demonstrate how organisation’s efforts may create employee obligation and desirable performance. Such exchange
ideologies stem from the norm of reciprocity that holds people should help those who have helped them (Goulder,
1960). The favourable treatment received by either exchange partner is reciprocated and leads to beneficial
outcomes. Unlike economic exchange, social exchange involves less tangible or symbolic resources. Both time
frame and nature of the expected future returns are not specified and hence the exchange parties conform ro rhe
norm of the reciprocity to discharge their obligations in future (Loi, Ngo & Foley, 2006).
Social exchange theory describes that resources received from others are more highly valued if they are
based on discretionary choice rather than circumstances beyond the donor’s control. Such voluntary aid is welcomed
as an indication that the donor genuinely values and respects the recipient (e.g., Blau, 1964; Eisenberger & Speicher,
1992). Thus HR activities and organisational rewards contribute more to POS.
Most organisations have considerable discretion and control concerning training policies and practices that
affect the importance of training. Some multinationals would arrange for formal career mentoring. According to
organisational support theory, such discretionary actions should make a major contribution to employees’
assessment of the organisation’s benevolent or malevolent orientation toward them. Employers’ emphasis on
training and career mentoring will have a trickle-down effect that may influence supervisors’ commitment to career
mentoring junior employees. Given that supervisors act as an agent of the organisation (Levinson, 1965),
supervisors are a source for indication of organisational support. Thus training and career mentoring contribute more
to POS.
In the context of social exchange theory (Blau, 1964), such organisational efforts may lead to a desirable
psychological contract of which are powerful determinants of organisational behaviours (Schein, 1980).
Psychological contracts describe individual beliefs about their employment relationship and guide employee beliefs
about what they think they are entitled to receive owing to real or perceived promises from their employers
(Robinson, Kraatz & Rousseau, 1994). HR practices are some of those that affect the psychological contract (Lucero
& Allen, 1994).
Eisenberger, et al (1986) assert that organisational support theory may help explain employees’ emotional
commitment to their organisation. This theory assumes that in order to meet socioemotional needs and to assess the
organisation’s readiness to reward increased efforts, employees form general beliefs concerning the level of
appreciation of employee contribution by their organisations as well as the level of care and concern by their
organisations. Being valued by the organisation can yield such benefits as approval, pay and promotion and access
to selective training. Eisenberger et al (1986) asserted that employees develop POS because people tend to ascribe
traits or qualities to organisations through a process of “personification” (Levinson, 1965). This personification of an
employer by an employee represents an accumulation of rewards and punishments the employee has received from
other, more powerful organisation members.
On the basis of the norm of reciprocity, employees who are treated favourably by others feels a sense of
indebtedness to the exchange partner and are motivated to repay the partners (Blau, 1964; Greenberg, 1980). In
other words, POS would create an obliged feeling to care about the organisation’s welfare and help the organisation
reach its objectives. Hence, the demonstration of care and concern for employees may influence exchanges (Liden et
al., 1997) such as organisational commitment, intention to leave, job satisfaction and performance rating (Wayne,
Shore & Liden, 1997; Bartlett, 2001).
As highlighted earlier, most organisations have considerable discretion and control concerning training
policies. According to organisational support theory, such discretionary actions should make a major contribution to

1221
employees’ assessment of the organisational support by their employers. Training and career mentoring as part of
the HR activities that can be controlled or managed to elicit a desired set of unwritten, reciprocal attitudes and
behaviours.
Career Mentoring
Training has been identified as one of the human resource practice that contributes to gains in competitive advantage
(Schuler & MacMillan, 1984). Scott and Meyer (1991) suggested that training improve productivity and
organisational performance. Others found that training and such satisfaction have influence on organisational
commitment, perception of organisational justice, in-role and extra-role performance (Leong, Randall & Cote, 1994;
Bartlett, 2001; Bartlett & Kang, 2004; Chew & Takeuchi, 2006). Studies examining training as participation in a
highly structured programme for new members to an organisation found similar results that participation in training
increase organisational commitment (Tannenbaum, Mathieu, Salas & Cannon-Bowers, 1991; Saks, 1995). These
literatures seem to suggest that training is related to development and maintenance of organisational commitment.
Extending from human resource management and training literature, there has been increasing literatures in
the area of career mentoring. Prior research has suggested that reduced employee turnover intentions can be an
outcome of formal communications through advices of undergraduate students and counselling of employees
(Rhode et al, 1977; Gregson, 1990). Scandura and Viator (1994) highlighted that in addition to the formal channel of
communication, nonformal communication networks such as mentoring of lower-level employees is as crucial in
enhancing behavioural outcomes that benefit organisations. Mentor enhances the career development of younger and
relatively inexperienced employees. Researchers suggest that employees who have a mentor experience greater job
success and have a better chance of being promoted. Scandura and Viator (1994) summarised literature review and
found that there are three functions of mentors, namely coaching protégés on career development, providing social
support, and serving as a role model. Other findings were consistent, stating that mentoring include career
development function and a psychosocial function (Kram 1985; Kram & Isabella, 1985). These two functions serve
different purposes. The former nurtures protégé for career advancement, while the latter operate to clarify the
protégé’s sense of identity and develop greater sense of competence (Noe, 1988).
In the context of social exchange theory (Blau, 1964), such organisational efforts may lead to a desirable
psychological contract of which are powerful determinants of organisational behaviours (Schein, 1980). HR
practices such as training and career mentoring as part of the HR activities can be managed to elicit a desired set of
unwritten, reciprocal attitudes and behaviours.
Some researchers believe that by providing employee with meaning and purpose, aiding employee
development, providing training opportunities, and providing a supportive environment are keys to gaining
commitment from the organization’s workforce (Hall & Mirvis, 1996; Bartlett, 2001; Rhoades, Eisenberger &
Armeli, 2001; Scandura & Williams, 2004). Such efforts by organisations may be perceived by employees as
indicative of the organisations’ care and concern. In the service industry, in particular that of the hotel, mentoring
exists as part of the on-the-job training given a large degree of the work-related skills are enhanced through the
frequent interaction between service provider and hotel guests. Hence, training and career mentoring are crucial.
Most organisations have considerable discretion and control concerning training policies that affect the importance
of training and the commitment to training among supervisors. According to organisational support theory, such
discretionary actions should make a major contribution to employees’ assessment of the organisation’s benevolent
or malevolent orientation toward them. POS is enhanced by the positive and discretionary treatment by the
organisation which leads to employees’ perception of the organisation’s commitment to them (Shore & Wayne,
1993). Employees can fulfil this reciprocal obligation through enhanced organisational commitment (Rhoades,
Eisenberger & Armeli, 2001) and reduced intention to leave.
Hypothesis 1: Career mentoring will be positively related to POS.
Organisational Commitment
Organisational commitment has been one of the most researched areas in the organisation theories. Meyer and Allen
(1997) described employees with high level of organisational commitment is one who will stay with the organisation
through thick and thin, attends work regularly, puts in a full day, protects company assets, and who shares company
goals. Early researchers treated organisational commitment as a unidimensional construct (Mowday, Steers &
Porter, 1979). However, it is more widely accepted now as a multidimensional construct.

1222
 Meyer and Allen (1990) define the three constructs of organisational commitment as: (i) affective
commitment, (ii) normative commitment, and (iii) continuance commitment which refers to the costs associated
with leaving the organisation. Affective commitment refers to the psychological or emotional attachment to the
organisation. Employees that are strongly committed identify with, is involved in, and enjoy membership in, the
organisation. Normative commitment refers to a perceived obligation to remain with the organisation. It reflects
individual’s personal values and belief about one’s responsibility to the organisation. Continuance commitment
which refers to the costs associated with leaving the organisation. This dimension of commitment is viewed as a
tendency to engage in consistent lines of activity (Becker, 1960, p.33) based on the individual’s recognition of the
costs associated with discontinuing the activity (Farrell & Rusbult, 1981; Allen & Meyer, 1990).
A large number of studies have found that employees who are emotionally committed to the organisation
demonstrate improved productivity, reduced absenteeism, a less likelihood to quit their job and enhanced extra-role
performance (Mathieu & Zajac, 1990; Meyer & Allen, 1997; Mowday, Porter & Steers, 1982). Some researchers
believe that by providing employee with meaning and purpose, aiding employee development and providing training
opportunities, are keys to gaining commitment from the organization’s workforce (Hall & Mirvis, 1996; Bartlett,
2001; Rhoades, Eisenberger & Armeli, 2001; Scandura & Williams, 2004). Meyer and Allen (1997) highlighted that
organisational commitment is accepted as an influence on the training process which demonstrates that training’s
positive effect on organisational commitment can be enhanced. Such efforts by organisations may be perceived by
employees as indicative of the organisations’ care and concern.
Hypothesis 2: Career mentoring will be positively related to organisational commitment: (a) affective
commitment, (b) normative commitment, and (c) continuance commitment.
Hypothesis 3: POS will mediate the positive relationship between career mentoring and
organisational commitment
Intention to Leave
POS meets the employees’ socio-emotional needs including approval, affiliation and self-esteem (Eisenberger et al,
1990). It encourages employees’ incorporation of organisational membership and role status into their self-identity.
Employees with high level of POS tend to express stronger feelings of affiliation and loyalty to their organisation
and to interpret the organisation’s gains and losses as their own (Loi, Ngo & Foley, 2006). When employees are
emotionally attached to the organisation, they are less likely to intend to leave the organisation. Empirically, POS
was found to be negatively related to intention to leave (Masterson et al, 2000; Wayne et al, 1997). Moreover,
considerable past research has accepted organisational commitment as a major antecedent of intention to leave,
having a significant negative relationships (Griffeth et al, 2000).
Hypothesis 4: Organisational commitment is negatively related to intention to leave.

Method
Sample and Procedure
The sample for this study was composed of 100 lower-level employees in five hotels that are ranked four and five
stars. Survey questionnaire were administered in December 2006. These participants have experienced formal
mentoring. The reason for selecting this group was to capture individuals who were with basic education. With the
limited education background, this group of employees may tend to rely more on mentor-mentee relationship to gain
career mentoring that may enhance their career advancement.
Data collection involved a number of personal trips by the co-author to each collection site. Well-
established scales previously reported in the literature were adopted for the design of the survey questionnaire. The
survey questionnaires were distributed to a few lower-level employees with the aim of determining the
appropriateness of the contents and use of words. The ease of understanding by the subjects was also considered.
The co-author was present to collect the questionnaire in order to gain more support and participation from subjects.
The survey questionnaires were prepared in English. All items were modified to fit into the seven-point
Likert-scale format (i.e. 1= strongly disagree and 7 = strongly agree). Of those responding to the demographic
questions, the average age is 27. Slightly less than half of the participants possessed high school or diploma

1223
qualification. The participants have an average of 7.2 years of work experience and 3.9 years of tenure with the
current organisation at the point of survey.
Measures
Career mentoring: A seven-item measure of career mentoring (Scandura, 1992) was employed to assess the
experience of career mentoring of lower-level employees. A sample item from the career mentoring scale is “My
mentor takes a personal interest in my career.” The coefficient alpha reliability estimate for this measure was .88.
This result is consistent with past results. Previous research has supported the construct validity of this instrument
(Scandura, 1992; Scandura & Schriesheim, 1991).
Perceived organisational support: The nine-item, shorten version of the Survey of Perceived
Organisational Support was adopted (Eisenberger et al, 1990). A sample item from the measure is “My organisation
strongly considers my goals and values.” The coefficient alpha reliability estimate for this measure was .79.
Although the coefficient alpha reliability estimate is lower than past results (Wayne et al, 2002), it is acceptable
(Nunnally, 1978).
Organisational commitment, affective commitment: Eight items from the affective commitment scale
(Allen & Meyer, 1990) were used to measure the employees’ psychological or emotional attachment to the
organisation in this study. A sample item from the measure is “I would be very happy to spend the rest of my career
with this organisation.” The coefficient alpha reliability estimate for this measure was .62. Given the low reliability
of the scale, factor analysis with varimax was used to reduce data. One of the items was reduced to produce a
coefficient alpha reliability estimate of .81.
Normative commitment: Eight items from the normative commitment scale (Allen & Meyer, 1990) were
used to measure the employees’ perceived obligation to remain with the organisation. It reflects individual’s
personal values and belief about one’s responsibility to the organisation. A sample item from the measure is “I think
that people these days move from company to company too often.” The coefficient alpha reliability estimate for this
measure was .43. A criterion cutoff point of .70 for accepting items was used, as suggested by Nunnally (1978).
Given the low reliability of the scale, factor analysis with varimax was used to reduce data. Two of the items were
dropped owing to low or ambiguous factor loading to produce a coefficient alpha reliability estimate of .71.
Continuance commitment: Eight items from the continuance commitment scale (Allen & Meyer, 1990)
were used to measure the employees’ perceived costs associated with leaving the organisation. A sample item from
the measure is “It would be very hard for me to leave my organisation right now, even if I wanted to.” The
coefficient alpha reliability estimate for this measure was .65. A criterion cutoff point pf .70 for accepting items was
used, as suggested by Nunnally (1978). Given the low reliability of the scale, factor analysis with varimax was used
to reduce data. One of the items was dropped owing to low or ambiguous factor loading to produce a coefficient
alpha reliability estimate of .83.
Intention to leave: Carson and Bedeian’s (1994) measure of intention to leave was adapted for use in the
study. A sample item from the measure is “I frequently think about leaving my current employer.” The coefficient
alpha reliability estimate for this measure was .89.

Results and Hypotheses Testing

The correlation matrix for the study variables is shown in Table 1. In this table, reliabilities are represented along the
diagonal, and all were within the acceptable range (Nunnally, 1978). To test Hypotheses 1 – 5, we conducted
multiple regression analysis.
Hypothesis 1 stated that career mentoring will be positively related to POS. Hypothesis 1 was supported (B
= .56, p < .01). This is self-explanatory given the high correlation between the two variables (r = .43, p < .01).
Hypothesis 2 stated career mentoring will be positively related to organisational commitment: (a) affective
commitment, (b) normative commitment, and (c) continuance commitment. Hypothesis 2 was partially supported.
Career mentoring is positively related to only affective (B = .34, p < .01) and normative commitment (B = .24, p <
.01). These results are further supported by the strong correlation between the career mentoring with the two
commitment dimensions (r = .61, p < .01; r = .53, p < .01).

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 Hypothesis 3 stated POS will mediate the positive relationship between career mentoring and
organisational commitment.

TABLE 1: MEANS, STANDARD DEVIATIONS, AND INTERCORRELATIONS

Variable 1 2 3 4 5 6
1. Career mentoring -
2. POS .43** -
3. Affective commitment .61** .57** -
4. Normative commitment .53** .23* .51** -
5. Continuance commitment .39** .22* .52** .62** -
6. Intention to leave -.33** -.59** -.50** -.34** -.27** -
M 5.38 4.72 4.21 4.47 4.25 3.93
SD 0.71 0.69 0.91 1.21 0.95 1.64
Note. **p ≤ .01, *p≤ .05

Discussion and Conclusion

As mentioned earlier, training and career mentoring can be viewed as part of HR activities that can be managed to
elicit desirable reciprocal attitudes and behaviours. To reciprocate for the organisational investment on them,
employees may exhibit organisational commitment and loyalty. However, there are also cases in which employees
may alter their view of what they feel is “owed” to them in return for their labour. Many employees have come to
view training and career mentoring as an entitlement and as a benefit of employment (Bartlett, 2001). This could be
more obvious in an employment relationship that emphasises economic exchange.

References

Contact the author for the full list of references.

1225
 The Relationship between HR Management Practices, Perceived Organizational Support
and Affective Organizational Commitment: The Evidence from Malaysia
Tan Foong Ming, k030514m@yahoo.co.uk
Nagoya University, Japan

Abstract
This study was conducted to examine the mechanism between existence, relatedness and growth (ERG) based human
resource management practices (HRMP) and organizational commitment. A survey involved 329 Malaysian knowledge
workers from four industries investigated (a) family-friendly policy, pay satisfaction, internal promotion, supervisory
support, and career development opportunities, (b) perceived organizational support (POS), with (c) organizational
affective as work outcome. Structural equations modeling analysis reveals that relations between employees’ self
evaluation of HRMP and their commitments to organizations are mediated by POS. These findings support previous
research claims that the effect of organizational commitment could be enhanced through organizational support theory
while making effective career-oriented HR policies.

Introduction

Organizational commitment (OC) has been regarded as global evaluation of the linkage between the individual
employee and organization while perceived organizational support (POS) is viewed as global beliefs concerning the
extent to which the organization values their contributions and cares about their well-being. (Eisenberger,
Huntington, Hutchison & Sowa, 1986).
Myriad research done mostly in the West on linking POS and OC (Tansky & Cohen, 2001; Meyer & Smith,
2000) and other work outcomes such as job satisfaction (Allen, Shore & Griffeth, 2003), and turnover intention
(Eisenberger, Stinglhamber, Vandenberghe, Sucharski, & Rhoades, 2002) to understand the motivation behind
individual behaviors and attitudes. With these findings, the notion of POS and OC are found to be correlated and
accepted as having significant role in enhancing organizational effectiveness.
Such inferences prompt to the allusion of utilizing effective practices that nurture human capital towards
positive relations with POS. Combining social exchange theory (Blau, 1964) and norm of reciprocity (Gouldner,
1960), POS claims the perceptions of employees that organization appreciates their contributions and well-being
would lead them reciprocate with loyalty and extended self dedication to the organization. This deserves further
attention to research to prolong organization-employee relationship, especially for Malaysian organizations that face
high turnover.
Eisenberger and colleagues (1986, 2002) suppose organization would only receive favorable responses
from employees if employees believe their socioemotional needs are fulfilled. Human behaviors driven by
motivation and needs are then come into consideration. Alderfer’s ERG theory (1972) classifies existence,
relatedness, and growth needs to describe human needs. Existence needs refer to physical well-being and job
security located in the lower hierarchy, followed by relatedness needs such as satisfactory relations with others in the
workplace (love and self-esteem) in the middle hierarchy, topped by growth needs which refer to the development of
competent skills and the realization of one’s potential.
With underlying context of ERG theory, this research applies perceptions of supportive human resource
management practices (HRMP) that satisfy socioemotional needs for employees. HRMP play a role in developing
and maintaining the inferential exchange relationship between employees and organization (Ogilvie, 1986). This is
proven by various theoretical and empirical human resource management literatures (Ulrich, 1997). Gaertner &
Nollen (1989) empirically reported employees’ commitment was related to both actual and perceived HRMP,
including career related developments and opportunities. Paul & Anantharaman (2004) reported total approach to
compensation, career development and work environment activities strongly associated to affective commitment

1226
(AC). Thus, researchers have recognized the strength of HRMP towards positive attitudinal and behavioral outcome.
Extended studies reported strong positive correlations with AC for desirable work behaviors and
performance (e.g. performance, attendance, and turnover) (Jaros, 1997; Meyer, Allen & Smith, 1993; Paul &
Anantharaman, 2004). Allen and Meyer (1990) classify AC as emotional attachment to, identification with, and
involvement in the organization. This study adapts AC as the final work outcome for the proposed research model in
relation to examine the effects of HRMP and POS because of its impact on loyalty and organizational effectiveness
(Mowday, 1998).
Although these studies suggest that HRMP are related to OC, there are queries to examine whether these
relations are direct or unconditional. Organizational support theory regards OC as one of its important favorable
outcomes, inviting researchers examine their relationship. Meyer & Smith (2000) adopted a broad aspect of HRMP
with overall organizational commitment to examine the mediating effect of POS and procedural justice. Rhoades,
Eisenberger & Armeli (2001) suggest rewards, procedural justice, and perceived supervisory support and AC are
mediated by POS.
It brings question on which HRMP are deemed to be suitable to be examined to understand the mechanism.
Considering POS emphasizes two important factors: employees’ contribution and organization caring, this points to
the consideration of understanding how to recognize employees’ efforts and extended parental role by organizations.
Shore & Shore (1995) identified two types of key HRMP to nurture POS: (1) discretionary practices that imply
organizational caring but are not mandated by company policy or union contract, (2) HRMP that symbolize
organizational recognition of the employees’ contributions.
Accordingly, HRMP associated with ERG needs and work appreciations are invited to the studies of
antecedents for POS, namely: family-friendly policies, pay satisfaction, supervisory support, internal promotion, and
career development opportunities.
There are tremendous studies conducted in the Western context, while research on POS in Asian countries
is yet to be explored. This study wishes to fulfill the following objectives: (a) to probe for and identify effective
antecedents of POS and, (b) the mediating role of POS between HRMP that fulfill socioemotional needs of
Malaysian employees. Targeting knowledge workers, this study wishes to fill the gap of HRMP to AC by
ascertaining the applicability of POS in collectivistic cultures by undergoing a survey in medium enterprises in
Malaysia.

Literature Review and Hypotheses

Rhoades, Eisenberger, and Armeli (2001) emphasize the relevance of fulfilling needs for esteem, approval, and
affiliation to the incorporation of organizational goals and membership, and extending voluntary self effort. This
provides support to the recognition of motivational theory found in Alderfer in explaining the needs for existence,
relatedness and growth to the bond of employees and organization.
As such, this research agrees overall satisfaction on rewards is pivotal to satisfy employees’ physiological
needs. Reward often reflects distinct tangible support on how organization considers support and care to their
employees to live comfortably. Using different approach on rewards satisfaction, this study examines the overall
pay, benefit package provided by the company, pay raises and structures to assess organizational support. This is
considered important as pay has been regarded as multidimensional (Heneman & Schwab, 1985), and deserved a
wider aspect in relation to support and recognition by organization.
Apart from monetary reward, this research regards intangible reward such as career development
opportunities, supervisory support, and family friendly policy at work are relevant to fulfill relatedness needs.
Employees believe an organization is committed to them by investing in training and providing welfare to
employees. As an agent of organization (Levinson, 1965), favorable supervisory support also indicates preference
from the senior management and organization. These factors could be easily related to employees thirst for needs in
fulfilling social and external esteem. Lastly, this paper suggests internal promotion is related to the fulfillment of
self-actualization located in the highest hierarchy of need. Through formal promotion, employees’ performance is
recognized and actually rewarded, indicating the company’s commitment to its human resources.

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 Three studies on HRMP are found to be related to employees’ commitment. Ogilvie (1986) found
promotion, merit-system accuracy and fairness of promotions have influences on commitment. Gaertner & Nollen
(1989) reported perceptions of internal promotion, training opportunities, and employment security are related to
commitment. Recently, Paul and Anantharaman (2004) suggested employee-friendly work environment, career
development, total approach to compensation, development-oriented appraisal, and comprehensive training had very
high positive relationship with affective organizational commitment to IT workers in India. The above investigations
support these selected HRMP fulfill the needs of today’s knowledge workers in exchange with strong identification
to organizational values and goals, and more willingness to extend extra effort, and continued membership with the
organization. Hence the following hypothesis is mentioned:
Hypothesis 1: ERG Related HRMP are Positively Related to AC
Organizational support theory (Eisenberger, Huntington, Hutchison & Sowa, 1986) postulates POS is heightened
when employees believe they benefit from organizational rewards and favorable job conditions that are free from
organizational policies external constraints such as union negotiations and governmental regulation. Given the
underlying concept, HRMP pertinent to ERG theory could be inferred to relate to POS as to AC.
Mutual reciprocity begins when one party receives support or assistance from other party. An implicit
psychological bond connects employees and organization together on what they ought to repay to the other party
when one receives favorable backups. This mutual gratification exchange maintains a stable social system, arguably,
leads to durable employers-employees relationship. Armeli, Eisenberger, Fasolo, and Lynch (1998) reported the
association between POS and performance was greater among employees with high socioemotional needs. While
ERG theory helps clarify employees’ need in an organization, it further assists in exploring the possibility for
organization to enhance POS.
A review of more than seventy POS studies (Rhoades & Eisenberger, 2002) reported supervisory support,
pay and promotions, and training found as antecedents to POS. These factors are in line with ERG theory acting
pertinent factors to the antecedents of POS. In light of activities for organizational support, this research uses
employees’ perceptions of ERG related HRMP to explore the effectiveness of POS towards AC.
In light of existence, relatedness and growth needs, this research regards family-friendly policies, pay
satisfaction, supervisory support, internal promotion, and career development opportunities are catered specifically
to individuals without external legal influence. Hence, the second hypothesis is:
Hypothesis 2: ERG Related HRMP are Antecedents of POS
Voluminous studies reported that POS and AC are strongly associated yet empirically distinct (Shore & Tetrick,
1991; Wayne, Shore and Liden, 1997; Meyer & Smith, 2000; Allen, Shore & Griffeth, 2003). AC and POS also
found to have similar antecedents. But little evidence has been given to why POS and AC have similar antecedents
and consequences.
Further investigation in antecedents for AC suggests the nature and strength of HRMP might not be as
effective as how employees perceive such practices. Gaertner and Nollen (1989) reported variance explained by
perceived employment practices (61 percent) expressed better than actual employment experiences (53 percent) on
OC. This suggests perceptions on HRMP have stronger effect on AC. Relatively, Paul & Anantharaman’s (2004)
overall HR package predicted 41 percent variance on OC.
Ogilvie (1986) distinguishes employees’ perceptions of HRMP reflect a sense of reciprocity and the level of
concern that the organization appears to distribute to employees, while HRMP are concrete, tangible programs. He
found that employees’ perceptions of HRMP explained 48 percent of OC. Even after controlled for personal and
work characteristics, evidence showed the predictability of merit rating system and promotions to OC. This provides
suggestion that the relationship of HRMP and AC are not unidirectional. The underlying psychological and
exchange approaches enhance the possibility of placing POS as the mediator in this research.
The variance explained to AC recorded in previous studies, together with Ogilvie’s findings strongly
demands the needs investigate the mechanism that could better explain the mediating role of POS between HRMP
and AC. Departing from cognitive perspective, this research concerns the mechanism of employees’ socioemotional
needs in connection to AC. The existence, relatedness, and growth needs are deemed important for today’s
knowledge workers, who are sufficient in academic training with given autonomy to handle challenges at work.
Associating the above mentioned factors, this study further examines the mediating role of POS in the following

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hypothesis:
H3: POS Mediates the Relationship Between ERG Related HRMP and AC

Method

Sample and Procedures

Knowledge workers are generally defined as those work for a living at the tasks of developing or using knowledge
(Drucker, 1993). It is believed that through a certain level of academic or vocational training, such workers are
capable at the tasks of planning, acquiring, searching, analyzing, organizing knowledge and contributing new ideas
at work. Giving such definition, the sample is limited to workers that are professionally, academically or
vocationally trained, able to utilize their knowledge to achieve goals for their department and organization. Hence,
AC is critical to this group of workers as affectively committed workers are willing to extend their extra effort, stay
with their organizations, believing and embedding their own values and goals to the organizations’. In return, they
are also thirst for personal growth and development for relatedness needs.
Survey was carried out in September to early December 2006. A cover letter attached with survey forms in
English was delivered to HR managers through the database of a professional publishing company to acquire
consent for the survey. Since previous studies used English language for Malaysian samples (Lim & Itakura, 2003;
Sheppard, 2001; Westwood and Everett, 1995) and English is an accepted medium used in public and private sector
for Malaysia, this survey was prepared in English.
Four HR managers from financial services, information technology, manufacturing, and education were
invited to participate. 1021 employees from the four companies approached. 329 out of 367 replied surveys were
found usable for analysis. A respond rate of 36 percent is considered good as Malaysians are not keen on such
cooperation (Westwood & Everett, 1995). Of all, 17.5 percent Malays, 68.7 percent Chinese, 10.3 percent Indians,
2.1 percent expatriates, and 1.5 percent of other ethnics participated in the study.
Due to the definitions of knowledge workers, respondents are strictly categorized by work experience,
education background, job position, and industry type. Financial service company topped the list with 28 percent
respondents, IT with 25 percent, manufacturing contributed 24 percent and 23 percent by education institution. In
total, 58 percent female, average age reported at 31 (SD = 6.8) and average organizational tenure was 4.2 years (SD
= 4.8). Respondents have average 8.1 years working experience (SD = 6.4). 46 percent are graduated in bachelors,
41 percent trained with professional or vocational qualifications while 13 percent completed post graduate program.
60 percent of the employees reported single. Sample organizations are locally set-up, ranged from 100 to 300
employees, which are considered as medium enterprises.

Measures

Questions were designed to measure employees’ feelings at individual level. All the measures were measured using
7-point Likert-type scale (1 = strongly satisfied/disagree; 7 = strongly dissatisfied/disagree).
ERG Related Human Resource Management Practices.
Five ERG theory related HRMP selected for investigation in this hypothesis: pay satisfaction, family-friendly policy,
internal promotion, supervisory support, and career development opportunities.
1. Pay Satisfaction. Six items reworded from Heneman & Schwab (1985) were used to ask to what extent the
satisfaction with employee’s pay conditions. To better understand which level is most preferred, this study
included four elements of pay include pay level, pay benefits, pay raise, and pay structure/administration.
2. Family-friendly Policy. Five items were adopted from Judge, Boudrea, & Bretz (1994) to measure the degree of
organizations supporting balance work and family demands for knowledge workers. It portrays the level of
organizations care about their employees’ welfare and support from family.
3. Internal Promotion. This study adopted three items from Gaertner & Nollen’s measure (1989). Questions
included preferences to promote within, placing people to new jobs rather than hiring from outside.
4. Supervisory Support. Eight items taken from London (1993) to ask the empowerment, trust and respect, and

1229
 career and performance feedbacks given by their immediate supervisor. Questions such as “your supervisory
jointly sets performance objectives with you”, “your supervisor helps you develop career plans”, and “your
supervisor gives you the authority you need to do the job” are used to examine level of support and recognition
from supervisors. A study of Korean hospital employees showed noticeably difference on supervisory support as
organizational support. Under the umbrella of Asian culture, this study expects to see high correlations between
supervisory support and POS to the importance of social integration.
5. Career Development Opportunities. Four items adopted from PhD thesis developed by Liu Wei (2004) to
measure long-term career development and career goals. Examples are ‘in the long run, my organization will
facilitate me accomplishing my goals’ and ‘my organization takes steps to insure that I maximize my career
potential’.
Perceived Organizational Support (POS).
Previous studies surveyed different occupations and organizations provide high reliability and unidimensionality of
the survey of POS (Eisenberger, Huntington, Hutchison, & Sowa, 1986; Rhoades & Eisenberger, 2002; Shore &
Tetrick, 1991). To assess employees’ perceptions about their contributions and well-being, ten items with highest
loadings were selected equally in regards of the two sections (employees’ well-being and contribution).
Affective Organizational Commitment (AC).
The attitudinal approach is considered appropriate for today’s knowledge workers. Utilizing the constructs
developed by Allen & Meyer (1990), this study adopted five items to explore employees’ commitment. “I would be
very happy to spend the rest of my career with this organization”, “I do not feel emotionally attached to this
organization (reverse scored)” and “I really feel as if this organization’s problems are my own” were included in the
survey.
Control variables. Age and marital status are added to AC as control variables, as these two variables
would affect AC according to previous literatures. Following Rhoades and colleagues’ study (2001), this study also
controls tenure for both POS and AC in the structural equation.

Results
Means, standard deviations, Cronbach’s alphas and correlations are shown in Table 1. The correlations are based on
the maximum sample available for each combination of variables. Samples were tested separately using structural
equation modeling (SEM). The similarity among samples resulted into combined report presented in Fig. 1 using
maximum likelihood parameter estimates with AMOS.
Table 1 showed support for hypothesis 1. All the HRMP are positively related to affective organizational
commitment and significant at .01 level. Results for Hypothesis 2 are presented in Fig. 1. Fig 1 also prepares the
first stage to test the mediating effect for POS. Family-friendly policy is found not related to POS, resulting partial
support for hypothesis 2.

TABLE 1: MEANS, STANDARD DEVIATIONS AND CORRELATIONS

In testing the mediation effect, this study applied techniques recommended by Baron and Kenny (1986).

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Four conditions need to be met in testing the mediator: (a) the independent variable must be related to the dependent
variable; (b) the independent variable must be related to the mediator; (c) the mediator must be related to the
dependent variable; and (d) the independent variable must have no effect on the dependent variable when the
mediator is held constant (full mediation) or should become significantly smaller (partial mediation).
Following Anderson and Gerbing’s (1988) approach, this analysis proceeded with comparison of
hypothesized model to a series of nested models through chi-square difference tests (Bentler & Bonett, 1980) and
goodness-of-fit indices. Goodness-of-fit measures were examined such as: the Tucker Lewis Index (TLI; Tucker &
Lewis, 1973), the comparative fit index (CFI; Bentler, 1990), the goodness-of-fit index (GFI; Jöreskog & Sörbom,
1993), and Root Mean Squared Error of Approximation (RMSEA; Steigner, 1990; Browne & Cudeck, 1989). GFI
were all above the recommended .90 criterion (Medsker, Williams, & Holahan, 1994); TLI that is greater than or
equal to .96, CFI that is greater than or equal to .96, and RMSEA is less than or equal to .06 (Hu & Bentler, 1999) to
show the parsimony adjusted fit indices for the overall model fit. Table 3 showed the hypothesized model 1 as
complete mediated effect by POS at acceptable scores [χ2(18)=66.556, p<.001, TLI=.0910; CFI=.955; GFI=.960;
RMSEA=.091].
The hypothesized model was then compared with other nested models with constrained or unconstrained
paths. Unconstrained path is to set free the parameter(s) or a path is estimated. Under these conditions, a comparison
of any two sequential models serves as a test of the importance of the restricted parameters. The sequence of model
comparisons continued until one rejects the hypothesized model, at which point the alternative model with the
constrained or unconstrained parameters was tentatively accepted. The chi-square differences are compared. The
significant in chi-square differences suggest that the added paths compare to the hypothesized model are meaningful.
If the change of chi-square provides significant in an unconstrained model compared to the hypothesized model, the
unconstrained model is superior over the hypothesized model because it suggests the added path(s) are meaningful
to the model. If the change is not significant, the hypothesized model is a better fit because of parsimonious
(Anderson & Gerbing, 1988).

Pay Satisfaction
.18***

Family-friendly .01 .09†

Policy Affective
Perceived Commitme
.12* Organizatio
Internal Promotion * .30*** nt
nal Support
.30***
Supervisory
Support .30***
.34***
Career
Development
Opportunities FIG. 1: FINAL MODEL AND RESULTS OF AMOS ANALYSIS
†p< .1, **p< .05, ***p< .001
Fig. 1 shows support for second and third conditions for mediating effect for POS to AC. All the HRMP
except for family-friendly policy are serving antecedents to POS, and POS is significantly predicting AC in a
positive direction.
To examine the fourth condition, Table 2 shows the result for each model comparison. Model 2 to 5 tested
the partial mediating effect for overall pay satisfaction, internal promotion, supervisory support and career
development opportunities. The parameter for Family-friendly policy was constrained to zero in all the nested

1231
models because of its poor regression results to POS. All the paths from antecedents to AC were added to compare
with Model 1.
Model 6 scored [χ2(14)=17.881 (p>.05) suggesting a better initial model fit compared to Model 1. To assess
whether Model 6 was the best depiction of the data, a chi-square difference test procedure was carried out with other
alternative models. As can be seen in Table 2, Model 6 showed significant improvement compared to rest of the
nested models. Thus, Model 6 is retained as the best fitting model. Standardized parameters are shown in Fig 1.
Results of Model 6 showed POS fully mediates internal promotion and supervisory support with AC, while
partially mediates pay satisfaction and career development opportunities with AC. Hypothesis 3 is partially
supported.

TABLE 2: RESULTS OF MODEL COMPARISONS

Discussion

The full mediating effect on internal promotion and supervisory support by POS to AC indicated three different
perspectives: 1) knowledge workers are looking for the highest hierarchical needs, the urge of self improvement and
self actualization; 2) employees regard supervisory actions as personified message of favorable and unfavorable
orientation towards employees, resulting employees’ affectionate actions with their serving organization; 3) internal
promotion strongly indicates discretionary, fair evaluation, and recognition from organization on individual efforts
and performance. The results further support Rhoades & Eisenberger’s (2002) and Wayne, Shore, & Liden’s (1997)
evidence of promotion as part of organizational rewards acts as antecedents of POS, in turn, foster stronger
reciprocal attachment and identification to the organization.
As supervisors are responsible for performance feedback and appraisal to employees and report these
feedbacks to senior management, they can be viewed as important middle person to reflect and influence
organizational views on employees. Similarly, supervisor plays an important role in providing career related
opportunities such as career related advice, extending career related network, providing training or promotion
opportunities to employees. Social exchange’s approach to commitment (Hrebiniak & Alutto, 1972) postulates that

1232
the more favorable the rewards and experience of an employee, the more employee becomes willing to offer in
return. Thus, supervisor’s positive influence combined with organizational decisions reveals more personal,
discretionary form of decision to cater employees, in return, invoke stronger social exchange and reciprocity from
individuals back to organization.
Extending previous studies found in Yoon & Lim (1999) and Ogilvie (1986), this study fills the gap
between supervisory support and commitment with POS. The result corroborates in the consistent prediction of
supervisory support as one of the salient organizational support in the literature, with empirical studies by four
industries in Malaysia (Rhoades, Eisenberger, & Armeli, 2001, Rhoades, & Eisenberger, 2002).
POS acts as partial mediating effect for pay satisfaction and career development opportunities to predict
affective commitment. Malaysian knowledge workers are not likely to consider pay as a critical role to influence
their perceptions of organization. This is shown by marginal significant overall pay satisfaction towards POS (b=.09,
p<.1) and AC (b=.18, p<.001). From the hierarchy needs point of view, pay is viewed as fundamental support to
employees’ physiological needs, and will certainly reveal certain form of reciprocal commitment with calculative
comparison to work with other organization. However, organization needs to go beyond remuneration package to
show further recognition and appreciation to employees.
Partial mediation effect for career development opportunities (b=.30, p<.001) may suggest organizations
need to provide strategic, intensive and result-oriented program that could effectively raise employees’ performance
and lead them to another level of responsibility and challenge at work. Knowledge workers are in the urge to handle
complexity of tasks with strong analytical skills to creativity and problem solving. Organizations that equipped with
fair, reliable assessment procedure to select qualified workers for result-oriented training would be deemed as
extending concern by foster employees’ ability at work.
Overall, this study contributes to the literature in a few ways. Employee perceptions of HRMP evidently
enhance POS towards identification and affective attachment to their organization. Four HRMP explained 51 percent
variance of POS, indicating the ERG related HRMP are deemed important tools for HR practitioners to portray care
and support to organizational members. Consequently, variance explained by POS alone towards AC recorded 41
percent in this study, suggesting the strength of POS in elevating AC is justifiable to combined HRMP in other OC
related studies (Ogilvie, 1986; Gaertner & Nollen, 1989; Paul & Anantharaman, 2004). This study invokes the
importance of individual confidence and trust with the management actions against employees.
Secondly, this study systematically selected HRMP that satisfy employees’ needs based on three levels of
motivation, namely physiological (existence), relatedness, and growth needs that apply to knowledge workers across
four Malaysian industries. Employees reciprocate organizational aid and benefits when their needs are satisfied with
stronger emotional attachment to organization. When such attachment is formed, employees would repay their well
treatment by internalizing organizational goals as theirs, extending extra effort, and resuming membership with the
organization. Corroborating to Gaertner & Nollen’s (1989) study, perception of organizational inherence relates to
career-oriented employment practices, further increase employees’ commitment to organization. The results
indicated the importance to staffs retention to first understand and satisfy their internal orientation needs. Giving
four HRMP closely link to career development, HR practitioners in Malaysia need to tailor specific goal-oriented
HRMP to different career stages for ambitious knowledge workers to maintain and develop active form of
commitments.
On the social context, Malaysian workers with its multicultural conformity across industries tend to show
strong collective and relationship orientation. They preferentially seek career success from building good (harmony)
relationship with colleagues and supervisors, forming “in-group” with trust and loyalty (Hofstede, 2001; Abdullah,
2001). Smaller firms with less hierarchical levels enable employees identify their supervisors with organizational
characteristics. Supervisory support enhances the natural tendency of integration of organization members into
organizational authority, ensuring loyalty to the organization (Abdullah, 2001).
Results demonstrated supervisory support has important implications for the affective emotional attachment
of subordinates bring into their organization. Apart from collectivist society, Malaysian professional workers regard
supervisory support as an integral part of social relationship, followed by economic exchange. This is rather
different from western views of economic exchange surpass social exchange (Becker, 1960; Yoon & Lim, 1999)

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Limitations and Future Research

The inconsistency result for family-friendly policy in relation to POS deserves further investigation to understand
reasons and mechanisms that is necessary to extend organizational support and care. Although family-friendly policy
is regarded as one of the important element to meet emotional support with provision of care, it does not bring much
effect to the increasing dual-working Malaysian knowledge workers. Family-friendly policy might not be as
important as other needs as compared to self actualization needs that aid career progress.
Second, this study was assessed using self-report measures. It might raise the possibility that the variables
reflect shared response biases. However, the result has considerable variability across HRMP with POS and AC in
the inter-correlations values. Such measures are then convinced that the respondents were making clear
discriminations when they are answering the survey.
Third, the data on human resource practices were recorded by one source. The reliability and validity of
one person’s perceptions could not be verified. However as the data collected from different industries, such bias
could be minimized. It is hoped that future studies incorporated company records and managerial responses to have
clearer comparison between HRMP that deal with comparison of perceptive and actual pay, promotion, career
development opportunities, and supervisory support.
Fourth, the respondents are relatively young (M=31, SD=6.8) and single (60 percent). While they are young
and ambitious with their career, it is not surprising to regard career related supervisory support that link to growth
opportunities and promotion as important organizational support than other related HRMP. A study involving
respondents with more experienced workers would be able to examine the validity of supervisory support as
important organizational support, apart from cultural reason.
Finally, in spite of considerations of all hierarchical needs covering existence, relatedness, and growth
needs, the other HRMP are yet to be distinguished to fully explain the variance for POS and AC. Although the four
HRMP explained 51 percent of POS, there are some other important human resource practices that could confide
employees as support and hence foster stronger bond to the organization. While other work outcomes are far to be
reached in this study, future research should include performance record and actual turnover record that show the
benefits of strategic, goal-oriented organizational supportive activities. This could elevate employer-employees
relations from purely psychological dimensions to a practical, results-oriented approach.

Conclusion

The salient role of POS as mediator for human resource management practices and affective commitment is a
practical insight for the HR practitioners in Malaysia. For young knowledge workers, they are looking for higher
needs such as self-esteem and self actualization rather than physiological needs. Organizational support could be
best portrayed when employees feel that their socioemotional needs are fulfilled, thus, reciprocate with loyalty and
extension of work effort to the organization. The findings revealed the importance of implementing goal oriented
policies that first satisfy employees’ internal needs. To the best of the author’s knowledge, this is the first study that
examines the association between internal needs, perceived organizational support and affective commitment using
four industries from Malaysia. Through more research, the role of supervisory support can be examined in detailed
form to better understand the connection between social support in a multicultural working environment and variety
of organizational settings. This study explores the first step, but leaves further questions for HR practitioners and
future research.

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 References

Contact author for the list of references.

1235
Some Antecedents of Organizational Commitment: A Study on Employees of the Technical
and Non-Technical Sector

Ibrahim Ali, ibrahim@kms.uniten.edu.my

Ida Irdawaty Ibrahim
Universiti Tenaga Nasional
Bandar Muadzam Shah
Pahang, Malaysia
Juhary Ali, juhary@uum.edu.my
Universiti Utara Malaysia, Sintok, Kedah

Abstract

The main objective of the study was to develop an understanding of the major antecedents that contribute to the variance
in employees’ commitment to an organization. It was significant to establish the relationships in order to ascertain
whether the three dimensions of organizational commitment was desirable, and which of the three dimensions can be
strengthened. The study was conducted on 136 employees of a power utility in Malaysia—both the technical and non-
technical groups of employees. Statistical analyses were utilized to establish whether there were significant relationships
between the selected antecedents and the three dimensions of organizational commitment—affective, continuous, and
normative commitment. Organization implications were then identified, and recommendations were suggested for
appropriate human resource management policies and practices. Keywords: Organizational commitment, affective,
continuous, and normative commitment, antecedents.

Introduction

This paper examines some of the antecedents of organizational commitment among employees in two different job
classifications—the technical and non-technical employees working for a power utility company. It examines the
three dimensions of organizational commitment—affective, continuance, and normative commitment, identifying
which, among the three components could be further strengthened for the purpose of enhancing employees’
performance. Not much has been mentioned in the literature with regard to studies that examined the relationship of
organizational commitment and job classification as its antecedents, although some has included job characteristic as
an antecedent to organizational commitment (e.g., Allen & Meyer, 1990; Steers, 1977). Examining job classification
as an antecedent therefore, will be able to add and update most, if not all the antecedents in its relationship to
organizational commitment.
Organizations are concerned on employees’ loyalty and commitment, when employees can be expected to
change their behaviors at the workplace, especially in a situation when incentive of security is no longer available
from the organization. Handy (1989) expresses this concern when predicting the secure and long-term employment
to become a less significant aspect of future careers—and for many employees, it is already an unrealistic objective
(Hartmann & Bambacas, 2000). In this context, Hircsh (1987) predicts a lesser level of commitment due to the
uncertainty in employment for individuals that result in the need for self interest and career management. The
prediction is concurred by the suggestion that employees who remain with the organization after downsizing
indicate strong organizational commitment (Long, 1995).
Organizational commitment has been regarded as one of the important construct in the organizational
behavior literature because of its impact on employees’ performance. Employees’ with low commitment is regarded
to be costly that deserves the attention of the management (Ward & Davis, 1995). The importance of organizational
commitment for an organizational study is also concurred by Benkhoff (1997) citing the reason for its importance to
be one of the most popular research subjects—i.e., the assumed impact on performance, in which effective employee
performance is the ultimate outcome of and purpose of commitment (Maxwell & Steele, 2003).

1236
 Although there were several studies examining organizational commitment in its relationships with many
other factors—e.g., job satisfaction, turnover, organizational performance, and productivity, yet the effect of
commitment on performance is still largely assumed and not conclusive. As Benkhoff (1997, p.702) has pointed out,
“researchers have not been able to come up with evidence that commitment and performance go hand in hand”.
Apart from various examinations on organizational commitment relationships with other attitudinal constructs,
organizational commitment has been also been examined in terms of its relationships with its antecedents (e.g.,
Stallworth, 2004). Varied antecedents of organizational commitment have been examined in various
classifications—personal, job, and organizational (Allen & Meyer, 1996; Mathieu & Zajac, 1990), and structural
characteristics (Mowday et al., 1982) because they were quite diverse in their nature and origins (Steers, 1977, p.53).
Among these researches, many focused on factors that employees felt the organization was supportive and
employees were valued (Meyer & Allen 1997), which were labeled as ‘employee-focused’ (Bridges & Harrison,
2003). The present study however, concentrates on job classification which belongs to the job characteristics
classification, because of two reasons: Firstly, because of dearth in research to examine job classification as the
antecedent, and secondly, because of the organization that segregated technical from non-technical employees when
dealing with compensation. Technical employees need to have technical skill and competencies to perform specific
duties compared to those of the non-technical employees who perform simple, day-to-day routine work. Technical
employees were perceived to have a mechanistic-type of attitude compared to those the non-technical employees
that were perceived to be more humanistic. Based on the premise that these two categories of employees differ in
nature of job role and attitude, therefore we believed that this job-related characteristic is significantly predictive to
organizational commitment and influenced the variance of commitment between job classification.

Literature Review

The study adopts Meyer and Allen’s (1991) model of organizational commitment that consists of the three
organizational commitment dimensions—affective, continuance, and normative. Affective commitment refers to the
employees’ emotional attachment to the organization, and in essence, with affective commitment, employees stay
with the organization because they want to. Affective commitment means that employees have emotional attachment
with the organization, and in order to achieve this attachment, organization has to help employees to value
participation. Recognition, special rewards, and respects demonstrated by managers and supervisors are some of the
factors that contribute to greater affective commitment. If employees look at themselves as part of the organization,
and the more employees value themselves being part of the organization, the more likely they tend to remain with
the organization, such as job satisfaction and negatively related to intention to quit, burnout, and lower self-esteem
(Sethivikram, Kingrking, & Sethiavsethi, 1996).
The second dimension of organizational commitment is the continuance commitment, which is based on
the costs that employees are associated with leaving the organization, i.e., employees stay because of comfort and
because they have to. Continuance commitment is linked with employees’ obligation to remain with the
organization because of benefits and perks they receive. This type of commitment helps to reduce turnover and not
to increase their affective commitment, but just because they cannot afford to do so.
The other dimension of organizational commitment is the normative commitment, which refers to
employees’ feelings of obligation to remain with the organization—i.e., employees stay because they feel that they
have to do so. Employees in this type of organizational commitment remain with the organization because of their
beliefs in that it is the right and moral thing to do (Weiner, 1982, p.429).
Review of literature indicates that organizational commitment is linked to various antecedents ranging from
the personal to the organizational characteristics. The organizational commitment construct is important because it
relates to the organizational success in terms of employees’ performance, absenteeism, and turnover. Although there
seems to be a little consensus concerning the way it is defined, most researchers conceive organizational
commitment as involving some form of psychological bond between people and organization (Camilleri, 2002).
Allen and Meyer (1990) conceptualize organizational commitment as multidimensional that is made up of three
components or dimensions—affective, continuance, and normative.

1237
 Several studies over the years have linked organizational commitment with performance, identifying
factors that distinguish specifically between the three dimensions of organizational commitment that would shed
greater light for the management to focus. Given the issues around the need to retain employees especially those
with respective job competencies, this study is expected to put some recommendations on which aspects of
employees’ attachment could be strengthened. Organization needs to retain good and competent employees because
finding new employees of equal ability and job experience is difficult, especially those the organization had trained
with relevant job-competencies and skills. According to Steers (1977, p. 47), the nature and quality of work
experience that employees gathered during their tenure in the organization influences employees’ commitment to the
organization. Personal characteristics, job-related characteristics, work experiences (Steers, 1977), and structural
characteristics (Mowday at el, 1982) were four of the organizational commitment categories that were argued as
influential.
Camilleri (2002) summarized the findings from the literature review regarding the relationships between
organizational commitment and antecedents to include position tenure, age, gender, education level, family life
cycle, individual character, and role states. In line with the study, this present study attempts to examine the
relationships of some of the employee’s personal characteristics that were considered in previous research as the
antecedents—i.e., employees age, gender, marital status, length of service, education, and position (e.g., Beck &
Wilson, 2000; Karrasch, 2003; Lok & Crawford, 2001), besides job satisfaction that has been cited in previous
literature as the antecedent to organizational commitment. It has been contended that employees with a broad job
scope tend to have a higher commitment because of the wider range of duties and responsibilities assigned to them
(Allen & Meyer, 1990; Steers, 1977; Stevens et al., 1978). When employees experience more challenges in the
organization, they become more committed.
Based on the review of the literature, this study examines the employees’ personal characteristics and job
satisfaction as antecedents to organizational commitment—examining a group of employees from two different job
classifications, with the assumption that there is a mean difference of organizational commitment between the two
classifications of employees. Figure 1 illustrates the research framework from which the following hypotheses are
developed:
1. Age: Older employees have higher degree of affective commitment. This is based on the premise that older
people tend to have a stronger sense of belonging to the organization they work.
2. Gender: Females tend to have lower degree of organizational commitment. In many studies, it was shown
as women to place a greater emphasis on family role than men. Along the same premise, we also
hypothesize that women are less committed than men.
3. Marital Status: Married employees have a higher degree of organizational commitment. Being bread
winners for the family, married employees tend to be more engaged with the organization.
4. Education: Employees education background affects variance in organizational commitment. This is based
on the premise that employees with lower education level will stick to the organization while those with
higher educational background will look forward for better opportunity.
5. Length of service: Employees with longer services have higher degree of affective commitment.
6. Position: Employee’s position affects variance of organizational commitment. This is based on the premise
that employees who are satisfied with their job position tend to stay while those who do not will look to
quit.
7. Job classification: There is a significant mean difference in organizational commitment for employees of
different job classifications.
8. Job satisfaction: Job satisfaction influences employees’ commitment to the organization.

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 .

Age Job satisfaction

Gender

Marital Status
Organizational
Commitment
Length of Service
• Affective
• Continuance
• Normative
Education

Job Classification

Position

Personal Characteristics Technical/Non-technical

FIG 1: THEORETICAL FRAMEWORK OF STUDY

Methodology

Samples
More than 200 questionnaires were sent out to respective stations either through postal or through representatives of
the stations where survey was to be conducted. Respondents were staff and employees of a power utility operating
its business throughout the peninsular. Respondents were classified into two job classifications—technical and non-
technical. The technical group consisting employees with technical competencies and performing technical duties
(e.g., technician, electrician, mechanics), and they are members of the technical service union, whereas the non-
technical group consists employees of the support services, working mostly in the administration department, and
members of the junior officers’ union. Respondents work at various levels and having different education and
cultural background. However, 151 questionnaires duly completed were returned, and 136 of them were found to be
valid for further analysis. The mean age of samples is 40 years, and the average length of service is between 1 to 10
years. Length of service ranges from less than 1 year (18.4%) to more than 20 years (31.6%). Of the 136
respondents, 54 percent reported to have passed the secondary school examination, 7 percent has higher school
certificate, and 5 percent with college or polytechnic background. 31 percent of the respondents have passed primary
school education only. Table 1 shows respondents’ personal profiles.

1239
 TABLE1: RESPONDENT PROFILES
Gender Nos. (Percentage) Marital Status Nos. (Percentage)
Male 104 (76.5%) Single 18 (13.3%)
Female 32 (23.5%) Married 118 (86.8%)
Age
19-24 6 (4%) Ethnic
25-29 20 (15%) Malay 125 (91.9%)
30-34 17 (12%) Chinese 6 (4.4%)
35-39 15 (11%) Indian 5 (3.7%)
40-44 19 (14%) Others 0
45-49 24 (18%)
50-56 35 (26%)
Education Work Station
Primary School 42 (31%) North 23 (17%)
Secondary School 73 (54%) East 1 (1%)
School Certificate 9 (7%) Perak 1 (1%)
High School Cert. 7(5%) Selangor/Wilayah 14 (10%)
Polytechnics 2 (1%) Melaka/NS 29 (21%)
College Diploma 3 (2%) Johor 3 (2%)
Degree Pahang 65 (48%)
Length of Service Job Classification
<1 year 25 (18.4%) Technical 50 (36.8%)
1-10 years 51 (37.5%) Non-technical 86 (63.2%)
11-20 years 17 (12.5%)
20 years 43 (31.6%)

Measures
Organizational Commitment
Apart from the demographic data, the instruments utilized were based upon proven questionnaires conducted from
previous studies. The three dimensional instrument developed by Allen and Meyer (1990) was adapted to measure
organizational commitment. It uses a seven point Likert scale, the response categories for each item ranged from
strongly disagree to strongly agree. Each item was given a score ranging from one to seven, depending on whether
the respective question has positive or negative impact on organizational commitment. The responses for each item
were then summed up, and the average was calculated to produce organizational commitment score. Organizational
commitment was measured on the three dimensions—affective, continuance, and normative.

Results
Means, standard deviations and reliability coefficients of job satisfaction and organizational commitment variables
are as in Table 2. All variables are in the range between .84 and .96 to indicate respective variables degree of
reliability as acceptable. Means for job satisfaction is 5.30, while affective, continuance, and normative commitment
are 5.36, 5.54, and 5.35 respectively indicating their level of commitment.

1240
 TABLE 2: MEANS, STANDARD DEVIATIONS, AND RELIABILITY COEFFICIENTS OF JOB SATISFACTION AND
ORGANIZATIONAL COMMITMENT VARIABLES
Cronbach’s
Variable Alpha N item N Means SD

Job satisfaction .96 30 136 5.30 .90

Affective
commitment .84 8 136 5.36 .77
Continuance
commitment .89 8 136 5.54 .84
Normative
commitment .89 7 136 5.35 .83
Organizational
commitment .93 23 136 5.42 .71

TABLE 3: CORRELATIONS OF PERSONAL CHARACTERISTICS, JOB CLASSIFICATION, JOB SATISFACTION, AND

ORGANIZATIONAL COMMITMENT
1 2 3 4 5 6 7 8 9 10
Age -
Gender .19* -
Education - -.16 -
.22**
Length of .51** -.16 .12 -
service
Position -.13 -.13 - - -
.30** .56**
Job Class. .08 - - - - -
.31** .27** .38** .44**
Job Satisfaction .04 .01 - - .46** - -
.23** .28** .39**
Affective
commitment .28** .10 -.09 .01 .148 .07 .50** -
Continuance
commitment .07 .00 -.07 -.13 .17* -.10 .49** .61** -
Normative
commitment .06 .03 -.11 -.18* .23** -.13 .54** .65** 63** -
Organizational
Commitment .15 -.03 -.10 -.12 .20* -.06 .59** .86** .86** .88**
Notes. *p < .05; **p < .01

Table 3 shows the result of correlations between the selected antecedents, i.e., the personal characteristics
and job satisfaction and the three dimensions of organizational commitment—affective, continuance, and normative
commitment. Affective commitment is significantly correlated to age (p < 00), position (p < .05), and job
satisfaction (p < .00), while continuance commitment is significantly correlated to position and job satisfaction only.
Normative commitment is significantly correlated to tenure (p < .05), position (p < .00), and job satisfaction (p <
.00). organizational commitment, as a whole is significantly correlated to position and job satisfaction.
Analysis of variance was performed to examine the associations between the selected antecedents and the
three dimensions of organizational commitment—affective, continuance, and normative to demonstrate the
significant effect of each antecedent on the respective organizational commitment dimensions. Table 4 shows the

1241
results of the analysis indicating the significant of respective constructs. Age was found significant (F=3.39, p<.01)
for affective commitment, while gender, marital status, and tenure did not reveal to affect all the three dimensions of
organizational commitment. Employees’ educational background however showed its significant effect on
continuance commitment, while employees’ job position in the organization was found significant to affect
normative commitment. As expected, job satisfaction, the attitudinal factor which was found significant in most
researches was also found significant in this study. The additional antecedent for the study, i.e., job classification
revealed high significant result in all the three dimensions of organizational commitment to denote job classification
factor did contribute as a significant antecedent to organizational commitment. Table 5 shows the levels of
organizational commitment for the two classifications of employees.

TABLE 4: ANALYSIS OF VARIANCE (ANOVA)

Affective Continuance Normative Organizational
Variable commitment commitment commitment commitment
(F-Value) (F-Value) (F-Value) (F-Value)
Age 3.39** .99 .78 1.58
Gender 1.35 .00 .09 .75
Marital status 1.61 .01 .15 .08
Tenure .21 2.08 2.20 1.42
Education 1.76 2.05 1.47 1.92
Position 2.04 2.25 2.90* 2.72*
Job classification 4.19* 6.78** 7.16** 7.37**
Job satisfaction 5.70** 12.90** 62.21** 13.84**
Notes. *p < .05; **p<.01

TABLE 5: LEVEL OF ORGANIZATIONAL COMMITMENT BY JOB CLASSIFICATION

Affective Continuance Normative Organizational
Job Commitment Commitment Commitment Commitment
Classification Mean SD Mean SD Mean SD Mean SD
Technical 5.63 .82 5.68 .85 5.43 1.03 5.61 .81
N-Technical 5.15 .78 5.24 .96 5.05 .78 5.14 .54

Discussion
The study examines some of the selected antecedents of organizational commitment on employees of different job
classifications with the assumption that there was a significant mean difference between employees of the technical
and non-technical professions. The three dimensions of organizational commitment—affective, continuance, and
normative commitment were examined to contribute an understanding, which among the three was the most
significant as it could enlighten the management for further improvisation.
Age was found significant for affective commitment denoting the importance of age factor to play a
significant role in influencing the creation of emotional attachment to the organization. The older employees were
perceived as being more sentimental to their organization than the younger ones. The finding contradicts to the study
of Camilleri (2002) which found age as not the influencing factor towards organizational commitment. The finding
also contradicts to study of Beck and Wilson (2000) indicating tenure as more valid antecedent of commitment than
age.
Gender, marital status, and length of service did not reveal any significance to the three dimensions of
organizational commitment, although other research did show the significant of gender (Grusky, 1966), where
women were posited as more committed than men because of more barriers they had to overcome. Although there
were previous research that focus more on continuance commitment argued that women were more committed than
men (e.g., Grusky, 1966; Hrebiniak & Alutto, 1972), this study did not however reveal any significance, which may
be attributed by the job classification factor—i.e., technical employees that were mostly dominated by men.
However, support to this study came from Mathiew and Zajac’s (1990) meta-analysis of antecedents, correlates, and

1242
consequences of organizational commitment when results from more than twenty studies showed no gender
differences in organizational commitment.
Education was found to be influencing continuance commitment, to support the finding of study conducted
by Camilleri (2002). Being technical in nature, qualification is an important factor for the organization to consider in
determining employees future career path. Employees with qualification that is highly technical and specialized may
have higher expectation for the organization to consider.
Job position was found significant to organizational commitment that is consistent with the finding of study
conducted by Lok and Crawford (2001) indicating position to be positively associated with organizational
commitment. Job satisfaction, the job attitude that is related to employees’ job scope, duties, and responsibilities was
found significant.
The last construct examined in the study was the job classification. The study was conducted mainly on
employees from two different job classifications—technical and non-technical, with the assumption that different
background and nature of job scope did affect the levels of employees’ commitment. Technical employees work in
high technological and structured environment where automation and workflow integration influence people’s
behavior at work. Grayson (1993) for example, examined the relationship among skill, autonomy, and technological
change, and found that those who characterized their jobs as skilled were more likely to report on technology to
influence their work.
Results of this study too, showed quite highly significant for job classification as an antecedent to
organizational commitment. Technical employees seem to demonstrate higher level of commitment compared to
those of the non-technical employees. Technical employees are skilled, competent, and trained to perform their job,
while non-technical employees such as the clerical officers and support staff are not really required to have specific
training to perform their routine office duties. Knowledge, training and clear career path experienced by technical
employees through services in the organization, besides other factors such as higher pay and rewards were some of
the contributing factor for exchanging to commitment for this type of job classification, i.e., technical employees.
The result concurs my previous study conducted on employees at power plants (Ibrahim, 2003), in which the study
that examined the interaction effects of technology and structure on affective commitment which revealed high
affective commitment to derive from the interaction of high level of structure and high level of technology employed
by the organization. What the study indicated was that technical workers involved with high automation and
workflow integration—i.e., technology factor, were found to be more committed than those involved with low
automation and workflow integration.
The study thus had accomplished its objective in examining job classification— technical and non-
technical as an antecedent of organizational commitment—examined from the job-related perspective, besides the
personal characteristics (Steers, 1977). There were two major implications that the organization has to consider. One
is the age factor whereby older employees were found to have higher affective commitment than the younger while
different job classifications influenced the levels of commitment. Compensation packages, training programs, and
job enrichment were among the human resource management factors the organization has to consider. The
organization has to consider the role of employees from the non-technical sector as well as equally important to the
technical—serving as support staff in the administration and management process towards achieving organizational
goals—organizational performance. Based on the finding, organization has also to consider employees’ age. Age
and job performance relationship had been an issue of importance on the premise that older employees brought with
them positive qualities—specifically experience, judgment, strong work ethic, and commitment to quality. In a study
that was based on age-turnover relationship, it was concluded that older workers were less likely to quit their jobs
(Rhodes, 1983). Therefore, organization has to consider whether it is necessary to increase the age limit for
optimizing performance. Reichheld (1996) who was concerned on loyalty suggested it—age as one of the great
engines of business success. As expected job satisfaction is significant to antecedent of organizational commitment.

1243
 References

[1] Allen, N. & Meyer, J. (1990). The measurement and antecedents of affective, continuance, and normative
commitment to the organization. Journal of Occupational Psychology, 63, pp.1-18.
[2] Bek & Wilson (2000).
[3] Benkhoff, B. (1997). Ignoring commitment is costly: new approaches establish the missing link between
commitment and performance. Human Relations, 50 (6), pp.701-26.
[4] Grusky, O. (1966). Career mobility and organizational commitment. Administrative Science
Quarterly, 10 (4), pp. 488-503.
[5] Camilleri, E. (2002). Some antecedents of organizational commitment: Results from an Information
Systems Public Sector Organisation. Bank of Valetta Review, 25, Spring 2002.
[6] Grayson, J.P. (1993). Skill, autonomy, and technological change in Canada. Work and Occupations, 20, pp.
23-45.
[7] Handy, C. (1989). The age of unreason. Cambridge, MA: Harvard University Press.
[8] Hircsh, (1987).
[9] Hartmann, L.C., & Bambacas, M. (2000). Organizational commitment: A multi method scale analysis and
test of effects. International Journal of Organizational Analysis, 8, pp. 89-108.
[10] Hrebeniak, L.G. & Alutto, J.A. (1972).personal and role-related factors in the development of
organizational commitment, Administrative Science Quarterly, 17, pp. 555-572.
[11] Ibrahim, A. (2003). Some interacting contextual determinants of organizational effectiveness in power
generation industry. Unpublished thesis. Penang: Universiti Sains Malaysia.
[12] Lok, P & Crawford, J. (2001). Antecedents of organizational commitment and mediating role of job
satisfaction. Journal of Managerial Psychology, 16 (8), pp.594-613.
[13] Long, S. (1995). Linking commitment to productivity. Human Resources Professional, 8, pp. 25-28.
[14] Mathieu, J and Zajac, D. (1990). A review and meta-analysis of the antecedents, correlates, and
consequences, of organizational commitment. Psychological Bulletin, 108,(2), pp.24-33.
[15] Maxwell, G. & Steele, G. (2003). Organizational commitment: a study of managers in hotels. International
Journal of Contemporary Hospitality Management, 15, pp. 362-370.

Contact author for the full list of references

1244
 Career Development and Related Factors in Moving Communities
Based on Indian Knowledge Workers in Tokyo

Bernat Agullo, bernat@valdes.titech.ac.jp

JiaLing Zhao
Midori Egawa
Tokyo Institute of Technology, Japan

Abstract

Knowledge workers have increasing international mobility and flexibility on their career development. Fieldwork on the
Indian community and interviews with 14 Indians who have extended their career through local contracts in the IT-
Finance Industry in Tokyo were conducted to find the related factors that enabled such career development in a foreign
country. Three main factors were found: (1) Changing companies for more challenging offers is common, but limited
mostly among foreign and English-speaking Japanese firms; (2) Business networks which increase their growth
possibilities inside the industry; (3) Good adjustment because of a safe, convenient, and friendly environment, regardless
of their Japanese ability. Through the influence of these three factors, working in Tokyo, for which most interviewees had
no special readiness, became a major turning point. It is hypothesized that those on engineering jobs will be more
influenced by factor (1) and that those with managerial positions by factor (2).

Introduction

The concept of knowledge worker refers to the group of workers “whose expertise, valued by organizations as a
source of competitive advantage, offers them access to rewarding jobs and careers” (Peiperl, Arthur, Goffee Morris,
2000). Industries such as information technology (IT), whose main management resource is people, compete to have
the most qualified workers (Oki, 2003). Given that technology degrees include a fair amount of information
technologies and that the demand in the IT industry is so high that the biggest companies in the industry have large
in-house training for new recruits, knowledge workers don’t necessarily have their academic background limited to
computer science (Oki, 2003).
The world-wide competition for the most talented (The Economist, 2006) and the universality of computer
standards makes IT knowledge workers one of the most mobile and sought-after segments of the workforce. Having
much fewer migration restrictions than less-skilled counterparts, knowledge workers from India, but also from many
other developing countries have been going to the USA in large numbers since 1965 (Helweg and Helweg, 1990;
Lessinger, 2003). In a lower rate, such migration has been directed to other English-speaking countries, namely UK,
Australia, New Zealand and Canada (Docquier and Rapoport, 2004; Khadria, 2002; Voigt-Graf, 2003).
There is yet no major study specifically on the careers of Indian knowledge workers abroad, but one of the
most paradigmatic images of Indian knowledge workers abroad is that in Silicon Valley, where at least 300.000 of
them work (Dhalman and Utz, 2005). Since the place is famous too for the mobility of the work force (Saxeninan,
1996), It is thus, plausible to think that careers abroad might be much more complex than that of corporate
expatriates who transfer national borders but remain inside the organizational boundaries.
Research on careers of Indian knowledge In Japan is non-existent; nonetheless they are sort of a new
phenomenon (Asahi Shimbun, July 5th, 2006). The Indian community in Japan was no more than 5,169 in 1994.
However, by 2004 it had tripled to 15,480, of which 6,380 are registered in the Tokyo metropolitan area1. In 2001
Indians displaced Filipinos for the first time as the third largest group of foreign workers in IT in a survey of the
Japanese Information Technology Services Industry Association (JISA), though the number is still way behind the
Chinese (Saitoh, 2006). This expansion of Indian IT companies into the Japanese market seems partly motivated in
turn by the tighter migration policy of the USA and economic downturn after September 11, 20012 rather than an
ease in the migration policies, since in Japan the number of Indian knowledge workers under the visa status of

1245
“engineer” hasn’t been limited by any yearly quota and their stay can be unlimitedly extendable by periods of three
years. Since April 2001, an accreditation system for information technology engineers and 5-year terms for each visa
extension were introduced in order to further encourage the migration of Indian knowledge workers to Japan3.

Purpose
The purpose of this paper is to contribute and deepen the understanding of career development abroad and its related
factors. In contrast with extensive research that has already been done on corporate expatriates (Takeuchi, Marinova,
Lepak, and Liu, 2005; Bonache, Brewster, and Suutari, 2001; Suutari and Brewster, 2000), we focus on the
relatively small group of Indian knowledge workers who have extended or plan to extend their stay in Japan through
local contracts inside the IT-Finance industry. By doing this, and following an increase on the attention migration
and cultural issues in careers (Lin, 1995; Pringle and Mallon, 2003), we seek to enlarge the scope of career research
by focusing on the career development of migrants, and among these, knowledge workers, who enjoy one of the
highest mobilities internationally (Docquier and Rapoport, 2004) and organizationally (Saxenian, 1996).

Subjects and Method

Subjects
Focus was placed on those subjects who fulfilled three requirements: (1) have Indian nationality, (2) work in the IT-
Finance industry, and (3) have three years of experience working in Japan. These requirements were set to guarantee
that all subjects are under the same legal framework and environmental factors. The third restriction was set after
initial contact with the field and seeing that is very common to change companies before 3 years. One subject with
just two years of experience was included as he had already changed jobs after one year in the country.
Method
The methodology used to present paper is qualitative. This choice of methodology responds to the need to reduce the
unit of analysis to the individual, for both migration (Brettell and Hollifield, 2000) and careers (Arthur, Inkson, and
Pringle, 1999; Alvarez, 2000). After initial fieldwork identifying the Indian community in the Tokyo metropolitan
area and its representative social networks, interviews were conducted with 14 Indian knowledge workers from
business, educational and leisure networks: Two business networks could be reached, namely, a network aiming “to
promote economic relations between India and Japan” (5 subjects) and a networking platform for the Indian IT
industry backed by the Indian embassy (2 subjects). On the educational domain 2 different networks could be
contacted. One is based on a top university in India (4 subjects) and the other based around a top Japanese university
(2 subjects). Finally looking at leisure networks a cricket team formed mainly by Indian IT engineers could be found
(1 subject). As many as 5 subjects were met in more than one network, signaling that there are substantial overlaps.
The interviews were scheduled by subjects’ convenience and lasted about 1 hour. The interviews were intentionally
flexible and the questions were open-ended. With subjects’ consent they were recorded and, as in Arthur et al.
(1999), the analysis was done from a fieldwork perspective, rather than statistically. The general structure and
several questions were adapted from the protocol used by Arthur et al. (1999) but more emphasis on cultural aspects
and the development and use of networks was added. The interview protocol included 9 sections, detailed in table 1.

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 TABLE 1: INTERVIEW PROTOCOL SECTIONS
(1) Basic personal information Age, civil status, children

(2) Experience in India Academic background and jobs in

India
(3) Arrival to Japan Reasons and initial plans

(4) Jobs in Japan Experiences in each company and

(5) Points of no-change
(6) Future planning
reasons behind each change
Moments in which they thought
seriously about changing jobs but
didn’t
Eventual return, remigration

(7) General questions on career Subjective view about ones career

(8) General questions on Japan Perceptions on the country

(9) Networks How they got to know people in Japan

and how they extended their social
circles

Results
Subject Characteristics
In this section subjects are described regarding: demographic data, academic background, migration mechanisms,
and reasons to come to Japan, as well as initial intentions on arrival. We shall refer to each of the 14 subjects by the
labels Case 1 to Case 14, by decreasing order of age. Appendix 1 and Appendix 2 provide an overview of the 14
subjects’ profile and career progression.
Demographic data
Subjects are all male and arrived in Japan with an age ranging from 22 to 32 years (av. = 25, SD = 3). On arrival,
only one was married but now 10 of them are (in all but one case, with an Indian woman). Their stay in Japan ranges
from 2 to 15 years (av. = 9, SD = 4) with ages ranging from 25 to 46 (av. = 34, SD = 6).
Academic background
They all have a scientific or engineering academic background, with the exception of Case 5 (Economics) and Case
12 (Sociology). However, only Cases 6, 10, 11, and 14 studied computer science as a degree. The qualification level
on arrival in Japan was of master in Cases 1, 2, 5 and 14 and bachelors in the other eleven cases. While in Japan,
Case 5 did a Ph.D. and Case 13 an MBA, full time. Cases 7 and 8 acquired qualifications related to finance
simultaneously with their work in Japan.
Migration mechanisms
From 14 subjects, five of them arrived to Japan through a job offer in India (Cases 4, 5, 6, 8 and 9), while the other
nine were sent to Japan by their companies, with the exception of Case 2, directly from India.
Reasons to come to Japan
While going to work abroad is a very common aspiration in the subjects’ environments, only 4 of the 14 subjects had
some preference to come to Japan: (Case 3) the Japanese quality systems; (Case 5) the Japanese rapid economic
development after World War II; (Case 6) interest on doing something outside the major trends (namely working in

1247
IT in the US); (Case 11) Japan’s leading technology. The other 11 subjects rather thought about going to the US and
had no special connection with Japan before the opportunity was presented.
Initial vs. present intentions
On arrival, only Case 3 and 5 had the intention to stay for 3 or more years in Japan. Cases 4, 6, 8, 10 and 12 didn’t
have any clear plans regarding migration. Eight of the subjects regarded their experience in Japan as a two year
experience or less, five of them (Cases 1, 2, 7, 13 and 14) were working on concrete projects with a definite end.
However, plans changed. One illustrative example is Case 7, who came for a six-month project and has been staying
already 10 years in the country: “Japan is a very special place. People don’t know much about it until they come
here, that’s how it was when I was in India, I just came here by coincidence, and I was amazed by how things are.”
“[The future is] not decided yet. Definitely it is whether settling in Japan or in India. One of these two places”, “we
don’t know… that’s the dilemma that we have. We like this place so much!” Thus, even though intentions regarding
migration do change over time, at the time of the interview we can broadly classify them into 4 groups: those who
plan to return to India, those who plan to remain in Japan, those who doubt between one or the other, and those who
want to migrate to another country (Table 2).

TABLE 2: FUTURE INTENTIONS

India Japan 3rd Country
11, 12 1, 2, 4, 5, 6,
14 3, 10, 13
7, 8, 9

Career Development
The academic background in India is a strong determinant of the social status, and possibilities in the labor market
(Oki, 2003). The educational system of India is clearly stratified in three categories. In the first category there are
Indian Institutes of Technology, Science, Information Technology, and Management (15 institutions). In the second
category there are 17 Regional Engineering Colleges and the 33 general Universities and some private institutions.
In the third category there are other 200 public institutions and 550 private ones (Oki, 2003).
7 subjects (Cases 1, 2, 7, 8, 9, 13, and 14) who graduated from institutions in the first category, entered the
labor market through what is called a “campus placement” by which companies go to the universities to attract the
best students. Students may join several selection processes, but once they are offered a job by one company they
have to either accept or decline at that moment. Since only major or rapidly growing companies do this kind of
selection process, at least among the subjects, it is quite common to take the first firm offer.
The seven subjects who graduated from institutions in category 2, (Cases 4, 5, 6, 7, 11, 12, and 13) applied
themselves for their first jobs in India. It is worth to mention that all the 4 subjects who studied Japanese in India,
either self-motivated (Case 3) or as part of the company training (Case 6, 10, and 11), are in this group.
The shift of 10 subjects who don’t hold a degree in the computer science to IT is a reflection of abundant
opportunities in the industry. Thus, their career development is not troubled by fears of loss of employment, but
rather on materializing their potential, always keeping an eye on the best opportunities. These opportunities are what
brought them to Japan, however what factors lead them to extend their stay in the country shall be now considered.
Factors
Three main factors have been identified to be especially relevant to their decision to extend their stay in Japan: (1)
changing companies for more challenging offers, mainly among English-speaking firms, (2) business networks
developed inside the country, which increased their opportunities inside the industry and (3) a good adjustment to
life in Japan.
Changing Companies for More Challenging Offers, Mainly Among English-speaking Firms
In order to understand the process by which the subjects started their career development in Japan we separate 15
subjects according to their initial employment situation in the country and analyze immediately their career
developments thereafter. Five different groups can be distinguished:
(a) Engineer working in an Indian IT company for a project (5 subjects)

1248
Cases 7, 13 and 14 switched for jobs in investment banks, Case 7 even before completing the 6-month project, and
Case 13 after doing an MBA in Japan. Case 6 left Japan to gain experience in the US (only to find that was assigned
to projects for customers in Japan and two years later returned), Case 1 received two extensions of the contract and
eventually was promoted to management of the operations in Japan.
(b) Engineer working in a Japanese IT company leveraging Indian HR: (2 subjects)
Engineers in this group, Case 10 and Case 11, received intensive Japanese language training in India before being
sent to Japan6. In less than two years Case 10 accepted the offer of the investment bank where he was working in a
project while Case 11 continued working in the same company, eventually being promoted to business development.
(c) Engineer working in an English-speaking Japanese company: (3 subjects)
These three subjects applied and got the jobs in Japan while they were in India. Two of them, Case 8 and Case 9
(after being introduced by Case 8) joined a research firm and the other, Case 4 an IT company. In both companies
the workforce included a wide variety of nationalities and was smaller than 50 employees.
After 2 years in the country, all three subjects had already switched companies. Case 8 joined an investment bank,
Case 9 to an IT company owned by foreigners and Case 4 joined a one-year project for an investment bank.
(d) Engineer working in an American investment bank: (1 subject)
Case 2 joined the investment bank in India, and after a year and a half was transferred to Hong Kong. Then, after
two years commuting between Hong-Kong and Tokyo, he accepted a local position in Tokyo, where allowing for
internal changes, has remained for fourteen years. He acknowledges that his behavior is very particular, motivated
for his search of flexibility in the workplace. All the colleagues with whom he arrived accepted better-paying offers
from head-hunters but he rejected them.
(e) Manager for IT companies leveraging Indian HR: (3 subjects)
Two of the subjects, Cases 3 and 12, were hired and sent by their companies in order to develop business in the
Japanese market. Case 3 stayed four years before changing companies in order to focus on banking, Case 12
changed after one year for a higher responsibility in another company who also wanted to establish operations in
Japan, where he has stayed until today. The third subject, Case 5, came to Japan to join a Japanese company run by
an Indian, where he stayed 3.5 years before switching for a foreign IT consultancy.
Combining groups (a), (b) and (c) (10 subjects), we see that jobs in investment banks are a popular career
move among the Indian knowledge workers who extend their stay in Japan (six subjects changing directly, one more
did after the second company). Subjects explain their change not only because of a much higher salary, but also in
order to see a new industry with a wide variety of job roles. Working on projects for financial institutions instead of
a development center in India opens a new range of possibilities:
(Case 10) “Even before I decided to change, I liked [Investment Bank X], it’s like a cool company to be working
with, and in Japan… it’s good here, and I don’t want to be with [IT services company Y] anymore. The way I do it, I
don’t go to the IT manager and say ‘hire me’. What I do is to raise my productivity to an extent that it gets noticed,
so that he says, ‘you are a very good guy, I want you in my company, why don’t you join us?’
Joining an investment bank, or any other company in Japan, though, doesn’t put an end in career changes.
Altogether, only two of the subjects have stayed until today in their initial company in Japan and as many as nine
subjects in 3 companies or more. From the 25 company changes in Japan of all 14 subjects combined, only 4 of
them have been forced by the loss of employment. The other 21 moves respond to strategic moves to improve one’s
career.
Looking at all the companies where they have worked while in Japan a clear trend towards employment in
foreign companies and English speaking environment is observed. From the 42 companies (counting repetitions)
where they have worked, only 12 are Japanese (29%). This number is further reduced to 7 (17%) if we only count
those Japanese companies with Japanese as main language for work. Indian knowledge workers who extend their
stay in Japan do it by changing companies and mainly foreign ones.
Business Networks Increase their Opportunities inside the Industry
Having business contacts in Japan, and especially knowing how to develop new ones played an important role in the
extension of the stay in Japan for 6 of the subjects. They can be classified in three different groups:
(a) Rejecting to go back to India when called back to the head quarters (2 subjects)
Case 1 and Case 3 decided to leave their companies when they were asked to return to the head quarters after 9 years

1249
(6.5 in management) and 5 years in Japan respectively. From their perspective, a return to India would not recognize
their efforts in developing trust with Japanese clients. Case 1 joined an IT company while Case 3 joined another
company starting business in Japan: “the management asked me to come back after 5 years of being here and
establish a Japanese focused office, the Japan help-desk sort of thing; [would that be the case] I’d be losing all my
contacts that I had here, so I decided to move on at that time”
(b) Switching to other companies who want to expand operations in Japan (3 Subjects)
The trend of expansion of Indian IT companies into the Japanese market is the reason why those with the expertise
on the market may receive offers from other companies who want to enter the Japanese market. Cases 5, 6, and 12,
working in management positions accepted offers to switch to other companies entering the market.
(c) Starting own company in Japan (1 Subject)
One of the subjects, Case 4, after working 9 years in Japan as IT engineer for 3 different companies, established his
own IT company in Japan. The contacts he had were instrumental in this decision: “by this time I had enough
contacts in the industry, so I decided to do something in my own”. After three years as CEO of his company he
thinks that “hopefully” this will be his last position. .
Adjustment to Life in Japan
Contrasting with the low readiness to come to Japan and Japanese language ability before going to Japan common
among the subjects, adjustment to life in Japan is stressed as one of the reasons to extend their stay. Such adjustment
is based broadly on 2 aspects about the environment: (a) the safety and convenience, (b) the wide range of options in
Tokyo, and 2 aspects about themselves: (c) the experience of diversity inside India and (d) the personal long term
projects they have developed in the country.
(a) Safety and convenience of life in Tokyo
This aspect is valued by all of the subjects from the beginning; enabling the progressive extension of their stay:
(Case 9) “I didn’t feel in need to look around, life was most comfortable”. It is especially relevant among those
married with children. Case 6, who has lived 2 years in the US puts it this way: “I leave my family and I go to India
for two weeks, other than the natural calamities such as earthquakes I don’t bother much about my family staying
here, but I think that if I’m going the other way, leaving my family in India, I will be much worried. Or even in the
US. So comparing with any other place, I feel here the safest.”
(b) Wide range of options in Tokyo
As Case 8 puts it, “The basic necessities are taken care of, it’s about how you spend your time, how can you be
creative in your life. Those things, you can always be selective, that’s when your friends come in, that’s when
associations come in, so you chose, where you want to belong to, so life is fun as well. It’s not a general part of the
society, but you can always choose.” Thus, it’s not just how they can adjust themselves to the environment, but also
how they adjust the environment to them.
(c) The experience of diversity inside India
Relocating to environments where they don’t comprehend the main language for daily life is not regarded as a
problem, since it’s experienced inside India when moving for job or university: (Case 9) “…language and cultural
differences, don’t come [as something new]. When I moved to Bombay, it was almost a new country. When I was in
Chennai, in south India, it was totally different again. In Bombay they speak Hindi, but in Chennai they don’t, the
buses are written like that. Only moving through India you find all sorts of changes.”
(d) Long term personal projects connected to Japan
While during the first years the work absorbs nearly all of their time, increasingly some start personal projects that
leverage their experience and networks in Japan, most often contributing to the development of India. These projects
may be their actual work, like Cases 4 and 6, who run companies leveraging Indian human resources, or activities
they undertake on their free time. Cases 2 and 8 are core organizers of non-profit initiatives to promote the economic
and cultural exchange between India and Japan.
While all subjects affirm they enjoy life in Japan, Cases 11 and 12 are planning to go back to India, and Cases 3, 10
and 13 to re-migrate to another country. Reasons for returning are to spend time with family members and settle
down. Both cases are married but with no kids. As for those who want to re-migrate, Cases 3 and 10 put children’s
education as one of the main reasons (the training of personal skills in the American education system is greatly
valued) as well as for the interest of experiencing life in a different country. In other 9 cases Japan has made itself a

1250
place in the subjects’ future.

Discussion
Changing Companies, Mainly Among English-speaking Firms
The ease by which the subjects consider strategically organizational changes, regardless of their university category
or educational level goes in line with tendencies pointed out by the protean career (Hall, D., 2002) and the unlimited
career (Arthur and Rousseau, 1996). By seeking to maximize their learning, utilization of skills and rewards, their
careers revolve inside the IT-Finance industry is a trend observed as well in other settings where opportunities
concentrate (Hall, D.T., 2002; Gunz, Evans, and Jalland, 2000; DeFillipi and Arthur, 1996).
Regarding the preference for foreign companies, it may not be limited to the Indians, but a more general
phenomenon of foreigners in Japan (Kajita, 1994). In contrast, finishing developing career abroad is found to be
employed mainly in organizations from the host society (Suutari and Brewster, 2000).
By using head-hunters and referrals, foreign companies go after not just their technical skills, but also their
cultural background and language skills (initally English, but years later Japanese as well). In other words, the career
metacompetency of “knowing-how” (DePhilippi and Arthur, 1996) plays a major role in enabling them to switch
companies, further learn, and, as their knowledge is increasingly suited to further develop their career in Japan,
ultimately contributing to the extension of their stay. A similar pattern is observed in some international assignees
(Forster, 1997; Takeuchi et al., 2005).
The Business Networks Developed Inside the Country
For three subjects who arrived as managers and who later moved into such positions, rather than specific know how,
who they knew, and more crucially, their capacity to get to know and be trusted by more people, that is, their
knowing-whom career competency (DeFillippi and Arthur, 1996), influenced their extension of their career
development in Japan. In the sense that business network utility is lost or greatly diminished when leaving the
country, the development of such networks contributes to the extension of the stay in Japan.
At this point it is important to say, that while in some contexts, such as Silicon Valley (Saxenian, 1996) or
the film industry (Jones, 1996), contacts are a basic tool to find jobs even for technical positions, in observed cases
referrals are greatly limited to managerial positions only. In technical positions head-hunters and personal
applications fulfill the role.
The Good Adjustment to Life in Japan
The fact that their adjustment to life in Japan was an important factor in their career development certainly doesn’t
go in line with person-environment career theories, such as Holland’s theory of vocational personalities and
environments (Spokane and Cruza-Guet, 2005), or the theory of work adjustment (Dawis, 2005), where only the
adjustment to the work environment is considered and the adjustment to the non-work environment is taken for
granted. Also the protean career and the boundless career, limit their scope to the work-related experiences. More
suitable for the careers observed, the division of work and non-work is rendered irrelevant in postmodernist
approaches such as the conceptualistic explanation of career of Young, Vallach, and Collin (2002). For them career
is understood as a “super ordinate” construction that allows people to construct connections between their actions
and such actions as “goal-directed and embedded in a network of meaning in the social level.” However, it still lacks
emphasis on the mobility and adjustment to this undivided work-life environment.
One of the fields with the most interest in the interaction between work and adjustment in a foreign country
is certainly human resource management. While their view of adjustment7 is basically to be able to cope with
cultural differences and complete the assignment, such adjustment does take into account also their activities outside
the workplace, and the adjustment of accompanying family members (Bennett, Aston, and Colquhoun, 2000; Porter
and Tansky, 2004; Harvey, Novicevic and Speieer, 2000). However, the subjects of study are almost invariably
managers from multinational corporations from developed countries with several years of experience in the
company. The situation for young Indian knowledge workers might differ in several counts. For once, the readiness
to go to work abroad is very high, although the country of choice is mainly the US. Secondly, and more importantly,
a good adjustment hasn’t been just to complete a company’s assignment, but rather to enable to extend way into the

1251
future and for others constitute an important stage of one’s life, followed by return to India or remigration. If we
separate the subjects according to their future intentions, namely, returning to India, remaining in Japan or re-
migrate to a third country, and whether or not they had some special reason to come to work to Japan, six possible
groups are formed, and even with such a small sample all groups have at least one subject (Table 3).

TABLE 3: MIGRATION TYPOLOGIES

Future intentions  Third
Japan India Country
Special reason With 5, 6 11 3
to come to 1, 2, 4, (7, 8, 9),
Japan Without (7, 8, 9), 12 10, 13
14

Thus, even though the convenience and safety of Japan has enabled them to develop their career in the country, their
past and future plans differ. From all six groups, those who came to Japan without a special reason, but who plan to
remain for the long term, are both the most numerous and surprising. These subjects, even though their arrival in
Japan was largely by chance and with a limited horizon, have found a meaning to their stay in Japan that reduces
both their need to go back to India or to re-migrate. As defined in the theory of career construction, where life
themes explain the “why of vocational behavior” (Savickas, 2005) we can say that Japan has become a crucial part
of their life themes. A similar concept is the knowing-why career competency, that “answers the question ‘why?’ as
it relates to career motivation, personal meaning and identification” (DePhilippi and Arthur, 1996, p.117). We
emphasize here that the environment (e.g. country, society) where a career develops, can play too a major role in the
development of life themes. We hypothesize that the more their life themes are entwined with their experiences in
the country, the better is their adjustment, and vice-versa, providing a deeper meaning to their stay.
However, good adjustment as it is conceptualized here may not be desirable for companies expecting their
workers back from projects abroad. Especially for technical assignments that don’t require a deep understanding of
the local culture, companies may prefer employees who leave “their heart at home” (Black, Gregersen, Mendenhall
and Stroh, 1999).

Limitations and Further Research

The complexity of even a small sample like the one of this study requires a larger sample with the same conditions
in order to confirm trends and factors, especially regarding the patterns of adjustment to the life in the host society
and the reasons leading to different future plans. Thus, ideally, not just those Indian knowledge workers that remain
in Japan, but also those who return to India or leave to a third country should also be included. In order to explore
for other influences from the environment, similar subjects in different places should be compared. Inside Japan,
Indian knowledge workers in Osaka and Kobe are an obvious target for comparison, and results can be contrasted
with samples in English-speaking countries. Further, since the adjustment has been found to depend on the
experience of diversity in the own country, comparisons with other foreign knowledge workers in Japan from more
culturally homogeneous countries are also warranted. Korean and the Philippine knowledge workers seem to be the
most obvious candidates.

Conclusion
The expansion of Indian IT companies together with Japanese and other countries interest in leveraging Indian
knowledge resources, provide opportunities for Indian knowledge workers to go to work abroad. Once abroad, a part
of them extend their stay, based on three factors: (1) changing jobs for more challenging offers, mostly among
English-speaking companies, (2) the business networks that increase the which increase their growth possibilities

1252
inside the industry; (3) Good adjustment because of a safe, convenient, and friendly environment, regardless of their
Japanese ability. While both the employment possibilities and business networks contribute to the extension of
career development in Japan of Indian knowledge workers, we hypothesize that the employment possibilities are a
more relevant factor for career actors in technical positions and the business networks are a more relevant factor for
career actors in management positions. The adjustment and emotional attachment to life in Japan should be taken
into account in career theories since it enables and even motivates further development in the country.

References

[1] Alvarez, J.L. (2000). Theories of managerial action and their impact on the conceptualization of executive
careers. In Peiperl M., Arthur M., Goffee R. & Morris T. (Eds.), Career frontiers: New conceptions of
working lives (pp.127-137), New York: Oxford University Press.
[2] Arthur, M.B., Inkson, K. & Pringle, J.K. (1999). The new careers: Individual action and economic change.
London: Sage Publications.
[3] Arthur, M.B., Rousseau, D.M. (1996). The boundaryless career: A new employment principle for a new
organizational era. New York: Oxford University Press
[4] Asahi Shimbun. (2006). Indo no ibuki, nihon ni mo myaku myaku [Indian breath, coming to Japan too].
July 5th
[5] Bagdadli S., Solari, L.., Usai, A., Grandori, A. (2003). The emergence of career boundaries in unbounded
industries: Career odysseys in the Italian new economy. International Journal of Human Resource
Management. 14(5), 788-808.

Contact authors for the full list of references

Appendix

1253
 Companies
Backgroun

companies
Arrival to
Academic

Ed. Level

Job descr
company
in Japan

in Japan

Previous
Years in

arrival
Age on
Japan

Japan

First
Age

Subject

*
Sent from Soft.
Case 1 46 15 31 Eng. Master IT comp 3 2
India Eng

Sent from
Soft.
Case 2 41 14 27 Eng. Master Other Inv. Bank 1 0
Eng
countries

Sent from
Case 3 40 8 32 Eng. Bach. IT comp Biz. Dev 3 3
India

Self- Soft.
Case 4 39 12 27 Comp. Sc Bach. IT comp 4 1
application Eng

Self-
Case 5 36 9.5 25 Econ. PhD.1 IT comp Biz. Dev 2 2
application

Self- Soft.
Case 6 35 13 22 Comp. Sc. Bach. IT comp 6 1
application Eng

Sent from Soft.

Case 7 34 10 24 Eng. Bach.2 IT comp 3 0
India Eng

Self- Soft.
Case 8 33 10 23 Scient. Bach.2 Research comp 5 1
application Eng

Self- Soft.
Case 9 33 9.5 23.5 Eng. Bach. Research comp. 4 1
application Eng

Sent from Soft.

Case 10 31 7 24 Comp. Sc. Bach. IT comp 4 1
India Eng
APPENDIX 1: CASE OVERVIEW

Sent from Soft.

Case 11 30 7 23 Eng. Bach. IT comp 1 1
India Eng

Sent from
Case 12 29 5 24 Sociol. Bach. IT comp Biz. Dev 2 1
India

Sent from Soft.

Case 13 28 3.5 23 Eng. Master1 IT comp 2 0
India Eng

Sent from Soft.

Case 14 25 2 23 Comp. Sc. Master IT comp 2 0
India Eng

Av. 34 9 25.1 1 In Japan (full time) * not including the company

SD 5.7 3.9 3.1 2Add extra qualif. in Japan (part time) sending them to Japan

1254
 Trade. Co. Hardw. Co IT Con. A (I) DB cons. (F) IT Con. B (F) ‘Country
‘Soft. Prog.’ ‘Region Mngr’
Case 1 ‘Int. trader’ ‘dom. Sales’ ‘Soft. Eng’ ‘Consultant’ ’strategic sales’ Mngr’.
2.5 years 6.5 years
2 years 1 year 3.5 years 3 years 2 years 1 year

Inv. Bank A (F)

‘Syst. Develop’ ‘Op. & Tech’
Case 2 ’Soft. Prog’
2 years 14 years
1.5 years
Manuf. Co. Manuf. Co. C Manuf. Co. D IT Con.
Con. C Soft Co. A IT Con.
Manuf. Co. A Manuf. Co. B.
B (I)
B (J) (J) (I) (I) D(F)
Case 3 ‘Co-founder’ ‘Quality Sys’
‘Quality Sys’ ‘Internship’ ‘Ind. Sales’ ‘Biz. Dev.’ ‘Biz. Dev.’ ‘Cons.’
5 years 0.3 years
5 years 0.5years 2.5 years 4 years 2 years 2 years
Soft. Co.
Co. B (I) Soft. Co. C(F)
C Inv. Bank B (F) Inv. Bank C (F) IT Con.
Con. E(F)
Case 4 ‘Soft. Eng’ ‘Soft. Eng’ ‘IT Proj. Eng’ ‘IT maintenance’ ‘CEO’
7 years 2 years 1 year 6 years 3 years
PhD Course Think Tank IT Con.
Con. F (F) IT Con.
Con G (J) IT Con. B (F)
Case 5 ‘Student’ ‘Analist’ ‘Market An.’ ‘Biz. Dev.’ ‘Biz. Dev.’
5 years 1 years 1.5 years 3.5 years 1 year

IT Con. H (I-J) IT Con. I (I) IT Con. C (I) IT Con. J (F) IT Con. K(J) IT Con. L (J) IT Con. M (J)
Case 6 ‘Soft. Eng.’ ‘Soft. Eng.’ ‘Soft. Eng.’ ‘Soft. Eng.’ ‘CTO’ ‘CEO’ ‘CEO’
0.5 years 1 year 3.5 years 2 years 3 years 3 years 2.5 years
IT Con. N (I) Inv. Bank D (F) Inv. Bank E (F)
‘Soft Eng.’ ‘Trader’
Case 7 ‘Soft. Eng.’ ‘Soft. Eng’ ‘Soft. Eng.’
0.5 years 1 year
2 years 7.5 years 2 years

Manuf.Co. E(I) R&D Comp (J) Inv. Bank F(F) Inv. Bank G (F) Inv. Bank H (J) Inv. Bank E(F)
‘Analist’
Case 8 ’Soft. Eng’ ‘sys. Eng.’ ‘Analist’ ‘Analist’ ‘Intl. Mngmt.’ ’Risk Mngmt’
1 years
0.5 years 2 years 2 years 1 years 3 years 2 years
APPENDIX 2: CAREER PROGRESSION OVERVIEW

Inv. Bank H
Manuf.Co. E (I) R&D Comp (J) IT Con.
on. O (F) Inv. Bank I (F)
(J)
Case 9 ‘Soft. Eng’ ‘Soft. Eng’ ‘Soft. Eng’ ‘Soft. Eng’
‘Soft. Eng.’
1.5 years 1.5 years 2 years 4 years
2 years
Marketing
IT Con. P (J) Inv. Bank A(F)
A Audit. (F) Inv. Bank D (F)
Co. ‘Soft. Eng’
Case 10 ‘Soft. Eng’ Soft. Eng. Auditor ‘Int. Aud’
‘Analist’ 1.5 years
0.5years 4 years 0.5 year 1 years
1 year
IT Con. P(J)
P
‘Soft. Eng’ ‘Biz. Dev’
Case 11 ‘Soft. Eng’
6 years 1 year
0.5years
Soft. Co. D
Real Est. (I) IT. Con. Q (I)
(I)
Case 12 ‘Sales’ ‘Biz. Dev’
‘Biz. Dev’
2 years 1.5 years
4.5 years
IT Con. R (I) MBA course(J)
course Inv. Bank J (F)
‘Soft. Eng.’
Case 13 ‘Soft. Eng.’ ‘Student’ ‘Analyst’
1.5 years
1 years 1.5 years 1 years
Soft. Co. A
Inv. Bank L (F)
(I) ‘Soft. Eng.’
Case 14 ‘Analist’
‘Soft. Eng.’ 1 year
1 year
1 year

1255
 End Notes

1. Immigration Bureau of Japan

2. The cap on H1-B Visas, the most common for Indian knowledge workers migrating to the US was limited to
65.000, up from a peak of 195.000
3. International Cooperation and Collaboration in Respect of Information and Communications Technology,
Ministry of Foreign Affaris of Japan, 2001.
4. Immigration Bureau of Japan
5. According to a worker of Wipro around 500 Indians are now in Japan, while Infosys website explains that 250
Indian employees are now in Japan.
6. To leverage the investment that the company makes on its employees, in the contract there’s a bond to remain
in the company for five years after finishing the training. Otherwise they have to pay a fee, which decreases
every year they remain in the company.
7. In most papers of HRM the terms adaptation and adjustment are used interchangeably, however while
adaptation refers to the cultural value changes in the individuals facing a value conflict in foreign culture,
adjustment refers to the psychological process whereby “an individual enters into a harmonious or healthy
relationship with the environment” (Bushan, 2002).

1256
 Human Resource Management: Emerging Roles and Challenges for the HR Managers
In Oman

Sami A. Khan, khan.drsami@gmail.com

Sultan Qaboos University, Sultanate of Oman

Abstract
Human Resource Management as a function has established itself as a proactive and strategic function and its new role
seems promising for organizations in achieving the competitive advantage through a higher degree of flexibility and
employee commitment. In context of Oman, this approach of HRM has not been fully harnessed and traditional personnel
management is still in practice. Omanization policy and other inherent cultural and regional factors are some of the
reasons for this pitfall. HR managers in Oman lack the requisite skill and competency to play a catalyst role in
transforming the Omani organization. There is an urgent need to address this imbalance and government must adopt
flexible employment policy in regard to the hiring of expatriate HR manager which is fully capped as of now. This can
help HR manager in acquiring required knowledge and competence and they can be better equipped to contribute to the
organizational goals.

Introduction
Global competition, fast changing development in information technology and manufacturing technologies, shorter
product life cycle, rising expectation of customers and a need for flexibility, responsiveness and new learning are
some of those challenges which are being faced by the organizations worldwide. Oman is no exception. After
signing the WTO treaty in 2000 and US-Oman Free Trade Agreement (FTA) in 2006, the pace of change in business
and economic scenario has further accentuated in Oman very recently. Omani firms depend heavily on the expatriate
workforce and they comprise 54 percent of the total workforce. Though, their proportion is least in Oman in
comparison to other Gulf Cooperation Council (GCC) countries as expatriate workforce exceeds 10 million and
constitutes upto 70 percent of the GCC labor force. It accounts for 88 percent in UAE, 83 percent in Qatar, 81
percent in Kuwait, 72 percent in Saudi Arabia and 55 percent in Bahrain. (Oman Economic Review, March 2006).
This percentage is much higher in the private sector firms in Oman and other GCC countries. The Government of
Oman has taken many steps to strategically cut down its reliance on expatriate workers in a phase-wise manner and
Omanization (the training and development of Omani nationals resulting into their employment) has become an
important issue posing greater challenge for the people management function in Oman. It is also believed by many
that it limits firms’ ability to compete and impacts the value chain of their competitive advantage. The job of even
human resource (HR) manager is Omanized by the Government order in Oman and firms sometime find difficulty in
employing a competent HR manager.
In this background, acquiring, utilizing, developing and retaining of committed and motivated workforce
becomes a Herculean task for human resource managers in Oman. Developing and implementing a human resource
policy which addresses the regional, cultural, legal and economic issues vis-à-vis a strategic human resource
management needs knowledge, skills and competency of HR field as well as knowledge of the business premises
and business realities in which businesses are being run in Oman. What is the relevance and utility of strategic HRM
function in a country like Oman? How it can help to equip HR managers to deal with the dilemma they are facing.
As we know human resource management function is viewed as proactive and strategic in nature which is well
integrated with the business strategy of the firm. Its new role worldwide seems promising to help organizations in
achieving the competitive advantage through a higher degree of flexibility, employee commitment, and adaptability.
This changed stance of people management function becomes highly relevant for firms in Oman also. The present
paper addresses the emerging challenges being faced by the human resource function in general and human resource
managers in particular. The paper is divided into four parts. The first part deals with the business and economic

1257
environment of Oman in which firms compete and adopt their people management policies and framework. The
second part talks about the human resource management function in Oman and evaluates its present status and
stance. The third part delineates with the challenges being faced by the Omani human resource managers. The last
part concludes the overall discussion of the paper.

Omani Economic and Business Environment

Oman with a population of 2.416 million (Ministry of National Economy, 2005) is the third largest country in
Arabia with a total land area of 309,500 sq. kilometers. bordering Yemen, Saudi Arabia and the United Arab
Emirates lying on the southeast corner of the Arabian Peninsula. The commercial export of oil began in 1967 in
Oman. Since then, oil has been the major contributor to the GDP. The fourth five year plan (1991-1995) for the first
time emphasized the need to diversify the production base other than oil and Government paid special attention to
the sectoral and regional development process in Oman (Ministry of Information, 2002).
The Government of Oman identified the role of privatization and liberalization of its policies to accelerate
the rate of economic growth. Government encouraged men and women equally to participate in the process of
economic development of the Sultanate. In 1995, visualizing the changes in the global economy, a new vision of
Oman’s economic future was drawn for 25 years. “Vision Oman 2020” proposed a policy for the Sultanate’s
development. It took into account the far-reaching changes in the world economy and the revolution in
telecommunications and information technology that has transformed the world."Vision Oman 2020" stipulated to
cut down the contribution of crude oil to GDP to around 9 percent in 2020, compared to 41 percent in 1996. Gas is
expected to generate 10 percent of GDP in 2020, compared to less than 1 percent in 1996. The industrial sector is
proposed to increase its contribution from 7.5 percent in 1996 to 29 percent in 2020 (Ministry of Information, 2003).
Consequently, the fifth five year plan (1996-2000) emphasized on the diversification of the national income
resources encouraging the domestic and foreign private investments and increasing the share of the private sector in
the total investments. It emphasized the role of human resources and participation of Omani men and women in the
private sector development and diversification process (Ministry of National Economy, 2002). The Omani Centre
for Investment Promotion and Exports Development (OCIPED) was launched in 1997 to encourage foreign
investment and Omani exports serving as a one-stop shop for foreign investors and entrepreneurs to expedite the
investment process.
Lately, sixth five year plan (2001-2005) emphasized on three core goals, i.e., developing human resources
and basic structures, economic diversification, and encouraging the private sector growth. The key aims of the plan
were to:
guarantee stable personal incomes
increase the number of secondary school students enrolling in higher education and technical colleges
create more jobs for Omanis
adopt sustainable financial policies
promote economic diversification
develop the private sector.
The performance of the economy has been good in the recent past as the sixth five year plan envisaged to
grow the national economy by an annual average rate of 4 percent (Ministry of National Economy, 2002) and the
economy grew to a higher level than what was envisaged in the plan due to the increased contribution of the non-oil
sectors and higher oil prices (Ministry of Information, 2003).
Oman joined the WTO in November 2000 which provided significant challenge for the country to liberalize
its policy without compromising its objective of Omanisation in ownership and employment. It is expected that with
the accession to WTO, the efficiency of service sectors especially finance and telecommunication and also the
tourism and manufacturing sector will increase and Oman manufactured products will penetrate into the markets of
both developed and developing countries (The Oman Daily Observer, 2004:13). Oman has come a long way in last
few years in attracting foreign direct investment and the Second Arab Business Intelligence Report ranks Oman as

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third Arab nation (after Saudi Arabia and Qatar) that inspire most economic confidence (Oman Economic Review,
Feb. 2007).
Oman adopted its seventh five year plan (2006-2010) based on the presumption that the oil price is going to
stick to an average of US$30 per barrel in the next five years. The market foresees the oil price going higher than
US$30, which implies that Oman’s GDP growth (relying heavily on oil revenues) is going to be higher than the
planned rate. As Oman’s economy is expected to be based predominantly on oil and gas production in the near
future (69 per cent government revenue to come from oil in the Seventh Plan), the government has envisaged a
staggering RO 4,474 million (34 per cent of the total investments) for investment in this sector. To boost the non-oil
sector, the government expects natural gas-based industries to grow at an annual growth rate of 14.5 per cent. The
main hub for natural gas-based industries is going to be Sohar Industrial Area where a number of such projects,
including Sohar Aluminum Smelter project, Polyethylene project and Oman Aromatics project (at a total cost of RO
2.8 billion) are coming up (Oman Economic Review, Feb. 2006).
Omanization of the Workforce: Emerging Issues
Omanization (the training and development of Omani nationals) was and still is the most crucial issue regarding HR
planning in Oman (Al-Hamadi and Budhwar, 2006) and providing employment to local people by replacing
expatriate worker has been a very complex and difficult task as it has a double-edge effect and it should be dealt
carefully. Oman’s economic Vision 2020 provided a very explicit policy framework in that regard. It aimed at
developing human resources through expansion of education among nationals, providing blueprint for educational
and vocational training initiatives and advocated development of labor market mechanism aimed at increasing the
level of workforce participation in the economy. Consequently, government has adopted certain Omanization
measures for private sectors from time to time but the Omanization drive seems to become more intensive in recent
past especially between the years 2003-2006. Government identified sector-wise Omanization plan in the year 2003
and envisaged the target to be achieved by the end of the year 2007 for each sector for different skill and category of
jobs.
Though, there is a visible tendency among Omanis to look for government sector jobs. The absence of a
comparable remuneration package and quality and conditions of work in the private sector has led to a work
preference for the government jobs (Al-Lamki, 1998, 2005; Al-Maskery, 1992; Sajwani, 2001). Government sector
also offers convenient working hours, generous holidays and annual leave, lifelong employment, favorable labour
laws provisions regarding maternity and bereavement leave, pension fund scheme and attractive retirement policies
(Al-Lamki, 1998, 2005; Al-Maskery, 1992; Sajwani, 2001). It also reflects in the statistics as out of the total Omani
employment in Oman (118,720), 61.1 percent (72,549) of employed Omani work for Government sector (Statistical
Year Book, 1999). But the government sector has its limitation in providing employment though it absorbs the
maximum number of Omani workforce it can as there is a limit to which the civil service can grow; and despite an
acknowledged need to curb the growth of the civil service, more than 6000 Omanis were employed by government
in 2002 and the size of the workforce grew to about 87000 (Oman Economic Review, Sept 2003).
In Oman, 68 per cent of the population is up to or below the age of 24 years and there is urgent need to
address the unemployment of young people in that regard. The Seventh Plan has accorded special attention to
employment generation scheme and with an investment of more than RO 13 billion, thousands of new jobs will be
created, especially for the Omanis. The government has placed greater emphasis on making private sector improve
on its Omanisation level. In 2005, Omansiation in the private sector was merely 25 percent whereas in the
government civil service, it was 81.80 percent. The government intends to fasten this process. The government is
contemplating to focus on those areas where the local talent needs to be trained and developed to reduce dependence
on expatriates (Oman Economic Review, Feb. 2006).
To encourage the process of Omanization, Oman Society for Petroleum Services (OPAL) was created in
October 2001 by a Ministerial Decree. It aims to provide a single umbrella body to promote standards of work
competence and professionalism with a view to make Oman’s oil and gas industry internationally competitive.
OPAL is striving hard to promote Omanization initiative by fostering training and development among Omani
nationals. OPAL not only facilitates training but identifies the requirement of the prospective employers and helps
the training providers in tailoring their program to the industry requirement. It aims at taking the Omanization index
in oil and gas sector to 70 percent by 2007 (Oman Economic Review, Sept 2003). OPAL adopted a mindset change

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strategy in their second HRD Workshop which was attended by 60 HR professionals in March 2006. OPAL feels
that the perceived mindset in employment environment regarding Omani employees needs to be changed as current
attitudes of some companies are that:
• They Omanise because of the Government drive on the minimization and in order to meet the minimum
target to obtain labor clearance rather than as a good employment policy.
• They adopt salary structure to a minimum statutory one and it doesn’t match the competencies of the
individuals. Moreover, they don’t look for retaining local skills or encouraging their self development.
• They consider the local human resources as a financial liability that affects the bottom line and not as a
valid asset that could increase profitability. Therefore, investment in their training and development
becomes the sole responsibility of the government and not the employers.
• Appropriate budget for the development of nationals is rarely set aside and investment in people is rarely
reflects in companies’ vision.
OPAL also exhorts the job seekers and employees to change their mindset and prescribes that the
competency-based strategy rather than the certificate-based approach will help them. They must strive to improve
their skills & competencies and productivity and getting employed is not the end rather they must pursue continuous
learning and development for their self development which will increase their employability in the long run (OPAL,
2006).
Changes in the Omani Labor Law and Onset of the Trade Union Movement in Oman
Though, the clout of the trade union movement is on a decline worldwide and the unilateral HRM practices have
further pushed this phenomenon. Studies have also shown that employees espouse a more unitarist view of
employment relation (Storey, 1992; Goss, 1997). Several factors have contributed to the steep decline, important
among them are: shrinking employment opportunities, changing technology leading to increasing employment of
white-collar workers who are reluctant to unionize, the general decline of liberal politics and pursuit of hard HRM
policies by employer (Saini, 2000).
But it is true that trade union acts as a countervailing power and minimizes the exploitation of the workers.
Employees must have freedom to associate and bargain their employment rights. In GCC countries, trade union
phenomenon is new and Oman is the only second country after Bahrain to allow the formation and functioning of
the trade unions. This has resulted as a consequence to the US-Oman Free Trade Agreement (FTA) signed on 19th
January 2006. Oman is the second country in the GCC region after Bahrain to sign the FTA. The Omani labor law
was adopted in 1973 to protect and administer the employment practices in the private sector which was amended
extensively in 2003. The important provisions were:
• Allowing the creation of worker representative committees for the first time.
• Adopted procedures for dispute resolution and removed a 1973 prohibition on strikes.
• The provisions of the new labor law apply equally to women and prohibit the dismissal of women during
pregnancy or maternity leave.
• Significantly, the protections of the labor law apply equally to foreign workers. Foreign workers must be at
least 21 years of age to obtain a work permit in Oman.
• Both nationals and non-nationals may belong to the worker representative committees and participate in the
leadership.
• Regarding collective bargaining, the new law allows the committees to represent workers in “all matters
that relate to their affairs” and for workers and employers to “enter into agreements.
• The law also provides for the settlement of labor disputes through bargaining and consultation between
workers and employers.
• The new law provides that representatives of the workers’ committees shall form a “main” representative
committee, which is a national organization, and may represent workers in local, regional, and international
conferences.
• In April 2003, the Government raised the minimum age of employment from 13 to 15 years to conform to
international standards.

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 • 2003 law permits workers in any establishment to form a representational committee through a secret ballot
election, with the goal of taking care of their employment interests and defending their workplace rights
and to date, 24 worker representative committees have been established in Oman (Office of the United
States Trade Representative, 2006).
The radical change in regard to formation of trade union came on July 9, 2006 in the Omani industrial
relation history when a Royal Decree as a response to the commitment to the US-Oman FTA came into force. This
decree cancels or supersedes all earlier provisions of the labor law that contravene or contradict its provisions.
Among these important reforms was changing the terms of reference for workers’ organizations to “unions”
(formerly “representative committee’) and “federations” (formerly “main representative committee.”). The new
decree:
• Directs the Minister of Labor to issue regulations to allow for collective bargaining.
• Prohibits dismissal of workers for union activity.
• Amends the law to allow for more than one union per workplace.
• Prohibits dismissal for union activity and established tougher penalties for employers who engage in anti-
union activity.
• Guarantees right to strike.
• Guarantees unions and federations the rights to practice their activities freely and without interference from
outside parties.
• Prohibits dismissal for union activity and establishes penalties, including fines and imprisonment for
depriving workers of their rights to carry out lawful union activities.
• Raises penalties for child labor violations, including fines and imprisonment (Office of the United States
Trade Representative, 2006).
Therefore, the recent changes in the labor law in response to the US-Oman FTA will have long lasting
impact on the labor scene and consequent employment relationship in Oman in time to come. Though, it is difficult
to predict that making such provisions will result into the emergence of the strong trade union movement in Oman.
Cultural factors, encouragement of the government, institutional support and presence of the strong union leadership
will be the most important factors in this regard. But the recent changes in labor law will surely strengthen and
protect workers’ interest and they will find an avenue to raise their voice in case of an eventuality. This may pave
the way of the industrial democracy in Oman at workplace. The Omanization process coupled with workers’ right to
bargain and form union will surely have an impact on the dynamics of the labor market and it will be an issue to be
dealt with by HR managers in the complex and turbulent business scenario. But the time will tell how far these
provisions have been successful in equipping employees with the countervailing power and changed employment
relationship equation.

Human Resource Management in Oman

Organizations worldwide are using people competency as a strategic resource and striving to create an ambience of
trust, empowerment and transparency to help their employees to come out with their best to serve the strategic goal
of the firm. These organizations are not bound by the bureaucratic structure, inflexible rules and hard-defined
procedures, rather flexibility, diversity and employee empowerment are highly acknowledged here. Organizations
that are responding to these concerns are adopting more initiatives towards team working, quality, flexibility and
commitment of the employees. The plethora of consultancy and excellence literature emerged during last twenty
years also endorses this viewpoint which laments on creating ambience to achieve the requisite excellence in
organization (Khan, 2007). Eichinger and Ulrich (See Kochan, 1997) identify seven most significant areas in which
organizations have to focus to build its competitive advantage for a survival. They have:
• to build and operate in an effective customer responsive organization,
• to gear up for becoming an effective global competitor. There is no choice left now for them,
• to compete profitably with low cost products and services to remain in the scene,

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 • to reposition from a profit through cost cutting to a revenue growth environment,
• to effectively take advantage of new information technology,
• to attract, develop, and retain top talent , and
• to operate internationally with the lack of a competitive, pro-business industrial policy matching those of
foreign competitors.
Consequently, the challenge before Omani organizations lies in responding to these issues and adopting
their structure which rely more on their work processes, results and outcomes. Very few Omani organizations are
run professionally and they are found to have strategic focus. Most of them seem to be inflexible and bound by
structure and hard-defined procedures. Few of them empower their employees to help in building customer
responsive organization. As the OPAL HR practitioners debate that there is a need to change the mindset of Omani
companies and they adopted OPAL future HRD Strategy towards 2010 which exhorts Omani companies to change
their mindset to look at people as important resource and to investment in their training and development (OPAL,
2006). The employees must have freedom to act and show their concern for learning and participation. There is no
room for bureaucracy and procrastination, and flexibility and diversity should be highly acknowledged which can
make Omani organizations more proactive and result oriented.
Strategic HRM and Its Relevance for Oman
It appears that in last 10-15 years, the human resource management function in Oman has gathered better stature and
focus. There is a widespread use of term HRM, HRD and personnel administration/ administrative affairs
interchangeably in Oman. It is a very common practice among the most developing countries. In fact, the use of
word human resource development (HRD) becomes more fashionable and accepted by the firms in Oman. Reliance
on foreign workers and needs to develop Omani nationals may have created this attraction. Though, there seems to
be an absence of linkages of HRD strategies with organizational strategies and national development policies made
no attempt in that regard (Al-Ansi, 1994). Budhwar, Al-Yahmadi and Debrah conducted a study on the human
resource development scenario in state owned enterprises (SOEs) in Oman and they approached 40 such
organizations. It was found that three nomenclatures were used by them, which were: HRD department, the
Personnel department, and Administrative Affairs department. Even good numbers of HRD departments (around
46%) were having subunits of coordination and legal procedures in addition to training. The job titles being used by
HR managers were found to be HRD Manager, HRD Head of section, Personnel Administrator, and General
Director of Administrative Development & Training (Budhwar, Al-Yahmadi and Debrah, 2002).
The new stance of HRM has emerged as a response to understand the demands of the various stakeholders
of the firm and to do value addition to help organization in sustaining the wave of change. It requires more
understanding of the business strategies of the firm and designing HR strategies which add value to the value-chain
of the business. This has transformed the people management abilities of the organization which remains equally
relevant for a country like Oman. The people management function has been transformed to suit the demand of the
exigencies of the workplace. The traditional personnel management (TPM) was inadequate to face the challenges of
the new business reality, and human resource management (HRM) emerged to respond to these new challenges (See
also Khan, 2007; 2000; Saini, 2000).
Khan (2007) is of the view that the plethora of literature emerged since mid 1980s are witnesses to the
changed stance of HRM. Critics call it an “old wine in new bottle” but it has been well accepted by HR constituency
that this wine tastes differently and have better taste. The proponents of HRM advocate that the human resource
management is an approach which is more integrated with business strategy of the firm and takes care of the value
addition by establishing work systems which leads to superior performance. It shows high degree of workforce
flexibility and commitment of workforce which results into greater quality concern and continuous learning having a
strategic focus (See also Guest, 1987; 1996; Beaumont, 1996; Storey (ed.) 1995; Tyson, 1995; Towers (ed.), 1996;
Mabey, Salaman and Storey, 1998; Mabey, Skinner and Clark (ed.), 1998; Khan, 1998; 1999; 2000; Saini, 1999;
2000).
The HRM function which emerged as a proactive and strategic function appears to be a departure from
reactive people management function being well integrated with the business strategy of the firm. In case of Oman,
it appears that most of the firms barring few multinational and government firms use more of a reactive personnel

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management as a people management function. There is absolute need for them to adopt proactive and effective
human resource strategies which can help Omani companies in achieving the competitive advantage through a high
degree of workforce flexibility, and greater concern for employees’ learning and growth. The human resource
management function has to add value to the business activities in the organization. Its contribution in integrating
the chain of activities for transforming inputs into outputs that customer values becomes key for achieving the
desired competitive advantage. The HR function being strategic and aligned with the business strategy results into
superior efficiency, quality, innovation and customer responsiveness which result into competitive advantage¹
(Khan, 2007) and it has equal relevance for Omani companies.
Budhwar, Al-Yahmadi and Debrah found in their study of 40 Omani SOEs that in 28% of cases HR/HRD
manager participate in the development of the corporate strategy from the very outset. This observation is based on
the perception of HR managers who responded to the questionnaire used by the researchers. Whereas 30 percent of
HR/HRD managers respond that they participate at the consultative level and 28% say that they are involved only at
the implementation stage. It was also found in the same study that more than half of the HR/HRD managers (51 %)
feel that the contribution of HRD is very little in the management of change in state owned enterprises in Oman
(Budhwar, Al-Yahmadi and Debrah, 2002). Thus it appears that there is absence of linkages between the business
strategy and the HR strategy in good number of firms in Oman. In fact, the above data only reflects the perceptions
of HR/HRD managers about their own departments and there is need for more realist evaluation of the integration of
HR strategy with the overall business strategy. The coherence between different HR interventions and programs is
also a matter of concern as one HR program must reinforce the other HR programs adopted in the organization.
Pursuing a strategy must keep in mind the availability and utilization of its people and the performance and reward
strategy being adopted in that regard. Omanization concern and training and development need must be integrated
with overall business strategy in Omani companies and companies must focus on HR deliverables in that context
Developing HR Programs in Omani Companies: Problems and Challenges
Becker, Huselid, Pickus and Spratt (1997) present a model for HR-shareholder value relationship. They advocate
that the design of HRM system should be aligned with business and strategic initiatives resulting into improved
operating performance and consequently the higher market value. They refer HR system as High Performance Work
Systems (HPWS) which include rigorous recruitment and selection procedures, performance-contingent incentive
compensation systems and management development and training activities linked to the needs of the business.
Anderson (1997) prescribes that a complete business strategy has three key components: an operating strategy, a
financial strategy and people strategy and HR and the corporation’s management group must engage in a strategic
management process which links business strategy, organizational capabilities AND people strategies. A good
business strategy identifies the need for specific organizational capabilities and reinforces the building of these
capabilities in organization as the primary strategy. At the heart of executing the business strategy lies the HR
becoming more of a value-added player. In this role, HR’s central responsibility becomes aligning its HR “tool kit”
to deliver the behavior needed in organization to realize the business strategy. HR tool kit consists of designing work
and organization, measuring performance, selecting, developing and rewarding employees as well as communicating
and clarifying strategic objective to its people. The different primary strategic choice determines how the HR tool kit
should be designed, aligned or integrated and implemented in the organization (Beaty and Scheneier, 1997).
Gomez-Mejia, Balkin and Cardy (2004) examine the strategic HR choices available in firms which provide
the real test for managers in making appropriate HR decisions. These choices are going to be equally relevant for
Omani companies provided they are evaluated and adopted in a coherent manner. HR choices are examined briefly
in context of Omani companies which provide a basic framework to understand the HR processes in Omani
companies. The choices are:
• Work Flow(Efficiency or Innovation; Control or Flexibility; Explicit job description or broad band job
classes; and Detailed work planning or loose work planning): Most of the Omani companies seems to be on
the other side of the fence where efficiency and control is rated high. There is absence of detailed job
description process and loose work planning is the norm in Omani companies which appears to be a
mismatch with inflexible work environment.
• Staffing (Internal Recruitment or External Recruitment; supervisor making hiring decision or HR
department makes hiring decision; and informal hiring or formal hiring): Referral system and words of

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 mouth is an effective means of recruitment but lack of skill forces organization to go for external sources in
most of Omani companies. Though, involvement of supervisors is seen important but HR managers have
their clout in hiring process in large Omani companies. Formals and informal systems both are used and it
depends on the type and size of the company. Small and medium enterprises frequently use informal
system. But in last 10 years or so this function has become more organized and rigorous.
• Employee Separations (Voluntary inducements to retire or layoffs; hiring freeze or recruit as needed):
Omani laws doesn’t encourage layoff and it is difficult to downsize or retrench large number of employees
in Omani companies though they adopt their silent policy in this regard which may be firing people after
giving appropriate notice as specified under the Omani labor law, minimum one month notice in advance is
required in private sector.
• Performance Appraisal (Customized appraisals or uniform appraisal procedures; developmental appraisal
or control-oriented appraisal; multipurpose appraisals or narrow focus appraisal; and multiple inputs for
appraisal or supervisor input only): Performance appraisal is very traditional in most of the Omani
companies and government sector it is rarely linked to training intervention. It is more of a supervisor’s
evaluation and in most of the cases no feedback process exists and it is seen as confidential.
• Training and Development (Individual training or team-based training; on-the-job training or external
training; job specific training or generic training; and “buy” skills by hiring experienced workers at a higher
wage or “make” skills by providing training to less experienced workers hired at a lower wage): This is one
activity which is pursued by most Omani companies regularly though most of the time it appears to be
cosmetic one and most of the participants are also found to be interested in procuring certificates rather that
competency. OPAL has very strong views in this regard and exhorts employees and employers to acquire
competencies which can be used at workplace.
• Compensation (Fixed pay or variable pay; job-based pay or individual-based pay; seniority-based pay or
performance-based pay; and centralized pay decisions or decentralized pay decisions): Most of the Omani
companies pursue a fixed pay policy which is highly centralized and for very few job categories in private
sector performance-based pay specially in sales and marketing.
• Employee Relations and Labour Relations (Top-down communication or bottom-up communication and
feedback; union suppression or union acceptance; and adversarial approach or enlightenment management):
Top-down approach is commonplace though employees can air their grievances but culturally Omani
society encourages collective approach and respect for authority. Trade union is new phenomena in Oman
after the amendment of labor law in July 2006 and at present union is non-existent. Though, there have
been few cases which are unreported where people have unionized to protect their interest in recent past.
• Employee Rights (Emphasis on discipline to reduce mistakes or emphasis on preventive action to reduce
mistakes; and informal ethical standards or explicit ethical codes and enforcement procedures): Employees
rights are protected by Omani labor law in private sector and most of the company attempt to make basic
provisions regarding discipline. Long absenteeism is the perennial problem in good number of companies.
• International management (Create global company culture or adapt to local culture; rely on expatriates or
rely on country national; and universal company policies or country-specific company policies): Most of
the multinational companies rely on adapting local culture but don’t want to loose the ambience of
seriousness and professionalism. Most of them customize their policies to make it country-specific.
The description provided above is very generic to indicate the popular work environment in relation to HR
practices in Omani companies and one size doesn’t fit all. The primary strategic choice of the firm becomes
paramount which determines the desired HR interventions and programs which suit the organizational requirement
for developing the requisite people competency and organizational capability. Omani companies vary at great length
in terms of their strategic positioning and choices available to them whereas some of them may strive for operational
excellence or product leadership whereas some may look for cost containment. It depends on the circumstances they
are in and what they have created over a period of time as their legacy. The cultural and regional factors also
become highly relevant while designing HR interventions and programs. it must gel well the culture milieu and the
workplace environment. Namazie and Tayeb (2006) quote Budhwar and others (Budhwar and Debrah, 2001;

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Budhwar and Sparrow, 1998, 2002) who feel that the HRM is in infancy in developing countries and they identify
three important factors which influence HRM policies and practices:
• National factors, including national culture, national institutions, business sectors, and dynamic business
environment;
• Contingent variables including age, size, nature, ownership, lifecycle stage of organization, presence of
trade union and the HR strategies and interests of different stakeholders,:
• Organizational strategies of the companies.
Al-Hamadi and Budhwar (2006:55) opines that “HRM is very much a new phenomenon in Oman. There
are many organizations both in the public and private sectors with no HRM departments. Omani organizations are
practicing more personnel management than HRM”. The situation becomes more complex in the absence of
qualified and experienced HR managers or professional in Oman. Budhwar, Al-Yahmadi and Debrah found in the
study mentioned earlier in this paper that the proportion of the total HRD staff to the total number of employees was
0.18 percent and the proportion of the professional HRD staff to the total employees was 0.07 percent in the selected
state owned enterprises in Oman and more than 38% of the senior HRD personnel were selected from other than
HRD or personnel departments (Budhwar, Al-Yahmadi and Debrah, 2002). This means that these senior HRD
personnel were not having prior HR experience or learning which will surely make the job of HR department highly
deficient and ineffective. The inadequate ratio of HR managers or professionals to workforce size is another issue
which needs to be rectified in most of the Omani companies. There is an urgent need to address these issues to make
HR strategy work in Omani companies. Developing high performance work system and an array of HR programs
which are consistent with the business strategy and creates organizational capability needs the HR job to be
delivered by qualified HR professional and the absence of qualified HR professional makes the job impossible in
most of the Omani companies.
The fourth five year plan in Oman put a cap on the employment of expatriate labor in HRM/personnel
department in the private sector. It also envisaged to minimize the use of expatriate labor in management functions
in the private sector and recommended filling of such job by Omanis (Al-Hamadi and Budhwar, 2006). The strict
cap on the employment of expatriate labor in HRM/ personnel department at times creates handicaps for private
companies to compete and adopt strategic HR policies and programs. There is dearth of trained Omani HR
professionals in Oman and sometime company employs the expatriate labor to do the professional HR work under
the guise of other job category which is not fully omanised. There is absolute need to have flexibility in employing
HR professionals rather than having a complete ceiling on the job as the labor market is tight for HR professional
and there is dearth of qualified and talented Omani HR professionals who can design and deliver the HR programs.
Once we have good number of trained and qualified Omani HR professionals, the cap can be reverted back. The
above discussed reasons are important reasons which hamper the HRM role to get appreciated and fully utilized in
true sense. Resultantly, most of the HR practices become piecemeal and reactive personnel activities. Good number
of times it caters to hiring, training and development function, adhering to Omanization target, paying salaries,
performance evaluation without any integrative framework, record keeping and other traditional routine personnel
functions. Budhwar, Al-Yahmadi and Debrah, (2002) in their study also found that HRD objectives of the state
owned enterprises were reflective of a routine and typical personnel activity of an Omani firm. The activities found
were following:
• Building up the employees’ knowledge and skills in their field of work,
• Achieving Omanization plan,
• Increasing the overall performance and productivity of the unit,
• Upgrading the qualification of employees to higher education and higher degree levels, and
• Implementing the training programs according to the unit needs.
To have a true HRM in Omani companies which will promote the organizational capability and people
competencies by adopting credible and coherent HR programs, we need to equip our HR departments with
competent and talented HR professional and creating an environment where HR is seen as an important partner and
stakeholder of the firm and asked to contribute in that regard which is not the case as of now in most of the
companies barring few multinational and joint sector companies.

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 There is also need to change the work culture and mindset of the employees and employers as well. Wilkins
(2002) in his evaluation of the implementation of national vocational qualifications (NVQs) in Oman finds that
many candidates in their NVQ training do fail because of their poor attitude and a lack of interest and commitment
and with their low ability in English and the NVQ methodology which in their view require too much effort to
understand and consequently they are tempted to drop out from the training program. This kind of attitude needs to
be changed where ignorance and complacency have no place and perseverance is practiced. Mellahi and Budhwar
(2006) commenting on the HRM in the Middle East comments that there is widespread adoption of some HRM
practices that are not compatible with Islamic values, such as the use of nepotism in recruitment and compensation
known as wasta in GCC countries and piston in North African countries. They feel that there is urgent need to move
away from the inequitable relationship-based HRM policies such as wasta and piston towards a more competence-
or merit-based approach and the survival of a large number of Middle Eastern organizations will depend upon
unlearning old inefficient or outdated HRM practices and learning new one.

Challenges for the HR Managers in Oman

The challenges are huge before HR managers in Oman to suit the exigencies of the workplace and business
environment. In good number of cases, HR managers employed in Omani companies lack requisite skills and
competency to deliver the desired outcomes in the organization. Budhwar, Al-Yahmadi and Debrah, (2002) find that
HR managers were having the educational level varying from the sixth elementary school certificate (those recruited
in 1970 or around that time) to Masters in HRD. It is ironical to observe that the HR development role which
warrants high level of professionalism and competence is being manned by very low qualified people. This needs to
be rectified at the earliest. It becomes antithesis to what Ulrich (1997) recommends for HR managers. Ulrich
recommends four common clusters of competencies required for HR professional in the present business scenario.
These are:
• Business knowledge: HR professional must know the business which includes a mastery of finance,
strategy, marketing and operation.
• HR state of the art: HR professional must know the theory and leading edge practices for HR tools.
• Change and process: HR professionals need a change and the ability to apply the model to a specific
situation.
• Credibility: HR professionals must become personally credible through the accuracy of their work and the
intimacy of their relationship.
The new role of HR managers seems to be challenging as they have to strive hard to help organizations in
achieving their competitive advantage. The role and status of human resource functionaries are going to be
reevaluated and redefined in the new situation and the line between the primary and secondary functional activities
of the value creation (in organization) or the distinction between the line and staff status of the function is blurring in
good number of the organizations worldwide (Khan, 2007). Consequently, there will be significant change in the
role and status of HR managers. Some of them are:
i) HR function has to come out of the cocoon and to think proactively and strategically to serve the business
strategy in enhancing the competitive advantage of the firm;
ii) HR policies and procedures are part of the organizational transformational process, and are required to be
coherent, credible and result-oriented. They are also required to contribute to the tangible goals of the
organization, more importantly, profits; and
iii) HR has attracted the attention of CEOs and line managers and they are going to be more indulged in
designing and implementing HR strategies. This phenomenon is likely to dilute the ownership of HR
prerogatives by the HR functionaries as line managers will be highly involved in the time to come (Khan,
1999)
Burke (1997) further exhorts HR managers to learn more about these nine needs. The knowledge about the
organizational design and structure, leadership, and the changing nature of psychological contract are worth
mentioning here. He is of the view that HR practitioner is not supposed to have the specialization in each of these

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areas but should strive to broaden his repertoire. HR generalist inside the organization is more valuable and his
enhanced understanding increases the HR practitioner’s value as an adviser and as a staff executive in the
organization (Khan, 2007).
The previous discussion throws a lot of challenges for HR managers in context of Oman which can be
summarized as follows:
a. HR management function is becoming more strategic and needs HR managers having the requisite skills,
competency and attitude to contribute to the value addition chain of the firm.
b. The cap on employment of expatriate HR manager by the government limits the chance of sharing and
learning of HR competency and skills for Omani HR managers in Omani firms. They have alternatives
which can fill this gap.
c. HR professional in general supposed to show professionalism in their transaction and delivery of outcomes.
They are supposed to be more networked and looking for new knowledge and learning emerging in the
field of HRM.
d. Knowing the dynamics of business they are operating into. For example, a HR manager working for oil and
petroleum company must know the dynamics of that business.
e. HRM as a strategic function is in its infancy stage in Oman and very few benchmarks and learning is
available locally which serves all types of firms.
f. Strategic HRM is not a kind of approach where “one size fits all’ and warrants Omani HR managers to
understand and evaluate the value chain of the business they are in and organizational capability they want
to create through people competency.
g. How to create productive work environment which fosters learning and growth of individuals in line with
organizational requirement.
h. How to manage change and processes in the organization.
i. How to face the dilemma of Omanization process i.e., employing Omani national without loosing the
competitiveness and productive work culture.
j. How to put in place a performance management system where performers are rewarded. Adopting feedback
process in performance management system and adopting relevant mechanism for that.
k. Adopting ethical work practices which encourage commitment and motivation of employee. How to deal
with wasta (nepotism) (especially in recruitment, promotion and compensation processes) highly prevalent
in Omani culture.
l. How to enhance the image of HR constituency and being more visible in the organization.
m. How to deal with the emerging challenges of trade union movement which often results into strained
employee relations.
n. How to adopt human resource information system to become more efficient and for improving HR decision
making process.
The list may become long. But it can be said that the new age HR managers in Oman needs to understand
the importance of the roles played by them. They are catalyst and change agent for bringing excellence in
organization and they must know the dynamics behind developing organizational capabilities and competencies.
They have to understand to contribute towards the core competencies of the firm and they must master the HR
competencies which can provide HR deliverables not a reactive HR intervention. They must equip themselves with
the right knowledge and learning required in that regard. The basic knowledge regarding developing HR policies
and programs will remain relevant to them. Omanization process remains a challenge and seizing this opportunity in
developing national workforce may be an endeavor which coming generation will devour. How to make a balance
between inconsistent business realities existing in Omani workplace and do the tight rope walking is a lesson must
learned by every HR manager.

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Conclusion

Oman has liberalized its economic policies in recent past and it signed the WTO treaty in 2000 and US-Oman Free
Trade Agreement (FTA) in 2006 which is going to provide a lot of opportunities and challenges to its businesses.
Businesses are supposed to seize this opportunity by bringing requisite change in their approach and mindset and
they must meet the rising expectation of customers providing quality products and services. This warrants
organization to become proactive, flexible, responsive and adaptive to the desired changes in their system, structure
and processes. Consequently it must use people competency as a strategic resource and strive to create an ambience
of trust, empowerment and transparency to help their employees to contribute. The HRM function has emerged as a
proactive and strategic function well integrated with the business strategy of the firm. Though, in case of Oman, this
definition doesn’t apply as most of the firms barring few multinational and government firms use more of a reactive
personnel management as a people management function and they need to adopt proactive and effective human
resource strategies which can help them in achieving the competitive advantage through a high degree of workforce
flexibility, and greater concern for employees’ learning and growth.
There is absolute dearth of trained Omani HR professionals in Oman and sometime company employs the
HR specialist without having the requisite skill and competency. Government must provide some flexibility in
employing HR professionals rather than having a complete ceiling on the employment of expatriate worker. The
HRM role is not getting fully appreciated and utilized in true sense in Omani companies and most of the HR
practices adopted are piecemeal and reactive one.
The HR managers in Oman have to prepare themselves to suit the exigencies of the workplace and business
environment. It has been found they lack requisite skills and competency to deliver the desired outcomes in the
organization. Some HR managers don’t have the bare minimal qualification to man the HR function, this kind of
imbalances needs to be addressed by training and enhancing their competency to the requisite level. It appears that
HR management role in Oman have to go a long journey which warrants high level of professionalism and
competence. Lastly, there is a strong need for attitudinal change among the various stakeholders of HRM. The HRM
practices which are not compatible with Islamic values, such as the use of nepotism in recruitment and
compensation practices known as wasta in GCC countries needs to be addressed earnestly. It will bring more
seriousness and professionalism at the workplace and it will give message to employees that merit and performance
is rewarded.

References

Contact author for the list of references.

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 The Effects of Individual and Group Levels of Fairness on Employee Outcomes:
A Scenario Study

Yoichiro Hayashi, hayashiocean@gmail.com

Nagoya University of Commerce and Business, Japan
Tomoki Sekiguchi
Osaka University, Japan

Abstract
While the traditional research on organizational justice focuses on the individual-level fairness (i.e., the degree to which
individuals are treated fairly in the organizational context), this study examines the concept of group-level fairness,
defined as the degree to which a group as a whole is treated fairly within the organization, and empirically examined the
role of the group-level fairness as well as individual-level fairness on various employee outcomes. A scenario study was
conducted using a sample of university students in Japan. Our results suggest that group-level fairness is as an important
and useful construct as individual-level fairness to predict key employee outcomes (e.g. organizational commitment, social
identity, job satisfaction and intent to quit). The research limitation and future research directions are discussed.

Introduction

The field of organizational justice has developed rapidly in recent decades and considerable theoretical and
empirical research has accumulated to better understand human life in business and organizations. However, the
majority of the research on organizational justice has been conducted within the North American context (Brockner,
et al. 2001; Chen, Meindl, and Hui, 1998). Because the culture in North America is characterized as relatively
individualistic, the dominant perspective on organizational justice has been on an individual level. That is, the field
of organizational justice has been focusing on how individuals feel or judge whether they are treated fairly in
organizations, and how such justice perceptions affect important individual outcomes (e.g., job satisfaction,
organizational commitment, performance, deviant behaviors, and turnover). However, it seems natural that people
may also consider whether their own group as a whole is treated fairly within the organization. We call this kind of
perception collective justice perception (CJP).In this paper, we examine this new concept that focuses on the group
level cognition.
Recently, some researchers have started to consider a similar group-level justice construct called procedural
justice climate (Colquitte, Noe, and James, 2002; Mossholder, Bennett, and Martin, 1998; Naumann and Bennett,
2000). Procedural justice climate is influenced by the recent trend of multilevel theorizing (Chan, 1998; Kozlowski
and Klein, 2000; House, Rousseau, and Thomas-hunt, 1995; Rousseau, 1985) which suggests that management
researchers should explore organizational phenomena in terms of different levels including individual, team, and
organization and so on. However, we believe that the way to conceptualize and operationalize procedural justice
climate is different from our proposed collective justice perceptions.
In the following section, we make a brief review on the procedural justice climate and in turn discuss the
difference between procedural justice climate and our new conceptualization, collective justice perception. In the
end part, we suggest several hypotheses based on justice at collective level.

Theory and Hypotheses

Procedural Justice Climate
Based on the evidence that individuals observe how members of a group in an organization are treated by other
groups and incorporate their (in) justice experience into their own justice assessment (Kray and Lind, 2002; Lind,
Kray, and Thompson, 1998; Tyler and Lind, 1992), Naumann, Ben nett and their colleagues proposed the construct

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of procedural justice climate as a distinct group-level cognition (Mossholder, Bennet, and Martin, 1998; Naumann
and Bennett, 2000). They apply the notion of organizational climate to understanding the group-level cognition of
procedural justice. Organizational climate refers to a set of shared perceptions about organizational policies,
practices, and procedures that are developed though group interaction (James, Joyce, and Slocum, 1988; Schneider
and Reichers, 1983). That is, climate perceptions represent meaning derived from the organizational context, which
form the basis for individual and collective responses. Accordingly, procedural justice climate is defined as distinct
group-level cognition about how a group as a whole is treated procedurally (Colquitt, Noe and Jacson, 2002;
Naumann and Bennett, 2000).
Mossholder et al. (1998) found that procedural justice climate explained unique variance in employee job
satisfaction beyond that accounted for by individual perceptions of procedural justice. Naumann and Bennett (2000)
indicated that work group perceptions of cohesion and supervisor visibility were associated with the development of
procedural justice climate, and which in turn was positively associated with helping behaviors after the effects of
individual procedural justice perceptions were controlled for. Colquitt et al. (2002) measured procedural justice
climate strength (i.e., consensus or dispersion about the procedural justice perceptions among team members) as
well as procedural justice climate level (i.e., the average procedural justice perceptions within a team) and found that
climate level was significantly related to both team performance and team absenteeism. Moreover the effects of
climate level were moderated by climate strength such that the relationship was more visible in stronger climates.
Specifically, the research showed that the positive effect of procedural justice perceptions on the team performance
were more pronounced for those groups with stronger consensus about the justice. In addition, team size and team
collectivism were significant antecedents of climate level, in that team size and team demographic diversity
predicted climate strength.
Research on procedural justice climate has demonstrated that these contextual variables influence work
attitudes and behaviors beyond the contributions of individual justice perceptions. For example, Naumann and
Bennett (2000) manifested that PJC accounted for the unique variance of the helping behaviors, even after the
control for the effect of procedural justice at individual level. These studies are of particular value in that they shed
light on the group-level cognition while most of the past research on organizational justice focused on individual-
level perceptions.
On the other hand, the concept of procedural justice climate has several limitations in understanding group-
level cognition regarding organizational justice, especially in group-oriented cultures. Firstly, the notion of
procedural justice climate is basically the perceptions about how individual members are treated fairly by the group,
and thus does not consider the other groups as referents in judging fairness. It is important to note that people in
group-oriented cultures typically distinguish in-group from out-group (Clayton and Opotow, 2003; Triandes, 1995).
Thus, they might compare their own group with other groups in making justice judgment about how their own group
is treated by the higher-level authority within the organization (e.g., top management teams, head quarters) or by the
organization as a whole. For example, employees in an accounting department may sometimes compare their own
department with other departments in the same organization (e.g., marketing and production departments) regarding
whether the company’s financial budget is allocated fairly or whether members of their department are treated fairly
by top management, general managers and other group members.
The concept of procedural justice climate does not appear to include the above-mentioned inter-group
comparison process. Therefore, it appears that the conceptualization is influenced by the individualistic cultures in
which people are not inclined to distinguish between in-group and out-group in judging fairness in daily life. In
other words, there may be a greater focus on within-group treatment rather than between-group comparisons in the
concept of procedural justice climate. That is, people in individualistic culture may tend to compare themselves with
other in-group members to judge whether they are treated fairly by the group. Therefore, although procedural justice
climate is assumed to be a group-level construct, the basis for judging procedural fairness originates at the individual
level (i.e., how individual members are treated within the group). The construct of collective justice that is also
applicable in group-oriented cultures should include between-group comparisons as well as within-group
comparisons.
Hypotheses
The mechanism in which perceptions of justice influence attitudes and behaviors may be different depending on

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whether the justice perception is individual- or group-level. For individual-level justice perceptions, the perception
of fairness influences individual attitudes and behaviors directly. For group-level justice perceptions, the
development of shared perceptions (e.g., agreement, consensus) about whether the group is treated fairly may lead to
group contexts (e.g., group behavioral norms), which in turn influence individual behaviors. This may be especially
true when individual behavior represents group interests, which can be interpreted as “group behaviors.” For
example, based on shared attitude and cognition toward other groups and organization as a whole, groups may
decide whether they cooperate or compete with other groups within the organization. If the shared and homogenous
attitude toward other groups is negative or hostile, the individual members’ behavior might be somewhat constrained
by such group context even if some members may privately hold positive attitudes toward such groups. Thus, the
resultant behaviors of the group members toward other groups may converge on negative or incorporative ones.
The above arguments suggest that collective justice perceptions are assumed to have independent effects on
group outcomes such as group attitude and group behaviors. This also means that the effects of collective justice
perceptions go beyond the effect of individual-level justice perceptions.
Hypothesis 1a: Group-level fairness perceptions will influence group-level outcomes (commitment to the
organization as whole and social identity based on the organization as a whole) even after controlling
for individual-level fairness perceptions.
Hypothesis 1b: Group-level fairness perceptions are more likely to influence group-level outcomes
(commitment to the organization as whole and social identity based on the organization as a whole) than
individual-level fairness perceptions.
While the effects of collective justice perceptions on group-level outcomes may be stronger than the effects
of individual-level justice perceptions, collective justice perceptions may also influence individual attitudes and
behaviors. Compared with group-level attitudes and behaviors (e.g., group OCBs; Schnake, Michael and Dumler,
2003), individual attitudes and behaviors may be less constrained by group contexts. Nonetheless, prior evidence
indicates that group contexts influence individual attitudes and behaviors. For example, research on procedural
justice climate has demonstrated that it had significant effects on individual attitudes and behaviors (Mossholder et
al, 1998; Nauman and Bennett, 2000). Research also shows that group affective tone, which means the consistent
and homogenous reactions within a group, affects individual reactions and individual absenteeism behavior. In
particular, when the group has a high positive group affective tone, people are absent less (George, 1990; 1996).
Thus, collective justice perceptions as well as individual level justice perceptions may influence individual-level
outcomes such as satisfaction, commitment, and citizenship behaviors.
Hypothesis 2: Group-level fairness perceptions will influence individual-level outcomes (job satisfaction
and intent to quit) even after controlling for individual-level fairness perceptions.
Research on organizational justice has both theoretically and empirically demonstrated that distributive
justice (outcome favorability) and procedural justice interact with one another to affect people’s reactions to
organizational decisions (Brockner, 2002; Brockner, DeWitt, Grover, and Reed , 1990; Daly and Geyer, 1994;
Folger’s ,1986; 1987). The interactive effect of these studies manifested that the tendency for people to respond
more positively when outcomes are fair was less likely when procedural fairness is high rather than unfair. To put it
another way, the tendency for people to respond more positively when procedures are fair was less pronounced
when outcome is fair rather than unfair. Brockner and Wisenfeld (1986) demonstrated the robustness of interactive
relationship between procedural justice and distributive justice in their meta-analysis study.
Given these research findings, we consider it reasonable to predict the different dimensions of justice at a
group-level interact with one another. That is, there may be interaction effects between different dimensions of
collective justice perceptions on various individual and group-level outcomes.
Hypothesis 3: There will be interactions between individual-level and group-level fairness perceptions
(job satisfaction and intent to quit).

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Method
Sample
Participants were recruited from management classes in two public and private universities located in Osaka, Japan
for extra credits in return for the participation in this study. All participants were told that the participation in this
study was voluntary and anonymous. Over 90 percent of the attended students were agreed to participate in this
study, resulting 417 of the sample size. Our sample included 80.1% males and 19.9% females with average age of
20.78 years old (SD = 1.92). Over 90 percent of the participants have experienced the part-time work. Because we
collected data from two universities, we explored whether significant differences existed in the mean levels of
variables central to our hypotheses. Independent-samples t tests for each variable revealed that there was no
significant difference between the two samples. Given the both samples were derived from the same population (i.e.,
undergraduate students), we combined the two samples into one to test our hypotheses.
Design
We used written scenarios to manipulate a situation that could occur in the workplace that should cause perceptions
of justice/injustice. Greenberg and Eskew (1993) suggested that using written scenarios is an effective method for
gauging how someone would react to a similar situation in an organization. In addition, Wiseman and Levin (1996)
found that individuals often make the same decisions in hypothetical situations as in real life.
We created scenarios of a hypothetical region-wide large restaurant chain for this study. Several pilot
studies were conducted to develop the scenarios. First, eighteen undergraduate students in a management class were
asked to provide information about the working situations they personally perceived individual level justice/injustice
as well as group level justice/injustice. They were also asked to provide the part-time jobs they had experienced.
Next, in another pilot study, about one hundred students provided their work experience, most of which were part-
time work. Results from these pilot studies revealed that a part-time job at a restaurant was the most frequently
mentioned work experience. Therefore, we concluded that a restaurant is suitable for the development of the realistic
scenarios for undergraduate students as research participants.
In the scenarios of hypothetical restaurant chain, participants were to play a role of its part-time employees
of one branch restaurant. Participants are randomly assigned to a 2 (justice at individual level: fair, unfair ) x
2(justice at collective level: fair and unfair) between subjects factorial design. In addition, the order in which
individual and collective justice situations are presented also varied such that the half of the surveys present
individual level justice situation first, and group level justice situation second, and another half of the surveys
present them in revise order. As a result, the total 8 versions of different scenarios were created, and participants
were to be randomly assigned to one of these 8 different scenarios. Finally, a pilot study was conducted in which 18
undergraduate students checked the realism of the scenarios and appropriateness of the manipulations.
Procedure
During the class, one of the authors gave each participant a survey containing one of eight different hypothetical
vignettes followed by a series of questions. Participants were asked to imagine themselves in the scenario depicted
and to indicate their likelihood of engaging in several different behaviors as well as their attitudes toward the
hypothetical organization (company as a whole) and group (branch restaurant). The participants’ individual
differences as well as their demographic information were also measured in the survey questionnaires. Debriefing
was made after participants returned their surveys.

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 TABLE 1: DESCRIPTIVE STATISTICS AND CORRELATION MATRIX
Table1
Descritive statistics and correlation matrix.
Variables name M SD 1 2 3 4 5 6 7 8 9
1 Sex 0.84 0.41 －
2 Age 20.78 1.92 0.02 －
3 Job experience 0.96 0.28 0.09 0.09 －
4 CJP 0.50 0.50 0.00 0.00 0.03 －
5 IJP 0.51 0.50 - 0.01 0.03 0.02 0.03 －
** **
6 Commitment 3.31 1.15 - 0.02 0.09 0.09 0.18 0.18 －
** ** **
7 Social identity 3.26 1.05 0.06 0.07 0.03 0.33 0.27 0.71 －
* ** ** **
8 Satisfaction 3.66 1.17 0.03 0.07 0.05 0.12 0.48 0.54 0.58 －
** ** ** ** **
9 Intent to quit 4.19 1.21 - 0.07 0.00 - 0.09 0.13 － 0.33 － 0.32 －0.39 －0.61 －
Note: Total N participants 417.
* p <0.05.
** p <0.01.

Measures
Commitment to organization: To measure organizational commitment, we used 4 items from the affective
commitment scale, developed by Allen and Meyer (1990). Four items were chosen from the original version of eight
items. A sample item is “I really feel as if this organization’s problems are my own” The Alpha coefficient for this
scale was .76 in our sample.
Social identity based on the organization: Social identity measures were adapted from Tyler & Blader (2000). Six
items were used to assess to which participants perceived the degree to which the participants feel proud of working
at the hypothetical company. The sample items are “I feel proud of working at this company” and “My values are
very similar to the company’s one. The Alpha coefficient for this scale was .87 in our sample.
Satisfaction: Job satisfaction was measured with 5 items from the Job in General (JIG) scale (Ironson, Smith.,
Brannick, Gibson, & Paul, 1989). Original version was eighteen items. The items ask employees to evaluate their
current job in term of several aspects. For example, we asked participants to answer the extent to which the job is
pleasant, better, good and worthwhile. This scale has an alpha coefficient .87 for our sample.
Intent to quit: Three items from Wayne et al. (1997) were used to measure participant’s intention to quit. An example
of items is “I want to quit this job”.

Results

Manipulation checks
To ensure that the justice manipulations were perceived in the expected way, we contrasted the manipulation check
scales across the conditions. Based on Moorman (1991), six organizational justice scales were created to evaluate
the manipulations of the two forms of justice using a scale from 1 (strongly disagree) to 7 (strongly agree).Half of
them were justice at individual level and assess the degree to which participants perceived fair the pay raise criteria
within the branch. The rest of items concerned justice at collective level and assess the degree to which participants
perceived fair the company’s system to rank every branch as fair. In addition, using 7-point scale (1 = strongly
disagree, 7 = strongly agree), participants indicated their extent of agreement with statements such as “I am pretty
familiar with that kind of situation,” with a mean response of 3.97 and standard deviation of 1.22.
The results of one-way ANOVA indicated that the justice conditions were successfully manipulated in the
expected way. The participants who read individually fair scenario (M =4.66, SD=1.24) showed higher level of
fairness than did those who read individually unfair scenario (M = 2.78, SD=1.02) 〔F (1, 424) =292.86, p < .01〕.
Similarly, the participants who read collectively fair scenario (M =4.49, SD=1.14) showed higher level of fairness
than did those who read individually unfair scenario (M = 2.51, SD=1.01)〔F (1, 424) =359.14, p < .01〕.

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The Effects of Justice at Individual- and Collective Level on Outcomes
We conducted a series of hierarchical regression analysis to test the validity of the study hypotheses. The scale
means, standard deviations, and intercorrelations among study variables are reported in Table 1.Hypothesis 1
predicted that the collective justice perceptions would affect outcomes at collective level (e.g. commitment to the
organization as whole and social identity based on the organization as a whole) even after controlling for individual-
level fairness perceptions and that there should be stronger relationship between justice at collective level and two
outcomes. As shown in table2, justice at collective level was associated (p<0.01) with each of two dependent
variables and accounted for unique variance (p<.001) in these variables over and above that explained by the control
variables even when both type of justice was entered simultaneously (Step 2). These results supported the hypothesis
1a. In addition, we compare the difference of predictive power to dependent variables between justice at collective
level and at individual level. That is, after entering the three control variables, we entered justice at collective level
or justice at individual level in step2. When justice at individual level and collective level were entered in step 2
respectively, each of them accounted for an additional 5% of the variance in commitment to the organization over
and above that accounted for by the control variables. Thus, hypothesis 1b was not supported. When justice at
individual level was entered in step 2, justice at individual level predicted an additional 8% of the variance in social
identity based on the organization. On the other hand, when justice at collective level was entered in step 2, this
variable explained additional 12% of the variance in social identity. This result confirmed hypothesis 1b.

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Table 2. Hierachical regression analysis for outcomes at individual level

Commitment to the Social identity based

organization on the organization
variable β β

step1
sex - 0.03 0.06
age 0.08 0.06
experience of part- time job 0.08 0.01
2
⊿ R after step1 0.02 0.01

step2
** **
Justice at individual level 0.17 0.26
** **
Justice at collective level 0.17 0.32
2 ** **
⊿ R after step2 0.08 0.18

step2
** **
Justice at individual level 0.18 0.27
2 ** **
⊿ R after step2 0.05 0.08

step2
** **
Justice at collective level 0.18 0.33
2 ** **
⊿ R after step2 0.05 0.12
2 ** **
Overall R 0.08 0.18
2 ** **
Overall adjusted R 0.06 0.17

Note: Total N participants.417; β is the standardized regression

coefficient. All β s represent the weight for that step of the model.
*
p<0.05;
**
p<0.01;

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 Table 3. Hierachical regression analysis for collective outcomes

Job satisfaction Intent to quit

Variable β β

step1
sex 0.03 - 0.06
age 0.06 0.01
experience of part- time job 0.04 - 0.09
2
⊿ R after step1 0.01 0.01

step2
** **
IJP 0.48 0.33
** **
CJP 0.12 0.12
2 ** **
⊿ R after step2 0.25 0.14

step3
IJPxCJP 0.01 0.08
2 ** **
Overall R 0.25 0.14
2 ** **
Overall adjusted R 0.24 0.13

Note: Total N participants.417; β is the standardized regression

coefficient. All β s represent the weight for that step of the model.
*
p<0.05;
**
p<0.01;

The results of the analyses for hypothesis 2 and 3 are also shown in Table 3. Justice at collective level was
associated (p<0.01) with each of two dependent variables (e.g. job satisfaction and intent to quit) and accounted for
unique variance (p<.001) in these variables over and above that explained by the control variables even when both
type of justice was entered simultaneously (Step 2). These results supported the hypothesis 2. However, there existed
no interactive effect of two types of justice on dependent variables and thus hypothesis 2 was not supported.

Discussion

The present study firstly proposed the justice perceptions at collective level as a distinct concept from individual
level justice and estimated the unique predictive power toward the important organizational outcomes. Our results
provided some support for these predictions. The individual in the organization might not only attend “how fairly am
I treated by the organization”, but also attend “how fairly my team is treated by the organization” in forming the
attitudes toward the organization.
Given that justice at collective level might be new area, this study includes some limitations. Firstly, justice

1276
at collective level did not accounted for more variance in collective outcome (e.g. commitment to the organization)
than did justice at individual level. This indicated that although it targeted the entire organization commitment to the
organization might be improper concept at collective level. It appears to be required to precisely define the collective
concept as a consequences in the future study. Secondly, interactional effect of justice at individual level and at
collective level on dependent variables could not found in this study. We did not assume the dimensionality of
justice (ex. procedural justice and distributive justice in differentiating the two types of justice. The lack of
dimensionality of justice might eliminate the interactive effect of justice at individual and collective level. The
future research should consider the dimensionality of justice in varying the fairness conditions.Thirdly, the scenario
based study might make it difficult that participants feel his or her team and group as a real entity, which might
attenuate the impact of justice at collective level on organizational outcomes. Forthly justice at collective level is
likely to be related with the sense of belongingness to the team or group. In the present study, we did not measure
this aspect and investigate the influence of belongingness on justice at collective level. Social identity theory and
self categorization theory may provide more insight to develop this new concept – justice at collective level. It
Further investigation should be needed to elaborate this new concept. Fourthly, all participants in this study were
university students. Therefore, it is unclear whether these results can generalize to business setting. The study using
employees can be expected.
In summary, this study is the first attempt to empirically conceptualize justice at collective level and
estimate the impact of this. The results basically showed that participants perceived the justice at collective level
independent of justice at individual level and attend the quality of justice collective level as well as individual level
in deciding how to react to the organization. Therefore, it should be promising to accumulate the theoretical and
empirical study regarding collective justice and direct new avenue of organizational justice research.

References

[1] Allen, N. J., and Meyer, J. P. (1990). The measurement and antecedents of affective, continuance, and
normative commitment to organization. Journal of Occupational Psychology, 63, 1-18.
[2] Brockner, J. 2002. Making sense of procedural fairness: How high procedural fairness can reduce or highten
the influence of outcome favorability. Academy of Management Review, 27, 58-76.
[3] Brockner, J., Ackerman, G., Greenberg, J., Gelfand, M. J., Francesco, A. M., et al. 2001. Culture and
procedural justice: The moderating influence of power distance on reaction to voice. Journal of Experimental
Social Psychology, 37, 300-315.
[4] Brockner, J., Dewitt, S., Grover, S., & Reed, T. 1990 When it is especially important to explain why: Factors
affecting the relationship between managers’ explanations of a layoff and survivors’ reactions to the layoff.
Journal of Experimental Social Psychology, 26, 389-407
[5] Brockner, J. and Wiesenfeld, B. M. 1996 An integrative framework for explaining reactions to decisions:
Interactive effects of outcomes and procedures. Psychological Bulletin, 120, 189-208.
[6] Chan, D. 1998 Functional relations among constructs in the same content domain at different levels of
analysis: A typology of composition models. Journal of Applied Psychology, 83, 234-246.
[7] Chen,C. C., Meindl, J. R., and Hui, H. 1998 Deciding on equity or parity: A test of situational, cultural, and
individual factors. Journal of Organizational Behavior, 19, 115-129.
[8] Clayton, S., and Opotpw, S. 2003 Justice and identity: Changing perspective on what is fair. Personality and
social psychology review, 7, 298-310.
[9] Colquitt, J. A., Noe, R. A., and Jackson, C. L. 2002 Justice in teams: Antecedents and consequences of
procedural justice climate. Personnel Psychology, 55, 83-109.
[10] Daly, J. and Geyer, P. 1994 The role of fairness in implementing large-scale change. Employee evaluations of
process and outcome in seven facility relocations. Journal of Organizational Behavior, 15, 623-638.
[11] Folger, R. 1986 Rethinking equity theory: A referent cognition model. In H. W. Bierhoff, R. L. Cohen, & J.
Greenberg (Eds.), Justice in social relations, New York: Plenum.
[12] Folger, R. 1987 Reformulating the preconditions of resentment: A referent cognitions mode. In J. C. Masters

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 and W. P. Smith(Eds), Social comparison, justice and relative deprivation: Theoretical, empirical, and policy
perspectives (pp.183-215). Hillsdale, NJ: Lawrence Erlbaum.
[13] George, J. M. 1990 Personality, affect, and behavior in groups, Journal of applied psychology, 74, 317-354.
[14] George, J. M. 1996 Group affective tone. In M. A. West (Ed.), Handbook of work group psychology (pp.317-
354). Chichester, UK: Wiley.
[15] Greenberg, J.,& Eskew, D. E. (1993). The role of role playing in organizational research. Journal of
Management, 19, 221-241.

Contact authors for the full list of references

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 Ecopreneurship as CSR: the Human Face of Development

Rajeshwari Narendran, rajeshwari18@yahoo.com

Gaurav Kumar Joshi, gk_joshi@rediffmail.com
Mohan Lal Sukhadia University, India

Abstract
The 21st century is witnessing the fastest ever changes and even faster developments in leaps and bounds. In the mad race
of ruthless development, its like an oasis in the desert that many corporates are coming of age for Corporate Social
Responsibility (CSR) as their cup of tea. Where corporates are heartily taking up socio – culture heritage cum
environmental issues much more seriously then ever. “Ecopreneureship” is a word which symbolizes normally eco-
friendly corporates but we take it definitely in bolder expression to call here that any Corporate which is sensitive
towards human development with human cause and concern for nurturing environment and not only just concern for
environment protection. The authors here are presenting a Case Study of Hindustan Zinc Limited, A Vedanta Group of
company which is setting neoteric trends in Human Resource Development as the challenging task of Corporate Social
responsibility has been a taken up under the umbrella of HRD. The Combo HR+CSR is making waves of development
which is worthful, meaningful, soulful and eco-sensitive as well as human sensitive. It is the question of knowledge driven
path for sustainable development with a concern for GEN NEXT, to leave a saga of Development which has a human face.

Introduction

The turn of the millennium has witnessed loads of changes in the corporate policies, vision & mission across the
globe. All the more concern and sensitivity towards Sustainable development, eco-sensibility, and bio friendly
products have once again taken the key driving position in any corporate vision and mission.
Seldom organizations have taken certain measures to achieve a sensible development but rarely few strive
from corporate soul to work for the larger benefits to be transferred to those people never are part of main stream
development consciously or unconsciously as they are normally left to the mercy of government plans and projects
particularly in Asian countries & more specifically India where still a big chunk of population is facing a dark fate
due to obvious reason of poverty, illiteracy and rural background.
The chairman’s philosophy “social vision must form a part of business vision” clearly is embossed and
reflected in every corporate activity and can be felt across organization, outside organization & all the places
surrounding the units of HZL, through serious CSR efforts & its impact on people, environment and HDI .
HZL believes in sharing its benefits to rural & poverty struck communities, living in the vicinity of mines and
smelters such as Zawar, Dariba, Debari, Agucha, Vizag, Chanderiya etc.
A fairly determined team of CSR professionals and grassroots’ level functionaries implement the various
projects of CSR aimed of transforming the poverty struck villages into the self sustainable, self reliant and model
villages of development.

Hindustan Zinc at a Glance

Vision
Be a world-class company, creating value, leveraging mineral resources and related core competencies.
Mission

Be a globally lowest cost zinc producer, maintaining market leadership

One million tonne Zinc-Lead metal capacity by 2010

Be innovative, customer oriented, and eco-friendly maximizing stake-holder value.

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To be counted among Best Zinc People in the World.

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 High Q uality Asset Base

Chanderiya Complex Chanderiy a project – Phase II

Pyro Smelter Hydro Smelter Ausmelt 170000 tp a Zin c Hydro smelter &
80 MW Coal based steam Power Rampura Agucha Mine
105,000 tpa zinc 170,000 tpa- 50000 tpa Lead plant
Lead-Zinc min e
and 35,000 tpa RLE tech. Smelter –
Reserves of 53.4 Mt ore
Lead capacity - Ausmelt tech.
Average grade of 12.8%
ISP tech. Zinc & 2% Lead

Rajpura Dariba Mine

2 x 77 MW Coal based steam power plant.
Lead-Zinc min e
Reserves of. 9.4 Mt ore
Average grade: 6.0 % Zinc
& 1.7 % Lead
Debari Smelter

80,000 tp a RLE zin c smelter Zawar Mining Complex

Lead- Zinc mines

Reserves of 5.8 Mt ore
Average grade of 4.3% Zin c
Vizag Smelter
& 1.9 % Lead

55,000 tp a RLE zin c smelter

Capacity surging ahead

Product 2001-02 2005-06 2008

Zinc 169,000 411,000 600,000

Lead 35,000 85,000 85,000

3 rd larg est Integrated Zinc Pro ducer

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 Top Ten Zinc Producers of the World-2006

Mining Company Top 10 Smelting Company Top 10

Company Prodn - kt Company Prodn - kt

1 Teck Cominco Limited 659 1 Korea Zinc Group 853

2 Zinifex 600 2 Xstrata AG 658

3 Glencore 599 3 Zinifex 635

4 Hindustan Zinc 498 4 Umicore 483

5 Xstrata AG 476 5 New Boliden 451

6 Anglo American plc 427 6 Hindustan Zinc Limited 420

7 Falconbridge 362 7 Votorantim 411

8 New Boliden 349 8 Glencore 396

9 Minera Volcan 287 9 Huludao Zinc Co 305

10 Industrias Penoles 221 10 Teck Cominco Limited 290

Total World Zinc Mining Production– 10,656 kt

Total World Zinc Smelting Production – 10,842 kt

HZL is the 3rd largest Integrated Zinc Producer

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Corporate Social Responsibility of HZL:
While keeping its focus on performance, HZL has never deterred from its commitment to society. HZL constantly
reviews pollution control and environment safety monitoring systems at all its mining and smelting units. Dust
emission control, plants, tailing ponds for solid waste disposal and secure containments, water reclamation systems,
effluent treatment plants, gas cleaning, treatment units, afforestation efforts, management of solid waste and much
more to keep its operations eco-friendly.
In 2003 HZL, along with others in the zinc industry has committed to
an environmental charter with the Indian Central Pollution Control
Board and the Ministry of Environment and Forests, establishing levels
of environmental performance beyond legal compliance. Some of the
major actions under CREP (Corporate Responsibility for Environment
Protection) are:

• Reducing sulphur dioxide (SO2) emissions by half by 2006.

• Achieving zero waste water discharge through 100% recycling by December 2004.
(Already achieved by HZL sites).
• The recycling of intermediate and waste materials.
• Reducing fugitive dust emissions from vehicles.
• Developing greenbelt around the plant and accommodation areas.
• HZL has prepared action plans and has planned investment of Rs 380 million over the next 2-3 years.

Initiatives taken by HZL in Corporate Social Responsibility:

HZL believes in good corporate governance and sustainable development and is committed to raise the quality of
life and social well being of communities where it operates.

HZL respects its obligation to its society and strives to minimize pollution
to the environment. The Corporate Social Responsibility is accorded as
much importance as to its business goals. Thus, HZL’s social vision forms an integral part of the business function
and covers the following community development initiatives:

• Social Investment - Health, Education & Livelihood

• Bio-Investment - Water Harvesting, Agriculture and Social Forestry
• Environment Conservation

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 HZL is implementing a meaningful need based sustainable development initiative in a number of
operational villages at its six different locations.
Through its CSR initiatives HZL is impacting the lives of more than 1, 05,000 rural masses belonging to over
22,000 families.
HZL has donated Rs. 11 million towards the Mid-Day Meal Scheme of Govt. of Rajasthan for construction
of kitchens at Chittorgarh, Bhilwara and Udaipur districts for catering to about 2,00,000 rural school children.

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 Six focus areas

Rural
education
&
Environment Mid-Day
Conservation Meal
& Plans
Infrastructure Social
development forestry
scheme
SHG &
employment
schemes for
Youth
Agricultural
&
Livestock
Health &
Hygiene
Rural

Urban

Health And Hygiene

Rural Area
a) Vaccination like BCG, OPV, and DPT provided to infants. Due to which it has achieved “Reduced
infant mortality rate and water borne diseases like malaria, typhoid, jaundice, viral fever, naaru
(tape worm infestation) etc.
b) Regular check ups are conducted for pregnant women, their vaccination and Nutrition is also taken
care of.
c) Eye care camps: Qualified medical practitioners and staff thoroughly work upon eye care result in
RTI`s and STI`s cases going from 18% to 6% and further lowering of such cases may go down
considerably in a year.
d) Regular health check-ups : regular health check-ups are taken up for all people living in HZL
vicinity encompassing checkups for Diabetes, Blood pressures, Blood tests, heart and Kidney
related awareness and checkups.Papsmear tests and mammography for women are also conducted

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 by medical team to trace early cancer detection, allergies, sanitation, prevention of communicable
diseases, potable water and so on…. Scores of programs are conducted to keep one and all
informed about health and hygiene.
Urban Area
Whereas Maharana Bhopal Govt. hospital of Udaipur now boasts of an exclusively Cardiology Centre set up by HZ
to make available 24 hours emergency services to heart patient around Udaipur and adjoining rural areas Rupees six
crore have been spent by HZL to establish a high tech cardiology fully functional department.

Agricultural and Livestock

The second volume of works relates to agriculture and livestock in collaboration with “Krishi Vigyan Kendra
(Center for Agriculture Science)”.
• HZ has been providing training on seed, soil and watershed management for the best
agricultural practices to ensure a highly productive and disease free livestock. Due to
this activity 65% of target farmers are cultivating 2-3 crops in a year.
• Cattle’s Vaccination camps are also held regularly. Due this activity Morbidity rate
reduced from 45% to 18%.

Programs for Women and Unemployed Youth

Self Helps Groups have been assembled to help them “Manage the Savings” and to impart them a new sense
of purpose and self assurance through various income generation projects. Women are target groups as women are
the axis of family. Hence involving them into small savings, financial management of the family budgets, talks by
eminent & learned women to motivate them is another landmark which makes rural women to come forward for
generating income for the families through learning some small skills and vocational experiences. This has enhanced
71% of target families’ monthly income from Rs 1700 to Rs 3000.
Employment schemes the village youth have started to get benefit from innumerable employment schemes
made available to them in small scale business sectors like:
• Cycle repairing
• Grocery
• Carpentry
• Tailoring
• Dairy & Poultry
• Blacksmithing

Hindustan Zinc has been mobilizing and implementing various infrastructure development
schemes (in result 70% resources mobilized from Zila-Parishad & Panchayat) like:
• Link Roads
• School Buildings
• Converts
• Check Dams
• Toilets
• Drains
• And Over Head Tanks.

Environment Conservation

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One of the basic concerns of Hindustan Zinc is Environment Conservation:
• To maintain the critical ecological balance and boasts of a sizeable green belt.
• Mass Tree Plantation are being undertaken on regular basis.

Rural Education and Mid-Day Meal Plan

• HZ planned to cover entire district under mid-day meal program. Most note worthy achievement has been, the
public private partnership of the state govt. with HZ, establishing high tech kitchen in Chittorgarh. Fresh and
Nutritional food from these kitchen is being provided to two lakh primary school children. Due to this activity
school attendance has improved from 55% to 90%.This exemplary model has been recognized by ministry of
HRD, Govt. of India.
• Games and Sports are regular activities in tune with HZ commitment towards recognizing & endorsing talents
of local, rural and tribal communities.
• HZ has distributed two hundred computers to fifty government schools in and around Udaipur and also taken up
to train and teach one-one teachers of these schools in order to make them the champions of computers
education who would be responsible to impart this knowledge to the school children. This project would be
extended to many more such schools in the years to come.
• Through various rural entertainment features, rural communities are being sensitized towards social evils,
building awareness for literacy, health, sanitation and family planning.
• The Mansi Wakal water project undertaken in collaboration with state govt., ensures that the areas around
udaipur gets an unbroken water supply for the domestic and agricultural purpose throughout the year.
• And a final and more consolidated process in place in Rajpura Village of Dariba Mines & Punchdevla Village
(Chittorgarh) Chanderia Lead-Zinc Smelter. These two villages have found a proud place on the map of state as
ideal villages.
• Simultaneously a three year rolling plan for all the 61 villages has been undertaken in a phased manner.

Commitment to Higher Education

The Vedanta group is heading for a break through in higher education by presenting a world class, hi-tech
university. The proposed Vedanta University will be a world class, multi-disciplinary university with students from
across India and around the world. The university will nurture generations of global leaders who will make
significant contributions to society through their chosen disciplines. Vedanta University will integrate teaching,
learning, and research into a holistic learning environment that encourages leading scholarship.
Vedanta University will span more than 8,000 acres on the Puri-Konark marine drive in Orissa and will be
home to more than 100,000 talented students from around the world. With an estimated investment of more than
15,000 corers, supported by a thriving ecosystem of knowledge in a breathtaking physical environment, the
University will transform Orissa into a primary centre for knowledge in India; the institution will join the ranks of
the world’s greatest Universities such as Harvard, Stanford, and Oxford.
The best educational centers in the world, without exception, have highlighted one critical element in
achieving genuine all-round academic excellence- that these centers need to be fundamentally ‘not for profit’
institutes. This concept will be one of the most fundamental philosophies of the Vedanta University. It is founded on
a commitment to the passionate pursuit of academic excellence. Opening its doors to the very best and brightest by
following a ‘needs- blind’ admissions policy, the University’s guiding tenet will be to nurture and mould talent. It
will be initially developed and endowed by a $1 Billion philanthropic grant from the Anil Agarwal Foundation.
Built on a foundation to promote greater access to quality higher education, cutting-edge research, and
contribution to society, Vedanta University will produce tomorrow’s Nobel Laureates, Olympic Champions and
community leaders. Vedanta University will strive to provide generic skills together with flexibility, adaptability and
a passion for life-long learning, while simultaneously equipping young people with the best basis for a career in any

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 area, including industry, and for the unforeseen needs of the future. Students of the University will be its
ambassadors to the world and a testament to all that it stands for- intellectual acumen and perception of issues, a
genuine commitment to social change and development and the necessary skills, passion and leadership to solve
them with honor and integrity.
All these projects have been evaluated by the Operation Research Group (ORG), New Delhi.
HZ through its continuing efforts tried to brings smile on the faces of villages by touching their lives.
Each mile covered is a joy but Sustainable Development is all about milestones.

References
Contact authors for the list of references

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